2000
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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 September 30, 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
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(NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
Massachusetts 04-2457335
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
One Patriots Park, Bedford, Massachusetts 01730-2396 781-275-6000
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (ISSUER'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange on
Title of Each Class Which Registered
--------------------------------------------------------------------------------
Not applicable Not applicable
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value, Nasdaq
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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 3,328,021 outstanding
shares of the issuer's only class of common equity, Common Stock, $.01 par
value, on October 31, 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
September 30, 2000 (unaudited) and December 31, 1999
Condensed Consolidated Statements of Operations 4
For the Three Months Ended September 30, 2000 and 1999 and
For the Nine Months Ended September 30, 2000 and 1999 (unaudited)
Condensed Consolidated Statements of Cash Flows 5
For the Nine Months Ended September 30, 2000 and 1999 (unaudited)
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition 8 - 11
and Results of Operations
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
-2-
<PAGE>
<TABLE><CAPTION>
SPIRE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
--------------
Cash and cash equivalents $ 7,625,883 $ 10,709,370
Accounts receivable, trade:
Amounts billed 2,397,606 2,017,865
Retainage 45,457 50,878
Unbilled costs 637,145 343,242
------------ ------------
3,080,208 2,411,985
Less allowance for doubtful accounts 108,000 107,000
------------ ------------
Net accounts receivable 2,972,208 2,304,985
------------ ------------
Inventories (Note 2) 2,042,907 1,862,933
Prepaid expenses and other current assets 440,590 351,948
------------ ------------
Total current assets 13,081,588 15,229,236
------------ ------------
Property and equipment 14,976,777 14,640,003
Less accumulated depreciation and amortization 12,815,637 12,621,001
------------ ------------
Net property and equipment 2,161,140 2,019,002
------------ ------------
Patents (less accumulated amortization, $470,075 in 2000 and $448,507 in 1999) 103,558 106,956
Other assets 14,651 8,271
------------ ------------
118,209 115,227
------------ ------------
$ 15,360,937 $ 17,363,465
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
-------------------
Notes payable $ 250,000 $ --
Accounts payable 630,757 1,280,951
Accrued liabilities 1,337,628 1,197,624
Federal and State income taxes payable -- 1,070,000
Advances on contracts in progress 1,194,825 1,962,300
------------ ------------
Total current liabilities 3,413,210 5,510,875
------------ ------------
Stockholders' equity
--------------------
Common stock, $.01 par value; shares authorized 20,000,000;
issued 3,879,431 shares in 2000 and 3,818,926 shares in 1999 38,794 38,189
Additional paid-in capital 10,067,369 9,846,239
Accumulated earnings 3,061,252 3,187,851
------------ ------------
13,167,415 13,072,279
Treasury stock at cost, 552,160 shares (1,219,688) (1,219,688)
------------ ------------
Total stockholders' equity 11,947,727 11,852,591
------------ ------------
$ 15,360,937 $ 17,363,465
============ ============
See accompanying notes to condensed consolidated financial statements.
-3-
</TABLE>
<PAGE>
<TABLE><CAPTION>
SPIRE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales and revenues
----------------------
Contract research, service and license revenues $ 1,927,350 $ 2,117,268 $ 6,239,303 $ 6,999,614
Sales of manufacturing equipment 898,894 604,760 4,277,674 2,221,708
------------ ------------ ------------ ------------
Total sales and revenues 2,826,244 2,722,028 10,516,977 9,221,322
------------ ------------ ------------ ------------
Costs and expenses
------------------
Cost of contract research, services and licenses 1,441,398 1,907,020 4,350,318 5,431,079
Cost of manufacturing equipment 689,419 502,679 3,156,462 1,904,953
Selling, general and administrative expenses 1,241,162 1,141,124 3,797,738 3,373,433
------------ ------------ ------------ ------------
Total costs and expenses 3,371,979 3,550,823 11,304,518 10,709,465
------------ ------------ ------------ ------------
Loss from operations (545,735) (828,795) (787,541) (1,488,142)
--------------------
Interest income (expense), net 119,719 (33,309) 362,323 (81,421)
