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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 March 31, 1996
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
- ------------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
919 Hermosa Court
Sunnyvale, CA 94086-4103
- ------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
(408) 737-7977
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(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 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 March 31, 1996
---------------------------- ------------------------
Shares of Common 15,990,096
Stock, no par value
<PAGE>
<TABLE>
TABLE OF CONTENTS
10-Q, March 31, 1996
<CAPTION>
PAGE
<S> <C>
PART I FINANCIAL INFORMATION:
Item 1 -- Financial Statements -- Unaudited
Balance Sheets as of March 31, 1996
and December 31, 1995 3
Statements of Operations for the three months ended
March 31, 1996 and 1995 4
Statements of Cash Flows for the three months ended
March 31, 1996 and 1995 5
Notes to Financial Statements 6
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II OTHER INFORMATION:
Item 6 -- Exhibits and Reports on Form 8-K 10
SIGNATURES 11
Exhibit Index 12
Exhibit 27 Financial Data Schedule 13
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Power Spectra, Inc.
Item 1: Financial Statements
Balance Sheets
(In thousands)
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited) (Note)
------------------- ------------------
<S> <C> <C>
Assets:
- -----------
Current Assets:
Cash and cash equivalents $ 3,832 $ 2,395
Accounts receivable 126 291
Unbilled receivables 53 45
Inventories, principally purchased parts 151 125
Other current assets 27 73
------------------- ------------------
Total current assets 4,189 2,929
Equipment, furniture and
leasehold improvements 1,316 1,279
Less, accumulated depreciation (897) (860)
------------------- ------------------
Net fixed assets 419 419
Patents, net of amortization 91 68
Other assets 31 26
------------------- ------------------
Total Assets $4,730 $3,442
=================== ==================
Liabilities and Stockholders' Equity:
- ------------------------------------------------
Current Liabilities:
Accounts payable $ 111 $ 203
Accrued compensation expense 150 178
Deferred contract revenue 311 311
Allowance for contract losses 100 100
Accrued professional fees 69 72
Financing costs payable 246 20
Preferred stock dividend payable 50 49
Other current liabilities 29 29
------------------- ------------------
Total current liabilities 1,066 962
Stockholders' Equity:
Preferred stock 1,681 1,681
Common stock 13,960 11,878
Accumulated deficit (11,977) (11,079)
------------------- ------------------
Total stockholders' equity 3,664 2,480
------------------- ------------------
Total Liabilities and Stockholders'
Equity $4,730 $3,442
=================== ==================
<FN>
Note: The balance sheet at December 31, 1995 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.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
Power Spectra, Inc.
Item 1: Financial Statements
Statements of Operations
(In thousands, except per share data)
<CAPTION>
Three Months Ended
--------------------------------------------
March 31, March 31,
1996 1995
(Unaudited) (Unaudited)
------------------ -------------------
<S> <C> <C>
Revenue $ 172 $ 467
Costs and expenses:
Cost of revenue 580 588
Sales and marketing 102 98
Research and development 88 35
General and administrative 269 250
------------------ -------------------
Total operating costs 1,040 971
------------------ -------------------
Operating income (loss) (868) (504)
Other income (expenses) 20 (2)
------------------ -------------------
Income (loss) before income taxes (848) (506)
Provision for income taxes 1 1
------------------ -------------------
Net income (loss) ($ 849) ($ 505)
================== ===================
Net income (loss) applicable to common shares ($ 898) ($ 540)
================== ===================
Net income (loss) per common share ($0.06) ($0.05)
================== ===================
<FN>
See notes to financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
Power Spectra, Inc.
Item 1: Financial Statements
Statements of Cash Flows
(In thousands)
<CAPTION>
Three Months Ended
March 31, March 31,
1996 1995
(Unaudited) (Unaudited)
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($849) ($505)
Adjustments to reconcile net income (loss)
to cash provided by (used in) operating activities:
Depreciation and amortization 34 40
Common stock issued for services 25 13
Changes in assets and liabilities:
Accounts receivable 165 (40)
Unbilled receivables (8) (298)
Inventories (26) 69
Other current assets 46 47
Accounts payable (92) (8)
Accrued compensation expense (28) 14
Other current liabilities 224 2
------------------ ------------------
Net cash provided by (used in) operating activities (509) (666)
Cash flows from investing activities:
Furniture and equipment additions and disposals, net (32) (5)
Patents additions (25) --
Increase in other assets (5) (19)
------------------ ------------------
Net cash used in investing activities (62) (24)
Cash flows from financing activities:
Preferred stock dividend (49) (26)
Proceeds from sale of common stock 2,057 --
Proceeds from sale of preferred stock -- 663
------------------ ------------------
Net cash provided by (used in) financing activities 2,008 637
------------------ ------------------
Net increase (decrease) in cash and cash equivalents 1,437 (53)
Cash and cash equivalents, beginning of period 2,395 215
------------------ ------------------
Cash and cash equivalents, end of period $3,832 $162
================== ==================
Supplemental schedule of cash flow information: Cash paid during the period for:
Interest $ 1 $ 1
================== ==================
Income taxes $ 1 $ 1
================== ==================
<FN>
See notes to financial statements.
