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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1995
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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
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Exact name of small business issuer in its charter
Massachusetts 04-2457335
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State or other jurisdiction of I.R.S. employer
incorporation or organization identification no.
One Patriots Park, Bedford, Massachusetts 01730-2396
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Address of principal executive offices Zip code
Issuer's telephone number 617-275-6000
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Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
Not applicable Not applicable
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Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
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Title of class
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. /X/
State issuer's revenues for its most recent fiscal year: $17,452,000. Based on
the closing average price for the registrant's voting stock on March 1, 1996,
the aggregate market value of such voting stock held by non-affiliates of the
registrant was $3,205,500 on March 1, 1996.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: There were 3,020,700 shares of the
issuer's only class of common equity, Common Stock, $.01 par value, on March 1,
1996.
Transitional Small Business Disclosure Format (Check One): YES NO X
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DOCUMENTS INCORPORATED IN TEXT BY REFERENCE
Portions of the definitive proxy statement for the Special Meeting of
Stockholders in Lieu of 1996 Annual Meeting to be held on May 30, 1996 are
incorporated by reference into Part III of this Report, and certain exhibits
filed with the Company's Registration Statement on Form S-1 filed with the
Securities and Exchange Commission on October 26, 1983, as amended on December
6, and December 8, 1983 and declared effective on December 9, 1983, are
incorporated by reference into Part III of this Report.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
Spire Corporation ("Company") is a Massachusetts corporation incorporated in
1969 under the original name of Simulation Physics, Inc. The Company is
organized into three business areas all of which have developed out of the
Company's expertise in thin film technologies: Photovoltaics, Optoelectronics
and Biomaterials. The Company's revenues over the past three years have been
between $17 and $20 million, but the sources of those revenues have varied among
the Company's three primary business areas.
Business of Issuer
The Company (i) provides processing services, primarily to the biomaterials
market but also to the defense/aerospace and electronics industries; (ii)
designs, manufactures, and markets (a) equipment that produces photovoltaic
modules which is marketed to industrial companies, start-up companies, and
governments throughout the world; and (b) complex electronic and optoelectronic
materials and devices such as gallium arsenide epitaxial structures and laser
diodes which are generally sold to the electronics and related industries; and
(iii) performs research and development activities, generally for agencies of
the United States government but also for commercial businesses.
Each of the Company's business areas has its own competitive conditions,
marketing strategies, and distribution methods.
Photovoltaics
Photovoltaics uses semiconductor materials to convert the sun's energy directly
into electricity. Photovoltaics offers a non-polluting and easily distributed
source of electricity. The Company became involved in photovoltaics in 1974 when
it entered into a research and development contract with the federal government
for the advancement of photovoltaic solar cells. Over many years of research,
funded mainly by the federal government, the Company has developed photovoltaic
processes, individual pieces of processing equipment, and integrated production
lines for manufacture of photovoltaic modules. Photovoltaic modules consist of
an array of solar cells interconnected to produce desired currents and voltages.
The Company markets this equipment throughout the world and has become the
world's largest supplier of photovoltaic module manufacturing equipment, having
sold more than 250 pieces of equipment in 113 facilities in 34 countries. The
Company's customers purchase equipment and technologies in order to manufacture
photovoltaic modules for such applications as telecommunications, water pumping,
lighting, medical refrigeration, cathodic protection, and village remote
homesite power.
The Company's module manufacturing equipment is flexible enough to process
various types and sizes of solar cells including mono-crystalline,
poly-crystalline and amorphous silicon materials. During 1995, the Company sold
module manufacturing equipment to various companies throughout the world
including the United States, India, Japan, Germany, Panama, Korea, South Africa,
Belgium, Canada, Mexico and Saudi Arabia. The Company's equipment prices range
from $25,000 for the smallest piece of equipment to over $1,000,000 for a
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complete module assembly line, depending upon capacity, configuration and
included technology. The Company also markets equipment and production lines
for the manufacture of solar cells; none were sold during 1995.
The Company develops new products to address growing market demands, by
utilizing both internal research and development funds as well as federal
government development contracts. During 1995, the Company introduced two new
machines which interconnect solar cells by soldering flat metal leads or tabs to
cell contacts. These machines were developed utilizing funds by both the Company
and the United States Department of Energy's National Renewable Energy
Laboratory (NREL). The SPI-STRINGER(TM) 500 automatically aligns and tabs
individual solar cells. The SPI-ASSEMBLER(TM) 5000, also developed under this
contract, provides in addition to tab cutting and shaping, cell and tab loading
and automatic string unloading. The machine is also offered with an optional
machine vision system for cell inspection and alignment.
Also during 1995 the Company entered into a subcontract from the NREL to
establish a photovoltaic module manufacturing facility in Johannesburg, South
Africa. The Company provided module manufacturing equipment, training, and
technology transfer as well as materials and system components to a new company.
This plant demonstrated the establishment of a prototype plant for assembly of
photovoltaic modules capable of producing 500 kilowatts of photovoltaic modules
per year on a one shift basis. Completed modules from the factory are intended
for use within South Africa for street lights, schools, clinics, water pumps,
telecommunications, etc.
The Company believes that it has a leadership position in the marketing of
photovoltaic manufacturing equipment. The Company is aware that there are
competitors in various aspects of the Company's business, but the Company is not
aware of any other company that offers a similar full array of products,
services, and support. However, several of the companies involved in portions of
the Company's market are larger and better financed than the Company and could
choose to offer products and services competitive with those of the Company. The
Company intends to maintain its leadership position in photovoltaics by
continuing its program of new product development; offering a full line of
products for both established manufacturers of solar modules and purchasers of
complete manufacturing lines; and providing a high level of service and product
quality.
The Company relies on in-house sales staff and a network of in-country sales
agents (who generally work on a commission basis) to reach its worldwide market.
In 1995, the Company established a European office and contracted an
organization to act as a representative and liaison for the Company and its
customers. The Company recognizes that the nature of its market, often involving
government agencies as buyers or financiers in developing countries where there
are barriers to conducting business such as limited availability of hard
currency, U.S. Government trade restrictions, and other problems, creates
certain difficulties for the Company, including long procurement cycles,
exposure to currency fluctuations, and competition from government or indigenous
competitors. The Company addresses these issues by working with indigenous
commissioned sales representatives, maintaining technology leadership, and
quoting prices and accepting payment only in United States dollars and generally
against irrevocable letters of credit.
Optoelectronics
The Company's Optoelectronics area uses its expertise in thin film technologies,
and especially in metalorganic chemical vapor deposition (MOCVD) to produce
optoelectronic and electronic wafers and devices for commercial, defense, and
other government applications. The Company performs on a number of research and
development contracts, primarily for agencies of the United States government
and primarily under the Small Business Innovation Research (SBIR) program. Under
the 3-Phase SBIR program certain U.S. government agencies award a percentage of
their extramural R&D budgets to small businesses for innovative research. Phase
I is to determine the technical feasibility of proposed concepts; Phase II is
for prototype development; and Phase III (funded by non SBIR capital) is to
pursue commercial applications. The Company is pursuing specific commercial
product initiatives based on its research activities and has organized its
personnel and resources accordingly. The initiatives are: Advanced Silicon
Technologies; High Definition Displays; Electronic Ceramics; Advanced MOCVD
Technologies; High Power Diode Lasers; Microelectronics; and Solar Cells.
The Company's Advanced Silicon Technologies initiative is focused primarily on
applications of the silicon-on-insulator (SOI) material whose development the
Company contributed to over a number of years through
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government-funded research and development programs for detectors and substrates
for growth of nitride compounds. If successfully developed, the Company believes
that there appears to be both commercial and government interest.
The Company continues to perform on a few high definition display technologies
contracts, where the Company is applying its ion implantation and MOCVD
expertise to the improvement of thin film electroluminescent materials, field
effect display phosphors, and light emitting porous silicon materials to create
bright multi-color displays for flat panel screens, head mounted displays, and
other commercial and military applications. This work is funded by both
government and commercial sources, as well as the Company's internal resources.
In 1995 the Company received a U.S. patent for Flat Panel Displays and Process.
