<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 3, 1997
REGISTRATION NO. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SPIRE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2457335
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
</TABLE>
ONE PATRIOTS PARK
BEDFORD, MASSACHUSETTS 01730-2396
(781) 275-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROGER G. LITTLE,
CHIEF EXECUTIVE OFFICER
SPIRE CORPORATION
ONE PATRIOTS PARK
BEDFORD, MA 01730-2396
(781) 275-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
LAUREN JENNINGS, ESQ. PAUL D. BROUDE, ESQ.
GOLDSTEIN & MANELLO, P.C. STROOCK & STROOCK & LAVAN LLP
265 FRANKLIN STREET 100 FEDERAL STREET
BOSTON, MA 02110 BOSTON, MA 02110
(617) 439-8900 (617) 482-6800
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF SHARES TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) FEE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Common Stock........................ 1,725,000 $17.72 $30,567,000 $9,017
</TABLE>
================================================================================
(1) Includes 225,000 shares that the Underwriters have the option, exercisable
within thirty (30) days, to purchase solely to cover over-allotments.
(2) Estimated based on the average of the high and low prices reported by the
National Association of Securities Dealers Automated Quotation ("Nasdaq")
National Market on December 3, 1997.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 3, 1997
PROSPECTUS
1,500,000 SHARES
[SPIRE LOGO]
COMMON STOCK
Of the 1,500,000 shares of Common Stock offered hereby, 1,000,000 shares
are being sold by Spire Corporation ("Spire" or the "Company") and 500,000
shares are being sold by certain stockholders of the Company (the "Selling
Stockholders"). See "Principal and Selling Stockholders." The Company will not
receive any of the proceeds from the sale of the shares by the Selling
Stockholders. The Common Stock is quoted on the Nasdaq National Market under the
symbol "SPIR." On December 3, 1997, the last reported sale price for the Common
Stock, as reported on the Nasdaq National Market, was $17.50 per share. See
"Price Range of Common Stock."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
<TABLE>
<CAPTION>
PROCEEDS
PRICE TO UNDERWRITING PROCEEDS TO TO SELLING
PUBLIC DISCOUNTS(1) COMPANY(2) STOCKHOLDERS(2)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
- --------------------------------------------------------------------------------------
Total(3)..................... $ $ $ $
</TABLE>
================================================================================
(1) The Company has agreed to reimburse the Underwriters for up to $100,000 of
their expenses in connection with the offering. The Company and the Selling
Stockholders have also agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company estimated
at $447,000 (including up to $100,000 of the Underwriters' expenses) and
payable by the Selling Stockholders estimated at $3,000.
(3) The Company and a Selling Stockholder have each granted the Underwriters a
30-day option to purchase up to a maximum of 180,000 and 45,000 additional
shares of Common Stock, respectively, for a total maximum of 225,000 shares
of Common Stock, to cover over-allotments, if any. If such options are
exercised in full, the total "Price to Public," "Underwriting Discounts,"
"Proceeds to Company" and "Proceeds to Selling Stockholders" will be
$ , $ , $ and $ ,
respectively. See "Underwriting."
------------------------
The shares of Common Stock are being offered by the Underwriters, subject
to prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the certificates representing the shares of Common Stock will be
made in Boston, Massachusetts, on or about , 1998.
------------------------
TUCKER ANTHONY
INCORPORATED
FIRST ALBANY CORPORATION
ADVEST, INC.
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE> 3
SPIRE LOGO
A time line using pictures and captions detailing key technology and product
development milestones in the photoroltaics, optoelectronics and biomedical
areas.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY, INCLUDING OVER-ALLOTMENTS, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. SUCH TRANSACTIONS, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK
OFFERED HEREBY ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE
"UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Consolidated Financial Statements
and Notes thereto, appearing elsewhere in this Prospectus or incorporated herein
by reference. The discussion in this Prospectus contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act") that involve risks and uncertainties. The
Company's actual results and the timing of certain events may differ materially
from the results discussed in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business." Except as otherwise noted,
all information in this Prospectus assumes no exercise of the Underwriters'
over-allotment options to purchase up to 225,000 shares of Common Stock and does
not reflect the exercise after November 30, 1997 of options issued under the
Company's stock option plans.
THE COMPANY
Spire develops, manufactures and markets highly-engineered photovoltaic
module manufacturing equipment and optoelectronic products and provides
biomedical processing services. Spire is the world's leader in the design and
manufacture of specialized equipment for the production of terrestrial
(land-based) photovoltaic modules from solar cells, with its equipment installed
in over 130 factories and in more than 30 countries. The Company also offers
certain optoelectronic products and is continuing to develop additional advanced
optoelectronic products for telecommunications, biomedical and electronics
applications, including solar cells used to power satellites. Spire's
value-added biomedical processing services offer surface treatments to enhance
the durability or antimicrobial characteristics of orthopedic and other medical
devices.
Photovoltaics, the technology of using solar cells to convert sunlight
directly into electricity, is a growing alternative energy production method and
an increasingly important component of world energy production, particularly in
the wireless telecommunications sector. With this technology, electricity is
produced by using photovoltaic modules, which consist of a number of solar cells
connected to each other and laminated in reliable and durable support
structures. The Company believes that it is the only company that manufactures
each piece of equipment necessary for a complete production line that fabricates
photovoltaic solar cells into modules. The Company's module manufacturing
equipment and production line configurations offer its customers a range of
manufacturing processes, from relatively labor intensive to fully automated
systems. Spire's products include solar cell testers, cell tabbing and stringing
assemblers, laminators and sun simulator module testers, as well as turnkey
module production lines complete with comprehensive technology, training and
service support.
Spire's market leadership and international reputation for quality
manufacturing and process technology position the Company to capitalize further
on the expanding global photovoltaic market. In the past five years, global
usage of terrestrial photovoltaic power has increased substantially, due to such
factors as rural electrification in the developing world, the accelerated growth
of wireless telecommunications, with its need for wireless power, and increased
environmental concerns encouraging the use of renewable energy sources.
Awareness and acceptance of photovoltaics as an energy source are receiving
significant support from initiatives such as the PV Rooftop Program in Japan,
the Building Integration Program in Germany and the Clinton Administration's
recently announced "Million Solar Roofs Initiative."
Projections by industry experts of growth in worldwide demand for
photovoltaic modules range from 25% to 50% per year through the year 2002. In
order to meet this increasing demand, manufacturers of photovoltaic modules must
increase their manufacturing capacity by adding capital equipment, including the
types of capital equipment offered by the Company. Industry experts estimate
that in 1997 annual worldwide module production capacity increased by at least
34%, or 44 megawatts. Photovoltaic module manufacturers already have announced
plans to expand worldwide module production capacity by 100 megawatts in 1998,
which would be a 58% increase over 1997 production capacity. The Company
believes that the 1998 market for photovoltaic module manufacturing equipment
will be approximately $25 million to $40 million, compared to a 1997 market of
approximately $20 million for such equipment.
3
<PAGE> 5
In addition to projected growth in the terrestrial photovoltaic market, the
proliferation of satellites resulting from the increasing need for
telecommunications bandwidth has created demand for specialized photovoltaic
cells to power satellites. According to industry experts, telecommunications
companies worldwide plan to launch more than 500 satellites in the next five
years. Based upon published reports, the Company believes there may be
insufficient manufacturing capacity in the industry to meet the increasing
demand for space solar cell production. The Company has developed extensive
technology and expertise as a result of more than 25 years of relevant contract
research for the U.S. government and commercial customers, and the Company
believes these capabilities provide the opportunity to enter the market for
space solar cells with commercial product offerings.
Spire is a leading U.S. provider of surface treatments for medical devices,
utilizing its ion implantation and ion beam assisted deposition (IBAD)
technologies. Spire's surface processing technologies have evolved from the
Company's silicon wafer ion implantation technology for solar cell applications.
These surface treatments improve the durability or antimicrobial characteristics
of invasive medical devices such as orthopedic implants and catheters. The aging
of the U.S. population has contributed to greater demand for joint replacement
procedures; longer and more active lives have led to the demand for enhanced
device durability and performance. Medical industry initiatives aimed at
lowering costs have focused efforts on reducing the incidence of infection,
which has created demand for antimicrobial treatment of catheters and other
invasive medical devices.
Spire's more than 25 years of advanced research in photovoltaics and
optoelectronics have resulted in a strong array of proprietary technologies.
These technologies have led to the Company's current product and service
offerings in photovoltaics and in medical device treatments, and have further
potential commercial applications in terrestrial and space solar cell
production, in other optoelectronic products and in enhancing the performance of
additional medical devices. Much of the Company's development of its core
technologies and the application of these technologies to commercial products
has been funded by the U.S. government under contracts providing that the
Company retains proprietary rights to all developments. The Company anticipates
that much of its future development efforts will continue to be funded by the
U.S. government and other outside sources.
The Company was incorporated in 1969 in Massachusetts. As used in this
Prospectus, the terms "Spire" and the "Company" include Spire and its
wholly-owned subsidiary, Spire International Sales Corporation. Spire's
executive offices are located at One Patriots Park, Bedford, Massachusetts
01730-2396. The Company's telephone number is (781) 275-6000.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company.......... 1,000,000 Shares
Common Stock Offered by the Selling Stockholders.. 500,000 Shares
Common Stock Outstanding Before the
Offering................................... 3,197,347 Shares(1)
Common Stock to be Outstanding After the
Offering................................... 4,197,347 Shares(1)
Net Proceeds to the Company from the
Offering................................... $ (2)
Use of Proceeds.............................. To invest in capital expenditures to expand
manufacturing capacity and semiconductor
production facilities, primarily for the
production of space solar cells; to invest in
capital equipment and marketing to support
biomedical service offerings; to upgrade
information and communications systems; and to
contribute to working capital and general
corporate purposes. See "Use of Proceeds."
NASDAQ National Market Symbol................ SPIR
</TABLE>
- ---------------
(1) Based upon 3,197,347 shares of Common Stock of the Company outstanding as of
November 30, 1997. Excludes 240,928 shares of Common Stock issuable upon the
exercise of options granted to employees and directors of the Company at a
weighted average exercise price of $3.71 per share as of November 30, 1997.
(2) Estimated based on an assumed public offering price of $ per share.
4
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data presented below under the captions
"Statements of Operations Data" and "Balance Sheet Data" for, and as of the end
of, each of the years in the five-year period ended December 31, 1996, are
derived from, and are qualified by reference to, the Company's Consolidated
Financial Statements, which financial statements have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. Such data should be read
in conjunction with the Company's Consolidated Financial Statements and Notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included or incorporated by reference in this Prospectus.
The consolidated financial statements as of December 31, 1995 and 1996, and for
each of the years in the three-year period ended December 31, 1996, and the
independent auditors' report thereon, are included elsewhere in this Prospectus.
The statements of operations data for the nine months ended September 30, 1996
and 1997, and the balance sheet data as of September 30, 1997, are derived from
unaudited consolidated financial statements that include, in the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the information set forth therein. The
results of operations for the nine months ended September 30, 1997 or any other
period are not necessarily indicative of future results.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales and revenues............................. $17,318 $20,135 $18,400 $17,452 $17,388 $12,539 $17,060
Gross profit....................................... 4,076 6,271 4,790 4,427 4,139 2,660 5,947
Earnings (loss) from operations.................... (1,430) 1,215 (121) (11) (608) (718) 1,663
Net earnings (loss)................................ $(1,571) $ 671 $ (182) $ 1 $ (599) $ (712) $ 1,577
Net earnings (loss) per share of common stock...... $ (0.51) $ 0.22 $ (0.06) $ 0.00 $ (0.20) $ (0.24) $ 0.48
Weighted average number of common and common
equivalent shares outstanding.................... 3,065 3,076 3,065 3,084 3,029 3,031 3,275
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
--------------------------
ACTUAL AS ADJUSTED(1)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................. $1,403 $
Working capital....................................................................... 4,878
Total assets.......................................................................... 11,807
Long-term debt........................................................................ -- --
Stockholders' equity.................................................................. 9,770
</TABLE>
- ---------------
(1) Adjusted to reflect the sale of the 1,000,000 shares of Common Stock offered
by the Company hereby at an assumed public offering price of $ per share
and the initial application of the estimated net proceeds to the Company as
described under "Use of Proceeds."
5
<PAGE> 7
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should consider the following risk factors inherent in and affecting
the business of the Company. The discussion in this Prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act that involve risks and uncertainties.
Such statements include market size, market growth rates and market share
estimates, about which the Company cannot provide any assurances of accuracy.
The Company's actual results and the timing of certain events may differ
materially from the results discussed in the forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed below and in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business."
DEPENDENCE ON MARKET GROWTH. The ability of the Company to sustain or
expand its business depends substantially on the stability and growth of the
various markets for the Company's products and services.
The growth of the photovoltaic market is tied to the continued growth of
worldwide need for wireless power, especially in the developing world, and on
domestic and international government funding of initiatives to promote solar
energy as an alternative to the burning of fossil fuels and other energy
production methods. There can be no assurance that government funding for such
initiatives will continue to be available, or that solar energy will prove to be
a cost-effective alternative to other energy sources and gain acceptance where
traditional energy sources continue to be available. Most of the Company's
revenues from its optoelectronics activities are generated by research and
development contracts with the U.S. government. There can be no assurance that
the U.S. government will continue to fund research and development projects at
the same or higher levels than it has in the past. The growth of the Company's
biomedical business depends on the condition of the health care system and the
industry sectors serving that system. The health care system recently has been
characterized by pricing pressures and consolidations which could reduce or
eliminate demand for the Company's processing services. The merger or
consolidation of manufacturers of orthopedic and other medical devices could
reduce the number of customers for the Company's biomedical processing services.
See "Risk Factors -- Dependence on Outside Funding for Research and Development"
and "Business -- Growth Strategy."
COMPETITION. The Company sells its products and services in competitive
markets. Entities now operating in related markets may enter the Company's
markets. Some of the Company's current and potential competitors have 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, financial resources, product quality, timely delivery,
service and price. Although the Company believes that there are considerable
barriers to entry into the markets it serves, including a significant investment
in specialized capital equipment and product design and development, and the
need for a staff with sophisticated scientific and technological knowledge,
there can be no assurance that new or existing entities will not seek to enter
the Company's markets.
The Company faces competition from various companies in the terrestrial
photovoltaic module manufacturing equipment market, particularly in Japan. The
Company's more technologically sophisticated and highly automated photovoltaic
module manufacturing equipment competes with more labor intensive alternatives.
Furthermore, the Company competes in foreign countries where there may be a
preference for doing business with local companies. In addition, large
manufacturers may from time to time produce certain items of equipment for their
own internal use, eliminating the purchase of such equipment from commercial
vendors. For its optoelectronics and biomedical products and services, the
Company competes on the basis of overall quality of service and price, and at
times on the basis of value added. The Company's products and services also
compete against products based on alternate technologies. In the space solar
cell market, which the Company anticipates entering, the Company will face
competition from larger, established companies with greater financial resources
than the Company. The expansion of this market may attract more companies to
enter the market, and may cause companies already in the market to expand
capacity, which may affect the ability of the Company to compete effectively. In
addition, the Company faces competition from numerous other businesses,
particularly small businesses throughout the United States, for contracts for
research and
6
<PAGE> 8
development funded by the U.S. government and other outside sources. See
"Business -- Sales and Marketing" and "-- Competition."
DEPENDENCE ON OUTSIDE FUNDING FOR RESEARCH AND DEVELOPMENT. Substantially
all of the Company's research and development work is funded by the U.S.
government and other outside sources. Loss of outside funding may materially
adversely affect the Company's ability further to develop its proprietary
technologies and applications of these technologies to its current products and
products under development. If the Company is unable to maintain its current
level of such funding for any reason, the Company would need to generate funds
for such research from other sources, reduce its research and development effort
or increase its internal research and development. An increase in internally
funded research and development would have a negative impact on profitability.
U.S. government contracts are cancelable without the Company's consent.
Furthermore, all companies that are parties to cost-plus contracts with the U.S.
government are subject to annual government audit and possible recapture of
payments. While the Company has not incurred significant losses as a result of
government audits to date, the Defense Contract Audit Agency has not yet audited
the Company's contracts for 1996, and any such audit may affect payments
received for work performed by the Company and the rates at which the Company is
reimbursed for future government contracts. Loss of a number of U.S. government
or other research and development contracts could have a material adverse effect
on the Company's business, results of operations or financial condition. See
"Risk Factors -- Risk of Backlog" and "-- Government Regulation" and "Business
- -- Research and Development."
DEPENDENCE ON EXPORT SALES. For the fiscal years ended December 31, 1995
and 1996 and the nine month period ended September 30, 1997, export sales from
the United States accounted for approximately 17%, 19% and 36%, respectively, of
the Company's net sales and revenues. Substantially all of the Company's
international revenues are derived from sales of its photovoltaic module
manufacturing equipment. The Company anticipates that international sales will
continue to account for a significant portion of net sales and revenues. The
Company intends to continue to expand its export sales and to enter additional
international markets, which may require significant management attention and
financial resources. The Company's operating results are subject to the risks
inherent in international sales, including, but not limited to, regulatory
requirements, political and economic changes and disruptions, transportation
delays, national preferences for locally manufactured products and import duties
or other taxes which may affect the prices of the Company's products in other
countries relative to competitors' products. In addition, present or future U.S.
government trade restrictions relating to sales to certain countries may limit
the Company's ability to sell its products in the affected foreign countries.
The Company currently sells its products only in U.S. dollars. As a result,
the Company's sales could be adversely affected to the extent that its customers
have limited access to U.S. dollars and to the extent that fluctuations in
exchange rates may render the Company's prices less competitive relative to
competitors' prices. If the Company chooses to accept payment for its products
in other currencies, it may be subject to reduced profits from adverse changes
in exchange rates. These factors could have a material adverse effect on the
Company's business, results of operations or financial condition. See "Risk
Factors -- Competition," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Sales and Marketing."
RELIANCE ON SALES REPRESENTATIVES. The Company markets its photovoltaic
manufacturing equipment products through a network of non-exclusive commissioned
sales representatives, as well as through its internal staff. While the Company
believes it has a good relationship with its sales representatives, there can be
no assurance that the Company will be able to retain such representatives. In
addition, under the Company's agreements with Marubeni Corporation of Nagoya,
Japan, Marubeni will distribute, and in some cases manufacture under a
technology license, certain Spire photovoltaic module manufacturing equipment
under Spire's name in Japan, and has rights to market this equipment line
throughout certain countries in Southeast Asia and the Pacific Rim. The loss of
a significant number of the Company's commissioned sales representatives or the
inability of Marubeni to market and distribute the Company's products
effectively in Japan and Southeast Asia could adversely affect the Company's
ability to market its photovoltaic products and could have a material adverse
effect on the Company's business, results of operations or financial condition.
See "Business -- Sales and Marketing."
7
<PAGE> 9
RECENT INCREASE IN PROFITABILITY; FLUCTUATIONS IN OPERATING RESULTS. While
the Company reported net earnings of $1,577,000 for the nine months ended
September 30, 1997, the Company experienced a net loss in two out of its prior
three full fiscal years, and a loss from operations in all three of such fiscal
years. There can be no assurance that the Company will sustain profitability.
Furthermore, the Company's revenues and operating results may vary significantly
from quarter to quarter as a result of a number of factors, many of which are
outside of management's control. These factors include, among others, timing of
capital expenditures by customers, changes in demand for the Company's products,
long business procurement cycles, changes in pricing policies by the Company and
its competitors, cancellation or delay by customers of contracts with the
Company and access to U.S. currency by the Company's customers. The Company
intends to use a significant portion of the proceeds of this offering for
capital expenditures, including funds to expand the Company's manufacturing
capacity. These expenditures will result in increased depreciation and
amortization expenses, which may negatively affect the Company's operating
results in future periods. See "Use of Proceeds" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
RISK OF BACKLOG. The Company's backlog as of September 30, 1997 (including
equipment, services, license agreements and contract research and development)
was $11,639,000, compared to $9,424,000 as of September 30, 1996. The Company
believes it will fill approximately 51% of this backlog in 1997. Approximately
$6,893,000 of the backlog at September 30, 1997, as compared to $8,152,000 at
September 30, 1996, is represented by contracts with the U.S. government that
are cancelable without the Company's consent, subject to reimbursement of the
Company's expenses. While the Company has not experienced any material
cancellations of such contracts in the past, there can be no assurance that
contracts representing anticipated revenues will not be canceled in the future.
Cancellations of significant amounts of these contracts could have a material
adverse effect on the Company's business, results of operations or financial
condition. See "Risk Factors -- Dependence on Outside Funding for Research and
Development" and "-- Government Regulation" and "Business -- Backlog."
TECHNOLOGICAL ADVANCES; DEPENDENCE ON FUTURE PRODUCT DEVELOPMENT AND MARKET
ACCEPTANCE. Each of the areas in which the Company maintains a proprietary
technology position, particularly photovoltaics and optoelectronics, is
characterized by rapid technological advances and improvements in manufacturing
efficiencies. The Company's ability to operate profitably depends in large part
on its timely access to, or development of, technological advances and its
ability to use those advances to improve existing products, develop new products
and manufacture those products efficiently. The failure to introduce new or
enhanced products on a timely and cost competitive basis could have a material
adverse effect on the Company's business, results of operations or financial
condition. In addition, there can be no assurance that the Company will be able
to attain market acceptance for commercial products based on these technologies.
See "Risk Factors -- Expansion into New Markets" and "-- Protection of
Proprietary Technology."
EXPANSION INTO NEW MARKETS. The Company has developed, and intends to use
a substantial portion of the proceeds of this offering to increase manufacturing
and marketing of, space solar cells used to power communications satellites. The
Company has not yet manufactured such products in commercial quantities. No
assurance can be given that the Company will be able to manufacture space solar
cells in commercial quantities or that sales of such products, if any, will
economically justify the Company's development, manufacturing and marketing
efforts in this area. The Company is also considering the development and market
introduction of new combinations of photovoltaic manufacturing equipment and
related services and new optoelectronic products, as well as proprietary medical
product offerings. The Company's expansion plans into these potential markets
will subject the Company to all of the risks incident to the expansion of a
small business, particularly the possible adverse impact associated with the
integration of a new line of products into the Company's existing operations and
the potential diversion of management time and attention from the Company's
existing lines of business. Companies that establish new product lines directed
toward new markets frequently encounter unforeseen expenses, difficulties,
complications and delays, and no assurance can be given that the Company will be
successful in meeting its business objectives. See "Risk Factors --
Competition," "-- Reliance on Sales Representatives" and "-- Difficulties of
Expanding Capacity" and "Business -- Growth Strategy."
8
<PAGE> 10
DIFFICULTIES OF EXPANDING CAPACITY. In order to accommodate its
anticipated growth, the Company is planning to expand and reconfigure its
manufacturing and laboratory facilities in Bedford, Massachusetts, and to lease
additional space. There can be no assurance that these planned changes will not
cause the Company to experience delays, a decrease in production yields or other
inefficiencies that can accompany the expansion of manufacturing facilities, or
that adequate equipment and personnel will be available to operate these
facilities. The completion of the Company's planned expansion will require
substantial funds. The Company anticipates that a significant portion of the net
proceeds from this offering will be adequate to fund the expansion. If, however,
adequate funds are not available to complete the expansion, the Company may be
required to scale down or abandon the planned expansion. If the Company
experiences significant delays or problems in implementing its capacity
expansion, such delays or problems could have a material adverse effect on the
Company's business, results of operations or financial condition. See "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Business --
Properties."
PROTECTION OF PROPRIETARY TECHNOLOGY. The Company actively protects
certain of its intellectual property and technological advances as trade
secrets, in part through confidentiality agreements with employees, consultants
and third parties. The Company also seeks and enforces patents as it deems
appropriate. The Company currently has 40 U.S. patents, two of which are jointly
owned, four patents pending in the United States and two foreign patents
pending, all of which cover elements of its materials and processing
technologies. There can be no assurance that the Company will be able to assert
successfully its intellectual property rights against allegedly infringing
competitors, and the inability to assert successfully its rights may have a
negative impact on the Company's competitive position and financial condition.
Further, there can be no assurance that the Company's intellectual property
rights will deter others from developing substantially equivalent or competitive
products or from reverse-engineering the Company's products. Even if a third
party's products infringe upon the Company's patents or other intellectual
property, it may be costly to enforce such rights, and such enforcement efforts
may divert management attention from the operations of the Company. In addition,
the foreign legal protection afforded intellectual property rights, including
patents, if issued, may be different from that afforded under U.S. laws. To the
extent the Company relies on non-disclosure agreements to protect its rights,
there can be no assurance that such information will not be disclosed in breach
of these agreements or, if disclosed, that the Company will be able to recover
amounts sufficient to compensate it for any damage such disclosure may cause.
Further, although no such claims are currently outstanding against the
Company, there can be no assurance that the Company will not be subject to
patent or other intellectual property rights infringement claims asserted by
others, or if asserted, that the Company will be successful in defending its
position or challenging such claims. In the event that the Company were to be
adjudged to infringe patents or other intellectual property rights 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 may 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 may entail
significant or prohibitive expense to the Company.
In addition to the foregoing, the U.S. government retains the right to
obtain a patent on any invention developed under contract as to which patent
protection is not sought and obtained by the contractor, or to require the
contractor to grant a third party license of such invention if steps to achieve
practical application of the invention have not been taken. The Company has not
sought, and will not seek, patent protection for each of its inventions under
U.S. government contracts, either due to the nature of the invention or the cost
of applying for and obtaining a patent. This practice subjects the Company to
the potential of losing patent rights to the U.S. government. The Company also
may not achieve practical application of an invention in each instance, or in a
timely manner, thus leading to the possibility of a mandatory third party
license. Furthermore, the U.S. government retains a non-exclusive, royalty-free,
non-transferable license to all technology developed under government contracts,
whether or not patented, for government use, including use by other parties to
U.S. government contracts. See "Business -- Proprietary Rights."
9
<PAGE> 11
DEPENDENCE ON SINGLE MANUFACTURING FACILITY. The Company has only one
manufacturing facility, and the Company's revenues are dependent upon the
continued operation of such facility. The operation of a manufacturing plant
involves many risks, including potential damage from fire or natural disasters.
In addition, the Company has obtained certain permits to conduct its business as
currently operated at its facility. There can be no assurance that such permits
would continue to be effective at the current location if the facility were
destroyed and rebuilt, or that the Company will be able to obtain similar
permits to operate at another location. While the Company maintains insurance
covering certain of such risks, including business interruption coverage, there
can be no assurance that the occurrence of these or any other operational
problems at the Company's facility would not materially adversely affect the
Company's business or results of operations. See "Business -- Manufacturing and
Quality Control" and "-- Properties."
