<PAGE> 1
1996
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] For the fiscal year ended
December 31, 1996.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[No Fee Required] For the transition period from to
--------- ------------
Commission file number: 0-12742
SPIRE CORPORATION
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
Massachusetts 04-2457335
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification No.)
One Patriots Park, Bedford, Massachusetts 01730-2396 617-275-6000
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code) (Issuer's Telephone Number,
Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class
-------------------
Not applicable
Name of Each Exchange on Which Registered
------------------------------------------
Not applicable
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value, Nasdaq
------------------------------------
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
----
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. [ ]
State issuer's revenues for its most recent fiscal year: $17,388,000.
Based on the closing average price for the registrant's voting stock on February
28, 1997, the aggregate market value of such voting stock held by non-affiliates
of the registrant was $3,205,500 on February 28, 1997.
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 February
28, 1997.
Transitional Small Business Disclosure Format (Check One): Yes No X
---- ----
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the Special Meeting of
Stockholders in Lieu of 1997 Annual Meeting to be held on May 22, 1997 are
incorporated by reference into Part III of this Report.
<PAGE> 2
PART I
------
ITEM 1. DESCRIPTION OF BUSINESS
- --------------------------------
Business Development
- --------------------
Spire Corporation ("Company"), a Massachusetts corporation incorporated in 1969,
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 $18 million, but the sources of those revenues have varied among
the Company's three primary business areas.
Business of Issuer
- ------------------
The Company: (i) designs, manufactures, and markets (a) equipment that produces
photovoltaic modules which are 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; (ii) provides processing services, primarily to the
biomaterials market but also to the defense/aerospace and electronics
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. The Company has supplied photovoltaic manufacturing equipment
and process technology to the photovoltaics industry worldwide for over 15
years. The Company sells individual pieces of equipment, such as cell and module
testers, cell soldering stations, and laminators, as well as turnkey production
lines complete with comprehensive training and technology transfer. The Company
markets the equipment throughout the world and has been the world's largest
supplier of photovoltaic module manufacturing equipment, having sold to more
than 126 customers in 37 countries.
The Company offers module production lines which assemble individual solar cells
into strings; array the strings; laminate them into high quality modules using
high transmission glass and polymer; and test the performance of the assembled
modules. The Company offers a broad range of manufacturing options depending on
customer needs. Such options include more labor intensive manufacturing
processes to fully automated manufactured processes.
The Company continues to rely on in-house sales staff and a network of
in-country sales agents, generally who work on a commission basis, to reach its
market worldwide. In addition the Company has established a European office and
has contracted with an organization to act as its representative and liaison for
the Company to its customers. During 1996, the Company sold equipment to
customers in the following countries: Japan, India, United States, Saudi Arabia,
Germany, Philippines, Macao, Spain, Syria, Brazil and Portugal.
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,
United States 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, quoting
prices and accepting payment only in United States dollars and generally against
irrevocable letters of credit.
Optoelectronics
- ---------------
Metalorganic chemical vapor deposition (MOCVD) is a process used in
semiconductor fabrication in which thin films are deposited from gaseous sources
to host materials. The Company utilizes MOCVD technology in its Optoelectronics
area to produce optoelectronic wafers and devices for commercial, defense, and
other government applications. The Company
2
<PAGE> 3
pursues specific commercial product initiatives based upon its research
activities and has organized its personnel and resources into specific
commercial initiatives: MOCVD Technologies; Advanced Silicon; Display
Technology; Electronic Ceramics; III-V Photovoltaics; Lasers; and Radiation
Detectors.
The Company performs on a number of research and development contracts. During
1996 the Company continued to receive funding to further develop its
technologies. Sources of such funding included the NASA Goddard Space Flight
Center, the NASA Ames Research Center and the NASA George C. Marshall Space
Flight Center.
The Company competes in these areas primarily on the basis of technological
innovation and the availability of its extensive array of sophisticated capital
equipment (primarily MOCVD) to apply these technologies to fabricate products
and perform services. The Company competes against numerous companies for
research contracts, and many of these competitors have greater financial and
other resources than the Company.