With government R&D support, the Company in 1995 continued its development of
high performance electronic ceramics grown by MOCVD. If successfully developed,
the Company believes that there is commercial and government interest in this
development is high and continued interest is tied to achievement of specific
technical performance criteria.
The Company's work with Advanced MOCVD Technologies encompasses advanced
reaction chamber designs, feedback control technologies, and materials growth.
Application of any developments in this area are primarily enabling technologies
that improve the quality or make possible the products addressed by other
commercial initiatives.
In 1995 the Company's diode laser business remained flat as the Company began to
overcome earlier manufacturing problems. The Company continued to expend
resources to correct these problems. The ultimate resolution of these problems,
and the resulting scope of the Company's diode laser business, is still
uncertain.
As part of its Microelectronics initiative, the Company continues to sell
epitaxial wafer structures grown by MOCVD and based on gallium arsenide, indium
phosphide and related compounds for fabrication of devices such as
heterojunction bipolar transistors and field effect transistors. The Company
also continues to receive government funding for research in this area. In
addition, the Company sells epitaxial wafer structures grown to customer
specifications for a variety of other applications.
The Company's Solar Cell Initiative is primarily addressing high efficiency
solar cells for space applications. With continuing government support the
Company has been able to demonstrate state-of-the-art solar cell technologies,
including solar cells that provide advantages over those currently available for
space missions in high radiation environments.
The Company competes in these areas primarily on the basis of technological
innovation and the availability of its extensive array of sophisticated capital
equipment necessary to apply these technologies to fabricate products and
perform services. A substantial portion of the Company's Optoelectronics
resources is devoted to the performance of research and development contracts
primarily for agencies of the United States government. The Company has
successfully competed for these contracts on the basis of its proprietary
technology base; its ability to perform innovative, cutting edge work; its
extensive array of capital equipment; its responsiveness to government
initiatives; and its ability to commercialize its innovations. The Company
competes against numerous small companies for SBIR contracts and against
numerous small and large companies for other government contracts. Many of these
large competitors have greater financial and other resources than the Company.
Changes in government research and development funding have had a substantial
impact on the Company as the government continues to emphasize cost sharing. The
Company continues to be very cautious in agreeing to cost sharing contracts. In
general, the Company's proposals for government funding have become more focused
on areas that the Company believes have the greatest commercial potential
consistent with the Company's expertise. Competition for government research and
development contracts continues to be intense. The Company attempts to insure
that its technology remains current and competitive by performing research in
emerging technologies relevant to the above initiatives.
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Biomaterials
The Company's Biomaterials processing services are based primarily on ion beam
technologies. The two primary techniques employed are ion implantation and ion
beam assisted deposition (IBAD). Both are used to modify functional surface
properties such as friction, wear, surface energy, wettability, etc. The
targeted market for these techniques is the medical industry where there is a
requirement for techniques capable of improving the performance of medical
materials and devices. IONGUARD(R) ion implantation processing continues to
provide a substantial portion of Biomaterials revenues. The main markets in
which this process is employed are orthopaedics and orthodontics. Although in
1995 the largest revenue source continued to be orthopaedics, revenues from
orthopaedic device processing continued to decline in 1995 as a result of
continuing market pressures. The orthopaedics device industry as a whole
continues to experience substantial cost pressures as a function of more
stringently regulated health care, the advent of increased purchasing power from
hospital conglomerates and the impact of diagnostic related groups (DRGs) on the
industry as a whole. The Company has increased its efforts to apply its emerging
technologies such as SPI-CERAMIC(TM) to orthopaedics and orthodontic
applications. Efforts are also underway to extend the Company's presence in the
dental market by investigating devices other than orthodontic arch wires. The
Biomaterials area also experienced a growth of its government research and
development funding in 1995.
The Company continued to allocate resources in the Biomaterials area to the
introduction and application of processes such as SPI-ARGENT(TM), SPI-SIGHT(TM),
SPI-SPECTRUM(TM), SPI-MET(TM) and SPI-POLYMER(TM). The Company has identified
specific applications where the performance of existing materials is inadequate
for the demands of more challenging medical device applications. Among these
applications are: cardiovascular products such as stents; grafts; catheters;
orthopaedic products; seals; and a host of short and long-term arterial and
venous access devices.
In an effort to accelerate the rate of incorporation of these emerging
technologies into the various medical device markets, the Company has adopted an
approach of entering into a variety of device-specific strategic marketing
agreements with market leaders in the various device markets. These agreements
seek to provide incentives to those companies to accelerate the rate of
introduction of products and to increase capacity. In 1995 new products using
the Company's surface modification processes were introduced by its customers.
Among the new products introduced in 1995 were a line of central venous pressure
catheters and myringotomy tubes with SPI-POLYMER(TM), as well as new guidewires
and vascular access catheters with the Company's SPI-SIGHT(TM) process. Others
are at various stages of review through the Food and Drug Administration (FDA),
and introduction of these products are dependant on successful review. No
assurances can be made of the outcome. The Company has continued to refine its
interaction with customers in the regulatory approval process in an effort to
streamline the application process and to minimize unexpected delays. The
Company is pursuing market opportunities through domestic manufacturers,
although those manufactures typically have rather substantial international
presence. In an effort to boost both international and domestic exposure, the
Company participates in, and supports, symposia, exhibitions and conferences.
This is further expanded by publications in trade magazines and technical
journals. The Company also markets its services through the use of sales
representatives in geographic areas where there is a particularly high density
of potential customers.
GENERAL INFORMATION
COMPETITION
The Company sells all of its products in competitive markets. Some competitors
are also customers or potential customers of the Company. Entities now operating
in related markets may enter the Company's markets. Some of the competitors and
potential competitors have access to financial and technical resources greater
than those of the Company. The bases for competition for the Company in its
various markets include the amount and pace of technological innovation, capital
equipment resources, product quality, timely delivery, service, and price.
Specific information about competitive conditions may be found in the detailed
discussion of each business area above.
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MARKETING AND EXPORTS
The Company markets many of its products and services through a network of
commissioned sales representatives and distributors as well as its internal
staff. The Company had 40 foreign and domestic sales representatives and
distributors as of December 31, 1995. The Company recognizes that such
representation is particularly important in facilitating access into certain
foreign countries. The Company also has licensed some of its technology and
technical information to several foreign firms so that they might competitively
service local markets. Such agreements have resulted in the sales of some
equipment and spare parts along with technical support.
The Company recognizes certain impediments to generating foreign sales. To
minimize some of the risks inherent in trading with foreign countries, the
Company quotes all prices and accepts payment only in United States currency.
The Company's policy is to require new customers and those with large orders to
furnish an acceptable letter of credit usually confirmed by a United States bank
prior to shipment. See "Description of Business - Photovoltaics."
The Company uses its wholly-owned subsidiary, Spire International Sales
Corporation, a foreign sales corporation under the Internal Revenue Code, to
take advantage of certain federal tax deferral benefits available to such
corporations with respect to foreign sales.
RESEARCH AND DEVELOPMENT CONTRACTS
The Company's policy is to support as much of its research and development as
possible through contract funding. The Company's internally funded research and
development expenditures in 1995 and 1994 were $59,000 and $124,000,
respectively. Revenues from materials research, process development, and
equipment engineering contracts were $8,232,000 and $8,806,000, respectively, in
such years.
Sales to the United States Government under direct contracts and subcontracts
accounted for 48% of the Company's sales for 1995 and 1994. As of December 31,
1995, the Company was performing 27 contracts for the government. The government
has audited the Company's contracts through 1992 and no adjustments were
necessary. Audits for 1993 and 1994 are currently in process, and 1995 has not
been performed.
The Company's contracts with the Government generally grant to the Company a
right to obtain ownership rights in any technology developed pursuant to such
contracts and grant to the Government a non-exclusive license to utilize the
technology for its benefit. The Company's rights to technology developed during
contracts with private companies vary, depending upon negotiated terms.
PATENTS
The Company has 58 patents (and 12 patents pending) in the United States which
cover elements of its manufacturing equipment as well as various materials and
processes. The Company actively protects its intellectual property and
technological advances by seeking patents as appropriate, enforcing existing
patents as necessary, and carefully protecting its non-patentable proprietary
information and processes. The Company has applied for four patents in various
foreign countries, but has not yet received any foreign patents.
