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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(MARK ONE)
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended March 31, 2000.
or
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission file number: 0-12742
SPIRE CORPORATION
- --------------------------------------------------------------------------------
(NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
Massachusetts 04-2457335
- --------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION IDENTIFICATION NUMBER)
One Patriots Park, Bedford, Massachusetts 01730-2396 781-275-6000
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange on Which Registered
- --------------------------------------------------------------------------------
Not applicable Not applicable
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value, Nasdaq
------------------------------------
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports); and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. There were 3,292,590 outstanding
shares of the issuer's only class of common equity, Common Stock, $.01 par
value, on April 30, 2000.
Transitional Small Business Disclosure Format (Check One): Yes |_| No |X|
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<PAGE>
SPIRE CORPORATION
INDEX
Page Number
-----------
PART I - FINANCIAL INFORMATION
- ------------------------------
Condensed Consolidated Balance Sheets at 3
March 31, 2000 (unaudited) and December 31, 1999
Condensed Consolidated Statements of Operations 4
For the Three Months Ended March 31, 2000 and 1999 (unaudited)
Condensed Consolidated Statements of Cash Flows 5
For the Three Months Ended March 31, 2000 and 1999 (unaudited)
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations 7 - 10
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
2
<PAGE>
SPIRE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE><CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets
- --------------
Cash and cash equivalents $ 7,848,729 $ 10,709,370
Accounts receivable, trade:
Amounts billed 3,106,007 2,017,865
Retainage 50,878 50,878
Unbilled costs 362,591 343,242
------------ ------------
3,519,476 2,411,985
Less allowance for doubtful accounts 107,063 107,000
------------ ------------
Net accounts receivable 3,412,413 2,304,985
------------ ------------
Inventories (Note 2) 1,578,674 1,862,933
Prepaid expenses and other current assets 395,121 351,948
------------ ------------
Total current assets 13,234,937 15,229,236
------------ ------------
Property and equipment 14,700,530 14,640,003
Less accumulated depreciation and amortization 12,675,861 12,621,001
------------ ------------
Net property and equipment 2,024,669 2,019,002
------------ ------------
Patents (less accumulated amortization, $455,741 in 2000 and $448,507 in 1999) 100,737 106,956
Other assets 12,071 8,271
------------ ------------
112,808 115,227
------------ ------------
$ 15,372,414 $ 17,363,465
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
- -------------------
Accounts payable $ 587,265 $ 1,280,951
Accrued liabilities 996,090 1,197,624
Federal and State income taxes payable 205,600 1,070,000
Advances on contracts in progress 1,312,273 1,962,300
------------ ------------
Total current liabilities 3,101,228 5,510,875
------------ ------------
Stockholders' equity
- --------------------
Common stock, $.01 par value; shares authorized 20,000,000;
issued 3,861,474 shares in 2000 and 3,818,926 shares in 1999 38,615 38,189
Additional paid-in capital 9,997,197 9,846,239
Accumulated earnings 3,455,062 3,187,851
------------ ------------
13,490,874 13,072,279
Treasury stock at cost, 552,160 shares (1,219,688) (1,219,688)
------------ ------------
Total stockholders' equity 12,271,186 11,852,591
------------ ------------
$ 15,372,414 $ 17,363,465
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
SPIRE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE><CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
Net sales and revenues
Contract research, service and license revenues $ 2,376,954 $ 2,655,097
Sales of manufacturing equipment 2,154,666 1,162,619
----------- -----------
Total sales and revenues 4,531,620 3,817,716
----------- -----------
Costs and expenses
Cost of contract research, services and licenses 1,531,622 1,816,022
Cost of manufacturing equipment 1,313,919 1,006,425
Selling, general and administrative expenses 1,338,360 1,117,623
----------- -----------
Total costs and expenses 4,183,901 3,940,070
----------- -----------
Earnings (loss) from operations 347,719 (122,354)
Interest income (expense), net 125,093 (26,799)
----------- -----------
Earnings (loss) before income taxes 472,812 (149,153)
Income tax expense 205,600 --
----------- -----------
Net earnings (loss) $ 267,212 $ (149,153)
=========== ===========
Earnings (loss) per share of common stock - basic $ 0.08 $ (0.05)
=========== ===========
Earnings (loss) per share of common stock - diluted $ 0.08 $ (0.05)
=========== ===========
Weighted average number of common shares outstanding - basic 3,295,239 3,243,766
=========== ===========
Weighted average number of common and common equivalent shares