NEED TO MANAGE GROWTH. The future success of the Company will depend upon,
among other factors, the ability of the Company to identify and exploit new
product and service opportunities, to recruit, hire, train and retain highly
educated, skilled and experienced management and technical personnel, to
generate capital from operations and to manage the effects of growth on all
aspects of its business, including research, development, manufacturing,
distribution, sales and marketing, administration and finance. Any failure by
the Company to identify and exploit new product and service opportunities,
attract or retain necessary personnel, generate adequate revenues or conduct its
expansion or manage growth effectively could have a material adverse effect on
the Company's business, results of operations or financial condition. See "Risk
Factors -- Expansion into New Markets" and "-- Difficulties of Expanding
Capacity" and "Business -- Growth Strategy."
DEPENDENCE ON KEY PERSONNEL. The Company's long-term success and its
growth strategy depend on the efforts and abilities of its senior management,
particularly Roger G. Little, the Company's founder and its Chairman, Chief
Executive Officer and President, and on its technical staff. The loss of
services of Mr. Little or one or more of the Company's technical staff, or an
inability of the Company to attract and motivate highly educated and skilled
employees, could result in the Company's inability to continue certain product
offerings, and could have a material adverse effect on the Company's business,
results of operations or financial condition. The Company has recently appointed
Vice Presidents for its photovoltaics and biomedical areas, to replace two
former Vice Presidents who resigned during the past two months. While the
Company believes that the two new Vice Presidents are highly qualified senior
managers, there can be no assurance that these management changes will not have
an adverse effect on the Company's operations. Further, there can be no
assurance that the former employees will not compete with the Company or
disclose Company confidential information, whether or not in violation of any
agreements. While the Company would seek to enforce its rights, any such
competition or disclosure could have a material adverse effect on the Company's
business, results of operations or financial condition. See "Recent
Developments," "Business -- Employees" and "Management -- Executive Officers and
Directors."
CONTROL BY PRINCIPAL STOCKHOLDER. After this offering, Roger G. Little,
the Chairman of the Board, Chief Executive Officer and President of the Company,
will control approximately 27.5% of the Company's outstanding Common Stock. In
addition, as one of three Trustees of the Company's 401(k) Plan, Mr. Little may
exercise control over shares of Common Stock held by the Plan. As a result, Mr.
Little will be in a position to exert significant influence over actions of the
Company which require stockholder approval and generally to direct the affairs
of the Company, including potential acquisitions, sales and changes in control
of the Company. See "Risk Factors -- Shares Available for Future Sale,"
"Principal and Selling Stockholders" and "Description of Securities to be
Registered."
GOVERNMENT REGULATION. The process of bidding for, obtaining, retaining
and performing U.S. government contracts is subject to a large number of U.S.
government regulations and oversight requirements. Compliance with these
government regulations requires extensive record keeping and the maintenance of
complex policies and procedures relating to all aspects of the Company's
business, as well as to work performed for the Company by any subcontractors.
Any failure by the Company to comply with applicable regulations, or to require
its subcontractors so to comply, could result in a variety of adverse
consequences, ranging from remedial requirements to termination of contracts,
reimbursement of fees, reduction of fees on a going forward basis and
prohibition from obtaining future U.S. government contracts. While the Company
10
<PAGE> 12
believes that it has put in place systems and personnel to ensure compliance
with all U.S. government regulations relating to contracting, there can be no
assurance that it will at all times be in compliance or that any failure to
comply will not have a material adverse effect on the Company's business,
results of operations or financial condition. Furthermore, the Company's U.S.
government contracts include provisions prohibiting the Company from granting
exclusive rights to use or sell any inventions unless such grantee agrees that
any product using the invention will be manufactured substantially in the United
States.
The Company is subject to export control regulations, which govern the
export of Company products to certain countries, as well as the release of
technical information to non-U.S. individuals and entities. It also is subject
to the federal Occupational Safety and Health Act ("OSHA"). While the Company
has a full-time compliance officer monitoring compliance with these laws and
regulations, there can be no assurance that it will at all times be in
compliance. Failure to comply with these laws and regulations could result in
penalties to the Company, including fines and requirements to take remedial
action, which could have a material adverse effect on the Company's business,
results of operations or financial condition.
The Company is also subject to a number of federal, state and local
government regulations related to the use, storage, discharge and disposal of
toxic, volatile or otherwise hazardous chemicals used in its business. Any
failure to comply with present or future regulations could result in the
imposition of fines and the suspension of production or a cessation of
operations. In addition, such regulations could restrict the Company's ability
to expand, or could require the Company to acquire costly equipment or incur
other significant expenses to comply with environmental regulations or to
remediate any pollution.
The introduction by the Company's customers of certain new biomedical
products depends on such products' passage through various stages of review by
the United States Food and Drug Administration ("FDA"). The process of obtaining
regulatory approvals involves lengthy and detailed laboratory and clinical
testing and other costly and time-consuming procedures. There can be no
assurance as to the timely or positive outcome of any such review process. The
inability of the Company's customers to obtain such approvals in a timely
manner, or at all, could impede or prevent the introduction of these biomedical
products into the marketplace, and could adversely affect the Company's revenues
from its biomedical processing services.
The extent of government regulation that may arise from future legislative
or administrative action cannot be predicted. See "Business -- Government
Regulation."
RISK OF UNINSURED LOSS. The use of orthopedic and other medical devices
may entail a risk of physical injury to patients. To the extent the Company has
been involved in the manufacturing of these products, it may be exposed to
potential product liability and other damage claims. Furthermore, the use of the
Company's photovoltaic module manufacturing equipment could result in operator
injury. To date, no product liability or other damage claim has been initiated
against the Company. The Company maintains product liability and umbrella
insurance coverage; however, there can be no assurance that any product
liability claim assessed against the Company would not exceed its insurance
coverage, or that insurance coverage will continue to be available. While the
Company typically obtains agreements of indemnity from manufacturers of
biomedical products for which the Company provides services, there can be no
assurance that any such indemnity agreements will be enforceable or that such
manufacturers will have adequate funds to meet their obligations under such
agreements. The cost of defending a product liability, negligence or other
action, and/or the assessment of damages in excess of insurance coverage, could
have a material adverse effect on the Company's business, results of operations
or financial condition.
FLUCTUATIONS IN STOCK PRICE. The Company's Common Stock has recently
experienced price and volume fluctuations and may experience such fluctuations
in the future. Factors such as announcements of technological innovations or new
products by the Company or its competitors, changes in domestic or foreign
governmental regulations or regulatory approval processes and fluctuations in
quarterly operating results, have and may continue to have a significant impact
on the market price of the Common Stock. Moreover, the stock market (and in
particular the securities of technology companies such as the Company) has
experienced and could in the future experience extreme price and volume
fluctuations. These fluctuations may be unrelated to operating performance and
could have a significant impact on the market price of the Common Stock. See
"Price Range of Common Stock."
11
<PAGE> 13
SHARES AVAILABLE FOR FUTURE SALE. Sales of a substantial number of shares
of Common Stock in the public market following the offering (pursuant to Rule
144 under the Securities Act, or otherwise), as well as the issuance of shares
upon exercise of stock options granted to employees and Directors, could
adversely affect the prevailing market price of the Common Stock and impair the
Company's ability to raise additional capital through the sale of equity
securities. Approximately 1,162,650 shares held by the Company's officers and
Directors after completion of this offering will be eligible for sale under Rule
144. In addition, following the offering, shares of Common Stock will continue
to be held by the Company's 401(k) Plan, and additional shares will be purchased
in open market transactions from time to time thereafter to fund the Company's
contributions to the Plan. The Company's officers, Directors and Selling
Stockholders have agreed not to sell or transfer any shares held by them for a
period of 180 days following the date of this Prospectus without the prior
written approval of Tucker Anthony Incorporated, with certain exceptions (the
"Lock-Up Agreements"). The Company has reserved 382,428 shares of Common Stock
for issuance to officers, Directors, employees and consultants pursuant to the
Company's stock option plans, of which options to purchase 240,928 shares have
been granted and are outstanding as of November 30, 1997. The shares underlying
the stock option plans have been registered under the Securities Act and
generally may be resold upon exercise. However, 93,000 shares issuable upon
exercise of outstanding stock options will be subject to Lock-Up Agreements. See
"Risk Factors -- Control by Principal Stockholder" and "Shares Available for
Future Sale."
NO DIVIDENDS. The Company has paid no dividends since its inception. The
Company anticipates retaining any future earnings for operations and does not
anticipate that dividends will be paid in the foreseeable future. Under its
credit agreement with Silicon Valley Bank, the Company is prevented from paying
dividends without the prior written consent of the Bank. See "Dividend Policy."
12
<PAGE> 14
RECENT DEVELOPMENTS
On March 31, 1997, the Company entered into two agreements with Marubeni
Corporation of Nagoya, Japan, by which Marubeni will distribute, and in some
cases manufacture under a technology license, certain of the Company's
photovoltaic module manufacturing equipment under the Company's name in Japan,
and has rights to market this equipment line throughout certain countries in
Southeast Asia and the Pacific Rim. Marubeni's Japanese office is headed by
Spire's long-time photovoltaic equipment sales representative in Japan.
Management believes that this Japanese office will give the Company the
in-country presence it needs to grow its already established photovoltaics
module manufacturing equipment business in Japan. See "Business -- Sales and
Marketing."
At the Special Meeting in lieu of the 1997 Annual Meeting held on June 3,
1997, the Company's stockholders authorized a plan of restructuring of the
Company, which would include a transfer of a substantial portion of the
Company's respective property and assets relating to its photovoltaics,
optoelectronics and biomedical operations to three wholly owned operating
subsidiaries (the "Transfer"). The Company's Board of Directors (the "Board")
sought approval for the Transfer because the Board believed that it would permit
the new operating subsidiaries to obtain public or private financing and to
engage in transactions such as strategic alliances, joint ventures and mergers
and acquisitions on terms more attractive to such subsidiaries than the Company
could achieve on its own. The Transfer was anticipated to occur within
approximately ten months of approval by stockholders, subject to certain
conditions; however, Company management or the Board could elect, within one
year from stockholder approval, to abandon the Transfer, in whole or in part.
While the Company has no plans to complete the Transfer at this time, or to
engage in any of the financings or other considered transactions, neither
management nor the Board formally has elected to abandon the Transfer in whole
or in part, and any one or more contemplated transactions under the Transfer
could be completed at any time deemed appropriate by the Company in the future.
On August 27, 1997, the Board elected Michael T. Eckhart as a new Director,
filling a vacancy on the Board. See "Management -- Executive Officers and
Directors."
On November 10, 1997, the Company announced the establishment of an office
in Denver, Colorado, to support the Company's activities in the Western and
Midwestern regions of the United States, with particular focus on customers
building complete photovoltaic module manufacturing facilities. The Denver
office is headed by Dr. David Mooney, who joined the Company after serving as
vice president of a telecommunications hardware company for the previous two
years. Prior to that, Dr. Mooney served in several research and management
positions at the National Renewable Energy Laboratory and worked directly with
the Secretary of Energy to help develop domestic and international renewable
energy policies. See "Business -- Sales and Marketing."
On November 25, 1997, the Board elected Stephen J. Hogan Vice President and
General Manager, Photovoltaics. Mr. Hogan has been with the Company since 1984,
when he joined the Company as Manager of Process Development. Mr. Hogan has
served the Company in various capacities, most recently as Director of
Photovoltaic Business Development. See "Risk Factors -- Dependence on Key
Personnel" and "Management -- Executive Officers and Directors."
Also on November 25, 1997, the Board authorized the Company to hire Ronald
S. Scharlack as Vice President and General Manager, Biomedical. Mr. Scharlack is
scheduled to join the Company on January 5, 1998. Previously, Mr. Scharlack was
the Manager of Advanced Technology at Chiron Diagnostics, Medfield,
Massachusetts, a manufacturer of biomedical instruments. See "Risk Factors --
Dependence on Key Personnel" and "Management -- Executive Officers and
Directors."
13
<PAGE> 15
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,000,000 shares of
Common Stock offered hereby by the Company are estimated to be $
million ($ million if the Underwriters' over-allotment options are
exercised in full), at an assumed public offering price of $ per share and
after deducting the underwriting discounts and estimated offering expenses
payable by the Company. The Company will not receive any proceeds from the sale
of Common Stock by the Selling Stockholders.
The Company intends to use the net proceeds from this offering (i) to
invest approximately $5 million to $7 million in capital expenditures over the
next two years to expand manufacturing capacity and semiconductor production
facilities, primarily for the manufacture of space photovoltaic solar cells;
(ii) to invest approximately $1 million to $2 million for capital equipment,
marketing and related expenses to support its biomedical service offerings;
(iii) to invest approximately $1 million to $2 million for facility enhancements
and to upgrade and improve information and communication systems; and (iv) to
contribute to working capital and general corporate purposes, which may include
joint ventures or acquisitions. The Company currently has no commitments with
respect to any joint ventures or acquisitions.
The allocation of the net proceeds of this offering set forth above
represents the Company's best estimate based upon its present plans and certain
assumptions regarding general economic and industry conditions and the Company's
future revenues and expenditures. If any of these factors change, the Company
may find it necessary or advisable to reallocate some of the proceeds within the
above-described categories or to other purposes. Proceeds not immediately
utilized for the purposes described above will be invested principally in
short-term, high-grade interest-bearing securities.
Management estimates, based on currently proposed plans and assumptions
relating to its operations, that the net proceeds from this offering together
with projected cash flow from operations will be sufficient to satisfy the
Company's anticipated cash requirements for at least 12 months following the
offering.
14
<PAGE> 16
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "SPIR." The following table sets forth the high and low closing sale
prices for the Common Stock for the periods shown as reported on the Nasdaq
National Market. These prices do not reflect retail mark-ups, mark-downs or
commissions.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1995
First Quarter.......................................... $2 5/8 $2 1/8
Second Quarter......................................... 2 5/8 2
Third Quarter.......................................... 3 1/4 2
Fourth Quarter......................................... 3 1/8 2
1996
First Quarter.......................................... 2 1/2 2
Second Quarter......................................... 6 3/4 2 1/2
Third Quarter.......................................... 3 1/2 2 3/4
Fourth Quarter......................................... 2 3/4 2 1/4
1997
First Quarter.......................................... 4 1/4 2 1/4
Second Quarter......................................... 5 3/8 4
Third Quarter.......................................... 16 5/8 5 1/8
Fourth Quarter (through December 2, 1997).............. 23 15 1/4
</TABLE>
On December 3, 1997, the closing price of the Common Stock, as reported on
the Nasdaq National Market, was $17.50, and on that date there were
approximately 220 holders of record of the Company's Common Stock.
DIVIDEND POLICY
Since its inception the Company has not paid any cash dividends on the
Common Stock and does not intend to pay cash dividends in the foreseeable
future. The Company expects that any earnings will be retained to finance the
Company's business. Future dividends, if any, will depend upon the Company's
earnings, financial condition, cash requirements, future prospects and other
factors deemed relevant by the Company's Board of Directors. Under its credit
agreement with Silicon Valley Bank, the Company is prevented from paying
dividends without the prior written consent of the Bank.
15
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997 and as adjusted to reflect the issuance and sale of 1,000,000
shares of Common Stock offered by the Company hereby at an assumed public
offering price of $ and the initial application of the estimated net
proceeds to the Company therefrom as described under "Use of Proceeds." This
table should be read in conjunction with, and is qualified in its entirety by,
the Company's Consolidated Financial Statements and the Notes thereto included
elsewhere or incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt......................................................... $ -- $ --
Stockholders' equity:
Common stock, $.01 par value, 20,000,000 shares authorized; 3,715,466
shares issued; 4,163,306 shares issued and outstanding as
adjusted(1).......................................................... 37 42
Additional paid-in capital............................................. 9,410
Retained earnings...................................................... 1,542 1,542
------- ------
10,990
Treasury stock at cost, 552,160 shares; no shares as adjusted(2)..... (1,220) --
------- ------
Total stockholders' equity........................................... 9,770
------- ------
Total capitalization................................................. $ 9,770
======= ======
</TABLE>
- ---------------
(1) Excludes 287,719 shares of Common Stock subject to options granted to
employees and directors of the Company as of September 30, 1997 at a
weighted average exercise price of $3.64 per share.
(2) All of the 552,160 shares of Common Stock held as treasury stock are being
sold as part of the offering.
16
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below under the captions
"Statements of Operations Data" and "Balance Sheet Data" for, and as of the end
of, each of the years in the five-year period ended December 31, 1996, are
derived from, and are qualified by reference to, the Company's Consolidated
Financial Statements, which financial statements have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. Such data should be read
in conjunction with the Company's Consolidated Financial Statements and Notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included or incorporated by reference in this Prospectus.
The consolidated financial statements as of December 31, 1995 and 1996, and for
each of the years in the three-year period ended December 31, 1996, and the
independent auditors' report thereon, are included elsewhere in this Prospectus.
The statements of operations data for the nine months ended September 30, 1996
and 1997, and the balance sheet data as of September 30, 1997, are derived from
unaudited consolidated financial statements that include, in the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the information set forth therein. The
results of operations for the nine months ended September 30, 1997 or any other
period are not necessarily indicative of future results.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
------- --------- --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales and revenues.............. $17,318 $ 20,135 $ 18,400 $17,452 $ 17,388 $12,539 $17,060
Cost of sales and revenues.......... 13,242 13,864 13,610 13,025 13,250 9,879 11,112
Selling, general and administrative
expenses.......................... 5,147 5,056 4,911 4,438 4,746 3,378 4,285
Loss on sale of product line........ 359 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Total cost and expenses............. 18,748 18,920 18,521 17,463 17,996 13,257 15,397
------- ------- ------- ------- ------- ------- -------
Earnings (loss) from operations..... (1,430) 1,215 (121) (11) (608) (718) 1,663
Interest income (expense)........... (308) (242) (82) (20) 9 13 14
------- ------- ------- ------- ------- ------- -------
Earnings (loss) before income
taxes............................. (1,738) 973 (203) (31) (599) (705) 1,677
------- ------- ------- ------- ------- ------- -------
Net earnings (loss)................. $(1,571) $ 671 $ (182) $ 1 $ (599) $ (712) $ 1,577
======= ======= ======= ======= ======= ======= =======
Net earnings (loss) per share of
Common Stock...................... $ (0.51) $ 0.22 $ (0.06) $ 0.00 $ (0.20) $ (0.24) $ 0.48
======= ======= ======= ======= ======= ======= =======
Weighted average number of common
and common equivalent shares
outstanding....................... 3,065 3,076 3,065 3,084 3,029 3,031 3,275
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1997
AS OF DECEMBER 31, ----------------------
--------------------------------------------------- AS
1992 1993 1994 1995 1996 ACTUAL ADJUSTED(1)
------- ------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital....................... $ 2,536 $ 2,156 $ 1,697 $ 2,430 $ 2,020 $4,878 $
Total assets.......................... 13,251 11,627 11,740 10,944 10,566 11,807
Long-term debt........................ 1,850 34 10 -- -- -- --
Stockholders' equity.................. 7,534 8,205 8,024 7,894 7,293 9,770
</TABLE>
- ---------------
(1) Adjusted to reflect the sale of the 1,000,000 shares of Common Stock offered
by the Company hereby at an assumed public offering price of $ per share
and the initial application of the estimated net proceeds to the Company as
described under "Use of Proceeds."
17
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations section and other parts of this Prospectus contain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act that involve risks and uncertainties.
The Company's actual results and the timing of certain events may differ
significantly from the results discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed below and in "Risk Factors" and "Business." The
following discussion is qualified in its entirety by, and should be read in
conjunction with, the detailed information and Consolidated Financial
Statements, including the Notes thereto, appearing elsewhere or incorporated by
reference in this Prospectus.
OVERVIEW
Spire develops, manufactures and markets highly-engineered photovoltaic
module manufacturing equipment and optoelectronic products and provides
biomedical processing services. Spire is the world's leader in the design and
manufacture of specialized equipment for the production of terrestrial
photovoltaic modules from solar cells, with its equipment installed in over 130
factories and in more than 30 countries. The Company also offers certain
optoelectronic products and is continuing to develop additional advanced
optoelectronic products for telecommunications, biomedical and electronics
applications, including solar cells used to power satellites. Spire's
value-added biomedical processing services offer surface treatments to enhance
the durability or the antimicrobial characteristics of orthopedic and other
medical devices.
The Company's net sales and revenues for the nine months ended September
30, 1997 increased 36%, compared to the nine months ended September 30, 1996.
All of the Company's three areas of business have contributed to the growth in
net sales and revenues. The most significant contribution has been from the
Company's photovoltaic module manufacturing equipment line. The photovoltaic
industry has experienced increased demand for solar module capacity, which has
resulted in the Company's recent growth in its manufacturing equipment sales.
The Company's ability to maintain the growth rate in this area is directly tied
to the industry's continued demand for solar power. The Company continues to
rely on funding from the U.S. government for its research and development
activities. For the nine months ended September 30, 1997, revenues from U.S.
government research and development contracts represented 35% of net sales and
revenues, compared to 39% for the nine months ended September 30, 1996. The
Company believes that such contracts are likely to represent a decreasing
percentage of net sales and revenues as sales of the Company's commercial
products and services continue to grow.
The Company's strategy is to concentrate on growing its commercial products
and services. The operating results in any particular quarter will depend upon
product mix, as well as the timing of shipments of higher priced products from
its equipment line. Export sales, which amounted to 36% of net sales and
revenues for the nine months ended September 30, 1997, continue to constitute a
significant portion of the Company's net sales and revenues. Export sales are
expected to continue to grow as worldwide demand for photovoltaic energy
continues to increase. The Company intends to use a significant portion of the
proceeds of this offering for capital expenditures. These expenditures will
result in increased depreciation and amortization expenses, which may negatively
affect the Company's operating results in future periods.
During 1997, the Company expects to utilize a significant portion of its
available net operating loss and tax credit carryforwards. As a result, the
Company's financial results for future periods are expected to reflect increased
tax expense.
18
<PAGE> 20
RESULTS OF OPERATIONS
The following table sets forth certain items as a percentage of net sales
and revenues for the periods presented:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales and revenues............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales and revenues......................... 74.0 74.6 76.2 78.8 65.1
----- ----- ----- ----- -----
Gross profit....................................... 26.0 25.4 23.8 21.2 34.9
Selling, general and administrative expenses....... 26.7 25.5 27.3 26.9 25.1
----- ----- ----- ----- -----
Earnings (loss) from operations.................... (0.7) (0.1) (3.5) (5.7) 9.8
Earnings (loss) before income taxes................ (1.1) (0.2) (3.4) (5.6) 9.8
Income tax expense (benefit)....................... (0.1) (0.2) -- 0.1 0.6
----- ----- ----- ----- -----
Net earnings (loss)................................ (1.0)% --% (3.4)% (5.7)% 9.2%
===== ===== ===== ===== =====
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Net Sales and Revenues
Net sales and revenues increased $4,521,000 or 36% in the first nine months
of 1997 to $17,060,000, compared to $12,539,000 in the first nine months of
1996. The increase is due to increased demand for commercial products and
services, increased contract research and development revenues, and receipt of a
$600,000 one-time license fee. Manufacturing equipment sales increased
$2,132,000 or 51% to $6,286,000 for the first nine months of 1997, compared to
$4,154,000 in the same period of 1996 due to increased sales of photovoltaic
equipment resulting from increased demand for photovoltaic energy. The following
table sets forth certain items regarding the Company's net sales and revenues
for the periods presented:
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1997 CHANGE
------------- ------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Contract research, service and license revenues............ $ 8,385 $10,774 28%
Manufacturing equipment sales.............................. 4,154 6,286 51%
------- -------
Net sales and revenues..................................... $12,539 $17,060 36%
======= =======
</TABLE>
Cost of Sales and Revenues
The cost of sales and revenues increased $1,233,000 to $11,112,000, but
decreased to 65% of net sales and revenues, for the nine months ended September
30, 1997, compared to $9,879,000 or 79% of net sales and revenues for the nine
months ended September 30, 1996.
The cost of contract research, service and license revenues increased
$997,000 to $6,899,000, but decreased to 64% of related revenues, for the nine
months ended September 30, 1997, compared to $5,902,000 or 70% of related
revenues for the nine months ended September 30, 1996. Cost of manufacturing
equipment sales increased $236,000 to $4,213,000, but decreased to 67% of
related sales, for the nine months ended September 30, 1997, compared to
$3,977,000 or 96% of related sales, for the nine months ended September 30,
1996. The decrease in total cost of sales and revenues as a percentage of
related sales and revenues is due to increased efficiencies in the manufacturing
process, product mix and higher volume.
19
<PAGE> 21
The following table sets forth certain items regarding the Company's cost
of sales and revenues for the periods presented, stated in dollars and as a
percentage of net sales and revenues:
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 % 1997 %
------------- ----- ------------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Contract research, service and license revenues........ $ 5,902 70% $ 6,899 64%
Manufacturing equipment sales.......................... 3,977 96% 4,213 67%
------------- -------------
Total cost of sales and revenues....................... $ 9,879 79% $11,112 65%
=========== ===========
</TABLE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the nine months ended
September 30, 1997 increased $907,000 to $4,284,000 or 25% of sales and
revenues, compared to $3,377,000 or 27% of sales and revenues for the nine
months ended September 30, 1996. Selling, general and administrative expenses
increased primarily due to increases in commissions and marketing and travel
costs related to increased sales of products and services, but decreased as a
percentage of net sales and revenues due to an increase in the sales and
revenues base.
Depreciation and Amortization Expenses
Depreciation and amortization expenses for the nine months ended September
30, 1997 increased $21,000 or 3% to $845,000, compared to $824,000 in 1996.
Expenditures for capital equipment increased $65,000 or 12% to $612,000 for the
nine months ended September 30, 1997, compared to $547,000 for the nine months
ended September 30, 1996.
Interest
The Company earned $14,000 in interest income in the first nine months of
both 1997 and 1996. The Company incurred insignificant interest expense during
both nine-month periods.
Income Taxes
The Company recorded tax expense of $100,000 for the nine months ended
September 30, 1997, compared to an expense of $6,773 for the nine months ended
September 30, 1996. The tax expense for the nine months ended September 30, 1997
benefited from a $300,000 realization of the Company's deferred tax asset. The
Company recorded this benefit because it believes that the tax effects of
existing deductible temporary differences or carryforwards of $300,000 are more
likely than not to be realized through the generation of sufficient future
taxable income. At September 30, 1997, the Company had a remaining valuation
allowance of $330,000 against its net deferred tax asset that consisted
primarily of credit carryforwards of $1,093,000 offset by net deferred tax
liabilities for timing differences of $809,000.