There can be no assurance that the Company will be able to assert successfully
its patent rights against allegedly infringing competitors and the inability to
assert successfully its rights may negatively impact the Company's competitive
position and financial condition. There can be no assurance that the Company
will not be subject to patent infringement claims asserted by others, or if
asserted, that the Company will be successful in defending its position or
challenging such claims. No such claims are presently outstanding against the
Company. In the event that the Company was adjudged to infringe patents of
others, the Company might be required to pay damages, and might be enjoined from
making, using or selling the infringing product or service, or might be required
to obtain a royalty-bearing license, if available on acceptable terms.
Alternatively, in the event a license is not offered or
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is not available on commercially acceptable terms, the Company might be required
to re-engineer the affected products or processes to avoid such infringement.
There can be no assurance that any such re-engineering will be successful, or
will result in commercially acceptable alternatives, and any such re-engineering
might entail significant or prohibitive expense to the Company.
EMPLOYEES
As of December 31, 1995, the Company employed 130 people, of whom 122 were full
time. The Company has experienced no work stoppage and considers its
relationship with its employees to be excellent.
MATERIALS
The Company assembles its electronic and photovoltaic equipment from components
purchased from a variety of suppliers or fabricates the components itself. The
Company has not experienced any major change in the price or availability of the
components it uses. For many items, alternate sources are available. The Company
believes that the loss of single source suppliers would not be material due to
the non-critical nature of those suppliers and the ability to substitute other
items with minimal re-engineering. The Company anticipates that it will be able
to manufacture and procure all such parts and materials in sufficient quantities
to meet its needs.
ENVIRONMENTAL COMPLIANCE
The Company makes it a high priority to comply in all material respects with all
safety and environmental regulations applicable to it. The Company employs a
full-time Environmental and Safety Engineer to manage its compliance efforts.
The cost of such compliance is not material to the Company.
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases 74,000 square feet in a building located at One Patriots
Park, Bedford, Massachusetts. All of the Company's office and production
facilities are located in the building. All of the space is subleased from
Millipore Corporation. Millipore rents the building from a trust of which Roger
G. Little, Chairman, Chief Executive Officer, and President of the Company, is
sole trustee and principal beneficiary. See "Item 12. Certain Relationships and
Related Transactions." The sublease originally was for a period of ten years,
for which the Company exercised its option to extend for an additional five year
period expiring on November 30, 2000 and has an option for an additional
five-year extension period. The Company believes that suitable facilities for
future use will be available to it on commercially competitive terms.
ITEM 3. 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,
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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 operation but may have a positive
impact.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security-holders in the
fourth quarter of 1995.
ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.01 par value ("Common Stock"), is traded on the
NASD National Market System under the symbol "SPIR." The following chart sets
forth the high and low closing bid price for the Common Stock during the
indicated periods:
<TABLE>
<CAPTION>
Period High Low
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<S> <C> <C>
January 1 - March 31, 1995 $2 5/8 $2 1/8
April 1 - June 30, 1995 2 5/8 2
July 1 - September 30, 1995 3 1/4 2
October 1 - December 31, 1995 3 1/4 2
January 1 - March 31, 1994 $4 1/4 $3
April 1 - June 30, 1994 4 1/2 3 1/8
July 1 - September 30, 1994 4 1/2 3 3/8
October 1 - December 31, 1994 3 1/2 2 1/8
</TABLE>
The foregoing quotations represent prices between dealers and do not include
retail markup, markdown or commission and may not necessarily represent actual
transactions. The actual closing bid price for the stock on March 1, 1996 was
$2.00. As of March 1, 1996, there were 267 stockholders of record.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL OVERVIEW
Net sales and revenues decreased in 1995 to $17,452,000 compared to $18,400,000
in 1994. The Company reported a profit for the year of $1,000 compared to a loss
of $182,000 in 1994. As a result, at December 31, 1995, the Company's retained
earnings were $564,000 compared to $563,000 as of December 31, 1994. Working
capital as of December 31, 1995 was $2,430,000, compared to $1,697,000 as of
December 31, 1994.
RESULTS OF OPERATIONS
1995 vs. 1994
<TABLE>
<CAPTION>
Revenues: 1995 1994 % Change
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<S> <C> <C> <C>
Contract research and
service sales $12,884,000 $14,537,000 (11%)
Manufacturing equipment
sales 4,568,000 3,863,000 18%
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Net sales and revenues $17,452,000 $18,400,000 (5%)
=========== ===========
</TABLE>
Contract research and service revenues decreased 11% in 1995 to $12,884,000
compared to $14,537,000 in 1994 due to decreased government contract and
orthopaedic product line revenues. The decline in contract revenue was largely
the result of the government's move toward programs requiring significant cost
sharing, which management has elected to pursue cautiously and selectively. The
orthopaedic processing service business continued to experience pricing
pressures due to competition and changes in the health care market which
negatively affected revenues and margins. Manufacturing equipment sales
increased 18% to $4,568,000 compared to $3,863,000 in 1994, due to increased
demand of photovoltaic manufacturing equipment.
<TABLE>
<CAPTION>
Cost of Sales: 1995 % Revenues 1994 % Revenues % Change
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<S> <C> <C> <C> <C> <C>
Contract research and
service cost of sales $ 9,187,000 71% $10,500,000 72% (1%)
Manufacturing equipment
cost of sales 3,838,000 84% 3,110,000 81% 3%
----------- -----------
Total cost of sales $13,025,000 74% $13,610,000 74% 0%
=========== ===========
</TABLE>
The cost of contract research and service revenues decreased to 71% of related
sales for the year ended December 31, 1995 compared to 72% for the same period
in 1994. The decrease was due to decreased indirect expenses. Cost of
manufacturing equipment was 84% of related sales in 1995 compared to 81% of
related sales in 1994. The increase is due to changes in product mix.
Selling, general and administrative expenses were 26% of net sales and revenues
for 1995 as compared to 27% for 1994. The decrease in selling, general and
administrative expenses as a percentage of sales is attributable to cost cutting
measures implemented by the Company, such as reduced staffing.
Depreciation and amortization expenses decreased 7% in 1995 to $1,293,000 from
$1,392,000 in 1994. The decrease was due to a reduction in expenditures for
capital equipment during prior years and items becoming fully depreciated.
Expenditures for capital equipment decreased 73%, totaling $390,000 in 1995
compared to $1,433,000 in 1994. The Company earned $18,000 interest income in
1995 compared to no interest income in 1994.
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The Company incurred interest cost for 1995 in the amount of $43,000 and
$112,000 in 1994, of which $1,000 was capitalized in 1995 and $29,000 in 1994.
The decline in interest expense was due to the Company's liquidation of all
debt.
1994 vs. 1993
<TABLE>
<CAPTION>
Revenues: 1994 1993 % Change
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Contract research and
service sales $14,537,000 $18,092,000 (20%)
Manufacturing equipment
sales 3,863,000 2,043,000 89%
----------- -----------
Net sales and revenues $18,400,000 $20,135,000 (9%)
=========== ===========
</TABLE>
Contract research and service revenues decreased 20% in 1994 to $14,537,000
compared to $18,092,000 in 1993 due to decreased government contract, laser and
orthopaedic product line revenues. The decline in contract revenue was largely
the result of the government's move toward programs requiring significant cost
sharing, which management elected to pursue cautiously and selectively. The
orthopaedic processing service business experienced pricing pressures due to
competition and changes in the health care market which negatively affected
revenues and margins. In addition, the Company experienced a substantial
diminution in business from a formerly large orthopaedic customer. Manufacturing
equipment sales were $3,863,000 compared to $2,043,000 in 1993. The increase in
manufacturing equipment sales was due primarily to the sale of a SPI-LINE(TM)
1000C line in 1994.
