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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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,
1995
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 0-16672
POWER SPECTRA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 94-2687782
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
919 HERMOSA COURT
SUNNYVALE, CA 94086-4103
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(Address of principal executive offices) (Zip Code)
(408) 737-7977
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIODS 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
----- -----
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK OF THE LATEST PRACTICABLE DATE.
OUTSTANDING AT
CLASS NOVEMBER 10, 1995
-------------------- ------------------
SHARES OF COMMON 13,675,222
STOCK, NO PAR VALUE
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<PAGE>
PART I FINANCIAL INFORMATION
POWER SPECTRA, INC.
<TABLE>
Item 1: Financial Statements
BALANCE SHEETS
(In thousands)
<CAPTION>
September 30, December 31,
1995 1994
(Unaudited) (Note)
------------------- ------------------
<S> <C> <C>
ASSETS:
- -----------
Current Assets:
Cash and cash equivalents $3,284 $ 215
Accounts receivable 99 30
Unbilled receivables 55 111
Inventories, principally purchased parts 134 222
Other current assets 51 83
------------------- ------------------
Total current assets 3,623 661
Equipment, furniture and
leasehold improvements 1,263 1,245
Less, accumulated depreciation (826) (716)
------------------- ------------------
Net fixed assets 437 529
Patents, net of amortization 70 75
Other assets 28 25
------------------- ------------------
TOTAL ASSETS $4,158 $1,290
=================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY:
- ------------------------------------------------
Current Liabilities:
Accounts payable $448 $ 138
Accrued compensation expense 184 161
Deferred contract revenue 87 73
Allowance for contract losses 100 100
Accrued professional fees 94 60
Preferred stock dividends payable 56 26
Other current liabilities 28 28
------------------- ------------------
Total current liabilities 997 586
STOCKHOLDERS' EQUITY:
Preferred stock 1,891 881
Common stock 11,587 8,151
Accumulated deficit (10,317) (8,328)
------------------- ------------------
Total stockholders' equity 3,161 704
------------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $4,158 $1,290
=================== ==================
<FN>
Note: The balance sheet at December 31, 1994 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to financial statements.
</TABLE>
2
<PAGE>
POWER SPECTRA, INC.
Item 1: Financial Statements
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Nine Months Ended
-----------------
September 30, September 30,
1995 1994
Unaudited) (Unaudited)
------- -------
Revenue $ 1,015 $ 2,829
Costs and expenses:
Cost of revenue 1,583 2,092
Sales and marketing 354 303
Research and development 112 224
General and administrative 797 773
------- -------
Total operating costs 2,846 3,392
------- -------
Operating loss (1,831) (563)
Other income (expenses) (15) 19
------- -------
Loss before income taxes (1,846) (544)
Provision for income taxes 1 1
------- -------
Net loss ($1,847) $ (545)
======= =======
Net loss applicable to common shares ($1,989) $ (623)
======= =======
Net loss per common share ($ 0.19) $ (0.06)
======= =======
See notes to financial statements.
3
<PAGE>
POWER SPECTRA, INC.
Item 1: Financial Statements
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended
----------------------------------
September 30, September 30,
1995 1994
(Unaudited) (Unaudited)
------- -------
Revenue $ 168 $ 315
Costs and expenses:
Cost of revenue 463 525
Sales and marketing 135 119
Research and development 22 105
General and administrative 242 260
------- -------
Total operating costs 862 1,009
------- -------
Operating loss (694) (694)
Other income (expenses) (15) 7
------- -------
Net loss ($ 709) $ (687)
======= =======
Net loss applicable to common shares ($ 764) $ (714)
======= =======
Net loss per common share ($ 0.07) $ (0.07)
======= =======
See notes to financial statements.
4
<PAGE>
POWER SPECTRA, INC.