Net Earnings (Loss)
The Company reported net earnings for the first nine months of 1997 of
$1,577,000, compared to a loss of $712,000 in the first nine months of 1996. The
improvement in the Company's profitability resulted in large part from increased
net sales and revenues in all areas of the Company's business, particularly in
manufacturing equipment sales where the Company's profit margins are generally
higher. In addition, the Company received a $600,000 one-time license fee.
20
<PAGE> 22
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net Sales and Revenues
Net sales and revenues decreased $64,000 or less than 1% for the year ended
December 31, 1996 to $17,388,000, compared to $17,452,000 for the year ended
December 31, 1995. This decrease is due to decreased government contract
revenues, partially offset by an increase in photovoltaic equipment sales.
Contract research, service and license revenues decreased $1,437,000 or 11% in
1996 to $11,447,000, compared to $12,884,000 in 1995, due to decreased
government contract revenues. Government contract revenues constituted a lesser
percentage of overall revenues as the percentage of revenues represented by the
Company's commercial activities increased. Manufacturing equipment sales
increased $1,373,000 or 30%, to $5,941,000, compared to $4,568,000 in 1995, due
to increased sales of photovoltaic module manufacturing equipment resulting from
increased demand for photovoltaic energy. The following table sets forth certain
items regarding the Company's net sales and revenues for the periods presented:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996 CHANGE
------------ ------------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Contract research, service and license revenues............... $ 12,884 $ 11,447 (11%)
Manufacturing equipment sales................................. 4,568 5,941 30%
------- -------
Net sales and revenues........................................ $ 17,452 $ 17,388 (less than 1%)
======= =======
</TABLE>
Cost of Sales and Revenues
The cost of sales and revenues increased $225,000 to $13,250,000 or 76% of
net sales and revenues for the year ended December 31, 1996, compared to
$13,025,000 or 75% of net sales and revenues for the year ended December 31,
1995. The cost of contract research, service and license revenues decreased
$249,000 to $8,938,000, but increased to 78% of related revenues, for the year
ended December 31, 1996, compared to $9,187,000 or 71% for the same period in
1995. The increase in cost of revenues as a percentage of related revenues was
due to a reduction in sales volume and resulting underutilization of fixed
costs. Cost of manufacturing equipment sales increased $474,000 to $4,312,000,
but decreased to 73% of related sales, in 1996, compared to $3,838,000 or 84% of
related sales in 1995. The decrease in cost of sales as a percentage of related
sales was due to improved product mix and increased manufacturing efficiencies.
The following table sets forth certain items regarding the Company's cost
of sales and revenues and revenues for the periods presented, stated in dollars
and as a percentage of net sales and revenues:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 % 1996 %
------------ -------- ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Contract research, service and license revenues..... $ 9,187 71% $ 8,938 78%
Manufacturing equipment sales....................... 3,838 84% 4,312 73%
------------ ------------
Total cost of sales and revenues.................... $ 13,025 75% $ 13,250 76%
========== ==========
</TABLE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $307,000 to
$4,746,000 or 27% of net sales and revenues for 1996, as compared to $4,439,000
or 25% of net sales and revenues for 1995. The increase in selling, general and
administrative expenses as a percentage of net sales and revenues is
attributable to increased selling activities and a decrease in net sales and
revenues.
Depreciation and Amortization Expenses
Depreciation and amortization expenses decreased $53,000 or 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 $553,000 or 142% to
$943,000 in 1996, compared to $390,000 in 1995. During 1996 the Company made a
major investment in its MIS systems.
21
<PAGE> 23
Interest
The Company earned $17,000 in interest income in 1996, compared to $18,000
in 1995. The Company incurred interest expense in the amount of $11,000 in 1996
and $39,000 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 reduction of debt. As
of December 31, 1996, the Company had no outstanding indebtedness.
Income Taxes
The Company recorded no tax expense for the year ended December 31, 1996,
compared to a tax benefit of $32,000 for the year ended December 31, 1995.
Net Earnings (Loss)
The Company reported a net loss for the year ended December 31, 1996 of
$599,000, compared to net earnings of $1,000 for the year ended December 31,
1995. The net loss in 1996 resulted primarily from increased selling, general
and administrative expenses and cost of sales and revenues, coupled with a
decrease in net sales and revenues.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Sales and Revenues
Net sales and revenues decreased $948,000 or 5% for the year ended December
31, 1995 to $17,452,000, compared to $18,400,000 for the year ended December 31,
1994. This decrease is due to decreased contract research, service and license
revenue, partially offset by an increase in photovaltaic equipment sales.
Contract research, service and license revenues decreased $1,653,000 or 11% in
1995 to $12,884,000, compared to $14,537,000 in 1994, due to decreased U.S.
government contract and orthopedic 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 orthopedic 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 $705,000 or 18% to $4,568,000, compared to $3,863,000 in 1994,
due to increased demand for photovoltaic manufacturing equipment. The following
table sets forth certain items regarding the Company's net sales and revenues
for the periods presented:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995 CHANGE
------------ ------------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Contract research, service and license revenues.............. $ 14,537 $ 12,884 (11%)
Manufacturing equipment sales................................ 3,863 4,568 18%
------------ ------------
Net sales and revenues....................................... $ 18,400 $ 17,452 (5%)
========== ==========
</TABLE>
Cost of Sales and Revenues
The cost of sales and revenues decreased $585,000 to $13,025,000, but
increased to 75% of net sales and revenues, for the year ended December 31,
1995, compared to $13,610,000 or 74% of net sales and revenues for the year
ended December 31, 1994. The cost of contract research, service and license
revenues decreased $1,313,000 to $9,187,000 or 71% of related revenues for the
year ended December 31, 1995, compared to $10,500,000 or 72% for the same period
in 1994. The decrease was due to reduced indirect expenses. Cost of
manufacturing equipment sales increased $728,000 to $3,838,000 or 84% of related
sales in 1995, compared to $3,110,000 or 81% of related sales in 1994. The
increase was due to changes in product mix.
22
<PAGE> 24
The following table sets forth certain items regarding the Company's cost
of sales and revenues for the periods presented, stated in dollars and as a
percentage of net sales and revenues:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 % 1995 %
------------ --------- ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Contract research, service and license
revenues..................................... $ 10,500 72% $ 9,187 71%
Manufacturing equipment sales.................. 3,110 81% 3,838 84%
------- -------
Total cost of sales and revenues............... $ 13,610 74% $ 13,025 75%
======= =======
</TABLE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $472,000 to
$4,439,000 or 25% of net sales and revenues for 1995 as compared to $4,911,000
or 27% of net sales and revenues for 1994. The decrease in selling, general and
administrative expenses as a percentage of net sales and revenues was
attributable to cost cutting measures implemented by the Company, such as
reduced staffing.
Depreciation and Amortization Expenses
Depreciation and amortization expenses decreased $99,000 or 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 $1,043,000 or 73%,
totaling $390,000 in 1995 compared to $1,433,000 in 1994. The capital
expenditures in 1994 included significant expenditures to fabricate a Class 100
Cleanroom, whereas capital expenditures were significantly reduced in 1995 to
conserve resources.
Interest
The Company earned $18,000 interest income in 1995, compared to no interest
income in 1994. The Company incurred interest expense in the amount of $39,000
in 1995 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
reduction of debt. As of December 31, 1995, the Company had no outstanding
indebtedness.
Income Taxes
The Company recorded a tax benefit of $32,000 for the year ended December
31, 1995, compared to a tax benefit of $21,000 for the year ended December 31,
1994.
Net Earnings (Loss)
The Company reported net earnings for the year ended December 31, 1995 of
$1,000, compared to a net loss of $182,000 for the year ended December 31, 1994.
The Company reduced its net loss despite a decrease in net sales and revenues,
due to reduced selling, general and administrative expenses and costs of sales
and revenues, as well as a reduction in interest expense.
23
<PAGE> 25
QUARTERLY INFORMATION
The following table sets forth certain unaudited quarterly results of
operations data of the Company for each of the four quarters in the years ended
December 31, 1995 and 1996 and for the three quarters ended September 30, 1997.
The Company believes that the following selected quarterly information has been
prepared on the same basis as the audited Financial Statements and that all
necessary adjustments, consisting only of normal recurring adjustments, have
been included to present fairly the selected quarterly information when read in
conjunction with the audited Financial Statements and the Notes thereto included
elsewhere or incorporated by reference in this Prospectus. Results for any
particular quarter are not necessarily indicative of results for any future
period. See "Risk Factors."
<TABLE>
<CAPTION>
1995 1996 1997
--------------------------------- --------------------------------- ------------------------
QTR. 1 QTR. 2 QTR. 3 QTR. 4 QTR. 1 QTR. 2 QTR. 3 QTR. 4 QTR. 1 QTR. 2 QTR. 3
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales and revenues......... $4,583 $4,659 $4,275 $3,935 $3,838 $4,489 $4,213 $4,848 $4,451 $6,433 $6,176
Gross profit................... 1,127 1,095 1,181 1,024 832 1,148 680 1,478 1,520 2,226 2,202
Earnings (loss) from
operations................... 20 22 101 (154) (272) 22 (468) 110 147 802 714
Net earnings (loss)............ 3 2 61 (65) (266) 33 (479) 113 150 702 725
Net earnings (loss) per
share........................ $ 0.00 $ 0.00 $ 0.02 $(0.02) $(0.09) $ 0.01 $(0.16) $ 0.04 $ 0.05 $ 0.22 $ 0.22
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has been able to fund its liquidity requirements using cash
from operations and available lines of credit. On April 4, 1997, the Company
amended and extended its revolving credit agreement with Silicon Valley Bank.
This agreement provides for a $2 million revolving credit facility, based upon
eligible accounts receivable requirements. 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
is secured by all assets of the Company. Interest on the line is at the Bank's
prime rate plus one-half of one percent. The line contains covenants including
provisions relating to profitability and net worth. As of September 30, 1997,
the Company had no outstanding debt under this revolving credit line.
The Company believes it has sufficient resources to finance its current
operations for the foreseeable future through working capital, its existing line
of credit and available lease arrangements. The Company will use portions of the
proceeds of this offering to execute its growth strategy. Net increase
(decrease) in cash and cash equivalents for the years ended December 31, 1994,
1995, and 1996, amounted to $120,000, $964,000, ($159,000), respectively, and
$432,000 for the nine months ended September 30, 1997. Capital expenditures for
the same periods amounted to $1,433,000, $390,000, $943,000 and $612,000,
respectively. To date there are no material commitments by the Company for
capital expenditures. However it is anticipated with this offering that the
Company will make significant capital investments for future product expansion.
At September 30, 1997, the Company's retained earnings were $1,542,000, compared
to a $35,000 accumulated deficit as of December 31, 1996. Working capital as of
September 30, 1997 was $4,878,000, compared to $2,020,000 as of December 31,
1996, an increase of 141%.
RECENT ACCOUNTING PRONOUNCEMENTS
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 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 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 128.
In June 1997, the Financial Accounting Standards Board issued SFAS 130,
"Reporting Comprehensive Income," which establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. Under this concept, all revenues,
expenses, gains and
24
<PAGE> 26
losses recognized during the period are included in income, regardless of
whether they are considered to be results of operations of the period. SFAS 130,
which becomes effective for the Company in its year ending December 31, 1998, is
not expected to have a material impact on the Consolidated Financial Statements
of the Company.
In June 1997, the Financial Accounting Standards Board issued SFAS 131,
"Disclosures about Segments of an Enterprise and Related Information," which
establishes standards for the way that public business enterprises report
selected information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports to stockholders. It also establishes
standards for related disclosures about products and services, geographic areas
and major customers. SFAS 131, which becomes effective for the Company in its
year ending December 31, 1998, is not expected to have a material impact on the
Company's results of operations.
IMPACT OF INFLATION AND CHANGING PRICES
Historically, the Company's business has not been materially impacted by
inflation. Manufacturing equipment sales are generally quoted, manufactured and
shipped within a cycle of approximately six months, allowing for orderly pricing
adjustments to the cost of labor and purchased parts. The Company has not
experienced any negative effects from the impact of inflation on long-term
contracts. The Company's service business is not expected to be seriously
affected by inflation because its procurement-production cycle typically ranges
from two weeks to several months, and prices generally are not fixed for more
than one year. Research and development contracts usually include cost
escalation provisions.
FOREIGN EXCHANGE FLUCTUATION
The Company sells only in U.S. dollars, generally against an irrevocable
confirmed letter of credit through a major U.S. bank. Therefore the Company is
not directly affected by foreign exchange fluctuations on its current orders.
However, fluctuations in foreign exchange rates do have an effect on the
Company's customers' access to U.S. dollars and on the pricing competition on
certain pieces of equipment that the Company sells in selected markets.
25
<PAGE> 27
BUSINESS
The discussion in this Prospectus contains forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act that involve risks and uncertainties. The Company's actual results
and the timing of certain events may differ materially from the results
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below and in "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
GENERAL
Spire develops, manufactures and markets highly-engineered photovoltaic
module manufacturing equipment and optoelectronic products and provides
biomedical processing services. Spire is the world's leader in the design and
manufacture of specialized equipment for the production of terrestrial
photovoltaic modules from solar cells, with its equipment installed in over 130
factories and in more than 30 countries. The Company also offers certain
optoelectronic products and is continuing to develop additional advanced
optoelectronic products for telecommunications, biomedical and electronics
applications, including solar cells used to power satellites. Spire's
value-added biomedical processing services offer surface treatments to enhance
the durability or antimicrobial characteristics of orthopedic and other medical
devices.
Photovoltaics, the technology of using solar cells to convert sunlight
directly into electricity, is a growing alternative energy production method and
an increasingly important component of world energy production, particularly in
the wireless telecommunications sector. With this technology, electricity is
produced by using photovoltaic modules, which consist of a number of solar cells
connected to each other and laminated in reliable and durable support
structures. The Company believes that it is the only company that manufactures
each piece of equipment necessary for a complete production line that fabricates
photovoltaic solar cells into modules. The Company's module manufacturing
equipment and production line configurations offer its customers a range of
manufacturing processes, from relatively labor intensive to fully automated
systems. Spire's products include solar cell testers, cell tabbing and stringing
assemblers, laminators and sun simulator module testers, as well as turnkey
module production lines complete with comprehensive technology, training and
service support.
Spire's market leadership and international reputation for quality
manufacturing and process technology position the Company to capitalize further
on the expanding global photovoltaic market. In the past five years, global
usage of terrestrial photovoltaic power has increased substantially, due to such
factors as rural electrification in the developing world, the accelerated growth
of wireless telecommunications, with its need for wireless power, and increased
environmental concerns encouraging the use of renewable energy sources.
Awareness and acceptance of photovoltaics as an energy source are receiving
significant support from initiatives such as the PV Rooftop Program in Japan,
the Building Integration Program in Germany and the Clinton Administration's
recently announced "Million Solar Roofs Initiative."
Projections by industry experts of growth in worldwide demand for
photovoltaic modules range from 25% to 50% per year through the year 2002. In
order to meet this increasing demand, manufacturers of photovoltaic modules must
increase their manufacturing capacity by adding capital equipment, including the
types of capital equipment offered by the Company. Industry experts estimate
that in 1997 annual worldwide module production capacity increased by at least
34%, or 44 megawatts. Photovoltaic module manufacturers already have announced
plans to expand worldwide module production capacity by 100 megawatts in 1998,
which would be a 58% increase over 1997 production capacity. The Company
believes that the 1998 market for photovoltaic module manufacturing equipment
will be approximately $25 million to $40 million, compared to a 1997 market of
approximately $20 million for such equipment. See "Risk Factors -- Dependence on
Market Growth" and "-- Technological Advances; Dependence on Future Product
Development and Market Acceptance."
In addition to projected growth in the terrestrial photovoltaic market, the
proliferation of satellites resulting from the increasing need for
telecommunications bandwidth has created demand for specialized photovoltaic
cells to power satellites. According to industry experts, telecommunications
companies worldwide plan to launch more than 500 satellites in the next five
years. Based upon published reports, the Company
26
<PAGE> 28
believes there may be insufficient manufacturing capacity in the industry to
meet the increasing demand for space solar cell production. The Company has
developed extensive technology and expertise as a result of more than 25 years
of relevant contract research for the U.S. government and commercial customers,
and the Company believes these capabilities provide the opportunity to enter the
market for space solar cells with commercial product offerings.
Spire is a leading U.S. provider of surface treatments for medical devices,
utilizing its ion implantation and ion beam assisted deposition (IBAD)
technologies. Spire's surface processing technologies have evolved from the
Company's silicon wafer ion implantation technology for solar cell applications.
These surface treatments improve the durability or antimicrobial characteristics
of invasive medical devices such as orthopedic implants and catheters. The aging
of the U.S. population has contributed to greater demand for joint replacement
procedures; longer and more active lives have led to the demand for enhanced
device durability and performance. Medical industry initiatives aimed at
lowering costs have focused efforts on reducing the incidence of infection,
which has created demand for antimicrobial treatment of catheters and other
invasive medical devices.
Spire's more than 25 years of advanced research in photovoltaics and
optoelectronics have resulted in a strong array of proprietary technologies.
These technologies have led to the Company's current product and service
offerings in photovoltaics and in medical device treatments, and have further
potential commercial applications in terrestrial and space solar cell
production, in other optoelectronic products and in enhancing the performance of
additional medical devices. Much of the Company's development of its core
technologies and the application of these technologies to commercial products
has been funded by the U.S. government under contracts providing that the
Company retains proprietary rights to all developments. The Company anticipates
that much of its future development efforts will continue to be funded by the
U.S. government and other outside sources.
HISTORY
From its founding by Roger G. Little in 1969 through the end of the 1970s,
substantially all of the Company's revenues were generated by its research,
development and engineering activities, generally through contracts with the
U.S. government. During that period, the Company began to research methods of
producing higher efficiency solar cells. The Company developed expertise in
various photovoltaic technologies and received funding to develop its
metalorganic chemical vapor deposition (MOCVD) technology to make advanced solar
cells from compound semiconductor materials such as gallium arsenide (GaAs). The
Company is continuing to apply its MOCVD process to different types of compound
semiconductor materials aimed at developing advanced solar cells, primarily for
space applications, as well as other compound semiconductor materials, devices
and components for medical and other applications. As the Company improved its
technique to develop higher efficiency solar cells, it also developed a line of
equipment aimed at manufacturing solar modules from cells. In 1981 the Company
introduced its first terrestrial photovoltaic module production equipment and is
currently the leading supplier of such equipment worldwide.
In 1984, the Company received U.S. government funding to apply its ion beam
technologies to metal surface applications for potential improvement of surface
properties. From this research effort, the Company developed its ion
implantation process. Since 1988, the Company has applied this process to the
medical industry by using its ion implantation process to improve the wear
resistance of orthopedic devices. Most recently the Company has developed its
IBAD technology, which combines implantation technology and deposition
technology to add antimicrobial properties to the surfaces of certain medical
devices.
CHRONOLOGY OF KEY SPIRE TECHNOLOGY DEVELOPMENTS
<TABLE>
<S> <C> <C>
- 1970 -- Spire builds its first SPI-PULSE(TM) electron beam generator to support
research in radiation effects testing
- 1974 -- U. S. government contract brings Spire into space solar cell research, which
leads to ion implantation and advanced silicon solar cell technologies
</TABLE>
27
<PAGE> 29
<TABLE>
<S> <C> <C>
- 1980 -- Spire receives contract to use pulsed electron beams to improve
GaAs-on-silicon solar cells grown by metalorganic chemical vapor deposition
(MOCVD)
-- Spire builds its first MOCVD reactor, which starts development of Spire's
expertise in using compound semiconductors for solar cells as well as other
applications
- 1981 -- Spire makes its photovoltaic module manufacturing equipment commercially
available for the first time
- 1982 -- Spire begins offering advanced compound semiconductor wafers and devices for
a broad range of optoelectronic technology
- 1983 -- Spire produces a 15% efficient photovoltaic module using ion implantation, a
milestone for the photovoltaic industry
- 1985 -- Ongoing Spire development of very high efficiency solar cells yields several
world record efficiency GaAs concentrator cells
-- Spire applies high current ion implantation technology developed for solar
cells to metal materials processing
- 1988 -- Spire begins development of its MOCVD processes utilizing indium phosphide
growth for application in the space solar cell telecommunications industry
-- Spire receives first commercial order for treatment of orthopedic components
by ion implantation
- 1992 -- Spire advances the state of the art in high throughput, high reliability
module manufacturing with new concepts in automated module fabrication
- 1993 -- Spire develops new MOCVD reactor designs for high uniformity growth of
advanced device structures
-- Spire introduces diode laser arrays providing reliable, efficient pumping of
energy into solid state lasers
- 1994 -- Spire begins using its proprietary IBAD system providing for high quality
coatings deposited at low temperatures to modify surfaces of medical polymers
and other materials
-- Spire develops thermophotovoltaic cells to generate electricity from thermal
sources
- 1996 -- Spire's solar cell and MOCVD expertise make possible advanced indium
phosphide solar cells for use in powering future generations of
communications satellites
</TABLE>
INDUSTRY/MARKET
Photovoltaics
Photovoltaics is the direct conversion of light into electricity. Certain
materials exhibit a property known as the photoelectric effect, which causes
them to absorb photons of light and to release electrons. The photovoltaic
industry processes semiconductor materials (most commonly silicon) into thin
semiconductor wafers to make solar cells, which are specially treated to form an
internal electric field, positive on one side and negative on the other. When
light strikes the solar cell, electrons are released from the atoms in the cell,
and electrical conductors attached to the positive and negative sides of the
cell collect an electric current. A typical four-inch diameter silicon solar
cell produces approximately one and one-half watts of electricity in bright noon
sunshine. These individual cells are connected together to form a photovoltaic
module, which can be designed to supply electricity at a certain voltage.
Photovoltaic modules are then wired together in arrays. Generally, the larger
the area of a module or array, the more electricity will be produced.
Photovoltaic modules are manufactured by a number of different entities,
many of whom use Spire equipment. These entities range from multinational
corporations to small private companies. Depending on their intended
application, the modules are sold to telecommunications companies, domestic and
foreign governmental agencies and utilities, among others.
Projections by industry experts of growth in worldwide demand for
photovoltaic modules range from 25% to 50% per year through the year 2002. In
order to meet this increasing demand, manufacturers of photovoltaic modules must
increase their manufacturing capacity by adding capital equipment, including the
types of
28
<PAGE> 30
capital equipment offered by the Company. Industry experts estimate that in 1997
annual worldwide module production capacity increased by approximately 34%, or
44 megawatts. Photovoltaic module manufacturers already have announced plans to
expand worldwide module production capacity by 100 megawatts in 1998, which
would be a 58% increase over 1997 production capacity. The Company believes that
the 1998 market for photovoltaic module manufacturing equipment will be
approximately $25 million to $40 million, compared to a 1997 market of
approximately $20 million for such equipment. See "Risk Factors -- Dependence on
Market Growth" and "-- Technological Advances; Dependence on Future Product
Development and Market Acceptance."
In non-industrialized areas photovoltaics is used for basic power
generation. In such places as developing countries or remote areas of the world
where power grids are not currently in place, photovoltaics has been an
economical way to electrify rural areas. Photovoltaic modules are also used for
power in various applications, such as water pumping, vaccine refrigeration and
telecommunications. According to industry analysts, developing countries now
account for about 30% of global energy use; with continued economic growth they
are projected to account for over one-half of the increase in global energy
consumption over the next three decades. Industry analysts believe that
approximately 75% of the population of the developing world (nearly two billion
people) are without electric power today. As developing countries become more
industrialized, photovoltaic usage is expected to expand as demand for
electrical power grows.
In industrialized areas such as the U.S., Europe and Japan, photovoltaics
has a number of specialized applications. Photovoltaic modules are integrated
into building facades, used on roof tops of homes, or as substitutes for windows
in large buildings, to supplement conventional power supplies. Photovoltaic
generated power is an increasingly important component of the telecommunications
infrastructure, as the growth in demand for wireless communications increases.
The expanding worldwide use of cellular telephones has required an expansion of
radio transmission systems, many of which use photovoltaic modules for power.
Photovoltaic modules complement existing power plants by expanding the plants'
energy production capability through an environmentally friendly energy source.
Photovoltaics produces no gaseous emissions during operation and offers an
environmentally benign alternative to fossil and nuclear sources of energy.
Finally, the economics of photovoltaic applications in the industrialized world
are improving. Photovoltaic energy is not currently price competitive with
existing means for generating power for central power stations. However,
continued efforts to reduce the costs of photovoltaic modules, as measured in
cost per peak watt, have resulted in a 50% decrease in such costs since the
1980s.
The Japanese government has increased its "PV Rooftop Program," under which
40,000 homes are to be equipped with photovoltaic modules. Photovoltaic module
manufacturers in Japan have already begun increasing capacity to meet the
expectations of this program by expanding facilities, including additions of
capital equipment. In 1997, the Company sold photovoltaic module manufacturing
equipment to customers in Japan in connection with such expansion. The Building
Integration Program in Germany has evolved from a recognition that
environmentally friendly energy sources should be included in the design of
newly constructed buildings. In 1997, the Company also sold photovoltaic module
manufacturing equipment to customers in Germany, who are increasing capacity to
meet the anticipated increase in demand for photovoltaic modules.
In the United States, President Clinton has announced the "Million Solar
Roofs Initiative," which aims to encourage greater use of photovoltaic energy in
residential and commercial buildings. Similarly, the European Commission
recently adopted a "White Paper on Renewables," which calls for photovoltaic
installations on half a million roofs in Europe and the export of 500,000 solar
systems to the developing world. While the Company cannot attribute any sales to
date to either of these initiatives, it believes that the awareness and
acceptance of photovoltaics as a viable energy source are increasing.
As a worldwide leader in the manufacture of equipment to produce
photovoltaic modules, Spire is poised to take advantage of the growing
applications and acceptance of photovoltaics. The Company believes that many of
its photovoltaic customers in the United States, Europe, Japan, India, China,
the Middle East, other areas of Asia and Africa are adding capacity to take
advantage of the increased demand for photovoltaic
29
<PAGE> 31
energy. See "Risk Factors -- Dependence on Market Growth," "-- Competition" and
"-- Dependence on Export Sales."
Optoelectronics
Optoelectronics involves the conversion of light to electricity, like
photovoltaics, and/or the conversion of electricity to light. Optoelectronics
uses thin film technology, such as MOCVD, to create semiconductor devices for
telecommunications, biomedical and electronics applications. In an MOCVD
reactor, specialized semiconductor materials are deposited onto substrate wafers
as single-crystal thin films. These wafers are then further processed into
various semiconductor devices.
Optoelectronics technology is used, among other things, to create
specialized types of solar cells to power space satellites; to create components
for biomedical instruments, such as semiconductor diode lasers, flat panel
displays and digital radiography; and to produce semiconductor wafers necessary
for electronic instruments such as cellular phones. The Company believes that
the market for MOCVD deposited films and other optoelectronics technology is
expanding rapidly, driven in part by the growth in the telecommunications
industry (which will require additional satellites powered by solar cells) and
the medical industry. Spire's processing facilities now include seven MOCVD
reactors, housed in a Class 100 Cleanroom.