outstanding - diluted 3,515,362 3,243,766
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
SPIRE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE><CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 267,212 $ (149,153)
Adjustments to reconcile net earnings (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 111,929 250,914
Changes in assets and liabilities:
Accounts receivable (1,107,428) 516,568
Inventories 284,259 535,596
Prepaid expenses and other current assets (43,173) 22,586
Income taxes payable (864,400) --
Accounts payable and accrued liabilities (895,220) (44,451)
Advances on contracts in progress (650,027) (541,589)
------------ ------------
Net cash used in operating activities (2,896,848) 590,471
------------ ------------
Cash flows from investing activities:
Additions to property and equipment (110,362) (293,278)
Increase in patent costs (1,015) (8,485)
Other assets (3,800) (14,016)
------------ ------------
Net cash provided by (used in) investing activities (115,177) (315,779)
------------ ------------
Cash flows from financing activities:
Net payments on short-term debt -- (300,000)
Exercise of stock options 151,384 --
------------ ------------
Net cash provided by (used in) financing activities 151,384 (300,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents (2,860,641) (25,308)
Cash and cash equivalents, beginning of period 10,709,370 121,866
------------ ------------
Cash and cash equivalents, end of period $ 7,848,729 $ 96,558
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense $ 3,000 $ 22,573
============ ============
Income taxes $ 1,070,000 $ 3,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(1) Interim Financial Statements
----------------------------
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
fairly present the Company's financial position as of March 31, 2000 and
the results of operations and changes in cash flows for the three months
ended March 31, 2000 and 1999. The results of operations for the three
months ended March 31, 2000 are not necessarily indicative of the results
to be expected for the fiscal year ending December 31, 2000.
The accounting policies followed by the Company are set forth in
Note 2 to the Company's consolidated financial statements in its annual
report on Form 10-KSB for the year ended December 31, 1999.
The financial statements, with the exception of the December 31,
1999 balance sheet, are unaudited and have not been examined by
independent certified public accountants.
(2) Inventories
-----------
Inventories consist of the following:
March 31, December 31,
2000 1999
---------- ----------
Raw materials $ 676,816 $ 653,695
Work in process 901,858 1,044,331
Finished goods -- 164,907
---------- ----------
$1,578,674 $1,862,933
========== ==========
(3) Earnings Per Share
------------------
The reconciliation of the denominators of the basic and diluted
earnings (loss) per share computations for the Company's reported
earnings (loss) is as follows:
<TABLE><CAPTION>
March 31,
-----------------------
2000 1999
--------- ---------
<S> <C> <C>
Weighted average number of shares outstanding - basic 3,295,239 3,243,766
Add net additional common shares upon exercise of common
stock options 220,123 --
--------- ---------
Adjusted weighted average common shares outstanding - diluted 3,515,362 3,243,766
========= =========
</TABLE>
4) Operating Segments and Related Information
------------------------------------------
The following table presents certain operating division
information. For Spire Optoelectronics for the three months ended March
31, 2000, the information relates to research and development activities,
primarily for the U.S. government.
<TABLE><CAPTION>
Spire Spire Spire Total
Solar Optoelectronics Biomedical All Other Company
---------------- ------------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
For the Three Months Ended March 31, 2000
-----------------------------------------
Net sales and revenues $2,129,899 $ 819,784 $1,355,628 $ 226,309 $4,531,620
Earnings (loss) from operations 157,902 93,328 123,572 (27,085) 347,719
Identifiable assets 3,536,609 1,063,691 1,764,692 9,007,423 15,372,414
For the Three Months Ended March 31, 1999
-----------------------------------------
Net sales and revenues $1,477,400 $1,289,938 $1,050,378 $ -- $3,817,716
Earnings (loss) from operations (159,132) (28,918) 38,897 -- (122,354)
Identifiable assets 2,722,901 3,648,715 1,235,541 1,330,823 9,738,650
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
OVERVIEW
Spire develops, manufactures and markets highly-engineered photovoltaic
module manufacturing equipment 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 144 factories and in 39 countries.
Spire's value-added service offerings to biomedical customers provide surface
treatments to enhance the performance of medical products. Spire also conducts
research and development activities, primarily for the U.S. government.
Results of Operations
- ---------------------
The Company's net sales and revenues for the three months ended March 31,
2000 increased, compared to the three months ended March 31, 1999.