</FN>
5
</TABLE>
<PAGE>
Power Spectra, Inc.
Notes to Financial Statements
March 31, 1996
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 three-month period ended March 31, 1996, are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1996. 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, 1995.
2. Per Share Data
Per share information for the quarter ended March 31, 1996, is computed
based on the net loss after deducting Series A and Series B preferred stock
dividends in 1996. The weighted average number of shares outstanding consists
solely of common stock. The effect of common stock equivalents which would arise
from the exercise of common stock options outstanding (using the treasury stock
method) and the conversion of Series A and Series B preferred stock have not
been included for the quarter ended March 31, 1996, as their effect is
anti-dilutive. The weighted average number of shares outstanding at March 31,
1996 is 14,147,684.
Per share information for the quarter ended March 31, 1995, is computed
based on the net loss after deducting Series A and Series B preferred stock
dividends in 1995. The weighted average number of shares outstanding consists
solely of common stock. The effect of common stock equivalents which would arise
from the exercise of common stock options outstanding (using the treasury stock
method) and the conversion of Series A and Series B preferred stock have not
been included for the quarter ended March 31, 1995, as their effect is
anti-dilutive. The weighted average number of shares outstanding at March 31,
1995 was 10,061,220.
3. Common Stock
In August 1995 the Company initiated a private placement of its common
stock with a maximum gross proceeds to be raised from the offering of
$6,000,000. The placement closed at March 29, 1996. Gross proceeds raised
through December 31, 1995 were $3,694,000, and gross proceeds through March 31,
1996 were $5,960,000.
The Company issued units in lieu of single shares of common stock. Each
unit consists of one share of common stock and one common stock purchase warrant
(the "units"). Each warrant entitles the holder to purchase one-half of a share
of common stock and is exercisable for ten years from the date of original
issuance of the warrants at the initial closing of the private placement ( the
"original issuance date"), subject to two vesting conditions described below.
Two warrants are required to purchase one share. The units were offered to
accredited investors only and were offered at $1.10 per unit (the "unit offering
price"). There was no minimum offering amount.
6
<PAGE>
Power Spectra, Inc.
Notes to Financial Statements (Continued)
March 31, 1996
The warrants, which were issued as a component of the units, are
exercisable only under the following circumstances and only to the following
extent:
(i) 50% of the total number of warrants held by the investor will
become exercisable if, within three years of the original issuance date, the
Company issues common stock or securities convertible into common stock at a
price below the unit offering price. The exercise price of such warrants vested
in accordance with this paragraph (i) will be equal to the price offered to the
investors in the subsequent financing.
(ii) 50% of the total number of warrants held by the investor will
become exercisable if, within two years of the original issuance date, the
Company's common stock is not quoted on the NASDAQ SmallCap Market (or, at the
Company's sole discretion, the NASDAQ National Market). The exercise price of
such warrants vested in accordance with this paragraph (ii) will be equal to the
unit offering price.
The Company has further agreed that, for three years from the original
issuance date, it will not grant any stock options under its existing or future
stock option plans at an exercise price less than 110% of the unit offering
price. This plan provision may only be amended or rescinded by the approval of
the outstanding shareholders.
7
<PAGE>
Power Spectra, Inc.
Item 2:
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Except for historical information contained herein, this Report contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The
forward-looking statements contained herein are subject to certain risks and
uncertainties, including those discussed herein and in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, that could
cause actual results to differ materially from those projected or discussed.
Investors are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date hereof. The
Company undertakes on obligation to publicly release the results of any revision
to these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Results of Operations:
Revenue for the first quarter ended March 31, 1996, was $172,000,
compared to $467,000 for the same period ended March 31, 1995, a decrease of
$295,000. Revenues from the Company's contract with the Air Force in 1996
decreased by $224,000 for the first quarter of the year, over the same period of
1995. Revenues from other contracts and products decreased on a period-to-period
comparison by $73,000.