Biomaterials
- ------------
The Company continues to address the needs of the medical community by improving
existing medical products through its ion beam technologies. The two primary
technologies employed are ion implantation and ion beam assisted deposition
(IBAD). The ion implantation process generally addresses the needs of the
orthopaedic device industry. During this process, orthopaedic devices are
bombarded by high energy beams or electrically charged ions. The ions are
imbedded within the orthopaedic device through a proprietary process which
enhances the device's capability of resisting wear. The IBAD process utilizes a
proprietary piece of equipment that the Company has developed which utilizes ion
beam technologies to deposit thin microscopic coatings onto medical devices.
Both of these processes are used on a wide variety of existing medical devices
and components in order to modify functional surface properties such as
friction, wear, surface energy, wettability, antimicrobial coatings, etc.
The Company continues its approach of entering into a variety of device-specific
strategic marketing agreements with market leaders in various device markets.
These agreements seek to provide incentives to those companies to accelerate the
introduction of products and to increase capacity. Typically the agreements call
for exclusive arrangements in return for a fee, and a price schedule based on
production volume. The introduction of certain new customer products depends on
their successful passage through various stages of review by the Food and Drug
Administration (FDA). The Company can make no assurances on the outcome of such
reviews. The Company continues to refine its interaction with customers in the
regulatory approval process in an effort to streamline their application process
to minimize unexpected delays. The Company markets its services primarily
through sales representatives in geographic areas having a particularly high
density of potential customers.
GENERAL INFORMATION
-------------------
COMPETITION
-----------
The Company sells all of its products in competitive markets. 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. Competitive factors 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.
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 22 foreign and domestic sales representatives and
distributors as of December 31, 1996. 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.
3
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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 government contract funding. The Company's internally funded
research and development expenditures in 1996 and 1995 were $84,000 and $59,000,
respectively. Revenues from materials research, process development, and
equipment engineering contracts were $6,706,000 and $8,232,000, respectively, in
such years.
Sales to the United States Government under direct contracts and subcontracts
accounted for 39% of the Company's sales for 1996 and 48% in 1995. As of
December 31, 1996, the Company was performing 48 contracts for the government.
All contracts with United States Government agencies have been audited and
settled through December 1994. The Defense Contract Audit Agency ("DCAA") has
raised certain issues for audit periods subsequent to December 31, 1994, which
if successful, will significantly decrease the Company's indirect rates which
may be applied to government contracts for periods subsequent to 1994. However,
in the opinion of management, these issues will be resolved in the favor of the
Company. To date, the Company has not incurred significant losses as a result of
government audits.
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 43 patents, of which 3 are jointly owned, and 9 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 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, 1996, the Company employed 137 people, of whom 127 were full
time. The Company has experienced no work stoppage and considers its
relationship with its employees to be excellent.
4
<PAGE> 5
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
- --------------------------
None.
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 1996.
PART II
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ITEM 5. MARKET FOR 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:
Period High Low
------ ---- ---
January 1 - March 31, 1996 $2 1/2 $2
April 1 - June 30, 1996 8 2 1/2
July 1 - September 30, 1996 3 3/4 2 1/2
October 1 - December 31, 1996 3 1/4 2 1/4
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
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 February 28, 1997
was $2.75. As of February 28, 1997, there were 245 stockholders of record.
5
<PAGE> 6
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
- -------------
Certain matters discussed in this document may be 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 below:
(a) Dependence on government agencies and other third parties for funding
contract research and service.
(b) Competition. See Item 1. Business - "Competition".
(c) Dependence on the trends of the medical industry which has faced pricing
pressures and consolidations.
(d) Management's reliance on the adequacy of certain accounting reserves.
(e) Dependence on key personnel. The success of the company is dependent on the
efforts and abilities of certain key management and technical personnel.
There is intense competition for a limited number of qualified employees
among companies in the Company's markets. The loss of certain of the
Company's employees or an inability to attract and motivate highly skilled
employees could adversely affect its business.
(f) Protection of proprietary technology. See Item 1. Business - "Patents".
FINANCIAL OVERVIEW
- ------------------
Net sales and revenues decreased in 1996 to $17,388,000 compared to $17,452,000
in 1995. The Company reported a loss for the year of $599,000 compared to a
profit of $1,000 in 1995. As a result, at December 31, 1996, the Company's
accumulated deficit was $35,000 compared to retained earnings of $564,000 as of
December 31, 1995. Working capital as of December 31, 1996 was $2,020,000,
compared to $2,430,000 as of December 31, 1995.