<TABLE>
<CAPTION>
Cost of Sales: 1994 % Revenues 1993 % Revenues % Change
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contract research and
service cost of sales $10,500,000 72% $12,603,000 70% (2%)
Manufacturing equipment
cost of sales 3,110,000 81% 1,261,000 62% 19%
----------- -----------
Total cost of sales $13,610,000 74% $13,864,000 69% (5%)
=========== ===========
</TABLE>
The cost of contract research and service revenues increased to 72% of related
sales for the year ended December 31, 1994 compared to 70% for the same period
in 1993. The increase is due to decreased sales volume. Cost of manufacturing
equipment was 81% of related sales in 1994 compared to 62% of related sales in
1993 due to product mix.
Selling, general and administrative expenses were 27% of net sales and revenues
for 1994 as compared to 25% for 1993. The increase in selling, general and
administrative expenses as a percentage of sales was attributable to decreased
sales volume.
Depreciation and amortization expenses decreased 15% in 1994 to $1,392,000 from
$1,644,000 in 1993. The decrease was due to a reduction in expenditures for
capital equipment during prior years; and items becoming fully depreciated.
Expenditures for capital equipment totaled $1,433,000 in 1994 compared to
$759,000 in 1993. The Company earned no interest income in 1994 compared to
$4,000 earned in 1993.
The Company incurred interest cost for 1994 in the amount of $112,000 and
$258,000 in 1993, of which $29,000 was capitalized in 1994 and $16,400 in 1993.
The decline in interest expense was due to the Company's liquidation of
long-term debt.
- 10 -
<PAGE> 11
Liquidity and Capital Resources
On September 30, 1994, the Company amended and extended its revolving credit
facility with a bank. The Company is currently negotiating an extension to the
line and anticipates no difficulty in obtaining the extension. This agreement
established a $2 million revolving credit agreement, subject to the availability
of 80% 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 has been
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 December 31, 1995, the Company had no outstanding debt
under this revolving credit line.
During 1994, the Company completed payments to a subordinated note holder. These
notes bore interest at 11%, and were secured by all assets and subordinated to
the Revolving Credit Agreement. The notes contained certain restrictive
covenants including provisions relating to cash flows, maintenance of working
capital and net worth, and others, as defined in the agreement. The Subordinated
Notes were originally issued with three warrants to purchase a total of 364,521
shares of the Company's common stock.
The Company believes it has sufficient resources to finance its anticipated
capital expenditures through working capital, existing lines of credit or
available lease arrangements.
- 11 -
<PAGE> 12
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Spire Corporation:
We have audited the consolidated balance sheets of Spire Corporation and
subsidiary as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Spire Corporation
and subsidiary at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
February 29, 1996
- 12 -
<PAGE> 13
ITEM 7. FINANCIAL STATEMENTS
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
-----------------------------
1995 1994
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,130,428 $ 166,567
Accounts receivable, trade (Note 3):
Amounts billed 2,401,536 3,136,544
Retainage 97,350 143,614
Unbilled costs 449,188 701,468
----------- -----------
2,948,074 3,981,626
Less allowance for doubtful accounts 95,000 45,000
----------- -----------
Net accounts receivable 2,853,074 3,936,626
----------- -----------
Inventories (Note 4) 1,126,734 888,747
Prepaid expenses and other current assets 369,483 411,816
----------- -----------
Total current assets 5,479,719 5,403,756
----------- -----------
Property and equipment (Note 6) 21,980,123 21,590,475
Less accumulated depreciation and amortization 17,330,271 16,134,705
----------- -----------
Net property and equipment 4,649,852 5,455,770
----------- -----------
Computer software costs (less accumulated amortization,
$786,862 in 1995 and $776,524 in 1994) 36,719 26,381
Patents (less accumulated amortization, $434,490 in 1995
and $319,060 in 1994) 518,087 475,015
Other assets 260,053 378,745
----------- -----------
814,859 880,141
----------- -----------
$10,944,430 $11,739,667
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
- 13 -
<PAGE> 14
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
--------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Current liabilities:
Note payable - bank (Note 7) $ -- $ 750,000
Current portion of capital lease obligation (Note 10) 10,401 47,838
Accounts payable 1,494,877 1,788,215
Accrued liabilities (Note 5) 789,153 890,532
Advances on contracts in progress 755,756 229,710
----------- -----------
Total current liabilities 3,050,187 3,706,295
----------- -----------
Capital lease obligation, net of current portion (Note 10) -- 9,635
Stockholders' equity (Note 8):
Common Stock, $.01 par value; shares authorized
6,000,000; issued 3,560,360 shares in 1995 and 1994 35,604 35,604
Additional paid-in capital 8,468,903 8,468,903
Retained earnings 564,424 563,293
----------- -----------
9,068,931 9,067,800
Treasury stock at cost, 537,160 shares in 1995 and
495,160 shares in 1994 1,174,688 1,044,063
----------- -----------
Total stockholders' equity 7,894,243 8,023,737
----------- -----------
$10,944,430 $11,739,667
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
- 14 -
<PAGE> 15
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net sales and revenues:
Contract research and service revenues $12,883,770 $14,537,201 $18,092,121
Sales of manufacturing equipment 4,568,426 3,863,284 2,042,785
----------- ----------- -----------
17,452,196 18,400,485 20,134,906
----------- ----------- -----------
Costs and expenses:
Cost of contract research and services 9,187,422 10,499,727 12,602,563
Cost of manufacturing equipment 3,837,536 3,110,296 1,261,233
Selling, general and administrative expenses 4,438,578 4,911,127 5,056,085
----------- ----------- -----------
17,463,536 18,521,150 18,919,881
----------- ----------- -----------
Earnings (loss) from operations (11,340) (120,665) 1,215,025
Interest expense, net (Note 6) 19,539 82,654 242,076
----------- ----------- -----------
Earnings (loss) before income taxes (30,879) (203,319) 972,949
Income tax expense (benefit)(Note 9) (32,010) (21,299) 302,000
----------- ----------- -----------
Net earnings (loss) $ 1,131 $ (182,020) $ 670,949
=========== =========== ===========
Earnings (loss) per share of common stock $ 0.00 $ (0.06) $ 0.22
=========== =========== ===========
Weighted average number of common and
common equivalent shares outstanding 3,084,067 3,065,026 3,076,165
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
- 15 -
<PAGE> 16
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
-------------------- Paid-in ---------------------- Retained
Shares Amount Capital Shares Amount Earnings Total
--------- ------- ---------- ------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 3,559,860 $35,599 $8,467,658 495,160 $(1,044,063) $ 74,364 $ 7,533,558
Net earnings -- -- -- -- -- 670,949 670,949
--------- ------- ---------- ------- ----------- --------- -----------
Balance, December 31, 1993 3,559,860 35,599 8,467,658 495,160 (1,044,063) 745,313 8,204,507
Exercise of stock options 500 5 1,245 -- -- -- 1,250
Net loss -- -- -- -- -- (182,020) (182,020)
--------- ------- ---------- ------- ----------- --------- -----------
Balance, December 31, 1994 3,560,360 35,604 8,468,903 495,160 (1,044,063) 563,293 8,023,737
Repurchase of treasury stock -- -- -- 42,000 (130,625) -- (130,625)
Net earnings -- -- -- -- -- 1,131 1,131
--------- ------- ---------- ------- ----------- --------- -----------
Balance, December 31, 1995 3,560,360 $35,604 $8,468,903 537,160 $(1,174,688) $ 564,424 $ 7,894,243
========= ======= ========== ======= =========== ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
- 16 -
<PAGE> 17
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 1,131 $ (182,020) $ 670,949
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization 1,293,114 1,392,181 1,644,490
Changes in assets and liabilities:
Accounts receivable 1,083,552 627,616 518,734
Inventories (237,987) (425,882) 78,493
Prepaid expense and other current assets 15,103 59,410 (125,409)
Refundable income tax 27,230 -- 280,973
Accounts payable and accrued liabilities (394,717) 305,673 564,319
Federal and State taxes payable -- (19,856) 19,856
Advances on contracts in progress 526,046 217,440 (221,432)
----------- ----------- -----------
Net cash provided by operating activities 2,313,472 1,974,562 3,430,973
----------- ----------- -----------
Cash flows from investing activities:
Additions to property and equipment (389,647) (1,432,747) (759,174)
Increase in patent costs (100,090) (70,387) (77,713)
Increase in software production costs -- (10,292) (2,019)
Other assets 67,823 (132,687) (39,873)
----------- ----------- -----------
Net cash used for investing activities (421,914) (1,646,113) (878,779)
----------- ----------- -----------
Cash flows from financing activities:
Net borrowings (payments) on short-term debt (750,000) 750,000 (1,650,000)
Payments on long-term borrowing (47,072) (959,675) (1,007,651)
Exercise of stock options -- 1,250 --
Repurchase of common stock (130,625) -- --
----------- ----------- -----------
Net cash used for financing activities (927,697) (208,425) (2,657,651)
----------- ----------- -----------
Net increase (decrease) in cash 963,861 120,024 (105,457)
Cash and cash equivalents, beginning of year 166,567 46,543 152,000
----------- ----------- -----------
Cash and cash equivalents, end of year $ 1,130,428 $ 166,567 $ 46,543
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense $ 43,567 $ 112,000 $ 258,000
=========== =========== ===========
Income taxes $ -- $ 138,000 $ 278,000
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
- 17 -
<PAGE> 18
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(1) NATURE OF THE BUSINESS
The Company specializes in biomaterials, optoelectronics, and
photovoltaics technologies. Products include ion beam based processing
services for medical components, compound semiconductor wafers and
devices, and photovoltaic module manufacturing equipment.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary, Spire International
Sales Corporation. All significant intercompany balances and
transactions have been eliminated in consolidation.