The 1996 first quarter net loss was $849,000, an increase of $344,000
over the net loss of $505,000 recorded in the 1995 first quarter. This increased
loss was due primarily to the decrease in revenue under the Air Force contract
during the period.
The cost of revenues decreased by $8,000 for the first quarter of 1996
over the same period in 1995 due to decreased sales volume. Although the cost of
revenues decreased, overhead costs could not be decreased proportionately
without the loss of essential skills, expertise, and capabilities required for
effective and efficient operations as the Company continues its transition from
research and development of laboratory hardware to application specific design
and testing. Sales and marketing increased by $4,000 for the first quarter,
compared to the same period in 1995, due primarily to continued expansion of the
Company's marketing efforts to meet changing marketing conditions. Reflecting a
renewed emphasis on research and development, research and development expense
increased by $53,000 for the first three months of 1996 compared to the same
period in 1995, as consultants and outside services were increasingly used to
provide essential services and expertise in Company sponsored research and
development efforts. General and administrative expenses increased by $19,000
for the 1996 first quarter due to increased personnel costs compared to the same
period in 1995.
8
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Liquidity and Capital Resources:
During the 1996 first quarter, cash and cash equivalents increased by
$1,437,000 due to the private placement of the Company's common stock, partially
offset by the net loss from operations. Accounts receivable decreased by
$165,000 as a result of decreased revenues under the Air Force Contract.
Unbilled receivables increased by $8,000 as progress billings were withheld
pending approval of new government overhead billing rates. Inventories increased
by 21% or $26,000 from December 31, 1995, in preparation for anticipated
increased industrial activity. Other current assets decreased by $46,000,
primarily due to the expiration of prepaid insurance and rent during the period.
Accounts payable decreased 45% from December 31, 1995, to $111,000 at
March 31, 1996, due primarily to the timing of vendor payments. The accrued
compensation expense balance decreased $28,000, a 16% decrease over the balance
at December 31, 1995, primarily due to the timing of payroll expenditures. The
$224,000 increase in other current liabilities was due to financing costs
payable of $226,000 as a result of the private placement of $2,266,000 of common
stock in the first quarter of 1996.
Backlog at March 31, 1996, was $690,000, of which 88% is made up of the
Air Force contract. The Air Force contract is currently scheduled to expire on
June 1, 1996.
Factors Affecting Future Results:
The Company's current cash position, together with anticipated cash
flows from operations, is 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 United States Air
Force contract, the Company, as presently sized, would continue to experience
significant operating losses and significant negative cash flow, and would be
required to significantly reduce its operations.
The Company's growth strategy includes the successful completion of
products under development, development of new product applications, and
development of marketing strategies.
The Company must continue to seek and obtain other sources of revenue
to continue operations. The Company continues its efforts to seek new strategic
partners or joint ventures. There can, however, be no assurances that the
Company will be able to successfully enter into suitable partnership or joint
venture arrangements, or that such arrangements would prove to be beneficial for
the Company and its shareholders.
9
<PAGE>
Part II OTHER INFORMATION
Power Spectra, Inc.
March 31, 1996
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 March 31,
1996 - None
10
<PAGE>
Power Spectra, Inc.
March 31, 1996
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: May 14, 1996 By: /s/Edward J. Lamb
------------------------------------
Edward J. Lamb
Controller, Chief Financial Officer, Secretary
Principal Accounting and Finance Officer)
11
<PAGE>
Exhibit Index
Exhibit
No. Description
27.1 Financial Data Schedule
12
<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 March 31, 1996,
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 3,832
<SECURITIES> 0
<RECEIVABLES> 126
<ALLOWANCES> 0
<INVENTORY> 151
<CURRENT-ASSETS> 4,189
<PP&E> 1,316
<DEPRECIATION> 897
<TOTAL-ASSETS> 4,730
<CURRENT-LIABILITIES> 1,066
<BONDS> 0
<COMMON> 13,860
0
1,681
<OTHER-SE> (11,977)
<TOTAL-LIABILITY-AND-EQUITY> 4,730
<SALES> 172
<TOTAL-REVENUES> 172
<CGS> 580
<TOTAL-COSTS> 1,040
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (848)
<INCOME-TAX> 1
<INCOME-CONTINUING> (849)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (849)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