------------ ------------ ------------ ------------
Loss before income taxes (426,016) (862,104) (425,218) (1,569,564)
Income tax expense (benefit) (298,619) -- (298,619) --
------------ ------------ ------------ ------------
Net loss $ (127,397) $ (862,104) $ (126,599) $ (1,569,564)
-------- ============ ============ ============ ============
Loss per share of common stock - basic $ (0.04) $ (0.27) $ (0.04) $ (0.48)
-------------------------------------- ============ ============ ============ ============
Loss per share of common stock - diluted $ (0.04) $ (0.27) $ (0.04) $ (0.48)
---------------------------------------- ============ ============ ============ ============
Weighted average number of common and common
equivalent shares outstanding - basic 3,318,317 3,245,016 3,307,743 3,244,266
============ ============ ============ ============
Weighted average number of common and common
equivalent shares outstanding - diluted 3,318,317 3,245,016 3,307,743 3,244,266
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
-4-
</TABLE>
<PAGE>
<TABLE><CAPTION>
SPIRE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (126,599) $ (1,569,564)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 332,863 697,970
Loss on sale of assets 11,798 --
Changes in assets and liabilities:
Accounts receivable (667,223) 20,537
Inventories (179,974) 345,492
Prepaid expenses and other assets (97,122) 62,412
Income taxes payable (1,070,000) --
Accounts payable and accrued liabilities (510,190) 304,401
Advances on contracts in progress (767,475) 372,348
------------ ------------
Net cash provided by (used in) operating activities (3,073,922) 233,596
------------ ------------
Cash flows from investing activities:
Capital expenditures (463,130) (415,892)
Patent expenditures (18,170) (7,549)
------------ ------------
Net cash used in investing activities (481,300) (491,888)
------------ ------------
Cash flows from financing activities:
Net borrowings on short-term debt 250,000 466,560
Exercise of stock options 221,735 3,287
------------ ------------
Net cash provided by financing activities 471,735 469,847
------------ ------------
Net increase (decrease) in cash and cash equivalents (3,083,487) 211,555
Cash and cash equivalents, beginning of period 10,709,370 121,866
------------ ------------
Cash and cash equivalents, end of period $ 7,625,883 $ 333,421
============ ============
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest expense $ 27,453 $ 33,309
============ ============
Income taxes $ 949,307 $ 3,000
============ ============
See accompanying notes to condensed consolidated financial statements.
-5-
</TABLE>
<PAGE>
SPIRE CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 September 30, 2000
and the results of operations for the three and nine months ended
September 30, 2000 and 1999 and cash flows for the nine months ended
September 30, 2000 and 1999. The results of operations for the three and
nine months ended September 30, 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:
September 30, December 31,
2000 1999
----------------- -----------------
Raw materials $ 884,214 $ 653,695
Work in process 835,023 1,044,331
Finished goods 323,670 164,907
----------------- -----------------
$2,042,907 $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>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Weighted average number of shares
outstanding - basic 3,318,317 3,245,016 3,307,743 3,244,266
Add net additional common shares upon
exercise of common stock options -- -- -- --
--------- --------- --------- ---------
Adjusted weighted average common
shares outstanding - diluted 3,318,317 3,245,016 3,307,743 3,244,266
========= ========= ========= =========
</TABLE>
Stock options to purchase 74,827 shares and 61,838 shares of
common stock were outstanding at September 30, 2000 and 1999,
respectively, but were not included in the computation of diluted
earnings per share because the Company incurred a net loss for the three
and nine months ended September 30, 2000 and 1999 and, therefore, the
effect would have been antidilutive.
On October 25, 2000 the Company announced a Stock Dividend for
stockholders of record on November 22, 2000; to be distributed on
December 22, 2000. The stock dividend will consist of one share of the
Company's common stock for each share outstanding.
-6-
<PAGE>
4) Operating Segments and Related Information
------------------------------------------
The following table presents certain operating division
information. For Spire Advanced Technology (previously Optoelectronics)
for the three and nine months ended September 30, 2000, the information
relates to research and development activities, primarily for the U.S.
government.