The Company currently produces several products based on its
optoelectronics technology, including diode lasers and compound semiconductor
wafers. The Company also has certain products under development using its
proprietary technologies. The Company believes that its current products, as
well as those under development, may have significant commercial potential. See
"Risk Factors -- Technological Advances; Dependence on Future Product
Development and Market Acceptance" and "-- Expansion into New Markets" and
"Business -- Product Development."
Biomedical
The Company uses its ion beam technology to provide processing services to
the medical industry by treating the surfaces of products, such as orthopedic
devices and catheters, that are used in the human body. The Company's surface
treatment technologies include ion implantation and the Company's proprietary
ion beam assisted deposition (IBAD). The Company uses its ion implantation
technology, such as its IONGUARD(R) service, to bombard the surface of certain
titanium and cobalt-chromium alloy medical devices with ions to enhance their
mechanical and chemical surface properties. This process reduces friction and
improves wear, fatigue and corrosion resistance of the devices. The Company's
proprietary IBAD technology is used in its family of IONCIDE(TM)
infection-resistant treatments applied to metal, polymers and ceramics for
medical applications.
The Company believes that the two main factors leading to the growth of the
orthopedic implant segment of the medical device industry are the aging of the
U.S. population and the trend toward more active lifestyles later in life. These
factors have led to the need for a greater number of artificial joints, such as
knees and hips, as well as the need for these devices to last longer and resist
wear. Currently, only a small percentage of orthopedic devices are treated with
the Company's proprietary processing technologies. However, the Company believes
that there will be a growing demand for its orthopedic device processing
services.
The Company targets its IONGUARD(R) service to the orthopedic market and
its IONCIDE(TM) processes to manufacturers of devices such as catheters. The
Company's strategy is to be a value-added vendor to the manufacturer, thereby
offering an improved product to the medical industry. See "Risk Factors --
Dependence on Market Growth," "-- Expansion into New Markets" and "-- Government
Regulation."
GROWTH STRATEGY
Management believes the Company can achieve additional growth by:
- Capitalizing on growth in the photovoltaics market and the
anticipated demand for terrestrial solar cell module manufacturing
equipment;
30
<PAGE> 32
- Developing and commercializing photovoltaic solar cells for space
applications based on its established expertise in semiconductor
technologies using silicon, gallium arsenide (GaAs) and indium
phosphide (InP);
- Building on its established optoelectronics product offerings and
technical expertise;
- Broadening market acceptance for its antimicrobial and wear
improvement coatings for orthopedic implants, catheters and other
invasive medical devices; and
- Continuing to develop new products and technologies by utilizing
government and third party research and development funding
consistent with the commercial objectives of the Company.
Growth in Photovoltaics Market. As worldwide demand for energy produced by
photovoltaics increases, demand for solar cell modules will increase. The
Company's goal is to maintain or increase its market share for manufacturing
equipment that is used by its customers to produce solar cell modules. In order
to achieve this goal the Company intends to (i) increase its production
capacity, (ii) enhance its worldwide sales and marketing organization, in part
by establishing sales offices in strategic geographic areas, and (iii) extend
its product lines to meet the needs of its customers. In addition, the Company
is evaluating the business potential of entering into strategic alliances with
certain U.S. utility companies by marketing its "Spire Solar Business," which
includes manufacturing systems, integration services and proprietary software.
The Company is considering extending its current product line by developing a
line of specialized manufacturing equipment for production of terrestrial
photovoltaic cells. See "Risk Factors -- Dependence on Market Growth," "--
Technological Advances; Dependence on Future Product Development and Market
Acceptance," "-- Expansion into New Markets," "-- Difficulties of Expanding
Capacity" and "-- Need to Manage Growth."
Photovoltaic Products for Space Applications. The Company has established
technological expertise in the production of photovoltaic components using the
MOCVD process. The Company intends to apply this expertise to commercialize
space solar cells for powering satellites, to be used primarily by
telecommunications companies, and for government applications. According to
industry experts, telecommunications companies worldwide plan to launch more
than 500 satellites in the next five years. Each satellite will require space
solar cells producing on the average more than four kilowatts of energy. Based
on the space solar cell requirements of these satellites, as well as other
customer needs, the Company believes that annual worldwide demand for space
solar cell energy production will be 500 kilowatts by the end of 1999, which the
Company estimates to be a $200 million market based on current market pricing.
The Company believes that the two largest manufacturers of space solar cells
currently can produce approximately 260 kilowatts of space solar cells per year,
and all other manufacturers can produce approximately 30 kilowatts of space
solar cells per year. The Company believes there may be insufficient
manufacturing capacity in the industry to meet the increasing demand for space
solar cell production. The Company currently possesses all of the necessary
expertise, technology and equipment to produce space solar cells in small
quantities, and has sold customized gallium arsenide space solar cells to a
limited number of its customers. The Company currently is planning to expand the
manufacturing capacity of its space solar cell facility, including installation
of dedicated multi-wafer MOCVD reactor capacity required to support the
commercialization of these products. See "Risk Factors -- Competition," "--
Technological Advances; Dependence on Future Product Development and Market
Acceptance," and "-- Expansion into New Markets" and "Use of Proceeds."
Building on Established Component Manufacturing Capability. The Company's
semiconductor component processing facilities currently include seven MOCVD
reactors housed in a Class 100 Cleanroom environment. The Company intends to
build on this capacity, together with its proprietary technologies and
experienced technical personnel, to expand its product offerings of
semiconductor components. Products under consideration for development and
potential commercialization include indium phosphide solar cells for satellites,
radiation detectors for medical instrumentation and vertical cavity diode lasers
for imaging and laser printing and communications. See "Risk Factors --
Technological Advances; Dependence on Future Product Development and Market
Acceptance" and "-- Expansion into New Markets."
Market Acceptance of Biomedical Products. The Company seeks increased
sales of its biomedical processing services by broadening the market acceptance
and demand for medical implants and components treated with its proprietary
processes. In the orthopedic device area, where the Company currently provides
31
<PAGE> 33
processing services on a commercial basis, the Company hopes to broaden
understanding that use of surface treated orthopedic devices provides an
improved, longer-lasting product for patients and is a cost-effective choice. In
the invasive device area, the Company offers surface treatment for catheters and
heart valve cuffs on a small-scale commercial basis, and has several other ion
beam surface treatment processes under development. The Company intends to
increase acceptance of surface treated devices as a cost-effective improvement
over untreated devices. In order to achieve its goals in this area, the Company
intends to expand its sales and marketing staff and to increase the surface
coating treatments services it offers. The Company believes that such efforts
will lead to an increased number of customers for the Company's proprietary
processes and, if FDA approval is received, to eventual commercialization of
niche medical devices that include the Company's antimicrobial coatings. See
"Risk Factors -- Dependence on Market Growth," "-- Technological Advances;
Dependence on Future Product Development and Market Acceptance," "-- Expansion
into New Markets" and "-- Government Regulation" and "Use of Proceeds."
Sponsored Research Activity. Throughout its history, the Company has
aggressively sought to develop its proprietary technologies and apply such
technologies to commercial products through sponsored research activities. While
the bulk of such research is supported by grants and contracts from the U.S.
government, the Company has received research funding from other outside
sources. The Company intends to continue its efforts to obtain such funding to
enhance existing product lines and introduce new products where it perceives
that such opportunities are consistent with its commercial objectives. See "Risk
Factors -- Competition," "-- Dependence on Outside Funding for Research and
Development" and "-- Government Regulation."
PRODUCTS AND SERVICES
The Company offers a number of highly-engineered products, devices and
services aimed at meeting the varied requirements of its diverse customer base.
The photovoltaic manufacturing equipment product lines offered by the
Company bring terrestrial solar cells through each step of the process for
module manufacturing. The Company's SPI-CELL(TM) tester first tests and sorts
each solar cell based on its electrical performance; the Company's
SPI-STRINGER(TM) then interconnects the cells into strings; the Company's
SPI-VAC PIK(TM) transfers the cells to a board and prepares them for lamination;
the strings are then laminated using the Company's SPI-LAMINATOR(TM); and the
Company's SPI-SUN SIMULATOR(TM) then tests the entire module for efficiency.
Prices for individual items of the Company's photovoltaic manufacturing
equipment range from $25,000 to $1 million, and complete lines of equipment
range from $500,000 to $3 million. The price of a piece of equipment depends on
its size, function and on the degree of custom engineering required by a
customer. The price of a complete line of equipment depends upon a customer's
production requirements. The Company constantly seeks to reduce the cost of
photovoltaic module manufacturing by developing more sophisticated equipment to
make photovoltaics more cost effective. The Company's customers for photovoltaic
manufacturing equipment include Siemens Solar Industries, Shell Oil Company,
Solarex Corporation USA, Sharp Corporation, Sanyo Electric Co., Ltd., BP Solar
(British Petroleum) and Pilkington Solar International GmbH.
Products produced using the Company's MOCVD technology include diode lasers
used for medical equipment, electronic devices, photocopiers and printers;
compound semiconductor wafers used for cellular telephones and other
communications devices; laser power converters, which change light into
electricity to power electric devices; and thermophotovoltaic cells, which
generate electrical energy directly from relatively low temperature heat
sources.
The Company offers surface treatment services to manufacturers of
orthopedic and other medical devices. The Company's IONGUARD(R) surface
treatment enhances the surface properties of medical devices, increasing their
durability and longevity. The Company also offers a family of antimicrobial
surface coating treatments utilizing the Company's IBAD technology under the
name IONCIDE(TM). The IONCIDE(TM) processes employ proprietary equipment that
use IBAD technologies to deposit thin microscopic coatings of various
semiconductor materials onto medical devices such as catheters. These processes
modify the functional surface properties by adding antimicrobial capabilities.
The Company believes that its IONCIDE(TM)
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<PAGE> 34
processes represent an opportunity for expansion, as infection has become a
growing concern in the invasive medical device industry.
The following table describes a portion of the Company's current products,
devices and services, their applications and target customers:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C>
CURRENT OFFERINGS APPLICATIONS TARGET CUSTOMERS
<CAPTION>
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Photovoltaic Manufacturing Equipment
- ---------------------------------------------------------------------------------------------
SPI CELL TEST(TM) 150 Tests the electrical
performance of photovoltaic
cells under simulated
sunlight
- ------------------------------------------------------------------------------
SPI CELL TEST(TM) 1000 Automatically performs
testing of up to 1000 cells
per hour; sorts cells by
output power
- ---------------------------------------------------------------
SPI CELL TEST(TM) QC6 Self-contained
semi-automatic system for
testing and grading
photovoltaic cells.
Measures current voltage
characteristics and assigns
a bin number so an operator
can quickly sort cells by
output power
- ---------------------------------------------------------------
SPI-GLASS WASHER(TM) 500 A family of systems for
SPI-GLASS WASHER(TM) 1000 automatically washing glass
used in photovoltaic
production
- ---------------------------------------------------------------
Hi-Voltage Tester Safety testing of finished
modules
- ---------------------------------------------------------------------------------------------
</TABLE>
I,1 All of the Company's
photovoltaic equipment is marketed to solar module manufacturers,
telecommunications
companies, power companies,
public utilities and U.S.
and foreign government
agencies
<PAGE> 35
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C>
CURRENT OFFERINGS APPLICATIONS TARGET CUSTOMERS
<CAPTION>
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Photovoltaic Manufacturing Equipment
- ---------------------------------------------------------------------------------------------
SPI ASSEMBLER(TM) 5000 Automatically interconnects
cells by soldering flat
metal leads, or tabs, to
solar cell contacts
- ---------------------------------------------------------------
SPI-STRINGER(TM) 500 A group of semi-automated
SPI-TAB(TM) 500 SPI-production machines
that interconnect solar
cells by soldering flat
metal leads, or tabs, to
solar cell contacts
- ---------------------------------------------------------------
SPI VAC PIK(TM) Transfers interconnected
photovoltaic module
circuits from alignment
board to a stack of
encapsulation materials
prior to lamination
- ---------------------------------------------------------------
SPI LAMINATOR(TM) 240 A family of automated
SPI LAMINATOR(TM) 350 photovoltaic module
SPI LAMINATOR(TM) 460 laminators that laminate
SPI LAMINATOR(TM) 580 cell strings and glass
SPI LAMINATOR(TM) 660 lay-up with controlled
heat, vacuum and pressure
- ---------------------------------------------------------------
SPI-SUN SIMULATOR(TM) 130i A family of photovoltaic
SPI-SUN SIMULATOR(TM) 240A module testers that test
SPI-SUN SIMULATOR(TM) 460 the electrical performance
SPI-SUN SIMULATOR(TM) 460i of photovoltaic modules
SPI-SUN SIMULATOR(TM) 660
- ---------------------------------------------------------------
SPI-ARRAY TESTER(TM) 750 A family of portable
SPI-ARRAY TESTER(TM) 800 photovoltaic array testers
SPI-ARRAY TESTER(TM) 1000 capable of measuring and
recording the current and
voltage characteristics of
photovoltaic modules or
groups of modules
- ---------------------------------------------------------------
SPI LINES(TM) turn-key factory A family of semi-automated
SPI LINE(TM) 100MSU to fully-automated
SPI LINE(TM) 500M production lines for the
SPI LINE(TM) 1000M manufacture of photovoltaic
SPI LINE(TM) 1000TFM modules from cells
- ---------------------------------------------------------------------------------------------
</TABLE>
I,1
All of the Company's
photovoltaic equipment is
marketed to solar module
manufacturers,
telecommunications
companies, power companies,
public utilities and U.S.
and foreign government
agencies
<PAGE> 36
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
CURRENT OFFERINGS APPLICATIONS TARGET CUSTOMERS
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Optoelectronic Materials and Devices
- ---------------------------------------------------------------------------------------------
Diode Lasers Medical equipment, Equipment manufacturers for
electronic devices, the photovoltaic,
photocopiers and printers biomedical and
optoelectronics industries
- ---------------------------------------------------------------------------------------------
Compound Semiconductor Wafers Cellular telephones and Telecommunications
communications devices; companies; manufacturers of
high speed electronics high speed electronic
devices; U.S. government
- ---------------------------------------------------------------------------------------------
Laser Power Converters Change light into Electronic equipment
electricity to power manufacturers;
electric devices telecommunications
companies
- ---------------------------------------------------------------------------------------------
Thermophotovoltaic Cells Generate electrical energy U.S. government
directly from relatively
low temperature heat
sources
- ---------------------------------------------------------------------------------------------
Biomedical Processing Services
- ---------------------------------------------------------------------------------------------
Manufacturers of orthopedic
IONGUARD(R) for Orthopedics A family of processing and other medical devices
services using ion beam
technologies to enhance the
mechanical and chemical
surface properties of
orthopedic and other
medical devices
- ------------------------------------------------------------------------------
IONGUARD(R) I For titanium alloy devices
IONGUARD(TM) II For cobalt chromium devices
- ---------------------------------------------------------------------------------------------
IONJOIN(TM) Enhances bond strength of Manufacturers of orthopedic
bone cement to orthopedic devices
device material for longer
life and increased joint
stability
- ---------------------------------------------------------------------------------------------
IONCIDE(TM) A family of antimicrobial Manufacturers of medical
surface treatments devices such as catheters
- ---------------------------------------------------------------------------------------------
</TABLE>
PRODUCT DEVELOPMENT
Spire's more than 25 years of advanced research in the photovoltaics and
optoelectronics areas have resulted in a variety of proprietary technologies
with potential commercial applications in terrestrial and space solar cell
production, enhancing the performance of medical devices, and for semiconductor
products. Much of this development effort has been funded by the U.S. government
and is anticipated to continue to be funded by U.S. government grants, including
Small Business Innovation Research grants, and by funding from other outside
sources. The Company's biomedical product offerings have evolved from Spire's
photovoltaic technology of silicon solar cell ion implantation, originally
developed for high volume, low cost photovoltaic module production. In addition
to new product development and commercialization, Spire also intends to pursue
further enhancements in its photovoltaic product lines, to permit its customers
to reduce their costs of solar cell module manufacturing and to increase yields.
The Company has several additional products under development utilizing its
optoelectronics technology. These products include indium phosphide solar cells
for satellites, radiation detectors for medical instrumentation and vertical
cavity diode lasers (VCSELs) for imaging, laser printing and communications.
Some engineering prototypes of these products have been built, while others are
still in the laboratory testing stage. In addition, the Company plans to expand
the manufacturing capacity of its space solar cell facility to achieve
commercial production of its gallium arsenide solar cells. While the Company
believes that these products, as well as others that it may develop from its
proprietary technologies, may have significant commercial potential,
35
<PAGE> 37
no assurance can be given that any of these products will reach a commercial
production stage or that sales of such products, if any, will economically
justify the Company's development, manufacturing and marketing efforts in this
area. See "Risk Factors -- Dependence on Outside Funding for Research and
Development," "-- Technological Advances; Dependence on Future Market
Development and Market Acceptance" and "-- Expansion into New Markets."
The following table describes certain products that the Company has under
development, their applications and target customers:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRODUCTS UNDER DEVELOPMENT APPLICATIONS TARGET CUSTOMERS
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Gallium Arsenide Solar Cells Space photovoltaics for Telecommunications companies;
satellite power systems U.S. and foreign governments
- ---------------------------------------------------------------------------------------------
Indium Phosphide Solar Cells Space photovoltaics for Telecommunications companies;
satellites operating in U.S. and foreign governments
earth's radiation belt where
standard silicon and GaAs
solar cells degrade rapidly
- ---------------------------------------------------------------------------------------------
Lightweight Flexible Silicon For wing mounting on unmanned U.S. and foreign governments;
Photovoltaic Modules ultra-light aircraft aircraft manufacturers
- ---------------------------------------------------------------------------------------------
Heterojunction Bipolar Used in cellular telephones, Electronic equipment
Transistor Epitaxial Wafers amplifiers and other high manufacturers;
frequency electronics telecommunications companies
- ---------------------------------------------------------------------------------------------
III-V Custom Photodiodes Near infrared detection and Optical equipment
imaging manufacturers; U.S. and
foreign governments
- ---------------------------------------------------------------------------------------------
Solar-Blind Ultra-Violet A low cost ultraviolet Analytic equipment
Detectors detector with little or no manufacturers; U.S. and
response to visible and foreign governments
infrared light; can be used
for fire detection and other
applications
- ---------------------------------------------------------------------------------------------
CdZnTe Flat Panel Display To make x-ray images without Medical device manufacturers;
Imager for X-ray Fluoroscopy film baggage scanner manufacturers
- ---------------------------------------------------------------------------------------------
Vertical Cavity Diode Lasers For use in photocopiers, Office equipment
printers and optical data manufacturers; LAN and
links computer manufacturers
- ---------------------------------------------------------------------------------------------
</TABLE>
RESEARCH AND DEVELOPMENT
The Company's policy is to support as much of its research and development
as possible through government contract funding, which it recognizes as revenue.
Revenues from the Company's research and development contracts funded by the
U.S. government were $8,806,000 in 1994, $8,232,000 in 1995, $6,705,000 in 1996
and $5,950,000 for the first nine months of 1997, accounting for 48%, 48%, 39%
and 35%, respectively, of the Company's net sales and revenues for these
periods. As of September 30, 1997, the Company was performing 37 contracts for
the U.S. government. All contracts with U.S. government agencies have been
audited and settled through December 1995. The audit for the year ended December
31, 1996 has not yet been performed.
The Company's contracts with the U.S. government grant to the Company
proprietary rights in any technology developed pursuant to such contracts and
grant to the U.S. government a non-exclusive license to utilize the technology
for its benefit. The U.S. government retains the right to obtain the patent on
any inventions made under these contracts as to which patent protection is not
sought and obtained by the
36
<PAGE> 38
Company. The Company's rights to technology developed under contracts with
private companies vary, depending upon negotiated terms. See "Risk Factors --
Dependence on Outside Funding for Research and Development," "-- Protection of
Proprietary Technology" and "-- Government Regulation."
The Company's internally funded research and development expenditures were
$124,000 in 1994, $59,000 in 1995, $84,000 in 1996, and $126,000 for the first
nine months of 1997.
SALES AND MARKETING
The Company builds its photovoltaic module manufacturing equipment only to
order, and generally requires 35% of the total purchase price on order, 55% on
shipment and the final 10% upon acceptance of the equipment by the customer. The
Company receives progress payments under its research and development contracts
on a cost reimbursement or per deliverable basis. Biomedical processing services
and optoelectronic devices generally are sold on a net 30 day basis.
The Company markets its products and services through a network of
non-exclusive commissioned sales representatives, as well as through its
internal staff. The Company had 19 sales representatives as of November 30,
1997. These outside sales representatives are responsible for making initial
contacts with potential customers, after which the representatives work in
conjunction with the Company's internal staff to consummate sales. The Company
believes that use of outside sales representatives is particularly important in
facilitating access into certain foreign countries. Most of the Company's sales
representatives have had long term relationships with the Company, and work with
the Company without written agency agreements. Sales initiated through the
Company's internal staff arise from a number of sources, including trade shows,
printed advertisements and telephone campaigns.
The Company recently entered into two agreements with Marubeni Corporation
of Nagoya, Japan, relating to the manufacture and distribution of certain Spire
photovoltaic module manufacturing equipment in Japan. Under the agreements,
Marubeni will distribute, and in some cases manufacture under a technology
license, certain of Spire's photovoltaic module manufacturing equipment under
the Company's name in Japan, and has rights to market this equipment line
throughout certain countries in Southeast Asia and the Pacific Rim. Marubeni's
Japanese office established on behalf of the Company is headed by the Company's
long-time photovoltaic equipment sales representative in Japan. Management
believes that this office will give the Company the in-country presence it needs
to grow its already established photovoltaic module manufacturing equipment
business in Japan. The Company also has recently opened an office in Denver,
Colorado, to support the Company's marketing activities in the Western and
Midwestern regions of the United States. See "Recent Developments."
In the biomedical area, the Company concentrates on identifying and serving
the leading U.S. manufacturers of orthopedic and other medical devices. Where
possible, the Company seeks to be the sole provider of surface processing
services to its biomedical customers. The Company is expanding its marketing
program in this area to include physicians and hospitals who utilize such
devices.
The Company's scientists are responsible for submitting proposals to the
U.S. government and other outside sources for sponsored research and development
work, particularly in the optoelectronics area. The Company has been increasing
its efforts to commercialize its extensive optoelectronics technology, by
focusing on marketing new optoelectronic products and forming relationships for
exploitation of the Company's optoelectronics technology, both domestically and
internationally. See "Risk Factors -- Dependence on Outside Funding for Research
and Development," "-- Reliance on Sales Representatives" and "-- Technological
Advances; Dependence on Future Product Development and Market Acceptance," and
"Business -- Growth Strategy."
BACKLOG
The Company's backlog believed to be firm as of September 30, 1997
(including equipment, services, license agreements and contract research and
development) was $11,639,000, compared to $9,424,000 as of September 30, 1996.
The Company believes it will fill approximately 51% of this backlog in 1997.
Approximately $6,893,000 of the backlog at September 30, 1997, as compared to
$8,152,000 at September 30,
37
<PAGE> 39
1996, is represented by contracts with the U.S. government that are cancelable
without the Company's consent, subject to reimbursement of the Company's
expenses. The Company has not experienced any material cancellations of such
contracts. See "Risk Factors -- Risk of Backlog" and "Business -- Research and
Development."
MANUFACTURING AND QUALITY CONTROL
The Company manufactures all of its products and performs all of its
biomedical processing services in a single facility. The fulfillment of each
customer order for the Company's photovoltaic module manufacturing equipment
requires customized engineering and systems design. While the time required to
fill orders is slightly different for each item of equipment, it generally takes
approximately six months from date of order to delivery to the customer. The
first few months of this process are devoted to customizing the design of the
item of equipment to meet the customer's requirements. The balance of the time
is spent on internal assembly, wiring and testing of the equipment. The Company
maintains quality control measures throughout each step of the manufacturing
process. Employees are responsible for reviewing incoming materials, conducting
interim testing throughout the Company's processing of the materials, and
servicing and testing final products before shipment to the Company's customers.
The Company's MOCVD reactors produce wafers with layers of semiconductor
materials, some of which are further processed into semiconductor devices. All
the Company's semiconductor wafers and semiconductor devices are tested in the
Company's measuring lab for quality control, before shipment to the customer.
The Company currently produces semiconductor wafers only to order. In the
biomedical area, customers ship medical devices to be surface-processed to the
Company. These devices are reviewed for surface defects prior to undergoing the
Company's surface processing, and are reviewed again for defects upon completion
of the processing. The devices are then shipped back to the customer.
The Company assembles its photovoltaic module manufacturing equipment from
a combination of components purchased from a variety of suppliers and
self-fabricated components. The Company has not experienced any major price
instability, or lack of availability, of its components. For many items,
alternate sources are available. The Company believes that the loss of any
supplier would not be material due to the ability to use alternate suppliers or
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. See "Risk Factors -- Difficulties of
Expanding Capacity," "-- Dependence on Single Manufacturing Facility" and "--
Need to Manage Growth."
PROPRIETARY RIGHTS
Over the course of more than 25 years of research and development, the
Company has accumulated extensive scientific and technological expertise. The
Company actively protects certain of its technological advances as trade
secrets, in part through confidentiality agreements with employees, consultants
and third parties. The Company also seeks and enforces patents as appropriate.
The Company currently has 40 United States patents, of which two are jointly
owned, four patents pending in the United States and two foreign patents
pending, all of which cover elements of its materials and processing
technologies.
Substantially all of the Company's research and development work is funded
by the U.S. government and other entities. The U.S. government retains the right
to obtain a patent on any invention developed under government contracts as to
which the Company does not seek and obtain a patent, and may require the Company
to grant a third party license of such invention if steps to achieving practical
application of the invention have not been taken. The U.S. government also
retains a non-exclusive, royalty-free, non-transferable license to all
technology developed under government contracts, whether or not patented, for
government use, including use by other parties to U.S. government contracts.
Furthermore, the Company's U.S. government contracts prohibit the Company from
granting exclusive rights to use or sell any inventions unless the grantee
agrees that any product using the invention will be manufactured substantially
in the United States. See "Risk Factors -- Protection of Proprietary Technology"
and "Government Regulation."
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<PAGE> 40
COMPETITION
The Company sells its products and services in competitive markets.
Entities now operating in related markets may enter the Company's markets. Some
of the Company's current and potential competitors have 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,
financial resources, product quality, timely delivery, service and price. The
Company believes that there are considerable barriers to entry into the markets
it serves, including a significant investment in specialized capital equipment
and product design and development, and the need for a staff with sophisticated
scientific and technological knowledge.