<TABLE>
Item 1: Financial Statements
STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Nine Months Ending
------------------
September 30, September 30,
1995 1994
(Unaudited) (Unaudited)
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,847) $ (545)
Adjustments to reconcile net loss
to cash provided by (used in) operating activities:
Depreciation and amortization 107 110
Common stock issued for services 66 64
Changes in assets and liabilities:
Accounts receivable (69) 855
Unbilled receivables 56 (32)
Inventories 88 (90)
Other current assets 32 2
Accounts payable 310 (10)
Accrued compensation expense 23 71
Deferred contract revenue 14 (2)
Other current liabilities 64 23
------- -------
Net cash provided by (used in) operating activities (1,156) 446
CASH FLOWS FROM INVESTING ACTIVITIES:
Furniture and equipment additions and disposals, net (22) (186)
Decrease (increase) in other assets 9 (1)
------- -------
Net cash used in investing activities (13) (187)
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred stock dividend (142) (78)
Proceeds from sale of common stock 3,370 --
Proceeds from sale of preferred stock 1,010 --
------- -------
Net cash provided by (used in) financing activities 4,238 (78)
------- -------
Net increase in cash and cash equivalents 3,069 181
Cash and cash equivalents, beginning of period 215 839
------- -------
Cash and cash equivalents, end of period $ 3,284 $ 1,020
======= =======
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest $ 19 $ 1
------- =======
Income taxes $ 1 $ 1
======= =======
<FN>
See notes to financial statements.
</TABLE>
5
<PAGE>
POWER SPECTRA, INC.
Notes to Financial Statements
September 30, 1995
1. Basis for Presentation:
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended September 30,
1995, are not necessarily indicative of the results that may be expected for the
year ended December 31, 1995. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
2. Per Share Data
Per share information for the quarter ended September 30, 1995, is
computed based on the net loss after adding the Series A and Series B Preferred
Stock dividends to the net loss in 1995. In 1995, shares issuable upon exercise
of stock options have not been included in the calculation as the effect would
be anti-dilutive. The Series A and Series B Preferred Stock is not included as
its effects are anti-dilutive on an as-if-converted basis. Weighted average
shares outstanding at September 30, 1995 are 10,350,343. Weighted average shares
outstanding at September 30, 1994, were 10,003,187.
3. Common Stock
During the quarter ended September 30, 1995, the Company sold
3,262,727 shares of Common Stock at $1.10 per share through a private placement.
Proceeds from this sale were $3,255,000 after deducting the costs of the
placement.
6
<PAGE>
POWER SPECTRA, INC.
Item 2:
Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS:
Revenue for the third quarter and nine months ended September 30,
1995, was $168,000 and $1,015,000, respectively, compared to $315,000 and
$2,829,000, respectively, for the same periods ended September 30, 1994, a
decrease of $147,000 for the quarterly period and a decrease of $1,814,000 for
the nine month period, respectively. Revenues from the Company's contracts with
the Air Force in 1995 decreased by $109,000 for the third quarter of the year,
and decreased by $243,000 for the first nine months of the year, over the same
periods of 1994. The Boeing Company Research Agreement, which terminated June
30, 1994, had no revenues for the third quarter of 1994, but had revenues of
$1,600,000 for the first nine months of 1994. Revenues from standard product
sales decreased by $38,000 for the third quarter and decreased by $8,000 for the
first nine months of the year over the same periods of 1994.
The 1995 third quarter net loss was $709,000, an increase of $22,000
over the net loss of $687,000 recorded in the 1994 third quarter. A net loss of
$1,847,000 was recorded for the first nine months of 1995 compared to a net loss
of $545,000 for the same period in 1994. This increased loss was due primarily
to the expiration of the agreement with The Boeing Company and delays by the
government in providing required technical direction for the Air Force contract.
This delay resulted in the government issuing a six month extension to the
contract.
The cost of revenues decreased by $62,000 for the third quarter of
1995 and decreased by $509,000 for the first nine months of 1995 over the same
periods in 1994 due to decreased sales volume in both periods. Although the cost
of sales decreased in proportion to sales decreases, overhead costs could not be
decreased proportionately without the loss of essential skills, expertise, and
capabilities required for effective and efficient operations during the
transitional phase from dependence upon the Boeing development contract to
development and product sales to other customers.