<TABLE>
RESULTS OF OPERATIONS
- ---------------------
1996 vs. 1995
- -------------
<CAPTION>
Revenues: 1996 1995 % Change
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Contract research and
service sales $11,447,000 $12,884,000 (11%)
Manufacturing equipment
sales 5,941,000 4,568,000 30%
----------- -----------
Net sales and revenues $17,388,000 $17,452,000 less than 1%
=========== ===========
</TABLE>
<TABLE>
Contract research and service revenues decreased 11% in 1996 to $11,447,000
compared to $12,884,000 in 1995 due to decreased government contract revenues.
The Company continues to rely less on government contracts and to focus more on
commercial activities. Manufacturing equipment sales increased 30% to $5,941,000
compared to $4,568,000 in 1995, worldwide the photovoltaic industry is expanding
which resulted in an increase in demand for the Company's equipment.
Cost of Sales: 1996 % Revenues 1995 % Revenues % Change
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contract research and
service cost of sales $ 8,938,000 78% $ 9,187,000 71% 7 %
Manufacturing equipment
cost of sales 4,312,000 73% 3,838,000 84% (11%)
----------- -----------
Total cost of sales $13,250,000 76% $13,025,000 74% 2%
=========== ===========
</TABLE>
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The cost of contract research and service revenues increased to 78% of related
sales for the year ended December 31, 1996 compared to 71% for the same period
in 1995. The increase was due to a decrease in sales volume. Cost of
manufacturing equipment was 73% of related sales in 1996 compared to 84% of
related sales in 1995. The decrease is due to increased sales.
Selling, general and administrative expenses were 27% of net sales and revenues
for 1996 as compared to 25% for 1995. The increase in selling, general and
administrative expenses as a percentage of sales is attributable to increased
sales activities.
Depreciation and amortization expenses decreased 4% in 1996 to $1,240,000 from
$1,293,000 in 1995. The decrease was due to a reduction in expenditures for
capital equipment during prior years and items becoming fully depreciated.
Expenditures for capital equipment increased 94%, totaling $758,000 in 1996
compared to $390,000 in 1995. During 1996 the Company made a major investment in
its MIS systems. The Company earned $17,000 interest income in 1996 compared to
$18,000 in 1995.
The Company incurred interest cost for 1996 in the amount of $11,000 and $43,000
in 1995, of which $2,000 was capitalized in 1996 and $1,000 in 1995. The decline
in interest expense was due to the Company's liquidation of all debt.
<TABLE>
1995 vs. 1994
- -------------
<CAPTION>
1995 1994 % Change
- ----------------------------------------------------------------------------------------
<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%
----------- -----------
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 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. 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
- ---------------------------------------------------------------------------------------------
<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 was due to changes in product mix.
Selling, general and administrative expenses were 25% 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 was 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.
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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.
The Company incurred interest cost for 1995 in the amount of $39,000 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.
Liquidity and Capital Resources
- -------------------------------
On April 5, 1996, the Company amended and extended its revolving credit facility
with the Silicon Valley Bank. The Company is currently negotiating a one year
extension to the line. 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 line has been secured by all assets of the Company.
Interest on the line is at prime. The line contains restrictive covenants
including provisions relating to profitability and net worth. As of December 31,
1996, the Company had no outstanding debt under this revolving credit line.
The Company believes it has sufficient resources to finance its anticipated
capital expenditures through working capital, existing lines of credit or
available lease arrangements.