(b) REVENUE RECOGNITION
Revenue for equipment sales is recognized upon shipment. Revenue
for service contracts is recognized upon performance of the
service. Revenue on government research contracts is recorded as
costs are incurred and includes a pro rated portion of the
estimated profit.
(c) INVENTORIES
Inventories are stated at the lower of cost or market, cost
being determined by the average cost method, on a first-in,
first-out (FIFO) basis.
(d) PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation and
amortization are provided using the straight-line method over
the estimated useful lives of the respective assets, as follows:
<TABLE>
<S> <C>
Machinery and equipment 7 years
Furniture and fixtures 5 years
Leasehold improvements 10 years
</TABLE>
Maintenance and repairs are charged to expense as incurred.
Major renewals and betterments are added to property and
equipment accounts at cost.
(e) PATENT COSTS
Patent costs are capitalized and amortized over their useful
lives using the straight-line method.
- 18 -
<PAGE> 19
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995, 1994 and 1993
(f) COMPUTER SOFTWARE COSTS
Capitalized computer software costs are being amortized by the
straight-line method over the estimated economic life of the
product. The amount of amortization charged to expense was
$10,338, $47,627 and $55,348, for 1995, 1994 and 1993,
respectively. The recoverability of such costs is reviewed on an
ongoing basis.
(g) INCOME TAXES
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under
Statement 109. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period
that includes the enactment date.
(h) RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations as
incurred, except where such costs are reimbursable under
customer funded contracts. During the years ended December 31,
1995, 1994 and 1993, unfunded research and development costs
were $59,000, $124,000 and $51,000, respectively.
(i) EARNINGS PER SHARE
Earnings per share of common stock are based on the weighted
average number of common shares outstanding, including the
dilutive effect of stock options and warrants.
(j) NEW ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation." This statement is required to be
adopted by the Company in 1996. The Company has yet to analyze
in detail the potential impact on its financial statements of
adoption of this pronouncement.
(k) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(l) FINANCIAL INSTRUMENTS
Financial instruments of the Company, consist of cash and cash
equivalents, accounts receivable and accounts payable. The
carrying amount of these financial instruments approximate
their fair value.
- 19 -
<PAGE> 20
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995, 1994 and 1993
(3) ACCOUNTS RECEIVABLE
Unbilled costs on contracts in progress represent revenues recognized
on contracts for which billings have not been presented to customers as
of each balance sheet date. These amounts are billed and generally
collected within one year.
Retainage represents revenues on certain United States Government
sponsored research and development contracts. These amounts, which
usually represent 15% of the Company's research fee on each applicable
contract, are not collectible until a final cost review has been
performed by government auditors. Included in retainage are amounts
expected to be collected after one year and were $97,450 and $143,614
at December 31, 1995 and 1994, respectively. All other accounts
receivable are expected to be collected within one year.
All contracts with United States Government agencies have been audited
and settled through December 1992. In the opinion of management, any
cost disallowances which may be incurred as a result of future
government audits for periods after December 31, 1992 will not be
material to the consolidated financial statements. The Company has not
incurred significant losses as a result of government audits.
(4) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994
----------- --------
<S> <C> <C>
Raw materials $ 487,255 $400,519
Work in process 639,479 488,228
---------- --------
$1,126,734 $888,747
========== ========
</TABLE>
(5) ACCRUED LIABILITIES
Accrued liabilities include the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
-------- --------
<S> <C> <C>
Accrued payroll and payroll taxes $382,916 $432,509
Accrued other 406,237 458,023
-------- --------
$789,153 $890,532
======== ========
</TABLE>
- 20 -
<PAGE> 21
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995, 1994 and 1993
(6) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Machinery and equipment $18,671,001 $18,415,041
Furniture and fixtures 2,172,269 2,071,551
Leasehold improvements 1,109,098 1,095,130
Construction in progress 27,755 8,753
----------- -----------
$21,980,123 $21,590,475
=========== ===========
</TABLE>
Interest costs of approximately $43,000, $112,000 and $258,000 were
incurred of which $1,000, $29,000 and $16,400 were capitalized in 1995,
1994 and 1993, respectively. In connection with the construction of
equipment for internal use, the Company has capitalized overhead costs
of approximately $41,000, $352,000 and $163,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.
(7) LONG-TERM DEBT AND CREDIT ARRANGEMENTS
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, is through April 5, 1996 and interest on
the loan is at the prime rate which at December 31, 1995 was 8.5%. The
note contains restrictive covenants including provisions relating to
profitability and net worth. As of December 31, 1995, the Company has
no outstanding balance under this revolving credit line.
(8) STOCKHOLDERS' EQUITY
The Company has adopted three employee stock option plans: the 1976 and
1985 Incentive Stock Option Plans and the Non-Incentive Stock Option
Plan. These plans provide that the Board of Directors may grant options
to purchase the Company's common stock to key employees of the Company.
The options must be granted at the fair market value of the common
stock or, in the case of certain optionees, at 110% of such fair market
value at the time of the grant. The options may be exercised, subject
to certain vesting requirements, for periods of one to ten years from
the date of issue.
Through December 31, 1995, the Company issued under its Directors Stock
Option Plan 25,000 non-qualified stock options to the unaffiliated
directors of the Company for the purchase of common stock at an average
price of $3.37 per share. The options may be exercised, subject to
certain vesting requirements, for periods of one to ten years from the
date of issue.
- 21 -
<PAGE> 22
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995, 1994 and 1993
A summary of the activity of these plans follows:
<TABLE>
<CAPTION>
Number of Per Share
Shares Option Price
-------- -------------
<S> <C> <C>
Outstanding, December 31, 1992 291,012 $2.50 - $3.87
Granted 33,850 $2.75
Exercised -- --
Terminated (16,000) $2.50 - $3.25
--------
Outstanding, December 31, 1993 308,862 $2.50 - $3.87
Granted 52,888 $3.13 - $3.63
Exercised (500) $2.50
Terminated (39,500) $2.50 - $3.87
--------
Outstanding, December 31, 1994 321,750 $2.50 - $3.87
Granted 36,500 $2.00 - $2.25
Exercised --
Terminated (33,000) $2.50 - $3.87
-------- -------------
Outstanding, December 31, 1995 325,250 $2.00 - $3.87
======== =============
Shares exercisable 237,659
</TABLE>
There are 601,501 shares reserved under all plans.