The Company faces competition from various companies in the terrestrial
photovoltaic module manufacturing equipment market, particularly in Japan. As an
industry leader, the Company has been subject to pricing pressures on certain
components of its photovoltaic module manufacturing equipment product line. The
Company's more technologically sophisticated and highly automated equipment
competes with more labor intensive alternatives. Furthermore, the Company
competes in foreign countries where there may be a preference for doing business
with local companies. In addition, large manufacturers may from time to time
produce certain items of equipment for their own internal use, eliminating the
purchase of such equipment from commercial vendors.
With respect to its optoelectronics and biomedical products and services,
the Company competes on the basis of overall quality of service and price, and
at times on the basis of value added. The Company's products and services also
compete against products based on alternate technologies. In addition, the
Company faces competition from numerous other businesses, particularly small
businesses throughout the United States, for contracts for research and
development funded by the U.S. government and other outside sources.
In the space solar cell market, which the Company anticipates entering, the
Company will face competition from larger, established companies with greater
financial resources than the Company. Furthermore, the space solar cells the
Company anticipates offering may compete with space solar cells of other
manufacturers, which use different technologies. In addition, the expansion of
the space solar cell market may attract more companies to enter the market,
which may affect the ability of the Company to compete effectively.
Because the Company often markets its photovoltaic products to governmental
agencies or financiers in foreign countries, it faces certain risks inherent in
international sales, such as regulatory requirements, political and economic
changes and disruptions and transportation delays. The Company also faces
competition from government or local companies in these countries. The Company
addresses these issues by working with local commissioned sales representatives,
seeking to establish a local presence, such as through its agreements with
Marubeni, maintaining technological leadership, and quoting prices and accepting
payment only in U.S. dollars, generally against letters of credit. Because the
Company sells its products only in U.S. dollars, the Company's sales could be
adversely affected to the extent that its customers have limited access to U.S.
dollars and to the extent that fluctuations in exchange rates may render the
Company's prices less competitive relative to competitors' prices. See "Risk
Factors -- Competition" and "-- Dependence on Export Sales."
EMPLOYEES
As of October 31, 1997, the Company employed 141 people, of whom 133 were
full-time. Twelve of the Company's employees hold Ph.D.'s. The Company has 41
employees on its technical staff and 10 on its manufacturing staff. The Company
has never experienced a work stoppage and considers its relationship with its
employees to be good.
PROPERTIES
The Company leases 74,000 square feet in a building located at One Patriots
Park, Bedford, Massachusetts. The production facilities and substantially all of
the Company's offices are located in the building. All of the Bedford space is
subleased from Millipore Corporation on what the Company believes are
commercially reasonable terms. Millipore leases 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. The 1985 sublease originally
was for a period of ten years. The Company has exercised its option to extend
the sublease for an
39
<PAGE> 41
additional five-year period expiring on November 30, 2000 and has an option for
an additional five-year extension.
The Company believes that its facilities are suitable for their present
intended purposes and adequate for the Company's current level of operations;
however, certain activities of the Company are operating at close to existing
capacity levels. In order to implement its growth plan, the Company intends to
use a portion of the net proceeds from the offering over the next 12 months for
additional equipment and facilities to expand manufacturing capacity. The
Company plans to lease additional space and believes that suitable facilities
for future use will be available to it on commercially competitive terms. See
"Risk Factors -- Difficulties of Expanding Capacity," "-- Dependence on Single
Manufacturing Facility" and "-- Need to Manage Growth" and "Use of Proceeds."
GOVERNMENT REGULATION
The Company's government contracting activities are subject to a large
number of federal regulations and oversight requirements. Compliance with the
array of government regulations requires extensive record keeping and the
maintenance of complex policies and procedures relating to all aspects of the
Company's business, as well as to work performed for the Company by any
subcontractors. The Company believes that it has put in place systems and
personnel to ensure compliance with all U.S. government regulations relating to
contracting.
The Company also is subject to export control regulations that govern the
export of Company products to certain countries, as well as the release of
technical information to non-U.S. individuals and entities. Further, the Company
is subject to federal, state and local governmental environmental regulations
and to federal OSHA regulations. The Company believes that it has complied in
all material respects with all applicable environmental and safety regulations
and has all permits necessary to conduct its business. The Company employs a
full-time Environmental and Safety Engineer to manage its compliance efforts.
The cost of such compliance has not been material to the Company.
The introduction by the Company's customers of certain new biomedical
products depends on passage of these products through various stages of review
by the United States Food and Drug Administration. The process of obtaining
regulatory approvals involves lengthy and detailed laboratory and clinical
testing and other costly and time-consuming procedures. The Company continues to
refine its interaction with its customers in the regulatory approval process in
an effort to streamline its customers' application process. See "Risk Factors --
Government Regulation."
LEGAL PROCEEDINGS
There are no material legal actions currently pending against the Company.
40
<PAGE> 42
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, their ages and
positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- --------------------------------------------------------- ------------------------------------------------
<S> <C> <C>
Roger G. Little 57 Chairman of the Board, Chief Executive Officer
and President
Richard S. Gregorio 42 Vice President, Chief Financial Officer,
Principal Accounting Officer, Treasurer and
Clerk
Stephen J. Hogan 46 Vice President and General Manager,
Photovoltaics
Everett S. McGinley, Ph.D. 39 Vice President and General Manager,
Optoelectronics
Ronald S. Scharlack 52 Vice President and General Manager, Biomedical
(effective January 5, 1998)
Michael T. Eckhart 49 Director
A. John Gale(1) 82 Director
Udo Henseler, Ph.D.(1)(2) 58 Director
Roger W. Redmond(2) 44 Director
John A. Tarello(1) 66 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
ROGER G. LITTLE is the founder of the Company and Chairman of the Board of
Directors, Chief Executive Officer and President. Mr. Little has been the
President and a Director of the Company since its founding in 1969. He is a
member of the U.S. Secretary of Energy's Advisory Board and the Chairman of the
Solar Energy Industries Association. Mr. Little holds a B.A. in Physics from
Colgate University and an M.Sc. in Physics from the Massachusetts Institute of
Technology.
RICHARD S. GREGORIO joined the Company in 1977 and has served in a number
of accounting and finance positions. He was named Principal Accounting Officer
in 1983, Treasurer in 1989, Vice President and Chief Financial Officer in 1993
and Clerk in 1996. Mr. Gregorio holds a B.S. in Accounting from Bentley College,
and a Certificate of Management from the Harvard Business School Extension
Program.
STEPHEN J. HOGAN joined the Company in 1984 as Manager, Process
Development. He was named Sales Manager, Photovoltaic Equipment in 1988,
Manager, Engineering and Manufacturing in 1990 and Director of Photovoltaic
Business Development in March 1997. He was elected Vice President and General
Manager, Photovoltaics, of the Company in November 1997. Prior to joining the
Company, Mr. Hogan was a scientist at the Solar Energy Research Institute in
Golden, Colorado, now known as the National Renewable Energy Laboratory. Mr.
Hogan holds a B.S. in Electrical Engineering from the University of Notre Dame
and an M.S. in Electrical Engineering from the University of Colorado.
EVERETT S. MCGINLEY, PH.D. has been Vice President and General Manager,
Optoelectronics, of the Company since August 1997. From January 1997 through
June 1997, Dr. McGinley was a consultant providing business development
consulting services to energy related clients, including for the Company. From
1993 until 1997, he was vice president of Axios Limited, an international
business development, venture capital, and consulting firm in optoelectronics
for alternative energy technologies. From 1991 to 1993, he was product manager
for Baltzers, Inc., a semiconductor production equipment and instrumentation
manufacturer. Dr. McGinley holds a B.S. from the University of Lowell and a
Ph.D. from the University of Wisconsin.
RONALD S. SCHARLACK is joining the Company as Vice President and General
Manager, Biomedical, on January 5, 1998. Mr. Scharlack was previously Manager of
Advanced Technology at Chiron Diagnostics, Medfield, Massachusetts, a
manufacturer of biomedical instruments. Mr. Scharlack previously had worked for
Thermo Electron Corporation for five years, first as the Manager of Solar
Systems,
41
<PAGE> 43
during which time he established a new business area in the development of
photovoltaic components and systems, and subsequently as Manager, Modular
Cogeneration Marketing and Controls. Mr. Scharlack holds a B.S. in Mechanical
Engineering from the Massachusetts Institute of Technology and an M.S. in
Mechanical Engineering from Stanford University.
MICHAEL T. ECKHART is a project director of Solar Bank Project, a planned
finance entity that will be a source of secondary lending for solar photovoltaic
markets. From 1989 to 1996, he served as president of United Power Systems, an
independent power development company. Mr. Eckhart was elected to the Board of
Directors of the Company in August 1997. Mr. Eckhart is a member of the
Institute of Electrical and Electronic Engineers, the American Solar Energy
Society and the International Solar Energy Society. Mr. Eckhart holds a B.S. in
Electrical Engineering from Purdue University and an M.B.A. from Harvard
Business School.
A. JOHN GALE was president of Ion Optics, Incorporated, of Stoneham,
Massachusetts, a high technology materials processing firm, until his retirement
in 1994. He now consults for Ion Optics, Incorporated. Mr. Gale has been a
Director of the Company since 1969 and was Chairman of the Board of Directors of
the Company from 1969 to 1983. Mr. Gale received his B.S.C. from King's College,
London University in 1936, with special honors in physics.
UDO HENSELER, PH.D. is vice president and chief financial officer of
Qualicon Corporation, a DuPont company, of Wilmington, Delaware. Qualicon is a
manufacturer of analytical instruments for testing of biologically-derived
products. He is the owner of MSI Management Services International, a financial
and business advisory firm, and was until 1996 senior vice president, chief
financial officer and a director of Andrx Corporation, a pharmaceutical company
in Fort Lauderdale, Florida. Dr. Henseler was elected to the Board of Directors
of the Company in 1992. Dr. Henseler holds a B.A. from Academy of Commerce and
Administration, Cologne, Germany, an M.B.A. from Fairleigh Dickinson University
and an M.A. and Ph.D. from Claremont Graduate School.
ROGER W. REDMOND is president and chief executive officer of Teletraining
Systems, Inc., which trains and educates employees by means of data base and
video systems. From 1984 until 1997, Mr. Redmond was an officer and managing
director of Piper Jaffray, Inc., an investment banking firm. Mr. Redmond was
designated a Chartered Financial Analyst in 1988. He was elected a Director of
the Company in 1991. Mr. Redmond holds a B.S. in Chemistry from the University
of Arizona and an M.B.A. in Finance from the University of Minnesota.
JOHN A. TARELLO has been senior vice president of Analogic Corporation, of
Peabody, Massachusetts, a publicly held manufacturer of diagnostic and
measurement instruments and medical, industrial, and other electronics
equipment, since 1980 and was elected treasurer and chief financial officer of
Analogic in 1985. Mr. Tarello has been a Director of the Company since 1970, and
a director of Analogic Corporation since 1979. Mr. Tarello attended Burdett
College.
Each Director is elected at the Company's annual meeting of stockholders
and serves until the next annual meeting of stockholders and until his successor
has been elected and qualified. In general, vacancies and newly created
directorships resulting from any increase in the authorized number of Directors
may be filled by the stockholders or, in certain circumstances, by the
Directors.
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<PAGE> 44
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth the beneficial ownership of the Company's
Common Stock as of November 30, 1997 (except as otherwise specified herein) and
as adjusted to reflect the sale of the Common Stock being offered hereby
(assuming no exercise of the Underwriters' over-allotment options) by (i) each
person or entity who is known by the Company to own beneficially more than 5% of
the outstanding securities of the Company, (ii) each Director and executive
officer of the Company, (iii) each Selling Stockholder and (iv) all Directors
and executive officers of the Company as a group. The information as to each
person has been furnished by such person, and each person has sole voting power
and sole investment power with respect to all shares beneficially owned by such
person, except as otherwise indicated and subject to community property laws
where applicable. Unless otherwise indicated, each person or entity listed
maintains a mailing address c/o Spire Corporation, One Patriots Park, Bedford,
Massachusetts 01730-2396.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1)(2) AFTER OFFERING(1)(2)
------------------------- -------------------------
NUMBER OF NUMBER OF NUMBER OF
SHARES OF PERCENT OF SHARES TO BE SHARES OF PERCENT OF
COMMON COMMON SOLD IN COMMON COMMON
NAME STOCK STOCK OFFERING STOCK STOCK
- -------------------------------------- ---------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Michael T. Eckhart.................... 0(3) 0% 0 0(3) 0%
A. John Gale.......................... 7,250(4) * 0 7,250(4) *
Richard S. Gregorio................... 11,000(5) * 0 11,000(5) *
Udo Henseler.......................... 4,750(6) * 0 4,750(6) *
Stephen J. Hogan...................... 6,000(7) * 0 6,000(7) *
Roger G. Little....................... 1,455,450(8) 45.5% 300,000 1,155,450(8) 27.5%
Everett S. McGinley................... 0(9) 0% 0 0(9) 0%
Roger G. Redmond...................... 4,950(10) * 0 4,950(10) *
Ronald S. Scharlack................... 0(11) * 0 0(11) *
John A. Tarello....................... 4,750(6) * 0 4,750(6) *
Dimensional Fund Advisors, Inc........ 160,400(12) 5.0% 0 160,400(12) 3.8%
Spire Corporation 401(k) Profit
Sharing Plan(13).................... 229,014 7.2% 200,000 29,014 0.7%
Directors and Officers as a group (9
persons on November 30, 1997)....... 1,494,150(14) 46.7% 300,000 1,194,150(14) 28.5%
</TABLE>
- ---------------
* Denotes ownership of less than 1% of the Company's outstanding Common
Stock.
(1) Based on 3,197,347 shares of Common Stock outstanding as of November 30,
1997 and 4,197,347 shares of Common Stock to be outstanding after this
offering. Shares of Common Stock which an individual or group has a right
to acquire within 60 days are deemed to be outstanding for purposes of
computing the percentage ownership of such individual or group, but are not
deemed to be outstanding for purposes of computing the percentage ownership
of any other person shown on the table.
(2) Beneficial stock ownership shown for employees excludes in all cases shares
of Common Stock that may be held by the Spire Corporation 401(k) Profit
Sharing Plan on behalf of such employees.
(3) Does not include 5,000 shares of Common Stock subject to options not
exercisable within 60 days.
(4) Includes 1,250 shares of Common Stock subject to options exercisable within
60 days. Does not include 3,750 shares of Common Stock subject to options
not exercisable within 60 days.
(5) Includes 11,000 shares of Common Stock subject to options exercisable
within 60 days. Does not include 14,000 shares of Common Stock subject to
options not exercisable within 60 days.
(6) Includes 4,750 shares of Common Stock subject to options owned by each of
Dr. Henseler and Mr. Tarello exercisable within 60 days. Does not include
1,250 shares of Common Stock subject to options owned by each of Dr.
Henseler and Mr. Tarello not exercisable within 60 days.
(7) Includes 5,000 shares of Common Stock subject to options exercisable within
60 days. Does not include 15,000 shares of Common Stock subject to options
not exercisable within 60 days.
43
<PAGE> 45
(8) Includes 1,454,000 shares of Common Stock held in a trust of which Mr.
Little is the primary beneficiary. If the over-allotment options are
exercised in full, Mr. Little will beneficially own 1,110,450 shares of
Common Stock or 26.5%, after the Offering. Mr. Little is the Chairman of
the Board of Directors, Chief Executive Officer and President of the
Company.
(9) Does not include 20,000 shares of Common Stock subject to options not
exercisable within 60 days.
(10) Includes 200 shares of Common Stock held by Mr. Redmond as guardian for his
minor children and 4,750 shares of Common Stock subject to options
exercisable within 60 days. Does not include 1,250 shares of Common Stock
subject to options not exercisable within 60 days.
(11) Does not include 20,000 shares of Common Stock subject to options expected
to be granted in 1998 and which will not be exercisable within 60 days.
(12) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 160,400 shares of Common
Stock as of October 31, 1997, all of which shares are held in portfolios of
DFA Investment Dimensions Group Inc., a registered open-end investment
company; or in series of the DFA Investment Trust Company, a Delaware
business trust; or the DFA Group Trust and DFA Participating Group Trust,
investment vehicles for qualified employee benefit plans; all of which
Dimensional serves as investment manager. Dimensional disclaims beneficial
ownership of all shares of the Company's Common Stock. Dimensional's
address is 1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401.
(13) Trustees of the Plan, which was established in 1985, are Messrs. Little,
Gregorio and Tarello, each of whom disclaims beneficial ownership of shares
held by the Plan. In this offering, 200,000 shares held by the Plan are
being sold. Messrs. Little, Gregorio and Tarello are respectively the
Chairman of the Board of Directors, Chief Executive Officer and President;
a Vice President, Chief Financial Officer, Treasurer and Clerk; and a
Director of the Company. Some of the shares being sold are shares held by
the Plan for the benefit of Messrs. Little and Gregorio.
(14) Includes 31,500 shares of Common Stock subject to options exercisable
within 60 days. Does not include 61,500 shares of Common Stock subject to
options not exercisable within 60 days.
As of November 30, 1997, the Spire Corporation 401(k) Profit Sharing Plan,
a qualified plan under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Plan"), held in the aggregate 229,014 shares of the Company's
Common Stock. Of those shares, 225,772 shares represented contributions made by
the Company to match elective salary deferrals by employees of the Company, and
are subject to voting and investment decisions by the Trustees of the Plan. The
remaining shares were held in ten separate elective deferral accounts of
individual participants and are not within the investment control of the
Trustees of the Plan. It is anticipated that the Plan will offer 200,000 shares
of the Company's Common Stock pursuant to the offering, none of which would
include shares held in the elective deferral accounts. Messrs. Little, Gregorio
and Tarello are the Trustees of the Plan (the "Plan Trustees") and are,
respectively, Chairman of the Board, Chief Executive Officer and President; Vice
President, Chief Financial Officer and Treasurer; and a Director of the Company.
See "Management."
It is anticipated that 300,000 of the 500,000 shares of Common Stock being
offered by the Selling Stockholders will be sold by Roger G. Little, as Trustee
and primary beneficiary of the Roger G. Little Family Trust (the "Trust"). In
the event the over-allotment options are exercised in full, the Underwriters may
purchase up to an additional 45,000 shares of Common Stock from the Trust.
44
<PAGE> 46
DESCRIPTION OF SECURITIES TO BE REGISTERED
GENERAL
The following description of the capital stock of the Company and certain
provisions of the Company's Restated Articles of Organization, as amended (the
"Articles") and By-Laws (the "By-Laws") is a summary of and is qualified in its
entirety by the provisions of the Articles and the By-Laws.
COMMON STOCK
The Company's authorized capital stock consists of 20,000,000 shares of
common stock, par value $.01 per share (the "Common Stock").
Holders of Common Stock are entitled to cast one vote for each share held
of record on each matter submitted to a vote of the stockholders, including the
election of directors. There is no cumulative voting for the election of
directors. Holders of Common Stock are entitled to receive ratably any dividends
when, as and if declared by the Board of Directors out of funds legally
available therefor and upon liquidation or dissolution, and are entitled to
share ratably in the assets of the Company legally available for distribution to
stockholders after the payments of all debts and other liabilities. Holders of
Common Stock have no preemptive rights and have no rights to convert their
Common Stock into any other securities. The outstanding Common Stock is, and the
shares of Common Stock offered hereby will be, validly authorized and issued,
fully paid and nonassessable.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is American
Stock Transfer and Trust Company, New York, New York.
INDEMNIFICATION
The Company's By-Laws require the Company to indemnify all officers,
Directors, employees and agents of the Company against all liabilities and
expenses they may incur on account of all actions threatened or brought against
them by reason of their services to the Company or to another entity at the
request of the Company. No indemnification is provided for any person with
respect to any matter as to which such person has been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Company. In addition, the Company and
the Selling Stockholders have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act, and to
contribute to certain payments that the Underwriters may be required to make in
respect thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to Directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
45
<PAGE> 47
SHARES AVAILABLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 4,197,347 shares of
Common Stock outstanding based on 3,197,347 shares of Common Stock outstanding
as of November 30, 1997. Of such shares of Common Stock, 3,034,697 shares will
be freely tradable without restriction or further registration under the
Securities Act unless purchased by "affiliates" of the Company, as that term is
defined in Rule 144 under the Securities Act. The remaining 1,162,650 shares are
held by persons who may be deemed affiliates of the Company or are "restricted
securities" under Rule 144 and are eligible for sale on the date of this
Prospectus subject to the restrictions of Rule 144. In addition, following the
offering, shares of Common Stock will continue to be held by the Plan, and
additional shares will be purchased in open market transactions from time to
time thereafter to fund the Company's contributions to the Plan. The Trustees of
the Plan are Messrs. Little, Gregorio and Tarello.
The Company, its executive officers and Directors who in the aggregate will
hold 1,162,650 shares of Common Stock and options to purchase 93,000 shares of
Common Stock following the offering, and the Plan, have agreed for a period of
180 days after the date of this Prospectus not to sell or otherwise dispose of
any shares of Common Stock without the prior written consent of Tucker Anthony
Incorporated except for: (i) the sale of the shares hereunder; (ii) the issuance
by the Company of Common Stock pursuant to the exercise of options under the
Company's equity based plans; (iii) the grant by the Company of stock options
after the date of this Prospectus under the Company's equity based plans; (iv)
sales by the Plan Trustees pursuant to the provisions of the Plan; or (v)
transfers by gift, will or intestacy or to immediate family members, provided
that the transferee agrees to the same limitations (the "Lock-Up Agreements").
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
within the meaning of Rule 144 for at least one year is entitled to sell within
any three-month period a number of shares that does not exceed the greater of
(i) 1% of the then outstanding shares of the Company's Common Stock
(approximately 42,000 shares after the offering) or (ii) the average weekly
trading volume of the Company's Common Stock during the four calendar weeks
preceding the date on which notice of the sale is filed with the Securities and
Exchange Commission. Sales under Rule 144 are also subject to certain manner of
sale provisions, notice requirements and the availability of current public
information about the Company. Any person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days preceding a sale, and who owns shares within the
definition of "restricted securities" under Rule 144 that were purchased from
the Company (or any affiliate ) at least two years previously, will be entitled
to sell such shares under Rule 144(k) without regard to the volume limitations,
manner of sale provisions, public information requirements or notice
requirements. In meeting the one- and two-year holding periods described above,
a holder of restricted securities can include the holding periods of a prior
owner who was not an affiliate. The one- and two-year holding periods do not
begin to run until the full purchase price or other consideration is paid by the
person acquiring the restricted securities from the Company or an affiliate.
The Company's 1996 Equity Incentive Plan (the "1996 Plan") allows the
Company to issue to its non-employee Directors, employees and consultants
options and other awards covering up to an aggregate of 300,000 shares of Common
Stock. As of November 30, 1997, options to purchase 154,206 shares of Common
Stock were issued and outstanding under the 1996 Plan, and options to purchase
86,722 shares of Common Stock were issued and outstanding under the Company's
1985 Incentive Stock Option Plan and Directors Stock Option Plan (the "Prior
Plans"). No further grants of options can be made under the Prior Plans. The
Company has filed registration statements under the Securities Act covering in
the aggregate approximately 520,000 shares of Common Stock reserved for issuance
under the Prior Plans, and 300,000 shares of Common Stock under the 1996 Plan.
Shares registered under such registration statements are, subject to Rule 144
volume limitations applicable to affiliates, available for sale in the open
market, except to the extent that such shares are subject to vesting
restrictions with the Company and the Lock-Up Agreements.
No prediction can be made as to the effect, if any, that market sales of
shares or the availability of shares for sale will have on the market price of
the Common Stock prevailing from time to time. Sales of significant amounts of
the Common Stock in the public market could adversely affect the market price of
the Common Stock. See "Risk Factors -- Control by Principal Stockholder" and "--
Shares Available for Future Sale."
46
<PAGE> 48
UNDERWRITING
The Underwriters named below, acting through Tucker Anthony Incorporated,
First Albany Corporation and Advest, Inc., as Representatives, have agreed,
subject to the terms and conditions of the Underwriting Agreement, to purchase
from the Company and the Selling Stockholders, and the Company and the Selling
Stockholders have agreed to sell to the Underwriters, the number of shares of
Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
--------------------------------------------------------------- ---------
<S> <C>
Tucker Anthony Incorporated....................................
First Albany Corporation.......................................
Advest, Inc....................................................
-------
Total................................................ 1,500,000
</TABLE>
The Underwriters will purchase all shares of Common Stock offered hereby,
including any over-allotment shares. The Underwriting Agreement provides that
the obligations of the several Underwriters are subject to conditions precedent
specified therein. In the event of a default by an Underwriter, the commitment
set forth above of the non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Company and the Selling Stockholders have been advised by the
Representatives that the Underwriters propose to offer the shares of Common
Stock to the public at the offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. Such dealers may re-allow a concession of not in excess of $ per
share to certain other dealers. After the public offering, the offering price,
concession and re-allowance to dealers may be changed by the Underwriters.
The Company and Roger G. Little, as Trustee of the Trust, have each granted
to the Underwriters an option, exercisable by the Underwriters not later than 30
days after the effective date of this Prospectus, to purchase up to 180,000 and
45,000 additional shares of Common Stock, respectively, at the public offering
price, less the underwriting discount set forth on the cover page of this
Prospectus. The Underwriters may exercise either of such options, or both, in
whole or in part, only to cover over-allotments made in connection with the sale
of the shares of Common Stock offered hereby. To the extent that the
Underwriters exercise such options, each Underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of shares of Common Stock to be purchased by it shown in
the above table bears to the total shown, and the Company and the Trust will be
obligated, pursuant to the options, to sell such shares to the Underwriters.
In connection with this offering, certain Underwriters and selling group
members may engage in passive market making transactions in the Common Stock on
the Nasdaq National Market immediately prior to the commencement of sales in
this offering, in accordance with Rule 103 of Regulation M under the Exchange
Act. Passive market making consists of displaying bids on the Nasdaq National
Market limited by the bid prices of independent market makers and purchases
limited by such prices and effected in response to order flow. Net purchases by
a passive market maker on each day are limited to a specified percentage of the
passive market maker's average daily trading volume in the Common Stock during a
specified period and must be discontinued when such limit is reached. Passive
market making may stabilize the market price of the Common Stock at a level
above that which might otherwise prevail and, if commenced, may be discontinued
at any time.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to certain payments that the Underwriters may
be required to make in respect thereof. The Company has also agreed to reimburse
the Underwriters for certain expenses incurred by the Underwriters in connection
with this offering up to a maximum reimbursement of $100,000.
