<PAGE> 1
1997
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1997.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number: 0-12742
SPIRE CORPORATION
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(Exact Name of Small Business Issuer as Specified in Its Charter)
<TABLE>
<S> <C>
Massachusetts 04-2457335
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(State or Other Jurisdiction of Incorporation or Organization (I.R.S. Employer Identification No.)
</TABLE>
One Patriots Park, Bedford, Massachusetts 01730-2396
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(Address of Principal Executive Offices) (Zip Code)
617-275-6000
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(Issuer's Telephone Number, Including Area Code)
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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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. There were 3,033,185 shares of the
issuer's only class of common equity, Common Stock, $.01 par value, on April 30,
1997.
Transitional Small Business Disclosure Format (Check One): Yes No X
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SPIRE CORPORATION
INDEX
Page Number
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PART I - FINANCIAL INFORMATION
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Condensed Consolidated Balance Sheets 3
March 31, 1997 and December 31, 1996
Condensed Consolidated Statements of Operations 4
For the Three Months Ended March 31, 1997 and 1996
Condensed Consolidated Statements of Cash Flows 5
For the Three Months Ended March 31, 1997 and 1996
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial 7 & 8
Condition and Results of Operations
PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K. 8
2
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SPIRE CORPORATION AND SUBSIDIARY
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
------
March 31, December 31,
1997 1996
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<S> <C> <C>
Current assets:
- --------------
Cash and cash equivalents $ 219,079 $ 970,997
Accounts receivable, trade:
Amounts billed 2,888,290 2,333,588
Retainage 210,878 130,215
Unbilled costs 555,966 650,345
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3,655,134 3,114,148
Less allowance for doubtful accounts 135,000 100,000
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Net accounts receivable 3,520,134 3,014,148
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Inventories (Note 2) 1,953,927 1,020,928
Prepaid expenses and other current assets 424,872 287,513
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Total current assets 6,118,012 5,293,586
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Property and equipment 23,083,422 22,919,385
Less accumulated depreciation and amortization 18,560,014 18,299,072
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Net property and equipment 4,523,408 4,620,313
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Computer software costs (less accumulated amortization,
$799,160 in 1997 and $795,637 in 1996) 62,441 31,735
Patents (less accumulated amortization,
$494,166 in 1997 and $697,119 in 1996) 312,173 385,245
Other assets 15,938 235,230
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390,552 652,210
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$11,031,972 $10,566,109
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
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Accounts payable $ 1,286,153 $ 1,233,548
Accrued liabilities 626,624 654,232
Advances on contracts in progress 1,696,659 1,385,462
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Total current liabilities 3,609,436 3,273,242
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Stockholders' equity:
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Common Stock, $.01 par value; shares authorized 6,000,000; issued
3,567,185 shares in 1997 and 1996 35,672 35,672
Additional paid-in capital 8,491,066 8,491,066
Retained earnings (deficit) 115,486 (34,808)
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8,642,224 8,491,930
Treasury stock at cost, 552,160 shares in 1997 and 547,160 shares in 1996 (1,219,688) (1,199,063)
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Total stockholders' equity 7,422,536 7,292,867
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$11,031,972 $10,566,109
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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SPIRE CORPORATION AND SUBSIDIARY
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
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<S> <C> <C>
Net sales and revenues:
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Contract research and service revenues $3,133,491 $2,601,909
Sales of manufacturing equipment 1,317,208 1,235,990
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Total sales and revenues 4,450,699 3,837,899
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Costs and expenses:
- -------------------
Cost of contract research and services 2,074,106 1,929,966
Cost of manufacturing equipment 856,108 1,075,971
Selling, general and administrative expenses 1,373,808 1,103,910
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Total costs and expenses 4,304,022 4,109,847
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Earnings (loss) from operations 146,677 (271,948)
- ------------------------------- ---------- ----------
Interest income, net 3,617 5,507
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Earnings (loss) before income taxes 150,294 (266,441)
Income tax expense 0 0
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Net earnings (loss) $ 150,294 $ (266,441)