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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, 1996 and 1995, 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, 1996. 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, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/KPMG Peat Marwick LLP
------------------------
KPMG PEAT MARWICK LLP
Boston, Massachusetts
February 28, 1997
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ITEM 7. FINANCIAL STATEMENTS
- -----------------------------
<TABLE>
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
------
December 31,
---------------
1996 1995
------------- ------------
<S> <C> <C>
Current assets:
- ---------------
Cash and cash equivalents $ 970,997 $ 1,130,428
Accounts receivable, trade (Note 3):
Amounts billed 2,333,588 2,401,536
Retainage 130,215 97,350
Unbilled costs 650,345 449,188
----------- -----------
3,114,148 2,948,074
Less allowance for doubtful accounts 100,000 95,000
----------- -----------
Net accounts receivable 3,014,148 2,853,074
----------- -----------
Inventories (Note 4) 1,020,928 1,126,734
Prepaid expenses and other current assets 287,513 369,483
----------- -----------
Total current assets 5,293,586 5,479,719
----------- -----------
Property and equipment (Note 6) 22,919,385 21,980,123
Less accumulated depreciation and amortization 18,299,072 17,330,271
----------- -----------
Net property and equipment 4,620,313 4,649,852
----------- -----------
Computer software costs (less accumulated amortization,
$791,846 in 1996 and $786,862 in 1995) 31,735 36,719
Patents (less accumulated amortization, $697,119 in 1996
and $434,490 in 1995) 385,245 518,087
Other assets 235,230 260,053
----------- -----------
652,210 814,859
----------- -----------
$10,566,109 $10,944,430
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
- --------------------
Accounts payable $ 1,233,548 $ 1,494,877
Accrued liabilities (Note 5) 654,232 789,153
Advances on contracts in progress 1,385,462 755,756
Current portion of capital lease obligation (Note 10) -- 10,401
----------- -----------
Total current liabilities 3,273,242 3,050,187
----------- -----------
Stockholders' equity (Note 8):
- ------------------------------
Common Stock, $.01 par value; shares authorized 6,000,000;
issued 3,567,185 in 1996 and 3,560,360 shares in 1995 35,672 35,604
Additional paid-in capital 8,491,066 8,468,903
Retained earnings (deficit) (34,808) 564,424
----------- -----------
8,491,930 9,068,931
Treasury stock at cost, 544,660 shares in 1996 and 537,160 shares
in 1995 (1,199,063) (1,174,688)
----------- -----------
Total stockholders' equity 7,292,867 7,894,243
----------- -----------
$10,566,109 $10,944,430
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
10
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<TABLE>
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Years Ended December 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net sales and revenues:
- -----------------------
Contract research and service revenues $11,447,000 $12,883,770 $14,537,201
Sales of manufacturing equipment 5,941,319 4,568,426 3,863,284
----------- ----------- -----------
17,388,319 17,452,196 18,400,485
----------- ----------- -----------
Costs and expenses:
- -------------------
Cost of contract research and services 8,938,034 9,187,422 10,499,727
Cost of manufacturing equipment 4,311,774 3,837,536 3,110,296
Selling, general and administrative expenses 4,746,235 4,438,578 4,911,127
----------- ----------- -----------
17,996,043 17,463,536 18,521,150
----------- ----------- -----------
Loss from operations (607,724) (11,340) (120,665)
- --------------------
Interest (income) expense, net (Note 6) (8,492) 19,539 82,654
----------- ----------- -----------
Loss before income taxes (599,232) (30,879) (203,319)
Income tax benefit (Note 9) -- (32,010) (21,299)
----------- ----------- -----------
Net earnings (loss) $ (599,232) $ 1,131 $ (182,020)
- ------------------- =========== =========== ===========
Earnings (loss) per share of common stock $ (0.20) $ 0.00 $ (0.06)
- ----------------------------------------- =========== =========== ===========
Weighted average number of common and
common equivalent shares outstanding 3,028,850 3,084,067 3,065,026
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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<TABLE>
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1996, 1995 and 1994
<CAPTION>
Common Stock Additional Treasury Stock Retained
------------------- Paid-in ------------------------- Earnings
Shares Amount Capital Shares Amount (Deficit) Total
------ ------ ------- ------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
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
Exercise of stock options 6,825 68 22,163 -- -- -- 22,231
Repurchase of treasury stock -- -- -- 7,500 (24,375) -- (24,375)
Net loss -- -- -- -- -- (599,232) (599,232)
--------- ------- ----------- ------- ----------- --------- ----------
Balance, December 31, 1996 3,567,185 $35,672 $ 8,491,066 544,660 $(1,199,063) $ (34,808) $7,292,867
========= ======= =========== ======= =========== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE> 13
<TABLE>
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended December 31,
----------------------------------------------------
1996 1995 1994