47
<PAGE> 49
The Company, its executive officers, Directors and the Selling Stockholders
have agreed not to offer, sell or otherwise dispose of any shares of Common
Stock or any equity securities or securities convertible into or exchangeable
for equity securities or any options, rights or warrants with respect to any
equity securities for a period of 180 days after the date of this Prospectus
without the prior written consent of Tucker Anthony Incorporated except for: (i)
the sale of the shares hereunder; (ii) the issuance by the Company of Common
Stock pursuant to the exercise of options under the Company's equity based
plans; (iii) the grant by the Company of stock options after the date of this
Prospectus under the Company's equity based plans; (iv) sales by the Plan
Trustees pursuant to the provisions of the Plan; or (v) transfers by gift, will
or intestacy or to immediate family members, provided that the transferee agrees
to the same limitations. See "Shares Available for Future Sale."
LEGAL MATTERS
The legality of the shares of Common Stock of the Company offered hereby
will be passed upon for the Company by Goldstein & Manello, P.C., 265 Franklin
Street, Boston, Massachusetts 02110. Stephen M. Honig, a member of Goldstein &
Manello, P.C., previously served as Clerk, and is currently Assistant Clerk, of
the Company. Certain legal matters in connection with the offering will be
passed upon for the Underwriters by Stroock & Stroock & Lavan LLP, 100 Federal
Street, Boston, Massachusetts 02110.
EXPERTS
The consolidated financial statements as of December 31, 1996 and 1995, and
for each of the years in the three-year period ended December 31, 1996 have been
included herein and in the Registration Statement in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information may be inspected and copied at the Public Reference Room of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; and at
the Regional Offices of the Commission at 7 World Trade Center, Suite 1300, New
York, N.Y. 10048; and at Citicorp Center, 500 West Madison Street, 14th Floor,
Chicago, Illinois 60661-2511. Copies of such materials may be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site
that contains reports, proxy and information statements and other information
regarding the Company; the address of such site is http://www.sec.gov. The
Company's Common Stock is traded on the Nasdaq National Market and such reports,
proxy statements and other information can be inspected at the offices of
Nasdaq, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-2 (including all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act, with respect to the Common Stock offered
hereby. This Prospectus, which constitutes a part of the Registration Statement,
omits certain of the information contained in the Registration Statement and the
exhibits and schedules thereto on file with the Commission pursuant to the
Securities Act and the rules and regulations of the Commission thereunder. For
further information with respect to the Company and its Common Stock, reference
is made to such Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus regarding the contents of any agreement
or other document filed as an exhibit to the Registration Statement are not
necessarily complete, and in each instance reference is made to the copy of such
agreement filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. The Registration Statement,
including the exhibits and schedules thereto, can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at certain of its Regional Offices at 7
World Trade Center, Suite 1300, New York, N.Y. 10048; and at Citicorp Center,
500 West Madison Street, 14th Floor, Chicago, Illinois 60661-2511.
48
<PAGE> 50
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act are incorporated by reference in this Prospectus: (i) the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1996; (ii) the Company's
Quarterly Reports on Form 10-QSB for the quarters ended March 31, 1997, June 30,
1997 and September 30, 1997 and (iii) the Company's Proxy Statement dated April
21, 1997. All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the initial filing
of the Registration Statement and prior to the termination of this offering
shall be deemed to be incorporated by reference in this Prospectus and to be
part hereof from the respective dates of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for all purposes to the extent that a statement contained in this Prospectus or
any other subsequently filed document that is also incorporated by reference
herein modifies or supersedes such statement. The Company hereby undertakes to
provide without charge to each person to whom a copy of this Prospectus has been
delivered, on the written or oral request of any such person, including any
beneficial owner of Common Stock, a copy of any or all of the documents referred
to above which have been or may be incorporated in this Prospectus by reference,
other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into the documents that the Prospectus incorporates.
Requests for such copies should be directed to Richard S. Gregorio, Chief
Financial Officer, Spire Corporation, One Patriots Park, Bedford, Massachusetts
01730-2396. Mr. Gregorio's telephone number is (781) 275-6000.
49
<PAGE> 51
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report.................................................. F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1995 and 1996 and
(Unaudited) September 30, 1997.......................................... F-3
Consolidated Statements of Operations for the Years Ended December 31,
1994, 1995 and 1996 and (Unaudited) for the Nine Months Ended
September 30, 1996 and 1997............................................. F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1994, 1995 and 1996 and (Unaudited) for the Nine Months
Ended September 30, 1997................................................ F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1994, 1995 and 1996 and (Unaudited) for the Nine Months Ended
September 30, 1996 and 1997............................................. F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 52
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Spire Corporation:
We have audited the consolidated financial statements 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, as listed in the
accompanying index. 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 as of 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
F-2
<PAGE> 53
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents......................... $ 1,130,428 $ 970,997 $ 1,402,548
Accounts receivable, trade (Note 3):
Amounts billed................................. 2,401,536 2,333,588 1,807,393
Retainage...................................... 97,350 130,215 120,964
Unbilled costs................................. 449,188 650,345 1,247,063
----------- ----------- -----------
2,948,074 3,114,148 3,175,420
Less allowance for doubtful accounts........... 95,000 100,000 85,000
----------- ----------- -----------
Net accounts receivable................... 2,853,074 3,014,148 3,090,420
----------- ----------- -----------
Inventories (Note 4).............................. 1,126,734 1,020,928 1,667,631
Deferred income taxes (Note 9).................... -- -- 300,000
Prepaid expenses and other current assets......... 369,483 287,513 454,544
----------- ----------- -----------
Total current assets................. 5,479,719 5,293,586 6,915,143
----------- ----------- -----------
Property and equipment (Note 6)..................... 21,980,123 22,919,385 23,559,710
Less accumulated depreciation and amortization.... 17,330,271 18,299,072 19,021,715
----------- ----------- -----------
Net property and equipment................ 4,649,852 4,620,313 4,537,995
----------- ----------- -----------
Computer software costs (less accumulated
amortization, $786,862 in 1995, $791,846 in 1996
and $806,916 in 1997)............................. 36,719 31,735 54,685
Patents (less accumulated amortization, $434,490 in
1995, $697,119 in 1996 and $528,607 in 1997)...... 518,087 385,245 274,511
Other assets........................................ 260,053 235,230 25,087
----------- ----------- -----------
814,859 652,210 354,283
----------- ----------- -----------
$10,944,430 $10,566,109 $11,807,421
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.................................. $ 1,494,877 $ 1,233,548 $ 1,148,725
Accrued liabilities (Note 5)...................... 789,153 654,232 770,689
Advances on contracts in progress................. 755,756 1,385,462 118,124
Current portion of capital lease obligation....... 10,401 -- --
----------- ----------- -----------
Total current liabilities................. 3,050,187 3,273,242 2,037,538
----------- ----------- -----------
Stockholders' equity (Note 8)
Common stock, $.01 par value; shares authorized
6,000,000 in 1995 and 1996, and 20,000,000
shares in 1997; issued 3,560,360 shares in
1995, 3,567,185 shares in 1996 and 3,715,466
shares in 1997................................. 35,604 35,672 37,155
Additional paid-in capital........................ 8,468,903 8,491,066 9,410,327
Retained earnings (deficit)....................... 564,424 (34,808) 1,542,089
----------- ----------- -----------
9,068,931 8,491,930 10,989,571
Treasury stock at cost, 537,160 shares in 1995,
547,160 shares in 1996 and 552,160 shares in
1997........................................... (1,174,688) (1,199,063) (1,219,688)
----------- ----------- -----------
Total stockholders' equity................ 7,894,243 7,292,867 9,769,883
----------- ----------- -----------
$10,944,430 $10,566,109 $11,807,421
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 54
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales and revenues
Contract research, service and license
revenues................................ $14,537,201 $12,883,770 $11,447,000 $ 8,384,894 $10,773,933
Sales of manufacturing equipment.......... 3,863,284 4,568,426 5,941,319 4,154,583 6,285,648
----------- ----------- ----------- ----------- -----------
Total sales and revenues.............. 18,400,485 17,452,196 17,388,319 12,539,477 17,059,581
----------- ----------- ----------- ----------- -----------
Costs and expenses
Cost of contract research, services and
licenses................................ 10,499,727 9,187,422 8,938,034 5,902,490 6,899,334
Cost of manufacturing equipment........... 3,110,296 3,837,536 4,311,774 3,977,156 4,213,078
Selling, general and administrative
expenses................................ 4,911,127 4,438,578 4,746,235 3,377,481 4,284,212
----------- ----------- ----------- ----------- -----------
Total costs and expenses.............. 18,521,150 17,463,536 17,996,043 13,257,127 15,396,624
----------- ----------- ----------- ----------- -----------
Earnings (loss) from operations............... (120,665) (11,340) (607,724) (717,650) 1,662,957
Interest income (expense), net (Note 6)....... (82,654) (19,539) 8,492 12,514 13,940
----------- ----------- ----------- ----------- -----------
Earnings (loss) before income taxes........... (203,319) (30,879) (599,232) (705,136) 1,676,897
Income tax expense (benefit) (Note 9)......... (21,299) (32,010) -- 6,773 100,000
----------- ----------- ----------- ----------- -----------
Net earnings (loss)........................... $ (182,020) $ 1,131 $ (599,232) $ (711,909) $ 1,576,897
=========== =========== =========== =========== ===========
Earnings (loss) per share of common stock..... $ (0.06) $ 0.00 $ (0.20) $ (0.24) $ 0.48
=========== =========== =========== =========== ===========
Weighted average number of common and common
equivalent shares outstanding............... 3,065,026 3,084,067 3,028,850 3,031,260 3,275,147
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 55
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<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...................... -- -- -- 10,000 (24,375) -- (24,375)
Net loss..................... -- -- -- -- -- (599,232) (599,232)
--------- ------- ---------- ------- ----------- ---------- ----------
Balance, December 31, 1996....... 3,567,185 35,672 8,491,066 547,160 (1,199,063) (34,808) 7,292,867
Exercise of stock options.... 148,281 1,483 541,498 -- -- -- 542,981
Tax benefit of disqualifying
dispositions of stock
option exercises........... -- -- 377,763 -- -- -- 377,763
Repurchase of treasury
stock...................... -- -- -- 5,000 (20,625) -- (20,625)
Net earnings................. -- -- -- -- -- 1,576,897 1,576,897
--------- ------- ---------- ------- ----------- ---------- ----------
Balance, September 30, 1997
(Unaudited).................... 3,715,466 $37,155 $9,410,327 552,160 $(1,219,688) $1,542,089 $9,769,883
========= ======= ========== ======= =========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 56
SPIRE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ --------------------------
1994 1995 1996 1996 1997
----------- ---------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)......................... $ (182,020) $ 1,131 $ (599,232) $ (711,909) $ 1,576,897
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization........... 1,392,181 1,293,114 1,240,215 824,457 845,425
Deferred income taxes................... -- -- -- -- (300,000)
Changes in assets and liabilities:
Accounts receivable................... 627,616 1,083,552 (161,074) 174,021 (76,272)
Inventories........................... (425,882) (237,987) 105,806 181,688 (646,703)
Prepaid expense and other current
assets.............................. 59,410 15,103 81,970 (290,095) (167,031)
Refundable income tax................. -- 27,230 -- -- --
Accounts payable and accrued
liabilities......................... 305,673 (394,717) (396,250) (328,402) 31,634
Federal and state taxes payable....... (19,856) -- -- -- --
Advances on contracts in progress..... 217,440 526,046 629,706 18,710 (1,267,338)
----------- ---------- ----------- ---------- -----------
Net cash provided by (used in)
operating activities............ 1,974,562 2,313,472 901,141 (131,530) (3,388)
----------- ---------- ----------- ---------- -----------
Cash flows from investing activities:
Additions to property and equipment......... (1,432,747) (389,647) (943,053) (547,029) (611,724)
Increase in patent costs.................... (70,387) (100,090) (129,797) (11,975) (29,370)
Increase in software production costs....... (10,292) -- -- -- (34,229)
Other assets................................ (132,687) 67,823 24,823 (188,259) 210,143
----------- ---------- ----------- ---------- -----------
Net cash used in investing
activities...................... (1,646,113) (421,914) (1,048,027) (747,263) (465,180)
----------- ---------- ----------- ---------- -----------
Cash flows from financing activities:
Net borrowings (payments) on short-term
debt...................................... 750,000 (750,000) (10,401) -- --
Payments on long-term borrowings............ (959,675) (47,072) -- (7,619) --
Tax benefit of disqualifying dispositions of
stock option exercises.................... -- -- -- -- 377,763
Exercise of stock options................... 1,250 -- 22,231 22,231 542,981
Repurchase of common stock.................. -- (130,625) (24,375) (24,375) (20,625)
----------- ---------- ----------- ---------- -----------
Net cash provided by (used in)
financing activities............ (208,425) (927,697) (12,545) (9,763) 900,119
----------- ---------- ----------- ---------- -----------
Net increase (decrease) in cash
and cash equivalents............ 120,024 963,861 (159,431) (888,556) 431,551
Cash and cash equivalents, beginning of
period...................................... 46,543 166,567 1,130,428 1,130,428 970,997
----------- ---------- ----------- ---------- -----------
Cash and cash equivalents, end of period...... $ 166,567 $1,130,428 $ 970,997 $ 241,872 1,402,548
=========== ========== =========== ========== ===========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest expense...................... $ 112,000 $ 43,567 $ 4,084 $ 2,790 $ 5,118
=========== ========== =========== ========== ===========
Income taxes.......................... $ 138,000 $ -- $ -- $ 6,773 $ 75,895
=========== ========== =========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 57
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
(1) NATURE OF THE BUSINESS
Spire develops, manufactures, and markets highly engineered photovoltaic
manufacturing equipment and optoelectronic products and provides biomedical
processing services. Spire designs and manufactures specialized equipment for
the production of terrestrial photovoltaic modules from solar cells. The Company
offers certain optoelectronic products and is continuing to develop additional
advanced optoelectronic products for telecommunications, biomedical and
electronics applications, including solar cells used to power satellites. In
addition, Spire's value-added service offerings to biomedical customers provide
surface treatments to enhance the performance of medical products.
(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.......... Lesser of 10 years or remaining life of
facility lease
</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 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 $48,000, $10,000 and $9,000 for 1994, 1995
and 1996, respectively, and $9,000 and $11,000 for the nine months ended
September 30, 1996 and 1997 (unaudited), respectively. The recoverability of
such costs is reviewed on an ongoing basis.
(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
F-7
<PAGE> 58
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
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, 1994, 1995 and 1996, unfunded research and
development costs were $124,000, $59,000 and $84,000, respectively, and $61,000
and $126,000 for the nine months ended September 30, 1996 and 1997 (unaudited),
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) 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 $97,000
and $130,000 at December 31, 1995 and 1996, respectively and $121,000 at
September 30, 1997 (unaudited). All other accounts receivable are expected to be
collected within one year.
F-8
<PAGE> 59
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
All contracts with United States Government agencies have been audited and
settled through December 1995. To date, the Company has not incurred significant
losses as a result of government audits.
(4) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials........................ $ 487,255 $ 572,309 $ 802,403
Work in process...................... 639,479 448,619 865,228
----------- ----------- -----------
$ 1,126,734 $ 1,020,928 $ 1,667,631
=========== =========== ===========
</TABLE>
(5) ACCRUED LIABILITIES
Accrued liabilities include the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Accrued payroll and payroll taxes.... $ 382,916 $ 289,078 $ 448,448
Accrued other........................ 406,237 365,154 322,241
--------- --------- ---------
$ 789,153 $ 654,232 $ 770,689
========= ========= =========
</TABLE>
(6) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment.............. $18,671,001 $19,118,037 $19,359,701
Furniture and fixtures............... 2,172,269 2,603,296 2,774,023
Leasehold improvements............... 1,109,098 1,193,782 1,195,465
Construction in progress............. 27,755 4,270 230,521
----------- ----------- -----------
$21,980,123 $22,919,385 $23,559,710
=========== =========== ===========
</TABLE>
Interest costs of $112,000, $39,000 and $11,000 were incurred of which
$29,000, $1,000 and $2,000 were capitalized in 1994, 1995 and 1996,
respectively, and $1,000 and none in the first nine months of September 30, 1996
and 1997 (unaudited), respectively. In connection with the construction of
equipment for internal use, the Company has capitalized overhead costs of
$352,000, $41,000 and $50,000 for the years ended December 31, 1994, 1995 and
1996, respectively and $38,000 and $47,000 for the first nine months ended
September 30, 1996 and 1997 (unaudited), respectively.
(7) LONG-TERM DEBT AND CREDIT ARRANGEMENTS
On April 4, 1997, the Company amended and extended its revolving credit
agreement with Silicon Valley Bank. This agreement established a $2 million
revolving credit facility, with availability limited to 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 the Bank's prime rate plus one-half of one
percent. The line contains restrictive covenants including provisions relating
to profitability and net worth. As of September 30, 1997, the Company had no
outstanding debt under this revolving credit line.
F-9
<PAGE> 60
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
(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
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.
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, and through September 30, 1997, the Company issued under its Directors
Stock Option Plan 24,250 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 $4.95 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.
A summary of the activity of these plans follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES OPTION PRICE
--------- ------------
<S> <C> <C>
Outstanding, December 31, 1993........................ 308,862 $ 3.49
Granted.......................................... 52,888 $ 3.32
Exercised........................................ (500) $ 2.50
Terminated....................................... (39,500) $ 3.16
-------- ------
Outstanding, December 31, 1994........................ 321,750 $ 3.51
Granted.......................................... 1,325 $ 2.25
Exercised........................................ -- --
Terminated....................................... (33,000) $ 3.38
-------- ------
Outstanding, December 31, 1995........................ 290,075 $ 3.51
Granted.......................................... 99,425 $ 2.63
Exercised........................................ (6,825) $ 3.26
Terminated....................................... (23,500) $ 3.40
-------- ------
Outstanding, December 31, 1996........................ 359,175 $ 3.28
Granted.......................................... 76,825 $ 5.36
Exercised........................................ (148,281) $ 3.66
Terminated....................................... -- --
-------- ------
Outstanding, September 30, 1997 (unaudited)........... 287,719 $ 3.64
======== ======
Shares exercisable at September 30, 1997
(unaudited)......................................... 108,541 $ 3.30
======== ======
</TABLE>
F-10
<PAGE> 61
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
There were 566,250 and 454,469 shares reserved for issuance under all plans
at December 31, 1996 and September 30, 1997, respectively. The per share
weighted-average fair value of stock options granted during 1995, 1996 and the
first nine months of 1997 was $1.19, $1.39 and $5.36, respectively, on the date
of grant using the Black Scholes option-pricing model with the following
weighted-average assumptions:
<TABLE>
<CAPTION>
EXPECTED RISK-FREE EXPECTED EXPECTED
PERIOD DIVIDEND YIELD INTEREST RATE OPTION LIFE VOLATILITY FACTOR
- --------------------------------------- -------------- ------------- ----------- -----------------
<S> <C> <C> <C> <C>
1995................................... 0% 5.05% 5 years 54.7%
1996................................... 0% 5.07% 5 years 54.7%
Nine months ended September 30, 1997... 0% 5.78% 5 years 66.2%
</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 earnings (loss) would have been reduced (increased) to the pro
forma amounts indicated below.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1995 1996 1997
-------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Net earnings (loss) as reported........... $ 1,131 $(599,232) $ 1,576,897
Net earnings (loss) pro forma............. (20,331) (649,724) 1,514,993
</TABLE>
Pro forma net earnings (loss) reflect only options granted in 1995 and
1996. Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net earnings (loss)
amounts presented above because compensation cost is reflected over the options'
vesting period of five years and compensation cost for options granted prior to
January 1, 1995 is not considered.
(9) INCOME TAXES
Total Federal and State income tax expense (benefit) for the years ended
December 31, 1994, 1995 and 1996 and for the nine months ended September 30,
1996 and 1997, consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------ --------------------
1994 1995 1996 1996 1997
-------- -------- ---- ------ ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
State............................... $(21,229) $(32,010) $ -- $6,773 $ 62,280
Federal............................. -- -- -- -- 337,720
------- ------- ---- ------ ---------
(21,299) (32,010) -- 6,773 400,000
------- ------- ---- ------ ---------
Deferred:
State............................... -- -- -- -- (46,710)
Federal............................. -- -- -- -- (253,290)
------- ------- ---- ------ ---------
-- -- -- -- (300,000)
------- ------- ---- ------ ---------
$(21,299) $(32,010) $ -- $6,773 $ 100,000
======= ======= ==== ====== =========
</TABLE>
F-11
<PAGE> 62
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
The actual income tax expense (benefit) for 1994, 1995 and 1996 and for the
nine months ended September 30, 1996 and 1997, 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>
DECEMBER 31, SEPTEMBER 30,
----------------------------------- -----------------------
1994 1995 1996 1996 1997
-------- -------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Computed "expected" income tax
expense (benefit).............. $ (69,128) $(10,499) $(201,436) $(239,746) $ 570,145
State tax, net of federal
benefit........................ (12,748) (1,936) (34,327) (22,776) 105,141
Increase (decrease) in valuation
allowance...................... (112,260) 55,354 298,686 290,000 (612,291)
Permanent differences............ 11,695 10,470 15,289 12,000 10,000
(Increase) decrease in tax credit
carryforwards.................. 136,441 (36,172) (15,300) (15,000) 21,446
Recovery of prior year
estimate....................... 24,701 -- (62,912) -- --
Other............................ -- (49,227) -- (17,705) 5,559
---------- -------- --------- --------- ---------
$ (21,299) $(32,010) $ -- $ 6,773 $ 100,000
========== ======== ========= ========= =========
</TABLE>
The amount recorded as a deferred income tax asset as of September 30, 1997
represents the amount of tax benefits of existing deductible temporary
differences or carryforwards that are more likely than not to be realized
through the generation of sufficient future taxable income within the
carryforward period. At September 30, 1997, based on the Company's level of net
income and projected earnings, the Company reduced the valuation allowance by
$612,291. The Company continually re-evaluates the recoverability of deferred
tax assets.
The tax effects of temporary differences that give rise to significant
portions of net deferred tax assets at December 31, 1995 and 1996 and September
30, 1997 (unaudited) are presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Charitable contributions.................... $ -- $ 4,168 $ --
Accounts receivable......................... 38,257 40,270 34,230
Accruals.................................... 142,242 96,278 83,770
Inventory................................... 51,733 112,784 164,700
Federal net operating loss carryforwards.... 102,039 281,651 --
General business credit carryforwards....... 752,998 752,998 752,998
Alternative minimum tax credit
carryforwards............................. 340,416 340,416 340,416
State net operating loss and investment
tax credit................................ 41,205 84,293 62,847
----------- ----------- -----------
Total gross deferred tax assets........ 1,468,890 1,712,858 1,438,961
Less: valuation allowance.............. (643,594) (942,280) (329,989)
----------- ----------- -----------
Net deferred tax assets................ 825,296 770,578 1,108,972
----------- ----------- -----------
Property and equipment...................... (786,610) (725,815) (766,297)
Capitalized software........................ (5,573) (9,436) (25,380)
Patents..................................... (3,975) (15,080) (13,587)
Research agreements......................... (29,138) (20,247) (3,708)
----------- ----------- -----------
Total gross deferred tax liabilities... (825,296) (770,578) (808,972)
----------- ----------- -----------
Net deferred tax assets..................... $ -- $ -- $ 300,000
=========== =========== ===========
</TABLE>
F-12
<PAGE> 63
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
The valuation allowance for deferred tax assets as of December 31, 1996 and
September 30, 1997 (unaudited) was $942,280 and $329,989, respectively. The net
change in the total valuation allowance for the year ended December 31, 1996 and
nine months ended September 30, 1997 was an increase of $298,686 and a decrease
of $612,291, respectively.
At December 31, 1996 and September 30, 1997, 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. 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 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 $817,000, $853,000 and $922,000 in 1994, 1995 and
1996, respectively, and $665,000 for the nine months ended September 30, 1997.
The Company has also entered into other noncancelable operating leases.
Total rent expense charged to these noncancelable leases was $138,000, $51,000,
and $90,000 in 1994, 1995 and 1996, respectively and $138,000 for the nine
months ended September 30, 1997.
At December 31, 1995 the cost of assets held under capital lease was
$115,000. At December 31, 1996 there were no future lease payments due under
capital lease. Future minimum lease payments under operating leases are as
follows:
<TABLE>
<S> <C>
October 1, 1997 to December 31, 1997......................... $ 278,359
1998......................................................... 997,449
1999......................................................... 992,566
2000......................................................... 869,619
----------
$3,137,993
==========
</TABLE>
(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 1994, 1995 and 1996 was $162,000, $148,000 and
$145,000, respectively, and $117,000 and $155,000 for the nine months ended
September 30, 1996 and 1997 (unaudited), respectively.
(12) SIGNIFICANT CUSTOMERS AND EXPORT REVENUES
Revenues from contracts with United States Government agencies for the
years ended December 31, 1994, 1995 and 1996 were $8,806,000, $8,232,000 and
$6,705,000 or 48%, 48% and 39% of net sales and revenues, respectively, and
$4,918,000 or 39% and $5,950,000 or 35% of net sales and revenues for the nine
months ended September 30, 1996 and 1997 (unaudited), respectively.
In 1994, 1995 and 1996, export revenues were $3,383,000, $2,894,000 and
$3,330,000, respectively, or 18%, 17% and 19% of net sales and revenues,
respectively, and $2,879,000 or 23% and $6,061,000 or 36% of net sales and
revenues for the nine months ended September 30, 1996 and 1997 (unaudited),
respectively.
F-13
<PAGE> 64
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
(13) QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the consolidated quarterly results for the
years ended December 31, 1995 and 1996 and for the nine months ended September
30, 1997:
<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)............. -- -- 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>
<TABLE>
<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 4,680,876 4,738,916
Earnings (loss) before income taxes...... (266,441) 33,062 (471,757) 105,904
Income tax expense (benefit)............. -- -- 6,773 (6,773)
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>
<TABLE>
<CAPTION>
1997
THREE MONTHS ENDED
------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30
---------- ---------- ------------
<S> <C> <C> <C> <C>
Net sales and revenues................... $4,450,699 $6,432,848 $6,176,034
Costs and expenses....................... 4,304,022 5,631,200 5,461,402
Earnings before income taxes............. 150,294 801,677 724,926
Income tax expense....................... -- 100,000 --
Net earnings............................. 150,294 701,677 724,926
Net earnings per share................... 0.05 0.22 0.22
</TABLE>
F-14
<PAGE> 65
Flow chart depicting items in the Company's photovoltaic module manufacturing
equipment product line, with captions describing the function of each item.