(9) INCOME TAXES
Total Federal and State income tax expense (benefit) for the years
ended December 31, 1995, 1994 and 1993 consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
-------- --------- --------
<S> <C> <C> <C>
Current:
State $(32,010) $ (21,299) $ 81,000
Federal -- -- 221,000
-------- --------- --------
(32,010) (21,299) 302,000
-------- --------- --------
Deferred:
State -- -- --
Federal -- -- --
-------- --------- --------
-- -- --
-------- --------- --------
$(32,010) $ (21,299) $302,000
======== ========= ========
</TABLE>
- 22 -
<PAGE> 23
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995, 1994 and 1993
The actual income tax expense (benefit) for 1995, 1994 and 1993 differs
from the "expected" income tax expense (benefit) for the year (computed
by applying the U.S. Federal corporate income tax rate of 34% to
earnings (loss) before income taxes) as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- --------- ---------
<S> <C> <C> <C>
Computed "expected" income tax
expense (benefit) $(10,499) $ (69,000) $ 331,000
State tax, net of federal benefit (1,936) (12,000) 60,000
Increase (decrease) in valuation allowance 55,354 (112,000) (88,000)
Permanent differences 10,470 11,000 --
(Increase) decrease in tax credit carryforwards (36,172) 136,000 --
Recovery of prior year estimate -- 24,701 --
Other (49,227) -- (1,000)
-------- --------- ---------
$(32,010) $ (21,299) $ 302,000
======== ========= =========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of net deferred tax assets at December 31, 1995 are presented
below:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Accounts receivable $ 38,257 $ 18,122
Accruals 147,276 111,339
Inventory 51,733 30,057
Federal net operating loss carryforwards 102,039 124,060
General business credit carryforwards 752,998 752,998
Alternative minimum tax credit carryforwards 340,416 340,416
State net operating loss and
investment tax credit 41,205 --
----------- -----------
Total gross deferred tax assets 1,468,890 1,376,992
Less: valuation allowance (643,594) (145,627)
----------- -----------
Net deferred tax assets 825,296 1,231,365
----------- -----------
Property and equipment (786,610) (1,089,986)
Capitalized software (5,573) (10,623)
Patents (3,975) (122,702)
Research agreements (29,138) (8,054)
----------- -----------
Total gross deferred tax liabilities (825,296) (1,231,365)
----------- -----------
Net deferred tax asset (liability) $ -- $ --
=========== ===========
</TABLE>
- 23 -
<PAGE> 24
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995, 1994 and 1993
The valuation allowance for deferred tax assets as of December 31, 1994
was $145,627. The net change in the total valuation allowance for the
year ended December 31, 1995 was an increase of $497,967.
At December 31, 1995, the Company has approximately $753,000 of general
business tax credits available to offset future taxable income which
expire through 2001. The Company also has approximately $340,000 of
alternative minimum tax credits to offset future taxable income. In
addition, for income tax purposes, the Company has a net operating loss
carryforward of approximately $300,000 which expires through December
31, 2007. However, if changes in the Company's stock ownership exceed
50% of the value of the Company's stock during any three-year period,
the utilization of the net operating loss and credit carryforwards may
be subject to limitations.
(10) COMMITMENTS
CAPITAL AND OPERATING LEASES
The Company subleases its facilities from a company who leases the
building from a trust; the principal beneficiary of the trust is the
principal stockholder of the Company. The term of this sublease is ten
years with two five year renewal options. The agreement provides for
minimum rental payments plus annual increases linked with the consumer
price index. Total rent expense under this lease was $853,000, $817,000
and $808,000 in 1995, 1994 and 1993, respectively.
The Company has also entered into other non-cancelable operating
leases. Total rent expense charged to these non-cancelable leases was
$51,000, $138,000 and $134,000 in 1995, 1994 and 1993, respectively.
As of December 31, 1995 and 1994, the cost and accumulated depreciation
of assets held under capital lease are $115,226 and $90,852,
respectively.
The following is a schedule of future minimum lease payments under
capital and operating leases, together with the present value of future
minimum lease payments:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ----------
<S> <C> <C>
1996 $10,742 $ 918,846
1997 -- 907,195
1998 -- 852,582
------- ----------
Total future minimum lease payments 10,742 $2,678,623
==========
Less amount representing interest 341
-------
Present value of minimum lease payments 10,401
Less current portion 10,401
-------
Present value of minimum lease
payments, net of current portion $ 0
=======
</TABLE>
- 24 -
<PAGE> 25
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995, 1994 and 1993
(11) CASH OR DEFERRED PROFIT SHARING PLANS
In 1985, the Company adopted a profit sharing plan under Section 401(k)
of the Internal Revenue Code. This plan allows employees to defer up to
17.5% of their income on a pre-tax basis through contributions to the
plan. The Company contributes its Common Stock in an amount equal to
40% of the employee's contribution up to a maximum of 15% of the
employee's cash compensation. Expense recognized under the plan in
1995, 1994 and 1993 was $147,516, $162,145 and $143,678, respectively.
(12) EXPORT REVENUES AND SIGNIFICANT CUSTOMERS
Revenues from contracts with United States Government agencies for the
years ended December 31, 1995, 1994 and 1993 were $8,232,000,
$8,806,000 and $10,559,000, or 48%, 48% and 52% of total revenues,
respectively.
In 1995, 1994 and 1993, export revenues were $2,894,000, $3,383,000 and
$1,323,000, respectively, or 17%, 18% and 6% of total revenues,
respectively.
(13) LITIGATION
A suit has been filed against the Company, alleging a breach of
contract on a marketing agreement. The Company has instructed its
counsel to defend the litigation vigorously and to pursue the Company's
counterclaims. Trial for this suit commenced on March 11, 1992, and the
jury verdict was returned on March 27, 1992, finding, inter alia, that
both parties breached various obligations. A second trial to assess
damages resulting from the various breaches by both parties was held in
September through October 1993, as a result of which neither party is
materially obligated to the other. The Court has under advisement
certain other issues. Based on information currently available and
discussion with legal counsel, management believes that the outcome of
this matter will not be material to the Company's financial position
and results of operations.
(14) QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the consolidated quarterly results for
the years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995
Three Months Ended
----------------------------------------------------------------------------
March 31 June 30 September 30 December 31
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales and revenues $4,583,221 $4,658,630 $4,275,124 $3,935,221
Costs and expenses 4,562,783 4,635,927 4,174,000 4,090,826
Earnings (loss) before income taxes 2,804 2,163 108,592 (144,438)
Income tax expense (benefit) 0 0 47,700 (79,710)
Net earnings (loss) 2,804 2,163 60,892 (64,728)
Net earnings (loss) per share 0.00 0.00 0.02 (0.02)
</TABLE>
- 25 -
<PAGE> 26
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1994
Three Months Ended
---------------------------------------------------------------------------
March 31 June 30 September 30 December 31
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales and revenues $4,626,153 $4,256,121 $4,383,102 $ 5,135,109
Costs and expenses 4,541,902 4,537,061 4,355,357 5,086,830
Earnings (loss) before income taxes 59,811 (312,977) 20,521 29,326
Income tax expense (benefit) 18,000 (18,000) -- (21,299)
Net earnings (loss) 41,811 (294,977) 20,521 50,625
Net earnings (loss) per share 0.01 (0.10) 0.01 0.02
</TABLE>
- 26 -
<PAGE> 27
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Information concerning the directors and executive officers of the Company
is set forth under "Election of Directors" and "Executive Officers" in the
Proxy Statement for the Special Meeting in Lieu of 1996 Annual Meeting of
Stockholders ("Proxy Statement") and is incorporated herein by reference.
The Company is not aware of directors, officers or beneficial owner of
more than 10% of any class of equity securities registered pursuant to
Section 12 of the Exchange Act who failed to file on a timely basis
reports required by Section 16(a) of the Exchange Act during 1995.
ITEM 10. EXECUTIVE COMPENSATION
Information concerning executive compensation is set forth under
"Executive Compensation" in the Proxy Statement and is incorporated herein
by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is set forth under "Ownership of Securities" in the Proxy
Statement and is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is
set forth under "Other Transactions and Relationships" in the Proxy
Statement and is incorporated herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(1) EXHIBITS
The following Exhibits are either filed herewith or are incorporated
by reference to the Company's Registration Statement filed with the
Securities and Exchange Commission on October 26, 1983, as amended on
December 6 and December 8, 1983 and declared effective on December 9,
1983 ("Registration Statement") or such other documents as may be
indicated.