----------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (599,232) $ 1,131 $ (182,020)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization 1,240,215 1,293,114 1,392,181
Changes in assets and liabilities:
Accounts receivable (161,074) 1,083,552 627,616
Inventories 105,806 (237,987) (425,882)
Prepaid expense and other current assets 81,970 15,103 59,410
Refundable income tax -- 27,230 --
Accounts payable and accrued liabilities (396,250) 394,717) 305,673
Federal and State taxes payable -- -- (19,856)
Advances on contracts in progress 629,706 526,046 217,440
----------- ---------- -----------
Net cash provided by operating activities 901,141 2,313,472 1,974,562
----------- ---------- -----------
Cash flows from investing activities:
Additions to property and equipment (943,053) (389,647) (1,432,747)
Increase in patent costs (129,797) (100,090) (70,387)
Increase in software production costs -- -- (10,292)
Other assets 24,823 67,823 (132,687)
----------- ---------- -----------
Net cash used in investing activities (1,048,027) (421,914) (1,646,113)
----------- ---------- -----------
Cash flows from financing activities:
Net borrowings (payments) on short-term debt (10,401) (750,000) 750,000
Payments on long-term borrowings -- (47,072) (959,675)
Exercise of stock options 22,231 -- 1,250
Repurchase of common stock (24,375) (130,625) --
----------- ---------- -----------
Net cash used in financing activities (12,545) (927,697) (208,425)
----------- ---------- -----------
Net increase (decrease) in cash (159,431) 963,861 120,024
Cash and cash equivalents, beginning of year 1,130,428 166,567 46,543
----------- ---------- -----------
Cash and cash equivalents, end of year $ 970,997 $1,130,428 $ 166,567
=========== ========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense $ 4,084 $ 43,567 $ 112,000
=========== ========== ===========
Income taxes $ -- $ -- $ 138,000
=========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
13
<PAGE> 14
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
(1) NATURE OF THE BUSINESS
The Company specializes in photovoltaics, biomaterials, and
optoelectronics, technologies. Products include photovoltaic module
manufacturing equipment, ion beam based processing services for medical
components, and compound semiconductor wafers and devices.
(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:
Machinery and equipment 7 years
Furniture and fixtures 5 years
Leasehold improvements 10 years
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 the patents' useful
lives using the straight-line method.
(f) COMPUTER SOFTWARE COSTS
Capitalized computer software costs are amortized by the straight-line
method over the estimated economic life of the product. The amount of
amortization charged to expense was $8,775, $10,338 and $47,627 for
1996, 1995 and 1994, respectively. The recoverability of such costs is
reviewed on an ongoing basis.
14
<PAGE> 15
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996, 1995 and 1994
(g) INCOME TAXES
The Company accounts for income taxes under the asset and liability method.
Under this method, 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. 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, 1996, 1995 and 1994, unfunded research
and development costs were $84,493, $59,000 and $124,000, 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) 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.
(k) FINANCIAL INSTRUMENTS
Financial instruments of the Company consist of cash and cash equivalents,
accounts receivable and accounts payable. The carrying amounts of these
financial instruments approximate their fair value.
(l) IMPAIRMENT OF LONG-LIVED ASSETS TO BE DISPOSED OF
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets to be Disposed Of," on January 1, 1996.
This Statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value
less costs to sell. Adoption of this Statement did not have a material
impact on the Company's financial position, results of operations, or
liquidity.
15
<PAGE> 16
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996, 1995 and 1994
(m) STOCK BASED COMPENSATION
Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock
exceeded the exercise price. On January 1, 1996, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting
for Stock-Based Compensation, which permits entities to recognize as
expense over the vesting period the fair value of all stock-based awards on
the date of grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide pro
forma net income (loss) and pro forma earnings (loss) per share disclosures
for employee stock option grants made in 1995 and future years as if the
fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No.
25 and provide the pro forma disclosure provisions of SFAS No. 123.
(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 $130,215
and $97,350 at December 31, 1996 and 1995, 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 1994. The Defense Contract Audit Agency ("DCAA") has
raised certain issues for audit periods subsequent to December 31, 1994, which
if successful, will significantly decrease the Company's indirect rates which
may be applied to government contracts for periods subsequent to 1994. However,
in the opinion of management, these issues will be resolved in favor of the
Company. To date, the Company has not incurred significant losses as a result of
government audits.