<TABLE><CAPTION>
Spire Spire Spire
Solar Solar Advanced Spire Total
Equipment Chicago Technology Biomedical Company
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Three Months Ended September 30, 2000
---------------------------------------------
Net sales and revenues $ 837,977 $ 335,142 $ 698,033 $ 955,092 $ 2,826,244
Earnings (loss) from operations (233,033) (184,043) 94,582 (223,241) (545,735)
For the Three Months Ended September 30, 1999
---------------------------------------------
Net sales and revenues $ 743,885 -- $1,050,266 $ 927,877 $ 2,722,028
Loss from operations (433,741) -- (279,767) (115,347) (828,795)
For the Nine Months Ended September 30, 2000
--------------------------------------------
Net sales and revenues $4,369,794 $ 599,197 $2,127,808 $3,420,178 $10,516,977
Earnings (loss) from operations (383,799) (447,049) 293,147 (249,840) (787,541)
For the Nine Months Ended September 30, 1999
--------------------------------------------
Net sales and revenues $2,937,183 -- $3,369,810 $2,914,329 $ 9,221,322
Loss from operations (793,476) -- (562,896) (131,770) (1,488,142)
</TABLE>
During nine months ending September 30, 2000, Spire Corporation
formed Spire Solar Chicago, an operating business unit located in
Chicago, Illinois. As of September 30, 2000, Spire Solar Chicago
identifiable assets are $347,154.
The other segments above are presented on a basis consistent with
December 31, 1999, and there have been no material changes in
identifiable assets for the reportable segments since December 31, 1999.
5) Spire Solar Chicago Transaction
-------------------------------
On October 8, 1999, the Company entered into an agreement with BP
Solarex (BPS) whereby BPS would purchase from Spire a photovoltaic (PV)
manufacturing line for $1,500,000. Under the terms of this agreement,
Spire can use this manufacturing line in its Spire Solar Chicago (SSC)
operation at no cost for a term of five years, provided Spire annually
purchases a specified quantity of raw materials used in the production of
PV modules from BPS at current market prices. If the Company does not
purchase the specified quantity of raw materials from BPS, BPS can take
possession of the equipment. Additionally, at any time during the
five-year term of the agreement, BPS, at its discretion, can exercise an
option to convert the purchase price of the equipment into an equity
interest in SSC. As of September 30, 2000, the Company has received
payments from BPS related to this agreement totaling $554,000 but the
related manufacturing equipment had not been put in service at SSC. The
Company has not recognized any revenue related to this transaction as the
criteria for revenue recognition has not yet been met. (see Note 5 of the
financial statements).
-7-
<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 following table sets forth certain items as a percentage of net sales
and revenues for the periods presented:
<TABLE><CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------ ----------------------------------
2000 1999 2000 1999
---------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
Net sales and revenues 100.0% 100.0% 100.0% 100.0%
Cost of sales and revenues 75.4 88.5 71.4 79.6
---------------- ---------------- ---------------- --------------
Gross profit 24.6 (11.5) 28.6 (20.4)
Selling, general and administrative expenses 43.9 41.9 36.1 36.6
---------------- ---------------- ---------------- --------------
Loss from operations (19.3) (31.7) (7.5) (16.1)
Loss before income taxes (15.9) (31.7) (4.3) (17.0)
Income tax expense (benefit) (11.4) -- (3.1) --
---------------- ---------------- ---------------- --------------
Net loss (4.5%) (31.7%) (1.2%) (17.0%)
================ ================ ================ ==============
</TABLE>
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 1999
NET SALES AND REVENUES
Net sales and revenues increased $104,000 or 4% for the three months
ended September 30, 2000 to $2,826,000, compared to $2,722,000 for the three
months ended September 30, 1999. Contract research, service and license revenues
decreased $190,000 or 9% to $1,927,000 for the three months ended September 30,
2000 compared to $2,117,000 for 1999. Manufacturing equipment sales increased
$294,000 or 49% to $899,000 for 2000, compared to $605,000 for 1999. The
following table categorizes the Company's net sales and revenues for the periods
presented:
<TABLE><CAPTION>
Three Months Ended September 30,
-------------------------------------------------------------
2000 1999 % Change
----------------- ----------------- -----------------
<S> <C> <C> <C>
Contract research, service and license revenues $1,927,000 $2,117,000 (9%)
Manufacturing equipment sales 899,000 605,000 49%
----------------- -----------------
Net sales and revenues $2,826,000 $2,722,000 4%
================= =================
</TABLE>
Net sales and revenues increased $1,296,000 or 14% for the nine months
ended September 30, 2000 to $10,517,000, compared to $9,221,000 for the nine
months ended September 30, 1999. Contract research, service and license revenues
decreased $761,000 or 11% to $6,239,000 for the nine months ended September 30,
2000 compared to $7,000,000 for 1999. The decline in contract research, service
and license revenues directly related to the sale of the Optoelectronics
business in 1999. Manufacturing equipment sales increased $2,056,000 or 93% to
$4,278,000 for 2000, compared to $2,222,000 for 1999. The increase in
manufacturing equipment sales is primarily due to capacity expansion of
photovoltaic module production.