The following table sets forth certain items as a percentage of net sales
and revenues for the periods presented:
Three Months Ended March 31,
------------------------
2000 1999
--------- ---------
Net sales and revenues 100.0% 100.0%
Cost of sales and revenues 62.8 73.9
--------- ---------
Gross profit 37.8 26.1
Selling, general and administrative expenses 29.5 29.3
--------- ---------
Earnings (loss) from operations 7.7 (3.2)
Earnings (loss) before income taxes 10.4 (3.9)
Income tax expense 4.5 --
--------- ---------
Net earnings (loss) 5.9% (3.9%)
========= =========
QUARTER ENDED MARCH 31, 2000 COMPARED TO QUARTER ENDED MARCH 31, 1999
NET SALES AND REVENUES
Net sales and revenues increased $714,000 or 19% for the three months
ended March 31, 2000 to $4,532,000, compared to $3,818,000 for the three months
ended March 31, 1999. Contract research, service and license revenues decreased
$278,000 or 10% to $2,377,000 for the three months ended March 31, 2000 compared
to $2,655,000 for 1999. Manufacturing equipment sales increased $992,000 or 85%
to $2,155,000 for 2000, compared to $1,163,000 for 1999. The following table
categorizes the Company's net sales and revenues for the periods presented:
<TABLE><CAPTION>
Three Months Ended March 31,
---------------------------------------------
2000 1999 % Change
------------ ------------ ------------
<S> <C> <C> <C>
Contract research, service and license revenues $2,377,000 $2,655,000 (10%)
Manufacturing equipment sales 2,155,000 1,163,000 85%
------------ ------------
Net sales and revenues $4,532,000 $3,818,000 19%
============ ============
</TABLE>
The increase in manufacturing equipment sales for the three month period
ended March 31, 2000 is primarily due to the completion of a line of equipment
to one customer during the first quarter of 2000. The decline in contract
research, service and license revenues for the three month period ended March
31, 2000 is primarily due to a decline in contract billings as more of the
Company's development efforts went toward commercial products. Included in
contract research, service and license revenues for the first quarter of 2000
are $400,000 of previously deferred license revenues related to a
7
<PAGE>
non-refundable license payment that were realized as revenue upon termination of
the related license agreement by the customer in March of 2000.
COST OF SALES AND REVENUES
The cost of sales and revenues increased $24,000 to $2,846,000, and
decreased to 63% of net sales and revenues, for the quarter ended March 31,
2000, compared to $2,822,000 or 74% of net sales and revenues for the quarter
ended March 31, 1999.
The cost of contract research, service and license revenues decreased
$284,000 to $1,532,000, and decreased to 65% of related revenues, for the
quarter ended March 31, 2000, compared to $1,816,000 or 68% of related revenues.
The decrease as a percentage of sales is due to a one time license sale of
$400,000 which increased revenues without any associated costs. Cost of
manufacturing equipment sales increased $308,000 to $1,314,000, and decreased to
61% of related sales, for the quarter ended March 31, 2000, compared to
$1,006,000 or 87% of related sales, for the quarter ended March 31, 1999. Cost
of manufacturing equipment sales decreased due to product mix and increased
volume which allowed the Company to better absorb fixed costs.
The following table categorizes the Company's cost of sales and revenues
for the periods presented, stated in dollars and as a percentage of related
sales and revenues:
<TABLE><CAPTION>
Three Months Ended March 31,
-------------------------------------------------
2000 % 1999 %
------------ ------ ------------ --------
<S> <C> <C> <C> <C>
Contract research, service and license revenues $1,532,000 65% $1,816,000 68%
Manufacturing equipment sales 1,314,000 61% 1,006,000 87%
------------ ------------
Total cost of sales and revenues $2,846,000 63% $2,822,000 74%
============ ============
</TABLE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the quarter ended March
31, 2000 increased $220,000 to $1,338,000, and increased to 30% of sales and
revenues, compared to $1,118,000 or 29% of sales and revenues for the quarter
ended March 31, 1999, due to increased sales and marketing activities.
DEPRECIATION AND AMORTIZATION EXPENSES
Depreciation and amortization expenses for the three months ended March
31, 2000 decreased $141,000 or 56% to $110,000, compared to $251,000 for the
three months ended March 31, 1999. The decrease is due to a sale of assets on
December 30, 1999. The Company sold substantially all of the assets of its
optoelectronics business for cash proceeds of $12,910,003. The assets that were
sold to the purchaser included machinery, equipment and technology. Capital
expenditures decreased $237,000 or 80% to $61,000 for the three months ended
March 31, 2000, compared to $293,000 for the three months ended March 31, 1999.
INTEREST
The Company earned $128,000 of interest income for the quarter ended
March 31, 2000, compared to $3,000 in interest income for the quarter ended
March 31, 1999. The Company incurred interest expense of $3,000 in the first
quarter of 2000 of which none was capitalized, compared to $30,000 of interest
expense for the quarter ended March 31, 1999.