(4) INVENTORIES
<TABLE>
Inventories consist of the following:
<CAPTION>
December 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Raw materials $ 572,309 $ 487,255
Work in process 448,619 639,479
---------- ----------
$1,020,928 $1,126,734
========== ==========
</TABLE>
16
<PAGE> 17
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996, 1995 and 1994
(5) ACCRUED LIABILITIES
<TABLE>
Accrued liabilities include the following:
<CAPTION>
December 31,
-----------------------
1996 1995
-------- --------
<S> <C> <C>
Accrued payroll and payroll taxes $289,078 $382,916
Accrued other 365,154 406,237
-------- --------
$654,232 $789,153
======== ========
</TABLE>
(6) PROPERTY AND EQUIPMENT
<TABLE>
Property and equipment consists of the following:
<CAPTION>
December 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Machinery and equipment $19,118,037 $18,671,001
Furniture and fixtures 2,603,296 2,172,269
Leasehold improvements 1,193,782 1,109,098
Construction in progress 4,270 27,755
----------- -----------
$22,919,385 $21,980,123
=========== ===========
</TABLE>
Interest costs of approximately $11,000, $43,000 and $112,000 were incurred
of which $2,000, $1,000 and $29,000 were capitalized in 1996, 1995 and
1994, respectively. In connection with the construction of equipment for
internal use, the Company has capitalized overhead costs of approximately
$50,000, $41,000 and $352,000 for the years ended December 31, 1996, 1995
and 1994, respectively.
(7) LONG-TERM DEBT AND CREDIT ARRANGEMENTS
On April 5, 1996, the Company amended and extended its revolving credit
facility with a bank. The Company is currently negotiating a one year
extension to the line. 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 line has been secured by all
assets of the Company. Interest on the line is at prime. The line contains
restrictive covenants including provisions relating to profitability and
net worth. As of December 31, 1996, the Company had no outstanding debt
under this revolving credit line.
(8) STOCKHOLDERS' EQUITY
The Company has two employee stock option plans: the 1985 Incentive Stock
Option Plan, and the 1996 Equity Incentive 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. Incentive 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
exercise price of non statutory options is determined by the Board of
Directors. The options may be exercised, subject to certain vesting
requirements, for periods up to ten years from the date of issue.
17
<PAGE> 18
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996, 1995 and 1994
Through December 31, 1996, the Company issued under its Directors Stock Option
Plan 20,000 non-qualified stock options and under its 1996 Equity Incentive Plan
5,000 non-qualified stock options to the unaffiliated directors of the Company
for the purchase of common stock at an average price of $3.22 per share. The
options may be exercised, subject to certain vesting requirements, for periods
up to ten years from the date of issue.
The Company may no longer award options under any plans except the 1996 Equity
Incentive Plan.
<TABLE>
A summary of the activity of these plans follows:
<CAPTION>
Number of Per Share
Shares Option Price
------ ------------
<S> <C> <C> <C>
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
Granted 104,425 $2.63
Exercised (6,825) $2.25 - $3.50
Terminated (23,000) $2.50 - $3.87
------- -------------
Outstanding, December 31, 1996 399,850 $2.00 - $3.87
======= =============
Shares exercisable 247,014 $2.00 - $3.87
======= =============
</TABLE>
<TABLE>
There are 566,250 shares reserved for issuance under all plans at December 31,
1996. The per share weighted-average fair value of stock options granted during
1996 and 1995 was $1.39 and $1.19, respectively, on the date of grant using the
Black Scholes option-pricing model with the following weighted-average
assumptions:
<CAPTION>
Expected Risk-Free Expected Expected
Dividend Interest Option Volatility
Year Yield Rate Life Factor
---- -------- -------- -------- ----------
<C> <C> <C> <C> <C>
1996 0% 5.07% 5 years 54.7%
1995 0% 5.05% 5 years 54.7%
</TABLE>
<TABLE>
The Company applies APB Opinion No. 25 in accounting for its plans and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation cost based on
the fair value at the grant date for its options under SFAS No. 123, the
Company's net income (loss) would have been reduced (increased) to the pro forma
amounts indicated below.
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Net Income (loss) as Reported $(599,232) $ 1,131
Net Income (loss) - Pro Forma (649,724) (20,331)
</TABLE>
18
<PAGE> 19
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996, 1995 and 1994
Pro forma net income reflects only options granted in 1996 and 1995. Therefore,
the full impact of calculating compensation cost for stock options under SFAS
No. 123 is not reflected in the pro forma net income amounts presented above
because compensation cost is reflected over the options' vesting period of five
years and compensation cost for options prior to January 1, 1994 is not
considered.