-8-
<PAGE>
The following table categorizes the Company's net sales and revenues for
the periods presented:
<TABLE><CAPTION>
Nine Months Ended September 30,
-------------------------------------------------------------
2000 1999 % Change
----------------- ----------------- -----------------
<S> <C> <C> <C>
Contract research, service and license revenues $6,239,000 $7,000,000 11%
Manufacturing equipment sales 4,278,000 2,222,000 93%
----------------- -----------------
Net sales and revenues $10,517,000 $9,221,000 14%
================= =================
</TABLE>
The increase in manufacturing equipment sales for the three and nine
month periods ended September 30, 2000 is primarily due to capacity expansion in
photovoltaic module production. The decline in contract research, service and
license revenues for the three and nine month periods ended September 30, 2000
is primarily due to the sale of the Optoelectronics business, as well as delays
in performance by a subcontractor.
COST OF SALES AND REVENUES
The cost of sales and revenues decreased $279,000 to $2,131,000, and
decreased to 75% of net sales and revenues, for the quarter ended September 30,
2000, compared to $2,410,000 or 89% of net sales and revenues for the quarter
ended September 30, 1999.
The cost of contract research, service and license revenues decreased
$466,000 to $1,441,000, and decreased to 75% of related revenues, for the
quarter ended September 30, 2000, compared to $1,907,000 or 90% of related
revenues for the quarter ended September 30, 1999. The decrease is due to a
change in product mix as a result of the sale of the Optoelectronics business in
December 1999. Cost of manufacturing equipment sales increased $186,000 to
$689,000, and decreased to 77% of related sales, for the quarter ended September
30, 2000, compared to $503,000 or 83% of related sales, for the quarter ended
September 30, 1999. Cost of manufacturing equipment sales decreased as a
percentage of sales due to an increase in sales volume, resulting in a favorable
absorption of 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 September 30,
--------------------------------------------------------------
2000 % 1999 %
---------------- -------- ---------------- ---------
<S> <C> <C> <C> <C>
Cost of contract research, service and licenses $1,441,000 75% $1,907,000 90%
Cost of manufacturing equipment 690,000 77% 503,000 83%
---------------- ----------------
Total cost of sales and revenues $2,131,000 75% $2,410,000 89%
================ ================
</TABLE>
The cost of contract research, service and license revenues decreased
$1,081,000 to $4,350,000, and decreased to 70% of related revenues, for the nine
months ended September 30, 2000, compared to $5,431,000 or 78% of related
revenues for the nine months ended September 30, 1999. The decrease as a
percentage of sales is due to a one time license sale during 2000 of $500,000
which increased revenues without any associated costs. Cost of manufacturing
equipment sales increased $1,251,000 to $3,156,000, and decreased to 74% of
related sales, for the nine months ended September 30, 2000, compared to
$1,905,000 or 86% of related sales, for the nine months ended September 30,
1999. Cost of manufacturing equipment sales decreased as a percentage of sales
due to an increase in sales volume resulting in a favorable absorption of fixed
costs, and expansion of the Company's product lines.
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>
Nine Months Ended September 30,
--------------------------------------------------------------
2000 % 1999 %
---------------- -------- ---------------- ---------
<S> <C> <C> <C> <C>
Cost of contract research, service and license revenues $4,350,000 70% $5,431,000 78%
Cost of manufacturing equipment sales 3,156,000 74% 1,905,000 86%
---------------- ----------------
Total cost of sales and revenues $7,506,000 71% $7,336,000 80%
================ ================
</TABLE>
-9-
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the quarter ended
September 30, 2000 increased $100,000 to $1,241,000, and increased to 44% of
sales and revenues, compared to $1,141,000 or 42% of sales and revenues for the
quarter ended September 30, 1999. The increase in selling, general and
administrative expenses is due to the Company investing in its sales and
marketing activities by increasing consulting costs.