3 (a) Articles of Organization and Articles of Amendment,
incorporated by reference to Exhibit 3 to the Registration
Statement.
3 (b) By-Laws, as amended, incorporated by reference to Exhibit
3 (b) to the Company's Form 10-K for the fiscal year ended
December 31, 1989 filed with Securities and Exchange
Commission on March 29, 1990 ("1990 10-K").
4 (a) Convertible Subordinated Note Purchase Agreement between
the Company and Massachusetts Capital Resource Company
dated as of November 20, 1987, as amended as of August 9,
1989, January 14, 1991 and May 22, 1991, incorporated by
reference to Exhibit 10 (i) to the Company's Form 10-K
for the fiscal year ended December 31, 1991 filed with
the Securities and Exchange Commission on March 30, 1992.
- 27 -
<PAGE> 28
4 (b) Letter from the Company to Fleet Bank of Massachusetts,
N.A. ("Fleet") dated July 30, 1992.
4 (c) Security Agreement between the Company and Fleet dated as
of July 30, 1992.
10 (a) Sublease Agreement for facility at Bedford, Massachusetts
dated November 25, 1985, incorporated by reference to
Exhibit 10 (a) to the Company's Form 10-K for the fiscal
year of the Company ended December 31, 1985 filed with the
Securities and Exchange Commission on March 28, 1986 ("1986
10-K").
10 (b) Spire Corporation Incentive Stock Option Plan as amended,
and standard form of Stock Option Agreement, incorporated
by reference to Exhibit 10 (b) to the Company's Form 10-K
for the fiscal year of the Company ended December 31, 1984
filed with the Securities and Exchange Commission on April
1, 1985 ("1985 10-K").
10 (c) Contract for $3.2 million with the Army Materials
Technology Laboratory (Watertown Arsenal, Watertown,
Massachusetts) dated May 1, 1987, incorporated by reference
to Exhibit 10 (g) to the Company's Form 10-K for the fiscal
year of the Company ended December 31, 1987 filed with the
Securities and Exchange Commission on March 30, 1988.
10 (d) Contract for $3.6 million with Texas Instruments dated
November 8, 1989, incorporated by reference to Exhibit 10
(k) to the 1990 10-K.
Employee and Director Benefit Plans
10 (e) Spire Corporation Non-Incentive Stock Option Plan and
standard form of Stock Option Agreement, incorporated by
reference to Exhibit 10 (c) to the 1985 10-K.
10 (f) Spire Corporation 1985 Incentive Stock Option Plan, (see
Item 10 (b) for standard form agreement), incorporated by
reference to Exhibit 10 (d) to 1985 10-K.
10 (g) Spire Corporation Cash or Deferred Profit Sharing Plan,
including Adoption Agreement, incorporated by reference to
Exhibit 10 (e) to the 1985 10-K.
10 (h) Spire Corporation Directors' Stock Option Plan and standard
form Stock Option Agreement, incorporated by reference to
Exhibit 10 (f) to the 1986 10-K.
22 Subsidiary of the Company, incorporated by reference to
Exhibit 22 to the Company's Form 10-K for the fiscal year
ended December 31, 1988 filed with the Securities and
Exchange Commission on March 30, 1989.
23 Accountants' Consent.
27 Financial Data Schedule.
(2) REPORTS ON FORM 8-K
The Company filed no Reports on Form 8-K during the last quarter of
1995.
- 28 -
<PAGE> 29
PART IV
11-K
Supplemental Information Pursuant to Rule 15d-21 Regarding Annual Report of
Employee Benefit Plans for the fiscal year ended December 31, 1995.
Spire Corporation Cash or Deferred Profit Sharing Plan
FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS
1. Audited Statements of Net Assets Available for Plan Benefits as of
December 31, 1995 and 1994.
2. Audited Statements of Changes in Net Assets Available for Plan Benefits
for each of the years in the three year period ended December 31, 1995.
B. EXHIBITS
1. Accountants' Consent
-29-
<PAGE> 30
SPIRE CORPORATION CASH OR DEFERRED
PROFIT SHARING 401(k) PLAN
Financial Statements
December 31, 1995
(With Independent Auditor's Report Thereon)
-30-
<PAGE> 31
SPIRE CORPORATION CASH OR DEFERRED
PROFIT SHARING 401(k) PLAN
Index to Financial Statements
Independent Auditor's Report
Statements of Net Assets Available for Plan Benefits
Statements of Changes in Net Assets Available for Plan Benefits
Notes to the Financial Statements
-31-
<PAGE> 32
[GERALD P. BONDER & COMPANY LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
The Participants and Administrator of
The Spire Corporation Cash or Deferred
Profit Sharing 401(k) Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Spire Corporation Cash or Deferred Profit Sharing 401(k) Plan
as of December 31, 1995 and 1994, and the related statements of changes in net
assets available for plan benefits for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits at December
31, 1995 and 1994, and the changes in net assets available for plan benefits
for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
/s/ Gerald P. Bonder & Company, P.C.
---------------------------------------
March 26, 1996
-32-
<PAGE> 33
SPIRE CORPORATION CASH OR DEFERRED
PROFIT SHARING 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
<TABLE>
<CAPTION>
DECEMBER 31, 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments:
At fair value:
Common Stock - Spire Corporation $ 428,690 $ 420,337
Scudder Mutual Funds -- 2,015,417
At Contract value:
Hartford Fixed Income Fund 474,614 --
Hartford Group Annuity Contracts 2,177,314 --
---------- ----------
Total investments 3,080,618 2,435,754
Contribution receivable - employer 60,245 --
Participants' loan receivable 72,460 109,450
Cash 43,437 35,840
---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $3,256,760 $2,581,044
========== ==========
</TABLE>
See accompanying notes to the financial statements
-33-
<PAGE> 34
SPIRE CORPORATION CASH OR DEFERRED PROFIT SHARING 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994
---- ----
Group Fixed Mutual Company Mutual Company
Annuity Income Funds Stock Total Funds Stock Total
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Additions to Net Assets
attributed to:
Investment income:
Interest and dividends 7,956 57,241 65,197 120,128 120,128
Interest-other 675 7,210 7,885 6,743 6,743
Realized gains 305,825 305,825
Net appreciation (depreciation)
in fair value of investments
as determined by quoted
market price 64,911 (28,129) 36,782 (141,221) (233,840) (375,061)
--------------------------------------------------------------------------------------------------
64,911 8,631 370,276 (28,129) 415,689 (14,350) (233,840) (248,190)
Contributions:
Employer 150,852 150,852 155,252
Employees 114,708 12,805 249,955 4,426 381,894 360,614 4,327 394,941
--------------------------------------------------------------------------------------------------
Total additions 179,619 21,436 620,231 127,149 948,435 376,264 (74,261) 302,003
--------------------------------------------------------------------------------------------------
Transfers 2,105,843 528,714 (2,626,807) (7,750)
Deductions from Net
Assets attributed to:
Benefits paid to participants (75,536) (154,131) (41,690) (271,357) (252,550) (44,218) (296,768)
Insurance premiums paid for
participants (1,362) (1,362) (2,000) (2,000)
--------------------------------------------------------------------------------------------------
Total deductions (75,536) (154,131) (43,052) (272,719) (252,550) (46,218) (298,768)
--------------------------------------------------------------------------------------------------
Net increase (decrease) 2,285,462 474,614 (2,160,707) 76,347 675,716 123,714 (120,479) 3,325
Net assets available for
plan benefits:
Beginning of year 2,160,707 420,337 2,581,044 2,036,993 540,816 2,577,809
--------------------------------------------------------------------------------------------------
End of year 2,285,462 474,614 0 496,684 3,256,760 2,160,707 420,337 2,581,044
==================================================================================================
<CAPTION>
1993
----
Mutual Company
Funds Stock Total
--------------------------------------
<S> <C> <C> <C>
Additions to Net Assets
attributed to:
Investment income:
Interest and dividends 143,390 143,390
Interest-other 2,460 2,460
Realized gains
Net appreciation (depreciation)
in fair value of investments
as determined by quoted
market price 60,402 83,878 144,280
-------------------------------------
206,252 83,878 290,130
Contributions:
Employer 143,714 148,714
Employees 375,560 3,753 379,313
-------------------------------------
Total additions 581,812 231,345 813,157
-------------------------------------
Transfers
Deductions from Net
Assets attributed to:
Benefits paid to participants (172,506) (29,950) (202,456)
Insurance premiums paid for
participants (2,062) (2,062)
---------------------------------------
Total deductions (172,506) (32,012) (204,518)
---------------------------------------
Net increase (decrease) 409,306 199,333 608,639
Net assets available for
plan benefits:
Beginning of year 1,627,687 341,483 1,969,170
---------------------------------------
End of year 2,036,993 540,816 2,577,809
=======================================
</TABLE>
See accompanying notes to financial statements.