(9) INCOME TAXES
<TABLE>
Total Federal and State income tax expense (benefit) for the years ended
December 31, 1996, 1995 and 1994 consists of the following:
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
State $ -- $(32,010) $ (21,299)
Federal -- -- --
---------- -------- ---------
-- (32,010) (21,299)
---------- -------- ---------
Deferred:
State -- -- --
Federal -- -- --
---------- -------- ---------
-- -- --
---------- -------- ---------
$ -- $(32,010) $ (21,299)
========== ======== =========
</TABLE>
<TABLE>
The actual income tax expense (benefit) for 1996, 1995 and 1994 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:
1996 1995 1994
--------- ------- ---------
<S> <C> <C> <C>
Computed "expected" income tax $(201,436) (10,499) $ (69,000)
expense (benefit) (34,327) (1,936) (12,000)
State tax, net of federal benefit 298,686 55,354 (112,000)
Increase (decrease) in valuation allowance 15,289 10,470 1,000
Permanent differences
(Increase) decrease in tax credit (15,300) (36,172) 136,000
carryforwards (62,912) -- 24,701
Recovery of prior year estimate -- (49,227) --
--------- ------- ---------
Other $ -- (32,010) $ (21,299)
========= ======= =========
</TABLE>
19
<PAGE> 20
<TABLE>
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996, 1995 and 1994
The tax effects of temporary differences that give rise to significant portions
of net deferred tax assets at December 31, 1996 are presented below:
<CAPTION>
1996 1995
--------- ----------
<S> <C> <C>
Charitable contributions $ 4,168 $ --
Accounts receivable 40,270 38,257
Accruals 96,278 147,276
Inventory 112,784 51,733
Federal net operating loss carryforwards 281,651 102,039
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 84,293 41,205
---------- ----------
Total gross deferred tax assets 1,712,858 1,468,890
Less: valuation allowance (942,280) (643,594)
---------- ----------
Net deferred tax assets 770,578 25,296
---------- ----------
Property and equipment (725,815) (786,610)
Capitalized software (9,436) (5,573)
Patents (15,080) (3,975)
Research agreements (20,247) (29,138)
---------- ----------
Total gross deferred tax liabilities (770,578) (825,296)
---------- ----------
Net deferred tax asset (liability) $ -- $ --
========== ==========
</TABLE>
The valuation allowance for deferred tax assets as of December 31, 1995 was
$643,594. The net change in the total valuation allowance for the year ended
December 31, 1996 was an increase of $298,686.
At December 31, 1996 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 $828,000 which
expires through December 31, 2011. 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
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 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 agreement provides for minimum rental payments plus annual
increases linked with the consumer price index. Total rent expense under this
lease was $922,450, $853,000 and $817,000 in 1996, 1995 and 1994, respectively.
20
<PAGE> 21
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996, 1995 and 1994
The Company has also entered into other noncancelable operating leases. Total
rent expense charged to these noncancelable leases was $90,051, $51,000, and
$138,000 in 1996, 1995 and 1994, respectively.
At December 31, 1995 the cost of assets held under capital lease was $115,226.
At December 31, 1996 there were no future lease payments due under capital
lease. Future minimum lease payments under operating leases are as follows:
1997 $ 922,450
1998 922,450
1999 922,450
2000 845,579
----------
$3,612,929
==========
(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 pretax 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 1996, 1995 and 1994 was
$144,929, $147,516 and $162,145, respectively.
(12) EXPORT REVENUES AND SIGNIFICANT CUSTOMERS
Revenues from contracts with United States Government agencies for the
years ended December 31, 1996, 1995 and 1994 were $6,706,000, $8,232,000
and $8,806,000 or 39%, 48% and 48% of total revenues, respectively.
In 1996, 1995 and 1994, export revenues were $3,330,000, $2,894,000 and
$3,383,000, respectively, or 19%, 17% and 18% of total revenues,
respectively.