Sales and marketing expense increased by $16,000 and $51,000 for the
third quarter and first nine months ended September 30, 1995, respectively,
compared to the same periods in 1994 due primarily to continued expansion of the
Company's marketing efforts to meet changing marketing conditions. Research and
development expense decreased by $83,000 and $112,000 for the third quarter and
first nine months of 1995, respectively, compared to the same periods in 1994
because of a reduction of personnel assigned to Company sponsored research and
development. General and administrative expenses in 1995 decreased by $18,000
for the third quarter, but increased by $24,000 for the first nine months,
respectively, due to increased personnel costs compared to the same periods in
1994.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
During the nine months ended September 30, 1995, cash and cash
equivalents increased by $3,069,000 over the December 31, 1994 balance due
primarily to a ongoing private placement of the Company's Common Stock and the
Series B Preferred Stock. The cash raised through the private placements was
partially offset by the net loss from operations. Accounts receivable increased
by $69,000 while unbilled receivables decreased by $56,000 from December 31,
1994, as previously completed work on Air Force contracts was billed.
Inventories decreased by 40% or $88,000 from December 31, 1994, as a result of
progress on these contracts. Other current assets decreased $32,000 or 39%
primarily because of amortization of prepaid insurance.
Accounts payable increased 225% from December 31, 1994, to $448,000 at
September 30, 1995, due primarily to the timing of vendor payments and a
$224,000 erroneous overpayment by the government on the Air Force contract. The
accrued compensation expense balance increased $23,000, a 14% increase over the
balance at December 31, 1994. Deferred contract revenue increased $14,000 or 19%
primarily as a result of timing of payments on the Air Force contract. Accrued
professional fees increased $34,000 or 57% primarily because of the costs of the
private Common Stock placement. The Preferred Stock dividend payable increased
$30,000 or 115% from year-end 1994 as a result of the issuance of Series B
Preferred Stock in the second quarter, 1995.
Backlog at September 30, 1995, was $910,000, of which 84% is made up
of the Air Force contract. The Air Force contract is currently scheduled for
completion in the second quarter, 1996. Although the Company successfully raised
additional operating capital, the Company continues to seek and obtain other
sources of revenue to sustain operations.
The Company's current cash position, together with anticipated cash
flows from operations and financing obtained through the private placement of
Common Stock and Series B Preferred, are expected by management to be sufficient
to finance the Company's operations through December 31, 1996. However, if the
Company is not successful in replacing the revenue and cash generated by the
Boeing Agreement and the United States Air Force contract, the Company, as
presently sized, would continue to experience significant operating losses and
cash outflows.
SUBSEQUENT EVENTS:
The Company continues the private placement of its Common Stock. The
aggregate amount raised to through November 10, 1995 is $3,694,000. Management
believes that one or more additional closings for the Common Stock will occur.
The maximum amount which may be raised in the financing is $6,000,000.
8
<PAGE>
PART II. OTHER INFORMATION
POWER SPECTRA, INC.
September 30, 1995
Item 6 Exhibits and Reports on Form 8-K
- ------ --------------------------------
a. Exhibits
27.1 Financial Data Schedule
b. Reports on Form 8-K during the quarter ended September 30, 1995
None
9
<PAGE>
POWER SPECTRA, INC.
September 30, 1995
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Power Spectra, Inc.
Dated: November 13, 1995 By: /s/ Edward J. Lamb
-------------------------------
Edward J. Lamb
Controller, Chief Financial Officer, Secretary
(Principal Accounting and Finance Officer)
10
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
------- ------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements in the Quarterly Report on Form 10-Q of Power Spectra, Inc.
for the quarter ended September 30, 1995 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000777527
<NAME> Power Spectra, Inc.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> DEC-31-1994
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 3,284
<SECURITIES> 0
<RECEIVABLES> 99
<ALLOWANCES> 0
<INVENTORY> 134
<CURRENT-ASSETS> 3,623
<PP&E> 1,263
<DEPRECIATION> 826
<TOTAL-ASSETS> 4,158
<CURRENT-LIABILITIES> 997
<BONDS> 0
<COMMON> 11,587
0
1,891
<OTHER-SE> (10,317)
<TOTAL-LIABILITY-AND-EQUITY> 4,158
<SALES> 1,015
<TOTAL-REVENUES> 1,015
<CGS> 1,583
<TOTAL-COSTS> 2,846
<OTHER-EXPENSES> 15
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,846)
<INCOME-TAX> 1
<INCOME-CONTINUING> (1,847)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,847)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