INCOME TAXES
The Company recorded $205,600 of income tax expense for the three months
ended March 31, 2000 and no income tax expense for the three months ended March
31,1999.
8
<PAGE>
NET EARNINGS (LOSS)
The Company reported net earnings for the quarter ended March 31, 2000 of
$267,000, compared to a net loss of $149,000 for the quarter ended March 31,
1999. Increased profitability was attributed to a one time license sale of
$400,000.
LIQUIDITY AND CAPITAL RESOURCES
To date the Company has been able to fund its liquidity requirements
using cash from operations and available lines of credit. On August 30, 1999,
the Company entered into a revolving credit agreement with the Silicon Valley
Bank, replacing its previous credit facility with the Bank. This agreement
provides for a $3 million revolving credit facility, based upon eligible
accounts receivable requirements and 50% of the liquidation value of the
Company's fixed assets. 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. At March 31, 2000, interest on the line was at the Bank's prime
rate plus two percent on receivable loans and prime plus 2 3/4% on fixed asset
loans. The line contains covenants including provisions relating to
profitability and net worth. The Company is currently compliant with the terms
of this credit agreement. As of March 31, 2000, the Company had no outstanding
debt under this revolving credit facility.
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. In addition, the Company has taken
steps to conserve its resources by reducing its cost of operations. Cash and
cash equivalents decreased $2,860,000 to $7,849,000 at March 31, 2000, from
$10,709,000 at December 31, 1999, as a result of a reduction in trade payable, a
tax payment and cash used in operations during the first quarter of 2000. To
date there are no material commitments by the Company for capital expenditures.
At March 31, 2000, the Company's retained earnings were $3,455,000, compared to
$3,188,000 as of December 31, 1999. Working capital as of March 31, 2000
increased 4% to $10,134,000, compared to $9,718,000 as of December 31, 1999.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." The Company will
adopt SFAS 133 on January 1, 2001. The impact of SFAS 133 on the consolidated
financial statements is not expected to be material.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition." An amendment in March 2000
delayed the effective date until the second quarter of 2000. The Company is
reviewing the requirements of this standard and has not yet determined the
impact of this standard on its consolidated financial statements.
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.
9
<PAGE>
YEAR 2000
The Company's Year 2000 initiative was successful. No interruptions to
Spire business processes have occurred, and no material problem is expected.
THE FOREGOING STATEMENTS MAY INCLUDE FORWARD-LOOKING STATEMENTS SUBJECT
TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE INDICATED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED OR REFERRED
TO IN THIS REPORT AND IN ITEM 6 OF THE ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR
ENDED DECEMBER 31, 1999.
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
The Company is subject, from time to time, to legal proceedings and
claims arising out of its business, which cover a wide range of matters.
Management, after review and consultation with counsel, considers that any
liability from all of these legal proceedings and claims would not materially
affect the consolidated financial position, results of operations or liquidity
of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
A. The following exhibits are filed herewith:
27 Financial Data Schedule
B. During the quarter ended March 31, 2000, the Company filed one report
on Form 8-K.
On February 15, 2000 the Company filed an Amended Form 8-K, relating to
an event of December 29, 1999. The filing covered a disposition of assets (Item
2) and proforma financial information (Item 7(b)).
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SPIRE CORPORATION
(Registrant)
15 May 2000 By: /s/ Roger G. Little
- -------------------------------- -------------------
Date Roger G. Little
President, Chief Executive Officer
and Chairman of the Board
15 May 2000 By: /s/ Richard S. Gregorio
- -------------------------------- ------------------------
Date Richard S. Gregorio
Vice President and Chief Financial
Officer, Treasurer, Clerk and
Principal Accounting Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 7,848,729
<SECURITIES> 0
<RECEIVABLES> 3,519,476
<ALLOWANCES> 107,063
<INVENTORY> 1,578,674
<CURRENT-ASSETS> 13,234,937
<PP&E> 14,700,530
<DEPRECIATION> 12,675,861
<TOTAL-ASSETS> 15,372,414
<CURRENT-LIABILITIES> 3,101,228
<BONDS> 0
38,615
0
<COMMON> 0
<OTHER-SE> 12,232,571
<TOTAL-LIABILITY-AND-EQUITY> 15,372,414
<SALES> 2,154,666
<TOTAL-REVENUES> 4,531,620
<CGS> 1,313,919
<TOTAL-COSTS> 4,183,901
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 125,093
<INCOME-PRETAX> 472,812
<INCOME-TAX> 205,600
<INCOME-CONTINUING> 267,212
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 267,212
<EPS-BASIC> 0.08
<EPS-DILUTED> 0.08
</TABLE>