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Earnings (loss) per share of common stock $ 0.05 $ (0.09)
- ----------------------------------------- ========== ==========
Weighted average number of common and
common equivalent shares outstanding 3,020,025 3,025,219
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
SPIRE CORPORATION AND SUBSIDIARY
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 150,294 $(266,441)
Adjustments to reconcile net earnings (loss) to
net cash used in operating activities:
Depreciation and amortization 309,250 291,574
Changes in assets and liabilities:
Accounts receivable (505,986) 105,659
Inventories (932,999) (331,958)
Prepaid expense and other current assets (137,359) 78,941
Accounts payable and accrued liabilities 24,997 (599,645)
Advances on contracts in progress 311,197 89,666
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Net cash used in operating activities (780,606) (632,204)
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Cash flows from investing activities:
Additions to property and equipment (135,435) (111,451)
Increase in patent costs (315) (6,097)
Increase in software production costs (34,229) (25,540)
Other assets 219,292 (50,249)
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Net cash provided by (used in) investing activities 49,313 (193,337)
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Cash flows from financing activities:
Net borrowing (payments) on short-term debt 0 0
Payments on long-term borrowings 0 (3,401)
Exercise of stock options 0 0
Repurchase of common stock (20,625) (10,625)
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Net cash used in financing activities (20,625) (14,026)
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Net decrease in cash and cash equivalents (751,918) (839,567)
Cash and cash equivalents, beginning of period 970,997 ,130,428
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Cash and cash equivalents, end of period $ 219,079 $ 290,861
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the quarter for:
Interest expense $ 0 $ 0
========= =========
Income taxes $ 0 $ 0
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(1) Interim Financial Statements
----------------------------
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
fairly present the Company's financial position as of March 31, 1997 and
December 31, 1996 and the results of operations and changes in cash flows
for the three months ended March 31, 1997 and 1996. The results of
operations for the three months ended March 31, 1997 are not necessarily
indicative of the results to be expected for the fiscal year ending
December 31, 1997.
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, 1996.
The financial statements, with the exception of the December 31, 1996
balance sheet, are unaudited and have not been examined by independent
public accountants.
(2) Inventories
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<TABLE>
<CAPTION>
Inventories consist of the following: March 31, December 31,
1997 1996
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<S> <C> <C>
Raw materials $ 564,812 $ 572,309
Work in process 1,389,115 448,619
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$1,953,927 $1,020,928
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</TABLE>
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OFOPERATIONS.
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Results of Operations
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<TABLE>
Net sales and revenues for the quarter ended March 31, 1997 increased 16% to
$4,451,000 compared to $3,838,000 for the quarter ended March 31, 1996. For the
quarter ended March 31, 1997, the Company had net earnings of $150,000 compared
to a net loss of $266,000 for the quarter ended March 31, 1996. The retained
earnings were $115,000 as of March 31, 1997 compared to an accumulated deficit
of $35,000 as of December 31, 1996. Working capital as of March 31, 1997 was
$2,509,000 compared to $2,020,000 as of December 31, 1996.
<CAPTION>
March 31, March 31, %
Revenues for the quarter ended: 1997 1996 Change
- ------------------------------ ---------- --------- ------
<S> <C> <C> <C>
Contract research and service revenues $3,134,000 $2,602,000 20%
Manufacturing equipment sales 1,317,000 1,236,000 7%
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Net sales and revenues $4,451,000 $3,838,000 16%
========== ==========
</TABLE>
<TABLE>
Net sales and revenues for contract research and services for the quarter ended
March 31, 1997 increased 20% to $3,134,000 compared to $2,602,000 in 1996. The
increase in contract revenue is a result of increased funding from the federal
government. Manufacturing equipment sales increased 6% to $1,317,000 compared to
$1,236,000 in the same period of 1996, due to increased market demand for
photovoltaic equipment.
<CAPTION>
March 31, % of March 31, % of %
Cost of sales for the quarter ended: 1997 Revenues 1996 Revenues Change
- ----------------------------------- ---------- -------- ---------- -------- ------
<S> <C> <C> <C> <C> <C>
Contract research and service cost of sales $2,074,000 66% $1,930,000 74% 7%
Manufacturing equipment cost of sales 856,000 65% 1,076,000 87% (20%)
---------- ----------
Total cost of sales $2,930,000 66% $3,006,000 78% (3%)
========== ==========
</TABLE>
The cost of contract research and service revenues decreased to 66% for the
three months ended March 31, 1997 compared to 74% for the three months ended
March 31, 1996. The decline is due to increased volume. Cost of manufacturing
equipment decreased to 65% for the three months ended March 31, 1997 compared to
87% for the three months ended March 31, 1996. The decrease in total cost of
sales is due to increased efficiencies in the manufacturing process.