(13) QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
The following is a summary of the consolidated quarterly results for the years
ended December 31, 1996 and 1995:
<CAPTION>
1996
Three Months Ended
--------------------------------------------------------------------
March 31 June 30 September 30 December 31
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales and revenues $3,837,899 $4,489,053 $4,212,525 $4,848,842
Costs and expenses 4,109,847 4,466,404 4,687,649 4,732,143
Earnings (loss) before income
taxes (266,441) 33,062 (478,530) 112,677
Income tax expense (benefit) 0 0 0 0
Net earnings (loss) (266,441) 33,062 (478,530) 112,677
Net earnings (loss) per share (0.09) 0.01 (0.16) 0.04
</TABLE>
21
<PAGE> 22
<TABLE>
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996, 1995 and 1994
<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>
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 1997 Annual Meeting of
Stockholders ("Proxy Statement") and is incorporated herein by reference.
Information concerning compliance with Section 16(a) of the Exchange Act
during 1996 is set forth under "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" in the Proxy Statement and is
incorporated herein by reference.
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.
22
<PAGE> 23
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
(1) EXHIBITS
--------
The following Exhibits are either filed herewith or are incorporated
by reference as may be indicated.
3(a) Articles of Organization and Articles of Amendment,
incorporated by reference to Exhibit 3 to the Registration
Statement declared effective on December 9, 1983.
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.
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.
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").
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.
10(i) Spire Corporation 1996 Equity Incentive Plan, incorporated
by reference to Exhibit 99 to Registration Statement
333-22223, filed February 21, 1997.
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.
23.1 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
1996.
23
<PAGE> 24
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, 1996.
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, 1996 and 1995.*
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, 1996.*
B. EXHIBITS
--------
1. Accountants' Consent.
2. Financial Data Schedule.
- ----------------------------
* To be filed by amendment.
24
<PAGE> 25
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 28, 1997
-------------------------
Roger G. Little
President, Chief Executive Officer
and Chairman of the Board
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.
Signature Title Date
--------- ----- ----
/s/Roger G. Little President ,Chief Executive March 28, 1997
- --------------------- Officer and Chairman of the
Roger G. Little Board
/s/Richard S. Gregorio Vice President and Chief March 28, 1997
- --------------------- Financial Officer,
Richard S. Gregorio Treasurer, Clerk,
Principal Accounting Officer
/s/A. John Gale Director March 28, 1997
- --------------------
A. John Gale
/s/Carl N. Graf Director March 28, 1997
- --------------------
Carl N. Graf
/s/Udo Henseler Director March 28, 1997
- --------------------
Udo Henseler
/s/Roger W. Redmond Director March 28, 1997
- --------------------
Roger W. Redmond
/s/John A. Tarello Director March 28, 1997
- --------------------
John A. Tarello
25
<PAGE> 26
EXHIBIT INDEX
PAGE
EXHIBIT DESCRIPTION NUMBER
- ------- ----------- ------
23.1 Accountants' Consent. 27
27 Financial Data Schedule. 28
26
<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, 33-53280 and 333-22223) on Form S-8 of
Spire Corporation of our report dated February 28, 1997, relating to the
consolidated balance sheets of Spire Corporation and subsidiary as of December
31, 1996 and 1995, 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, 1996, which report appears in the December 31, 1996
annual report on Form 10-KSB of Spire Corporation.
/s/ KPMG Peat Marwick LLP
----------------------------
KPMG PEAT MARWICK LLP
Boston, Massachusetts
March 28, 1997
27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS ON FORM
10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-KSB.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 970,997
<SECURITIES> 0
<RECEIVABLES> 3,114,148
<ALLOWANCES> 100,000
<INVENTORY> 1,020,928
<CURRENT-ASSETS> 5,293,586
<PP&E> 22,919,385
<DEPRECIATION> 18,299,072
<TOTAL-ASSETS> 10,566,109
<CURRENT-LIABILITIES> 3,273,242
<BONDS> 0
0
0
<COMMON> 35,672
<OTHER-SE> 7,292,867
<TOTAL-LIABILITY-AND-EQUITY> 10,566,109
<SALES> 0
<TOTAL-REVENUES> 17,388,319
<CGS> 0
<TOTAL-COSTS> 13,249,808
<OTHER-EXPENSES> 4,746,235
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (8,492)
<INCOME-PRETAX> (599,232)
<INCOME-TAX> 0
<INCOME-CONTINUING> (599,232)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (599,232)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