Selling, general and administrative expenses for the nine months ended
September 30, 2000 increased $425,000 to 3,798,000, and decreased to 36% of
sales and revenues, compared to $3,373,000 or 37% of sales and revenues for the
nine months ended September 30, 1999. The increase in selling, general and
administrative expenses is due to the Company investing in its sales and
marketing activities by increasing consulting costs.
INTEREST
The Company earned $120,000 of interest income for the quarter ended
September 30, 2000, compared to no interest income for the quarter ended
September 30, 1999. The Company incurred interest expense of $1,000 in the third
quarter of 2000 which was capitalized, compared to $40,097 of interest expense
for the quarter ended September 30, 1999.
INCOME TAXES
The Company recorded a tax benefit of $299,000 for the quarter and for
the nine months ended September 30, 2000 compared to no tax benefit/expense for
the same period of 1999. This tax benefit was to record a refund received from
federal and state tax agencies for the overpayment of taxes relating to the year
ended December 31, 1999.
NET EARNINGS (LOSS)
The Company reported a net loss for the quarter ended September 30, 2000
of $127,000, compared to a net loss of $862,000 for the quarter ended September
30, 1999. The Company reported a net loss of $127,000 for the nine months ended
September 30, 2000, compared to a net loss of $1,570,000 to the same period of
1999.
On October 8, 1999, the Company entered into an agreement with BP Solarex
(BPS) whereby BPS would purchase from Spire a photovoltaic (PV) manufacturing
line for $1,500,000. Under the terms of this agreement, Spire can use this
manufacturing line in its Spire Solar Chicago (SSC) operation at no cost for a
term of five years, provided Spire annually purchases a specified quantity of
raw materials used in the production of PV modules from BPS at current market
prices. If the Company does not purchase the specified quantity of raw materials
from BPS, BPS can take possession of the equipment. Additionally, at any time
during the five-year term of the agreement, BPS, at its discretion, can exercise
an option to convert the purchase price of the equipment into an equity interest
in SSC. As of September 30, 2000, the Company has received payments from BPS
related to this agreement totaling $554,000 but the related manufacturing
equipment had not been put in service at SSC. The Company has not recognized any
revenue related to this transaction as the criteria for revenue recognition has
not yet been met. (see Note 5 of the financial statements).
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 July 25, 2000, 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 $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. At September 30, 2000, interest on the line was at the Bank's prime
rate plus 1/2 percent on receivable 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 September 30, 2000, the
Company had $250,000 outstanding under this revolving credit facility.
-10-
<PAGE>
The Company believes it has sufficient resources to finance its current
operations for the foreseeable future through working capital, available cash
reserves, its existing line of credit and available lease arrangements. Cash and
cash equivalents decreased $3,083,000 to $7,626,000 at September 30, 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 nine months of 2000. To
date there are no material commitments by the Company for capital expenditures.
At September 30, 2000, the Company's retained earnings were $3,061,000, compared
to $3,188,000 as of December 31, 1999. Working capital as of September 30, 2000
was $9,668,000, compared to $9,718,000 as of December 31, 1999.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities" was issued. The
Company will adopt SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, on
January 1, 2001 and it will not have a material effect on the consolidated
financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition." An amendment has delayed the
effective date until the fourth 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.
In July and September 2000, the EITF reached consensuses on Issue No.
00-10, "Accounting for Shipping and Handling Fees and Costs." This Issue
addresses the income statement classification for shipping and handling fees and
costs. The Company will adopt the consensuses in the fourth quarter of 2000. The
adoption of EITF Issue No. 00-10 will not have a material impact on the
consolidated financial statements. The Company is still evaluating if additional
disclosures necessitated by the consensuses may be required.
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.
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.
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<PAGE>
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 September 30, 2000, the Company filed no reports
on Form 8-K.
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<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)
14 November 2000 By: /s/ Roger G. Little
--------------------------- ----------------------------------------
Date Roger G. Little
President, Chief Executive Officer and
Chairman of the Board
14 November 2000 By: /s/ Richard S. Gregorio
--------------------------- ----------------------------------------
Date Richard S. Gregorio
Vice President and Chief Financial Officer,
Treasurer, Clerk and Principal Accounting
Officer
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