-34-
<PAGE> 35
SPIRE CORPORATION CASH OR DEFERRED
PROFIT SHARING 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
- -------------------------------------------------------------------------------
(1) DESCRIPTION OF PLAN
The following description of the Spire Corporation (Company) Cash or
Deferred Profit Sharing 401(k) Plan (Plan) provides only general
information. Participants should refer to the Plan agreement for a more
complete description of the Plan's provisions.
(a) General
The Plan is a salary reduction (401(k)) plan covering all full-time
employees of the Company who have three months of service and are age
twenty-one or older. It is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
(b) Contributions
1. Employer Contribution
The Company will contribute to the Plan an amount equal to 40% of an
employee's contributions up to a maximum of 6% of an employee's cash
compensation. The Company's contribution will always be used to
purchase/acquire Company common stock on the open market.
2. Employee Contribution
Employees electing to participate in the Plan may defer receipt of up
to 17.5% of their compensation subject to the limitation imposed by
the Internal Revenue Code in any one calendar year, by directing the
Company to invest the deferred amount in various investment vehicles.
The investment choices are the Company's common stock and several
investment funds offered by Hartford Life Insurance Company.
(c) Participant's Accounts
Each participant's account is credited with the participant's
contribution and the Company's match contribution, plus an allocation of
(a) plan earnings, and (b) forfeitures of terminated participants'
nonvested accounts. The benefit to which a participant is entitled is
the benefit that can be provided from the participant's account.
(d) Vesting
Participants are immediately vested in their voluntary contributions
plus actual earnings thereon. Vesting in other amounts is based on years
of continuous service. A participant is 100 percent vested after six
years of credited service.
-35-
<PAGE> 36
SPIRE CORPORATION CASH OR DEFERRED
PROFIT SHARING 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(e) Payments of Benefits
On termination of service, a participant may elect to receive either a
lump-sum amount equal to the value of his or her account, or annual
installments over a period no longer than ten years.
In addition, a participant is eligible to receive distributions under
financial hardship rules for medical, housing and education needs.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the plan administrator to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
(b) Concentration of Credit Risk
Financial instruments which subject the Plan to concentration of credit
risk principally of guaranteed investment contracts. The Plan restricts
investment of guaranteed investment contracts to financial institutions
with high credit standing.
(3) INVESTMENTS AND ADMINISTRATION OF PLAN ASSETS
Effective for the 1995 plan year, the trustees of the plan have entered into
a contract with Hartford Life Insurance Company (Hartford) to maintain
custody of assets of the plan. Under the terms of the contract, certain
assets of the plan are held in a Deposit Administration Account for the
benefit of the participants. The Deposit Administration Account consists
of:
(a) The Fixed Income Fund, which includes amounts allocated to
Hartford's General Investment Account. These amounts are guaranteed as
to principal and minimum interest earnings. The interest rate
guaranteed for the year ended December 31, 1995 was 5.60%.
(b) The Direct Participation Account, which consists of amounts allocated to
Separate Investment Accounts. The Separate Investment Accounts offered
include a growth stock fund, an international investment fund and a
capital appreciation stock fund. The amounts invested in the Direct
Participation Account are not guaranteed as to principal or minimum
interest earnings.
-36-
<PAGE> 37
SPIRE CORPORATION CASH OR DEFERRED
PROFIT SHARING 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(3) INVESTMENTS AND ADMINISTRATION OF PLAN ASSETS (continued)
The common shares of the Company and the mutual fund shares are valued at
fair value on December 31 of each year. Fair value is determined by using
quoted market values. The fixed income fund and group annuity contracts are
stated at contract value, which approximates fair value, as reported to the
plan by Hartford. During the years ended December 31, the Plan's investments
appreciated (depreciated) in value by $36,782 in 1995 and $(375,061) in
1994, and $144,280 in 1993.
(4) INCOME TAXES
The Plan qualifies for certain tax benefits under Section 401(a) and 401(k)
of the Internal Revenue code. The Federal tax consequences to employees
participating in the Plan, and to the Company, under present tax laws are as
follows:
Salary reductions designated by employees to be contributed to the Plan
from their compensation are not includable in employees' taxable income
and are not subject to Federal tax withholding at the time such
contributions are made.
Additionally, interest, dividends and other earnings on such contributions
are not subject to tax when earned. Employees will be taxed on such
contributions and earnings at the time such amounts are returned as
withdrawals or distributions.
(5) PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contribution at any time and to terminate
the Plan subject to the provisions of ERISA. In the event of plan
termination, participants will become 100 percent vested in their accounts.
(6) EXPENSES NOT INCLUDED IN THE FINANCIAL STATEMENTS
The Company pays all professional fees and other expenses related to the
Profit Sharing 401(k) Plan.
-37-
<PAGE> 38
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 March 29, 1996
----------------------
Roger G. Little
President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Roger G. Little President and Chief Executive March 29, 1996
- ----------------------------------- Officer, Chairman of the Board
Roger G. Little
/s/ Richard S. Gregorio Vice President and Chief Financial March 29, 1996
- ----------------------------------- Officer, Treasurer, Clerk,
Richard S. Gregorio Principal Accounting Officer
/s/ A. John Gale Director March 29, 1996
- -----------------------------------
A. John Gale
/s/ Carl N. Graf Director March 29, 1996
- -----------------------------------
Carl N. Graf
/s/ Udo Henseler Director March 29, 1996
- -----------------------------------
Udo Henseler
/s/ Roger W. Redmond Director March 29, 1996
- -----------------------------------
Roger W. Redmond
/s/ John A. Tarello Director March 29, 1996
- -----------------------------------
John A. Tarello
</TABLE>
- 38 -
<PAGE> 39
EXHIBIT INDEX
PAGE
EXHIBIT DESCRIPTION NUMBER
- ------- ----------- ------
23 Accountants' Consent. 40
27 Financial Data Schedule. 41
- 39 -
<PAGE> 1
ACCOUNTANTS' CONSENT
The Board of Directors
Spire Corporation:
We consent to incorporation by reference in the registration statements (Nos.:
2-97806, 33-4783, 33-16519, 33-29522 and 33-53280) on Form S-8 of Spire
Corporation of our report dated February 29, 1996, relating to the consolidated
balance sheets of Spire Corporation and subsidiary as of December 31, 1995 and
1994, and the related consolidated statements of operations, stockholders
equity, and cash flows for each of the years in the three-year period ended
December 31, 1995, which report appears in the December 31, 1995 annual report
on Form 10-KSB of Spire Corporation.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
March 29, 1996
- 40 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENT OF OPERATIONS ON FORM
10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-KSB.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 1130428
<SECURITIES> 0
<RECEIVABLES> 2498886
<ALLOWANCES> 95000
<INVENTORY> 1125734
<CURRENT-ASSETS> 5479719
<PP&E> 21980123
<DEPRECIATION> 17330271
<TOTAL-ASSETS> 10944430
<CURRENT-LIABILITIES> 3050187
<BONDS> 0
0
0
<COMMON> 35604
<OTHER-SE> 7724013
<TOTAL-LIABILITY-AND-EQUITY> 10944430
<SALES> 17452196
<TOTAL-REVENUES> 17452196
<CGS> 0
<TOTAL-COSTS> 13024957
<OTHER-EXPENSES> 4438578
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19539
<INCOME-PRETAX> (30879)
<INCOME-TAX> (32010)
<INCOME-CONTINUING> 1131
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1131
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> 0
</TABLE>