<PAGE> 66
================================================================================
TABLE OF CONTENTS
PAGE
----
Prospectus Summary....................... 3
Risk Factors............................. 6
Recent Developments...................... 13
Use of Proceeds.......................... 14
Price Range of Common Stock.............. 15
Dividend Policy.......................... 15
Capitalization........................... 16
Selected Consolidated Financial
Data................................... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations.......................... 18
Business................................. 26
Management............................... 41
Principal and Selling Stockholders....... 43
Description of Securities to be
Registered............................. 45
Indemnification.......................... 45
Shares Available for Future Sale......... 46
Underwriting............................. 47
Legal Matters............................ 48
Experts.................................. 48
Available Information.................... 48
Incorporation of Certain Documents by
Reference.............................. 49
Index to Consolidated Financial
Statements............................. F-1
------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
================================================================================
================================================================================
1,500,000 SHARES
[SPIRE LOGO]
COMMON STOCK
------------------------
PROSPECTUS
------------------------
, 1998
TUCKER ANTHONY
INCORPORATED
FIRST ALBANY CORPORATION
ADVEST, INC.
================================================================================
<PAGE> 67
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be borne by the
Company in connection with the offering of the securities registered hereby:
<TABLE>
<CAPTION>
EXPENSE COST
-------------------------------------------------------------------- --------
<S> <C>
SEC Registration Fee(1)............................................. $ 9,017
NASD Filing Fee..................................................... --**
Nasdaq Listing Fee.................................................. 17,500
Blue Sky Qualifications and Expenses (including Counsel Fees)....... --**
Legal Fees and Expenses............................................. --**
Accounting Fees and Expenses........................................ --**
Printing, Engraving and Mailing Expenses............................ 55,000*
Transfer Agent and Registrar Fees................................... 3,700*
Underwriters' Expenses.............................................. 100,000*
Miscellaneous....................................................... **
--------
Total.......................................................... $450,000*
========
</TABLE>
- ---------------
* Estimated
** To be filed by amendment.
(1) The Selling Stockholders will pay 3.16% of the SEC Registration Fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 67 of the Massachusetts Business Corporation Law sets forth certain
circumstances under which directors, officers, employees and agents may be
indemnified against liability that they may incur in their capacity as such.
Section 67 of the Massachusetts Business Corporation Law provides as follows:
Indemnification of directors, officers, employees and other agents of
a corporation, and persons who serve at its request as directors,
officers, employees or other agents of another organization, or who
serve at its request in any capacity with respect to any employee
benefit plan, may be provided by it to whatever extent shall be
specified in or authorized by (i) the articles of organization or (ii)
a by-law adopted by the stockholders or (iii) a vote adopted by the
holders of a majority of the shares of stock entitled to vote on the
election of directors. Except as the articles of organization or
by-laws otherwise require, indemnification of any persons referred to
in the preceding sentence who are not directors of the corporation may
be provided by it to the extent authorized by the directors. Such
indemnification may include payment by the corporation of expenses
incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding, upon
receipt of an undertaking by the person indemnified to repay such
payment if he shall be adjudicated to be not entitled to
indemnification under this section which undertaking may be accepted
without reference to the financial ability of such person to make
repayment. Any such indemnification may be provided although the
person to be indemnified is no longer an officer, director, employee
or agent of the corporation or of such other organization or no longer
serves with respect to any such employee benefit plan.
No indemnification shall be provided for any person with respect to any
matter as to which he shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his action was in the best
interest of the corporation or, to the extent that such matter relates to
service with respect to an employee benefit plan, in the best interests of the
participants or beneficiaries of such employee benefit plan.
The absence of any express provision for indemnification shall not limit
any right of indemnification existing independently of this section.
II-1
<PAGE> 68
A corporation shall have power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or other agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or other agent of another organization or with
respect to any employee benefit plan, against any liability incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability.
The Company's Articles of Organization provide that a director is not
liable to the Company or its shareholders for monetary damages for breach of
fiduciary duty except for: (a) any breach of the director's duty of loyalty to
the Company or its shareholders, (b) acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (c) under the
Massachusetts Business Corporation Law provisions imposing joint and several
liability for improper distributions to shareholders or loans to officers or
directors, (d) transactions from which a director derived an improper personal
benefit or (e) for any act or omission occurring prior to the effective date of
such provision.
The Company's By-Laws require the Company to indemnify all officers,
directors, employees and agents of the Company against all liabilities and
expenses they may incur on account of all actions threatened or brought against
them by reason of their services to the Company or to another entity at the
request of the Company. No indemnification is provided for any person with
respect to any matter as to which such person has been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Company. The Company maintains a
directors' and officers' liability insurance policy in the aggregate amount of
$3,000,000 on behalf of its directors and officers.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- --------------------------------------------------------------------------------
<S> <C>
1 Forms of Underwriting Agreements(1)
5 Opinion of Goldstein & Manello, P.C. regarding legality(1)
10.1 Equipment Manufacturing License Agreement with Marubeni Corporation
10.2 Distribution Agreement with Marubeni Corporation
23(a) Consent of KPMG Peat Marwick LLP
23(b) Consent of Goldstein & Manello, P.C. (included in Exhibit 5)
24 Power of Attorney (included on Page II-3 of this Registration Statement)
</TABLE>
- ---------------
(1) To be filed by amendment to the Registration Statement
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
A. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
B. (1) For determining any liability under the Securities Act, to treat
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant under Rule 424(b)(1), or (4) or 497(h) under
the Securities Act as part of this registration statement as of the time the
Commission declares it effective.
(2) For determining any liability under the Securities Act, to treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-2
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Bedford, Commonwealth of Massachusetts, on the 3rd
day of December, 1997.
SPIRE CORPORATION
By: /s/ ROGER G. LITTLE
------------------------------------
ROGER G. LITTLE
PRESIDENT, CHIEF EXECUTIVE
OFFICER AND CHAIRMAN OF THE BOARD
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Roger G. Little and Richard S. Gregorio,
or either of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their or his substitutes, may lawfully do or cause
to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney have been signed below by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ---------------------------------- ------------------
<S> <C> <C>
/s/ ROGER G. LITTLE Chairman of the Board of December 3, 1997
- ---------------------------------------- Directors, President and Chief
ROGER G. LITTLE Executive Officer (Principal
Executive Officer)
/s/ RICHARD S. GREGORIO Vice President, Chief Financial December 3, 1997
- ---------------------------------------- Officer, Treasurer, Principal
RICHARD S. GREGORIO Accounting Officer
/s/ MICHAEL T. ECKHART Director December 3, 1997
- ----------------------------------------
MICHAEL T. ECKHART
/s/ A. JOHN GALE Director December 3, 1997
- ----------------------------------------
A. JOHN GALE
/s/ UDO HENSELER, PH.D. Director December 3, 1997
- ----------------------------------------
UDO HENSELER, PH.D.
/s/ ROGER W. REDMOND Director December 3, 1997
- ----------------------------------------
ROGER W. REDMOND
/s/ JOHN A. TARELLO Director December 3, 1997
- ----------------------------------------
JOHN A. TARELLO
</TABLE>
II-3
<PAGE> 1
Exhibit 10.1
EQUIPMENT MANUFACTURING LICENSE AGREEMENT
This License Agreement is made as of 31 March 1997, between Spire Corporation,
with its principal place of business located at One Patriots Park, Bedford,
Massachusetts, USA (hereinafter called "Company") and Marubeni Corporation,
Nagoya Branch with its principal place of business located at 2-4 Nishiki,
2-chome Naku-ku, Nagoya-shi, Aichi Prefecture, Japan (hereinafter called
"Licensee").
It is agreed as follows:
ARTICLE I
LICENSE TERM
1.1 This License Agreement is effective as of the date written above and will
remain in effect for five years from the date above. This License Agreement will
renew automatically at the time, and at the end of every second year thereafter
unless either party gives Notice of Intent not to renew no less than 60 days
prior to the second year anniversary date, or unless the earlier termination of
this License Agreement in accordance with Article X.
1.2 This License Agreement supersedes all prior agreements; between the
parties hereto with respect to its subject matter, and may be referred to herein
as simply "License" or "Agreement."
ARTICLE II
DEFINITIONS
2.1 When used in this Agreement the following terms shall have the following
respective meanings:
(a) "Industrial Property Rights" means all patents, utility models,
designs and other Industrial Property Rights (or applications pending
thereof) relating to the
<PAGE> 2
manufacture of the Products, owned or controlled by the Company thereafter,
including without limitation those listed in Exhibit I to be provided by the
Company within thirty (30) days of the signing of this Agreement.
(b) "Industrial Information" means all Industrial Property Rights, Trademarks
and other information and know-how relating to the manufacture of the Products
owned or controlled by the Company as of the date hereof, and all improvements
thereto acquired by the Company after the date hereof, including without
limitation drawings, specifications, plans, models, designs, charges, processes
and formulae.
(c) "Products" has the meaning set out in Section 3.1.
(d) "Technical Information" has the meaning set out in Section 5.1.
(e) "Territory" means Japan
(f) "Trademarks" means all trade names and trademarks (registered or
unregistered) and all applications pending therefor relating to the Products,
owned or controlled by the Company as of the date hereof or issued to or
otherwise acquired by the Company thereafter, including without limitation those
listed in Exhibit II to be provided by the Company within thirty (30) days of
the signing of this Agreement.
2
<PAGE> 3
ARTICLE III
PRODUCTS
3.1 The equipment items covered by this Agreement, to be referred to singularly
as "Product" or collectively as "Products" are all of the Company's Lamination
Equipment; all of the Company's Cell Testing Equipment; and all of the Company's
Assembler Equipment, each one inclusive of all models. This includes equipment
otherwise referred to by the Company as the SPI-LAMINATORS, SPI-CELL TESTERS and
SPI-ASSEMBLERS. The Licensee shall be allowed to manufacture all of the
Company's sun simulation equipment, also known as SPI-SUN SIMULATORS beginning
on 1 January, 1999.
3.2 The definition of "Products" may be expanded from time to time to include
other items of equipment currently manufactured by the Company at such time as
both parties may mutually agree. In making the decision to expand the "Products"
definition beyond its meaning herein, the parties shall pay particular attention
to the effect that manufacture of such other items of equipment may have on the
sales price within the Territory and the volume of potential sales in the
Territory of such other items of equipment.
ARTICLE IV
LICENSE GRANTED
4.1 Company agrees to grant and hereby does grant to Licensee the right and
license (License) to fabricate, manufacture or assemble the Products on an
exclusive basis in unlimited quantities within the Territory, otherwise referred
to as a "License" to (a) fabricate, manufacture and assemble the Products in
unlimited quantities within the
3
<PAGE> 4
Territory and (b) to use the Industrial Information in connection with such
fabrication, manufacture and assembly, and the Licensee does hereby accept such
grant.
4.2 The Licensee shall be entitled to grant Sub-Licenses of its rights under
this Agreement on an exclusive or non-exclusive basis to any third party or
parties (hereinafter called the "Sub-Licensee") acceptable to the Company during
the term of this Agreement. The Licensee shall be careful that any sublicense
granted does not conflict with this Agreement.
4.3 The Company shall not, during the term of this Agreement, manufacture the
Products in the Territory. The Company shall not likewise, during the term of
the Agreement, use the Industrial Information (as hereinafter defined), or any
portion thereof, for any purpose under the subject matter of this Agreement, nor
shall Company grant any right to use the Industrial Information or any portion
thereof in the Territory to any third party except Licensee for any purpose
under the subject matter of this Agreement.
4.4 The parties agree that Licensee shall identify each unit it manufactures as
a "SPI-LAMINATOR, CELL TESTER or ASSEMBLER" (as the case may be) and include the
appropriate model number, and that each unit shall be further described as
"manufactured under license from Spire Corporation"
4.5 Licensee agrees that at all times during the term of this Agreement it will
have assigned not less than two senior engineers to all pre-manufacturing and
manufacturing activities of the Products.
4
<PAGE> 5
ARTICLE V
TECHNICAL INFORMATION
5.1 Company shall furnish all necessary Technical Information, including
blueprints, wiring diagrams, parts lists, assembly drawings, manufacturing
procedures, names of vendors, pricing information, and any other data,
regardless of the medium, to allow Licensee to manufacture the Product. All such
materials shall be in the English language. Company shall commence with the
physical transfer of such Technical Information when Licensee completes the
requirement set forth below in Section 6.1. Licensee shall be allowed to send up
to five engineers to visit Company's facility each time Company manufactures a
new or different model Product, for the purpose of observing its manufacture and
assembly. On such occasion, the Company shall permit the Licensee's
Representatives to have such access and information as may be reasonably
required for such purpose. The Company will endeavor to provide Licensee with at
least sixty (60) days notice, but in any case as soon as possible of the plans
to initiate manufacture and assembly, and Licensee will respond in writing with
two-week's notice when it plans to dispatch staff members to Company for this
purpose. All of Licensee's staff sent to Company facility for this purpose shall
be proficient in English or be accompanied by an interpretation personnel. The
expenses incurred by Licensee in travel, housing and other related costs are the
Licensee's sole responsibility.
5.2 Licensee shall manufacture either to order or for inventory, at its option.
5.3 The first unit manufactured by Licensee under this Agreement shall be known
as the "First Unit" or "First Item". Company will provide an engineer to
conduct a design review for three to five days at Licensee manufacturing
facility prior to Licensee commencing manufacture of the First Item, and again
for a similar period when assembly of the First Item
5
<PAGE> 6
is complete for its operational test. Materials used during the operational test
are the responsibility of Licensee.
5.4 Company engineers will be available at other times to render assistance to
Licensee via telephone, facsimile or computer telecommunication should Licensee
so request.
5.5 All such Technical Information provided by or on behalf of the Company
shall be subject to the restrictions in Article IX below.
5.6 Licensee, Sublicensee, and Company agree to grant, and do grant hereby,
rights to use, manufacture and sell any improvement they makes, devises,
originates, invents, or innovates during the term of this Agreement to each
other. Ownership of said improvement vests with the party responsible, but the
right to unlimited use, manufacture and sale of said improvement throughout the
world, without further compensation to that party shall remain with that party
during the term of the Agreement. Thereafter, the parties may negotiate a
separate license with the other for that purpose.
5.7 The Company, the Licensee, its' Sublicensee and MECH (the last two are not
parties to this Agreement and whose participation in the activity covered by
this Article 5.7 is, upon the effective date of this Agreement, anticipatory),
shall design and build all assemblers to be sold under this Agreement. Company
shall be paid a development support fee of $100,000. Upon the effective date of
this Agreement, the parties expect to construct an assembler for Mitsubishi
Electric Company. Although this unit will be built based on a MECH design,
Royalty on this and other Assembler units built jointly by the parties will be
due the Company. Should Mitsubishi require a String IV Tester, it will be priced
separately.
5.8 Licensee agrees to institute and operate a service facility for the
equipment at manufacturers under this License. Either Licensee or Sublicensee
or both of them jointly may manage such service facility at their discretion.
6
<PAGE> 7
5.9 Should Company provide the design for any equipment associated automation
device, Licensee agrees that its' manufacture and sale shall generate a royalty
payment for Company as provided in 6.2 below, if this device is based on Company
concept provided to Licensee.
ARTICLE VI
CONSIDERATION
6.1 In consideration for the transfer of Technical Information to Licensee and
assisting Licensee in its implementation as described in Article V, Licensee
agrees to pay Company a process technology fee of U.S. $600,000 (the "Technology
Fee") within 90 days of the effective date of this Agreement.
6.2 In consideration for permission to manufacture units of the equipment in
the Territory, Licensee shall pay 5% royalty of the net sales price for every
unit it manufactures and sells. Net sales price means Distributor's sales price
to the Customer, excluding packing and transportation fee, installation fee,
startup and supervision fee, and any taxes. This royalty will also apply to all
spare parts and consumable parts of the Product sold for use in the normal
operation and support of the equipment. The royalty rate, as stated in this
Article 6.2, shall be reviewed annually each December unless the Company and
Licensee shall decide otherwise, and revised as Company and Licensee shall
mutually agree.
6.3 The Licensee shall be entitled to withhold any sum required under laws of
the Territory to be withheld for the account of the Company from any payments
made pursuant to this Agreement and to pay such sum to the appropriate
government authority. In such event, the Licensee shall furnish the Company with
receipts or other appropriate evidence of remittance as issued by the government
authority.
7
<PAGE> 8
6.4 All royalties due and payable by the Licensee under this Agreement shall be
paid semi-annually within (forty-five) 45 days after the close of the period
during the term of this Agreement or after the termination hereof, as the case
may be, in respect of the immediately preceding calendar quarter, or portion
thereof, as the case may be.
6.5 Each royalty payment made to the Licensee pursuant to this Agreement shall
be accompanied by a written statement showing the calculation of such payment.
6.6 All royalties due and payable by the Licensee to the Company pursuant to
this Agreement shall be paid in United States Dollars and shall be paid by
remittance by the Licensee to such bank account as the Company shall designate
in writing from time to time.
6.7 If the term of this Agreement is automatically extended pursuant to section
1.1, any change in the royalty rate applicable to such extended period shall be
determined by the parties hereto on the basis of mutual discussions.
ARTICLE VII
WARRANTY
7.1 The Company hereby represents and warrants that:
(i) it has provided complete and accurate Technical Information sufficient to
allow Licensee to construct the Products in a workmanlike manner;
(ii) there are no defects existing in its Technical Information that would
affect the ordinary manufacture and/or ordinary operation of the Product;
(iii) the Company owns the Industrial Information free and clear of any
encumbrances and has the full power and right to enter into this Agreement
and to grant the License to the Licensee as contemplated by this Agreement;
8
<PAGE> 9
(iv) the Industrial Information constitutes the best available industrial
property rights and technical information in the possession or under the
control of the Company with respect to the manufacture of the Products;
(v) the Company is not restricted or prohibited from granting the right to use
the Industrial Property Rights and/or the Trademarks, or from granting the
License or from disclosing the Industrial Information by any applicable
law, regulation or order or by the terms of any other agreement to which
the Company is a party or by which it is bound; and
(vi) no part of Industrial Information infringes any industrial property right
(including without limitation patents, utility models, design, trade names,
trademarks, and copyrights) belonging to any third party, to the best of
the Company's knowledge.
7.2 All such warranties, guarantees and representations concerning any and all
units of the Products or the Products in the abstract made by the Licensee to
its Customers are the responsibility of the Licensee. Licensee agrees to
indemnify and hold Company harmless from liability should the same accrue to
Licensee as a result of its manufacture of the Products.
7.3 Company accepts no liability arising from Licensee's activities under this
License save where it can be demonstrated that Company furnished incomplete,
out-of-date or otherwise inaccurate Technical Information and that Licensee
relied upon same while engaging in an activity under this Agreement that gave
rise to the liability.
ARTICLE VIII
JOINT VENTURE
8.1 Company and Licensee having entered into a Distributorship Agreement
herewith for the exclusive distribution of the Products as therein defined. In
this connection the Company and Licensee agree that once Licensee's production
accounts for greater than 50% of the equipment designed by Company and sold in
Japan, Company and Licensee
9
<PAGE> 10
would initiate a formal review of the prospect of joining resources to form a
joint venture, the purpose of manufacturing and selling Company equipment within
Japan. The parties confirm that any negotiations with respect to such a joint
venture shall be based on the following understandings:
a. For the purpose of opening negotiations, a target capitalization for the
purpose of opening negotiations will be U.S.$500,000.
b. A target distribution of interest in the joint venture will be determined
at the time negotiations are opened. Capitalization contributions may
include the valuation for such things as technology, trade name use,
physical plant and so forth. Each participant will be expected to furnish
some portion of the contribution in cash.
8.2 Neither party shall be obligated to form the joint venture unless both
parties agree upon all the terms of the joint venture.
ARTICLE IX
NON-COMPETITION AND REPRESENTATION
9.1 Licensee agrees that during the term of this Agreement and for a period of
eighteen (18) months after the termination or non-renewal of this Agreement for
any reason, it will not develop, design, manufacture, sell, or lease any of the
Products set forth in Article III, whether located within or without the
Territory; and Licensee agrees further that it will not, during the
above-referenced period, provide sales and/or technical representation services
for any other business entity engaged in the manufacture and sale of the
Products unless Company and Licensee agree otherwise in writing.
9.2 The Licensee agrees that all Technical Information as used herein and
including business, accounting, marketing and administrative information
received (otherwise known
10
<PAGE> 11
as Technical and Business Information) from Company will be treated as a
confidential, proprietary technical and/or business information of Company and
will not be disclosed or displayed to anyone, except as specifically authorized
by Company in writing. Upon the termination or non-renewal of this Agreement for
any reason, Licensee agrees to return to Company, all Technical and Business
Information in its possession without retaining copies thereof. The Licensee
further agrees to require each of its employees who will have access to or
possession of such Technical and Business Information to agree in writing that
he or she will not disclose or display such Technical and Business Information
to anyone, except as provided above. The Licensee agrees at all times during the
continuance of this Agreement and thereafter for a period of eighteen (18)
months after the termination of this License, to keep secret and not divulge by
writing, conversation, actions or otherwise, to any person, firm, corporation,
or entity, any information relating to the Technical and Business Information
any other features of the business of Company except by prior written
authorization of Company.
9.3 Notwithstanding anything to the contrary, the obligations created under
this Article IX shall not apply to any technical or business information which
(i) is available to the public at the time of its disclosure or becomes
publicly available after such disclosure by any means other than a breach of
this Agreement, (ii) is known by the receiving party prior to its disclosure
or is obtained on a non-confidential basis from a source which is not under any
obligation to maintain its confidentiality or (iii) a receiving party is
required by law to disclose.
11
<PAGE> 12
ARTICLE X
INDUSTRIAL PROPERTY RIGHTS
10.1 The Company represents that to the best of its knowledge, it is the owner
of the Industrial Property Rights as defined above, and, as such, may dispose
them as it sees fit.
10.2 The Company represents that to the best of its knowledge that the
Industrial Property Rights as defined above do not infringe on any patent,
utility model, design, trade name or mark, copy right or other industrial
property right belonging to any third party in the Territory.
10.3 During the term of this Agreement, should the Company find that for any
reason the representations in 10.1 and 10.2 above may not be accurate, the
Company may take any or all of the following steps at its discretion, but in
the consultation with Licensee:
a. Take steps such as are or may be necessary to perfect or defend its
right, title and interest to the Industrial Property Rights;
b. Negotiate a suitable accommodation with the contesting party;
c. Abandon any pretense of right, title and interest to the Industrial
Property Rights and discuss with Licensee some form of
compensation for removal of such industrial property right from
Licensee's use under this License.
12
<PAGE> 13
ARTICLE XII
TERMINATION
12.1 Either party may forthwith terminate this Agreement upon notice if the
other party is subject to bankruptcy, insolvency, or reorganization proceedings,
or other proceedings analogous in nature or effect, instituted by or against the
other party, or the other party is dissolved or liquidated, whether voluntarily
or involuntarily, and a receiver or trustee is appointed for all or a
substantial part of the assets of the party, or the other party makes an
assignment for the benefit of creditors.
12.2 The following acts or omissions on the part of the Licensee or Company
shall constitute a default of this Agreement and provide the other party cause
to terminate this Agreement forthwith as set forth above in Section 10.1:
A. The breach of any other covenant, condition or restriction provided in
this Agreement which is to be kept or performed by either party;
B. If either party shall:
(i) cease to carry on a material part of the subject business of this
agreement; or
(ii) suffer more than 25% of the power to elect its directors or
persons performing similar functions to be under the control of
any competitor of Company.
C. If either party engages in any conduct which in the opinion of the
other party is prejudicial to its interests.
13
<PAGE> 14
12.3 Either party may forthwith terminate this Agreement if the other
party breaches any provision, covenant, or condition under this
Agreement, and if the breach is not cured within thirty (30) days
after notice requiring the cure.
12.4 In the event of the termination or non-renewal of this Agreement,
royalties shall be payable to Company only on orders received prior
to the effective date of termination or end of the term of this
Agreement and, as to potential orders in process prior to
termination, orders accepted within one hundred twenty (120) days
after the termination date.
ARTICLE XIII
GENERAL PROVISIONS
A. NO WAIVER. Waiver of any provision of this Agreement, in whole or part,
in any one instance shall not constitute a waiver of any other provision in the
same instance, nor any waiver of the same provision in another instance, but
each provision shall continue in full force and effect with respect to any other
then-existing or subsequent breach.
B. NOTICE. Any notice required or permitted under this Agreement shall be
given in writing to the parties at their respective addresses specified above or
at such other address for a party as that party may specify by notice, by (i)
(A) delivery in hand or by postage prepaid, United States or Japanese first
class mail AND (B) registered or certified mail, return receipt requested, OR
(ii) by Federal Express or other form of expedited mail that provides for
delivery to the sender of a signed receipt, or (iii) by telegram. Notice so sent
shall be effective upon receipt.
C. ARBITRATION OF DISPUTES. Any disputes that cannot be amicably resolved
by the parties shall be submitted to binding arbitration for resolution. The
arbitration shall be
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conducted before a panel of three (3) arbitrators in Boston, Massachusetts under
the rules of the American Arbitration Association. Each party shall select one
arbitrator and the two so chosen shall select the third, who shall act as
chairperson. If a party shall fail to appoint an arbitrator within twenty (20)
days after receiving written notice of the arbitration and the name of the
arbitrator selected by the party initiating the arbitration, the initiating
party may request that the American Arbitration Association appoint the second
arbitrator, and if the two arbitrators so selected fail to select a third
arbitrator within twenty (20) days after the appointment of the second
arbitrator, either arbitrator may request that the American Arbitration
Association select the arbitrator. The decision of the majority of the
arbitrators shall be final and binding on the parties with respect to all
matters referred to the panel for decision and may be enforced in an appropriate
court in any competent jurisdiction. The arbitrators shall not have the
authority to award punitive or special damages. In the absence of a contrary
ruling by the arbitrators, each party shall pay its own costs and fees in
connection with the arbitration.
D. MISCELLANEOUS. This Agreement: (i) may be executed in any number of
counterparts, each of which, when executed by both parties to this Agreement
shall be deemed to be an original, and all of which counterparts together shall
constitute one and the same instrument; (ii) shall be governed by and construed
under the laws of The Commonwealth of Massachusetts applicable to contracts
made, accepted, and performed wholly within The Commonwealth, without
application of principles of conflict of laws; (iii) constitutes the entire
Agreement of the parties; with respect to its subject matter, superseding all
prior oral and written communications, proposals, negotiations, representations,
understandings, courses of dealing, Agreements, contracts, and the like between
the parties in such respect; (iv) may be amended, modified, or terminated, and
any right under this Agreement may be waived in whole or in part, only by a
writing signed by both parties; (v) contains headings only for convenience,
which headings do not form part, and shall not be used in construction, of this
Agreement; (vi) shall bind and inure to the benefit of the parties and their
respective legal Representatives, successors and assigns, except that no party
may delegate any of its obligations under this Agreement or assign this
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Agreement without the prior written consent of the other party; (vii) is not
intended to inure to the benefit of any third-party beneficiary; and (viii) may
be enforced only in courts located within The Commonwealth of Massachusetts, and
the parties hereby agree that such courts shall have venue and exclusive subject
matter and personal jurisdiction, and consent to service of process by
registered mail, return receipt requested, or by any other manner provided by
law, and agree that the party to this Agreement prevailing in a suit or action
arising from breach of this Agreement or any of its provisions shall be entitled
to all costs of such suit or action, including reasonable attorney's fees.