Selling, general and administrative expenses for the three months ended March
31, 1997 were 31% of sales compared to 29% of sales for the three months ended
March 31, 1996. Selling, general and administrative expenses increased as a
percentage of sales due to an increase in certain fixed costs, particularly
sales and marketing expenditures. Depreciation and amortization expenses for the
three months ended March 31, 1997 increased 6% to $309,000 compared to $292,000
in 1996. Expenditures for capital equipment were $135,000 for the three months
ended March 31, 1997 compared to $111,000 for the three months ended March 31,
1996.
Liquidity and Capital Resources
- -------------------------------
On March 24, 1997, the Company extended its revolving credit facility with the
Silicon Valley 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 line has been secured by all assets of the Company.
Interest on the line is at prime plus 1/2%. The line contains restrictive
covenants including provisions relating to profitability and net worth. As of
March 31, 1997, the Company had no outstanding balance under this revolving
credit line.
7
<PAGE> 8
The Company believes it has sufficient resources to finance its anticipated
capital expenditures through working capital, existing lines of credit or
available lease arrangements.
New Accounting Pronouncement
- ----------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS 128
establishes a different method of computing net income per share than is
currently required under the provisions of Accounting Principles Board Opinion
No. 15. Under SFAS No. 128, the Company will be required to present both basic
net income per share and diluted net income per share. Basic net income per
share is expected to be higher than the currently presented net income per share
as the effect of dilutive stock options will not be considered in computing
basic net income per share. The impact on diluted net income per share is not
expected to be material.
The Company plans to adopt SFAS No. 128 in its fiscal quarter ending December
31, 1997 and at that time all historical net income per share data presented
will be restated to conform to the provisions of SFAS No. 128.
THE FOREGOING STATEMENTS MAY INCLUDE FORWARD-LOOKING STATEMENTS SUBJECT TO RISKS
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE INDICATED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH
A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED OR REFERRED TO IN
THIS REPORT AND IN ITEM 6 OF THE ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED
DECEMBER 31, 1996.
PART II - OTHER INFORMATION
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- -----------------------------------------
A. Exhibits - No exhibits have been included.
B. During the quarter ended March 31, 1997, the Company filed one
report on Form 8-K dated March 11, 1997, with respect to Items 5 and 7.
8
<PAGE> 9
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SPIRE CORPORATION
(Registrant)
14 May 1997 By: /s/Roger G. Little
----------- ----------------------
Date Roger G. Little
President, Chief Executive Officer
and Chairman of the Board
14 May 1997 By: /s/Richard S. Gregorio
----------- ----------------------
Date Richard S. Gregorio
Vice President and Chief Financial
Officer, Treasurer, Clerk and
Principal Accounting Officer
9
<PAGE> 10
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SPIRE CORPORATION
(Registrant)
14 May 1997 By:
----------- ----------------------
Date Roger G. Little
President, Chief Executive Officer
and Chairman of the Board
14 May 1997 By:
----------- ----------------------
Date Richard S. Gregorio
Vice President and Chief Financial
Officer, Treasurer, Clerk and
Principal Accounting Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS ON FORM 10-
QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 219,079
<SECURITIES> 0
<RECEIVABLES> 3,655,134
<ALLOWANCES> 135,000
<INVENTORY> 1,953,927
<CURRENT-ASSETS> 6,118,012
<PP&E> 23,083,422
<DEPRECIATION> 18,560,014
<TOTAL-ASSETS> 11,031,972
<CURRENT-LIABILITIES> 3,609,436
<BONDS> 0
35,672
0
<COMMON> 0
<OTHER-SE> 7,386,864
<TOTAL-LIABILITY-AND-EQUITY> 11,031,972
<SALES> 0
<TOTAL-REVENUES> 4,450,699
<CGS> 0
<TOTAL-COSTS> 2,930,214
<OTHER-EXPENSES> 1,373,808
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,617
<INCOME-PRETAX> 150,294
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 150,294
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0
</TABLE>