E. AVAILABILITY OF EQUITABLE RELIEF. The obligations imposed by this
Agreement are unique. Breach of any of such obligations would injure the parties
to this Agreement; such injury is likely to be difficult to measure; and
monetary damages, even if ascertainable, are likely to be inadequate
compensation for such injury. Therefore, the parties to this Agreement
acknowledge and agree that protection of the respective interests in this
Agreement would require equitable relief, including specific performance and
injunctive relief, in addition to any other remedy or remedies that the parties
may have at law or under this Agreement, including, without limitation,
entitlement to reimbursement by the breaching party or parties of the legal fees
and expenses of the injured party or parties prevailing in any such suit.
F. FORCE MAJEURE. No party to this Agreement shall be responsible to the
other for delays or errors in its performance or other breach under this
Agreement occurring solely by reason of circumstances beyond its control,
including acts of civil or military authority, national emergencies, fire, major
mechanical breakdown, labor disputes, flood or catastrophe, acts of God,
insurrection, war, riots, delays of suppliers, or failure of transportation,
communication or power supply.
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In WITNESS WHEREOF, the parties hereto have set their respective hands and
seals, in a number of counterpart copies, each of which shall be deemed to be an
original for all purposes.
MARUBENI CORPORATION SPIRE CORPORATION
- -------------------- -----------------
By: /s/ Yoshio Muto By: /s/ Roger G. Little
--------------------------------------- ----------------------
Yoshio Muto Roger G. Little
Title: General Manager of Machinery Dept. Title: President
Nagoya Branch
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<PAGE> 1
Exhibit 10.2
MARUBENI CORPORATION
DISTRIBUTORSHIP AGREEMENT
<PAGE> 2
----------------------------------
COMPANY CONFIDENTIAL [LOGO: SPIRE]
----------------------------------
CONFIDENTIAL
DISTRIBUTORSHIP AGREEMENT
This Agreement is made as of 31 March 1997, between Spire Corporation, with
its principal place of business located at One Patriots Park. Bedford.
Massachusetts, USA (hereinafter called "Company") and Marubeni Corporation,
Nagoya Branch with its principal place of business located at 2-4 Nishiki
2-chome Naka-ku, Nagoya-shi, Aichi Prefecture, Japan (hereinafter called the
"Distributor").
IT IS AGREED as follows:
ARTICLE I
Term of Agreement
1.1 This Agreement is effective as of the date written above and will
remain in effect for five years from the date above. This Agreement will renew
automatically at the end of every second year thereafter unless either party
gives Notice of Intent not to renew no less than sixty (60) days prior to the
second year anniversary date or unless the earlier termination of this
Agreement in accordance with Article VIII. This Agreement supersedes all prior
Agreements between the parties hereto with respect to its subject matter.
1.2 Distributor's right of distribution as described herein is contingent
upon the purchase from Company of demonstration equipment for Module
Manufacturing, otherwise referred to as "Equipment", consisting of the following
individual units: SPI-CELL TEST 1000, SPI-LAMINATOR 350 (with Prototype
Automation System), SPI-SUN SIMULATOR 460i, and SPI-ARRAY TESTER 800,
manufactured according to Company's standard specifications unless advised by
Distributor of more appropriate market-driven specification(s). The purchase and
sale of the Equipment shall be accomplished by the issuance of a standard
purchase order with terms and conditions which shall be mutually agreed to
between the parties. The price of the Equipment as defined above is based upon
the 1997 standard list price published 11 March 1997, less a discount of
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<PAGE> 3
8% on all items except the SPI-SUN SIMULATOR 460i, which is discounted 10%. The
total net purchase price is $617,377.00 (unless Distributor's order deviates
from Company's standard specifications on all standard items). Distributor shall
furnish Company with a purchase order at the earliest possible opportunity.
Failure of Distributor to issue a purchase order as described above and make a
down-payment in accordance with said purchase order, shall cancel Distributor's
right of distribution and void this Agreement if not done within ninety (90)
days of the effective date of this Agreement. Distributor shall further select a
location for the installation of the Equipment and shall be responsible for all
costs associated with the installation and commissioning (including training of
operating personnel as needed) of the Equipment. The Equipment and its
installation site will be maintained as a showroom for prospective customers and
a training facility for after-product delivery. If circumstances warrant,
Distributor may distribute single units of Equipment. Distributor will inform
Company of such distribution. Distributor may sell under such circumstance, a
part of the Equipment with the condition that for a period of two years from the
date of this agreement, or until Equipment is manufactured in Japan, it order a
replacement within sixty (60) days.
1.3 a. Company and Distributor will fix the minimum sales target for each
year by a letter of mutual agreement which makes reference to this
agreement. Negotiation of such minimum sales target shall begin in
December of 1998, and each December thereafter unless the parties
should decide otherwise. Should Distributor have failed to reach the
target for that year, the parties shall discuss an appropriate remedy,
if any, at that time.
b. The 1998 minimum sales target shall be $2,500,000 U.S. Dollars.
ARTICLE II
Sales Territory
2.1 Company appoints the Distributor, and the Distributor agrees to act as an
exclusive Distributor for Company with respect to Customers, located in the
geographical area set forth in Exhibit A (hereinafter called "the
Territory") for the purpose of affecting the sale of the products and
services, manufactured or marketed as set forth on Schedule 1 (all of which
are hereafter
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collectively referred to as "the Products") and such other products and
services as may hereafter mutually be agreed between the parties in
writing and added to Schedule 1. Company may from time to time, offer
products, solicit business or enter into direct negotiations with a
Customer within the Territory when Company and Distributor conclude that
circumstances warrant it. Company and Distributor shall negotiate
compensation for any support that Distributor may offer in such
circumstances. Company will additionally, in such circumstances, keep
Distributor wholly aware of the particulars of any such transaction and
negotiations leading thereto. Distributor shall have non-exclusive
distributorship rights on a case-by-case basis outside of the Territory.
2.2 The Company agrees that, during the term of this Agreement, it will not
sell the Products in the Territory itself, except as provided in Article
2.1, nor will it sell the Products to any third party who it knows, or
should reasonably know, intends to promote sales of the products in the
Territory. The Company further agrees that during the term of this
Agreement, it will not itself take, nor cause any third party to take
action which may tend to damage, limit, or circumscribe the exclusive
rights of the Distributor granted herein.
2.3 The Company also agrees to refer to the Distributor all inquiries or orders
for the products received from any person, firm, or company residing or
carrying on business in the Territory.
2.4 The Company will decide whether Equipment sold outside of Japan will be
built by Company or by Distributor under the terms of Equipment
Manufacturing License Agreement.
ARTICLE III
Responsibilities of the Distributor
3.1 The Distributor will, during the term of this Agreement, diligently and
faithfully serve as Company's Distributor and will use its best efforts to
increase the sale of the Products and promote the interests of Company within
the Territory and will not do anything that may hinder such sales. Distributor
agrees to assign at all times a minimum of three sales persons to sell and
market the Products, including a Sales Manager and a Sales Staff for sales in
the Territory. The Distributor will cause these sales persons and any other
required personnel to plan and execute a sales and marketing
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campaign. Distributor shall use in the capacity of Sales Manager, a Japanese
National with skill and experience at selling equipment used in the PV Device
manufacturing industry (hereinafter known as "Sales Manager"). Sales Manager may
be independent or an employee of Distributor. Distributor shall make available
to Sales Manager office space and support at its facility. While he is
independent the Sales Manager's business card shall bear Company's corporate
identification, but the address of Distributor's facility. Distributor shall
bear all the cost of the business activity of sales manager while he is
independent, but Company will partially support such activities with a payment
of $5,000 U.S. each month through December, 1998 to Distributor. Distributor and
Sales Manager will formally commence sales of Company's Products on 1 May 1997.
3.2 The Distributor will provide Company with occasional timely reports
summarizing the distributor's activities with respect to sales and marketing of
the products; market conditions including specific industry information;
competitive conditions; customer service issues; etc. These reports may be made
in the form of notes concerning customer contacts, oral telephone reports to
company personnel, or by other informal means. In general, the Distributor
agrees to keep Company informed on a timely basis of any development within the
Territory affecting the sale or potential sale of Company's Products.
3.3 The Distributor agrees to provide assistance, including the dissemination
of technical information and sales literature, to existing and potential
Customers, and to act as liaison between Company and these Customers should such
a requirement arise.
3.4 The relationship established hereunder is that of an independent contractor
and the Distributor shall sell the products in its own name and on its own
account. The Distributor will have no authority to execute contracts,
Agreements, documents, or instruments on behalf of Company, to pledge the credit
of Company, to accept orders on Company's behalf, or to otherwise bind Company
and shall not hold itself out as having such authority. Any such actions taken
by the Distributor, representations made by the Distributor, or undertakings of
the Distributor are understood to be on Distributor's account and Distributor
shall be responsible for all such actions, representations or undertakings. The
Distributor will not, without the written authority of Company, make any
representations or warranties regarding the Products beyond the express
warranties and
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<PAGE> 6
representations made in currently effective data sheets and sales documents
issued by Company. The Distributor shall have the right to use the trade names,
trademarks, symbols and identification of Company only to the extent and in the
manner authorized in advance by Company. Any such use shall be made only in the
reasonable belief that such use will further the interests of Company,
particularly with respect to promoting the sale of Products. No such use shall
in any manner create any rights in the Distributor, but all such use by the
Distributor shall be made on behalf of and shall inure to the benefit of
Company. Upon termination of this Agreement for any reason whatsoever the
Distributor shall immediately discontinue all such use.
3.5 The Distributor shall keep Company informed of laws, regulations, and
practices in the Territory which have material impact on Company's business in
that Territory and shall provide whatever other administrative (i.e.,
non-selling) services as may be necessary in order to generate, develop,
consummate, and support sales of Products in the Territory (e.g., bonds, local
taxes, customs, clearances, installation arrangements, etc.).
3.6 The Distributor agrees to conduct all of its business in its own name and
at its own expense. The Distributor further agrees to conduct itself and its
business in a manner which will not reflect discredit to itself or to Company.
The Distributor will comply with all applicable laws and regulations of all
relevant jurisdictions in the performance of all of its duties and obligations
under this Agreement.
3.7 Distributor (or any agent or Sublicensee of Distributor under this or any
other Agreement) and Company agree that improvements to the maintenance,
operation, and repair of the Equipment (in 1.2 above) made, invented, originated
or innovated by either party remains the exclusive property of the party
responsible, but are hereby licensed for unlimited use, manufacture or sale
throughout the world by the Company without further compensation to either party
during the term of this Agreement. Thereafter, either party may negotiate a
separate license from the other for that purpose.
3.8 Distributor will maintain a field service staff of sufficient size and
ability to respond to service requests in a manner commensurate with customer
demands.
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<PAGE> 7
3.9 Negotiations to separate sales representative responsibility from Company's
current sales representative in the Territory shall occur directly between
distributor and the other party.
ARTICLE IV
Company's Responsibilities
4.1 Company will respond to Distributor's request for quotations on a priority
basis. Company will not sell the Products in the Territory under all normal
situations, but may do so under conditions described in 2.1 above. Company shall
further be obligated to discourage potential Customers in the Territory from
transacting business involving the Products with the Company directly. Company
shall at all times furnish Distributor with copies of correspondence between
Customers and potential Customers in the Territory.
4.2 Company will respond promptly to all requests for technical assistance,
sales promotional materials, and training as is reasonable and necessary for the
Distributor to promote sales of the Product in the Territory.
4.3 Company will offer Distributor prices in accordance with Article 7.1 for
purchase by Distributor of the Products to be distributed within the Territory
4.4 Company is obligated to accept purchase orders issued to it by Distributor
providing that:
a. such orders reflect the terms and conditions for payment stated in
Company's quotation, and any other Terms and Conditions agreed upon by
the parties from time to time, or any deviation there from negotiated
by Distributor and Company prior to the Distributor's issuance and,
b. all such orders are for Products covered by this agreement for sales
within the Territory.
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4.5 Company agrees to make all shipment of the products hereunder on or
before the date specified for such shipment in any individual purchase
contract (described below) into which the Company and Distributor may
enter, and Company agrees to abide by the Terms and Conditions
thereof. Company shall make all arrangements in a timely manner for
any export licenses or permits which may be required.
ARTICLE V
Non-Competition and Representation
5.1 In partial consideration for the appointment of Distributor as a
distributor by Company, the Distributor agrees that, during the term of this
Agreement and for a period of eighteen (18) months after the termination of this
Agreement for any reason, it will not sell or lease any products, instruments,
devices or services of the kind as set forth in ARTICLE VI, Products, Pricing
and Purchase Order. Distributor agrees further that it will not, during the
above-referenced period, provide sales and/or technical representation services
for any other business entity engaged in the manufacture and sales of equipment
or services of a type the same or similar as set forth in Schedule 1.
5.2 The Distributor agrees that all data, drawings, proposals, models,
machines, instruments, reports, customer lists or other documents, or material
(hereinafter called "Data and Material") received from Company will be treated
as the confidential, proprietary business information of Company, and will not
be disclosed or displayed to anyone, except as specifically authorized by
Company in writing. Upon termination of this Agreement for any reason,
Distributor agrees to rerum to Company all Data and Material in its possession
without retaining copies thereof. The Distributor further agrees to require each
of its employees who will have access to or possession of such Data and Material
to agree in writing that he or she will not disclose or display such Data and
Material to anyone, except as provided above. The Distributor agrees at all
times during the continuance of this Agreement and thereafter for a period of
eighteen (18) months after the termination of this Agreement, to keep secret and
not divulge by writing, conversation, actions or otherwise, to any person, firm,
corporation, or entity, any information regarding the processes, selling
techniques, customers or any other features of the business of Company except by
prior written authorization of Company.
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<PAGE> 9
5.3 Notwithstanding anything to the contrary, the obligations created under
this Article 5.2 shall not apply to any data, materials or other information (i)
which is available to the public at the time of its disclosure or becomes
publicly available after such disclosure by any means other than a breach of
this agreement, (ii) is known by the Distributor prior to its disclosure or is
obtained on a non-confidential basis from a source which is not under any
obligation to maintain its confidentiality; or (iii) the Distributor is required
by law to disclose.
ARTICLE VI
Products, Pricing and Purchase Order
6.1 The Products and Pricing covered by this Agreement and the prices of
such Products when sold by Company to Distributor, are set forth on Schedule 1,
attached hereto and made a part hereof. This Agreement does not include any
other products and services offered for sale by Company, unless agreed to in
writing by the parties.
6.2 Company and Distributor shall enter into a purchase contract for each
of Distributor's orders with Company. Such purchase contract will be founded
upon Company's quotations or offers, but subject to negotiation by Company and
Distributor. Company will acknowledge acceptance of each purchase contract and
its Terms and Conditions in writing using a form entitled "Confirmation of
Purchase Contract." (an example is attached hereto as Exhibit B).
6.3 Each purchase contract shall incorporate all of the Terms and
Conditions hereof to the extent they apply to the subject transaction of the
purchase contract. In all cases this Agreement shall govern where its terms are
inconsistent with those of the purchase contract, unless the parties shall agree
that those of the purchase contract shall take precedence.
6.4 The failure by Company to return any countersigned "Confirmation of
Purchase Contract" within twenty (20) days after dispatch by Distributor shall
constitute its acceptance of the purchase contract and its Terms and Conditions.
ARTICLE VII
Pricing
7.1 Pricing as set forth on Schedule I shall be subject to the following
terms and conditions:
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<PAGE> 10
A. All pricing is based on the current standard international price for the
Product bought by Distributor. The term "current" shall mean the calendar year
in which the quotation is sought by Distributor. Company shall discount same by
8%, except that the SPI-SUN SIMULATORS shall be discounted by 10%. The following
charges may be included in Company's pricing or itemized on its invoice as
necessary:
1. The amount of any sales, duties, excise, gross receipts, or like
taxes, excluding income taxes, which is either added to the selling
price or absorbed therein, or paid to any taxing authority by Company;
2. Intercompany sales between or among Company and its corporate
affiliates;
3. Import or export duties, license fees and similar charges;
4. Transportation charges;
B. Distributor may apply any markup (defined herein as the price Products are
sold to Distributor's Customers less the current standard international price
referenced in A. above) it chooses, so long as such markup is not prejudicial to
the market for Company's Products, or tend to discourage the sales thereof or
make any competing Product sufficiently attractive by comparison as to encourage
sales of competing Product.
C. The exclusivity of the Distributor's rights in Territory do not necessarily
extend to sales to United States Government installations located in the
Territory. Such sales may be subject to the following conditions:
1. Company shall be the Seller, not Distributor, or
2. Distributor may not mark up the current standard international price.
In any such case, Company may negotiate with Distributor compensation for any
services rendered by Distributor in connection with a sale for which Distributor
shall make available substantiation of such services.
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<PAGE> 11
D. Under certain specific circumstances when multi-national procurement
is involved or when Company's Products are supplied as part of an overall
system and the prime system contractor is located outside of Distributor's
Territory, Distributor may be required to restrict or eliminate its markup.
In such cases. Distributor and Company may negotiate the restriction of the
markup, or if circumstance requires its elimination, a possible discount to
Distributor should both parties agree that the situation warrants it.
7.2 Should unusual circumstances warrant it, the Company may propose
changes, alterations or amendments to its standard prices, terms and conditions,
delivery schedules, and methods of payment, to take effect with sixty (60) days
written notice unless Distributor and Company shall negotiate otherwise during
that time. Such proposed changes, or changes otherwise negotiated, shall not
apply to orders already accepted by the Company.
ARTICLE VIII
Termination
8.1 If, as a result of the Distributor's activities in any area of the
Territory, the Company is subject to taxes (other than United States Federal
Income or Excise Taxes) claimed by a Governmental Agency in such area and the
Distributor does not compensate Company for such taxes, the Company may remove
such area from the Territory.
8.2 Either party may forthwith terminate this Agreement upon notice if the
other party is subject to bankruptcy, insolvency or reorganization proceedings,
or other proceedings analogous in nature or effect, instituted by or against the
other party, or the other party is dissolved or liquidated whether voluntarily
or involuntarily, and receiver or trustee is appointed for all or a substantial
part of the assets of the party or the other party makes an assignment for the
benefit of creditors;
8.3 The following acts or omissions on the part of the Distributor shall
constitute a default of this Agreement and entitle Company to terminate this
Agreement forthwith:
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A. The Distributor's breach of any other covenant condition or restriction
provided in this Agreement which is to be kept or performed by the
Distributor, if the same is not cured within thirty (30) days after
Company's notice requiring the cure.
B. If the Distributor shall:
(i) cease to carry on a material part of the subject business of this
Agreement
(ii) suffer more than 25% of the power to elect its directors or
persons performing similar functions to be under the control of
any competitor of Company.
C. If the Distributor engages in any conduct which in the opinion of
Company is prejudicial to Company's interests.
8.4 Either party may forthwith terminate this Agreement if the other party
breaches any provision, covenant or condition under this Agreement, and if the
breach is not cured within thirty (30) days after notice requiting the cure.
ARTICLE IX
Warranty
9.1 Company warrants that the Product sold and delivered to Distributor
hereunder shall have been produced in accordance with the then presently
available best technical knowledge, and for a period of one hundred and eighty
(180) days from date of customer acceptance shall be free from all defects in
design, materials and workmanship. If a longer warranty period is required by
customers in Territory, the Distributor and Company will negotiate an extended
Warranty contract. In addition, and not by way of limitation of the foregoing,
the Products shall conform to any specifications mutually agreed upon between
the parties.
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9.2 In the event that within the warranty period set forth in the foregoing
Article 9.1 any Product or part thereof is found to be defective or not in
conformity with the agreed specifications, Company shall, within fifteen (15)
days after receipt of the claim from the Distributor, repair or replace such
defective or non-conforming Product or part thereof free of charge.
9.3 Shipping charges for Warranty replacement components will be paid by the
Company. In the event of Product return to Company, the shipping charges for
return of Product or components to the Company will be paid by Distributor or
customer. Shipping charges for returning the Product or components after repair
by Company will be paid by Company.
ARTICLE X
Industrial Property Rights
10.1 The Company represents that to its knowledge at the time of this Agreement
that neither the Products nor any part thereof infringe on any industrial
property rights of any third party individual within the Territory.
10.2 The Company shall notify the Distributor of any actual or suspected
conditions which may affect this representation.
ARTICLE XI
General Provisions
A. No Waiver. Waiver of any provision of this Agreement, in whole or in part,
in any one instance shall not constitute a waiver of any other provision in the
same instance, nor any waiver of the same provision in another instance, but
each provision shall continue in full force and effect with respect to any other
then-existing or subsequent breach.
B. Notice. Any notice required or permitted under this Agreement shall be
given in writing to the parties at their respective addresses specified above,
or at such other address for a party as that party may specify by notice, by (i)
(A) delivery in hand or by postage prepaid, United States
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or Japanese first class mail and (B) registered or certified mail, return
receipt requested, or (ii) by Federal Express or other form of expedited mail
that provides for delivery to the sender of a signed receipt, or (iii) by
telegram. Notice so sent shall be effective upon receipt.
C. Arbitration of Disputes. Any disputes that cannot be amicably resolved by
the parties shall be submitted to binding arbitration for resolution. The
arbitration shall be conducted before a panel of three (3) arbitrators in
Boston, Massachusetts under the rules of the American Arbitration Association.
Each party shall select one arbitrator and the two so chosen shall select the
third, who shall act as chairperson. If a party shall fail to appoint an
arbitrator within twenty (20) days after receiving written notice of the
arbitration and the name of the arbitrator selected by the party initiating the
arbitration, the initiating party may request that the American Arbitration
Association appoint the second arbitrator, and if the two arbitrators so
selected fail to select a third arbitrator within twenty (20) days after the
appointment of the second arbitrator, either arbitrator may request that the
American Arbitration Association select the third arbitrator. The decision of
the majority of the arbitrators shall be final and binding on the parties with
respect to all maters referred to the arbitration panel for decision and may be
enforced in an appropriate court in any competent jurisdiction. The arbitrators
shall not have the authority to award punitive or special damages. In the
absence of a contrary ruling by the arbitrators, each party shall pay its own
costs and fees in connection with the arbitration.
D. Miscellaneous. This Agreement: (i) may be executed in any number of
counterparts, each of which, when executed by both parties to this Agreement,
shall be deemed to be an original, and all of which counterparts together shall
constitute one and the same instrument; (ii) shall be governed by and construed
under the laws of The Commonwealth of Massachusetts applicable to contracts
made, accepted, and performed wholly within The Commonwealth, without
application of principles of conflict of laws; (iii) constitutes the entire
Agreement of the parties with respect to its subject matter, superseding all
prior oral and written communications, proposals, negotiations, representations,
understandings, courses of dealing, Agreements, contracts, and the like between
the parties in such respect; (iv) may be amended, modified, or terminated, and
any right under this Agreement may be waived in whole or in part, only by a
writing signed by both parties; (v) contains headings only for convenience,
which headings do not form part, and shall not be used in
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construction, of this Agreement; (vi) shall bind and inure to the benefit of the
parties and their respective legal representatives, successors and assigns,
except that no party may delegate any of its obligations under this Agreement or
assign this Agreement without the prior written consent of the other party;
(vii) is not intended to inure to the benefit of any third-party beneficiary;
and (viii) may be enforced only in courts located within The Commonwealth of
Massachusetts, and the parties hereby agree that such courts shall have venue
and exclusive subject matter and personal jurisdiction, and consent to service
of process by registered mail, return receipt requested or by any other manner
provided by law, and agree that the party to this Agreement prevailing in a suit
or action arising from breach of this Agreement or any of its provisions shall
be entitled to all costs of such suit or action, including reasonable attorney's
fees.
E. Availability of Equitable Relief. The obligations imposed by this Agreement
are unique. Breach of any of such obligations would injure the parties to this
Agreement; such injury is likely to be difficult to measure; and monetary
damages, even if ascertainable, are likely to be inadequate compensation for
such injury. Therefore, the parties to this Agreement acknowledge and agree that
protection of the respective interests in this Agreement would require equitable
relief, including specific performance and injunctive relief, in addition to any
other remedy or remedies that the parties may have at law or under this
Agreement, including, without limitation, entitlement to reimbursement by the
breaching party, or parties of the legal fees and expenses of the injured party
or parties prevailing in any such suit.
F. Force Majeure. No party to this Agreement shall be responsible to the
other for delays or errors in its performance or other breach under this
Agreement occurring solely by reason of circumstances beyond its control,
including acts of civil or military authority, national emergencies, fire, major
mechanical breakdown, labor disputes, flood or catastrophe, acts of God,
insurrection, war, riots, delays of suppliers or failure of transportation,
communication or power supply.
In WITNESS WHEREOF, the parties hereto have set their respective hands and
seals, in a number of counterpart copies, each of which shall be deemed to be an
original for all purposes.
MARUBENI CORPORATION SPIRE CORPORATION
- -------------------- -----------------
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By: /s/ Yoshio Muto By: /s/ Roger G. Little
----------------------------- --------------------------
Yoshio Muto Roger G. Little
Title: General Manager of Machinery Dept. Title: President
Nagoya Branch
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EXHIBIT A
PRODUCTS AND DISTRIBUTOR'S TERRITORY
TERRITORY PRODUCTS
Section 1 Japan Spire Corporation SPI-LINES
Taiwan (production lines), individual units of
Vietnam equipment which constitute the SPI-
Malaysia LINES and related components and
Thailand accessories
Korea
Philippines
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SCHEDULE 1
PRICING - PRODUCTS AND SERVICES
PRICING
- -------
All pricing for sales to Distributor shall be in accordance with Article 7.1 of
this Agreement unless otherwise agreed upon in any single sale for a particular
customer in advance of completing the subject transaction(s).
PRODUCTS
- --------
For Customers in Territory described in Exhibit A:
Spire Corporation SPI-LINES (Production Lines) and individual units of
equipment which constitute such SPI-LINES.
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Exhibit 23(a)
Accountants' Consent
The Board of Directors and Stockholders
Spire Corporation:
We consent to the use of our reports included herein and to the reference to
our firm under the headings "Summary Consolidated Financial Data," "Selected
Consolidated Financial Data" and "Experts" in the prospectus.
KPMG Peat Marwick LLP
Boston, Massachusetts
December 3, 1997
