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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, 1997
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 (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 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 May 6, 1997
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Shares of Common 20,553,275
Stock, no par value
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<PAGE>
Power Spectra, Inc.
Item 1: Financial Statements
Balance Sheets
(In thousands)
March 31, December 31,
Assets: 1997 1996
--------- ----------
Current Assets:
Cash and cash equivalents $ 329 $ 843
Accounts receivable 86 70
Unbilled receivables 26 26
Inventories, principally
purchased parts 285 218
Other current assets 27 49
-------- --------
Total current assets 753 1,206
Equipment, furniture and
leasehold improvements 1,355 1,355
Less, accumulated depreciation (1,021) (987)
-------- --------
Net fixed assets 334 368
Patents (net of amortization) 76 73
Other assets 26 26
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Total assets $ 1,189 $ 1,673
======== ========
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable $ 135 $ 161
Accrued compensation expense 103 145
Deferred contract revenue 433 433
Allowance for contract losses 100 100
Accrued professional fees 82 76
Preferred stock dividend payable 96 49
Other current liabilities 28 28
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Total current liabilities 977 992
Stockholders' equity:
Preferred stock 1,666 1,666
Common stock 14,088 14,078
Accumulated deficit (15,542) (15,063)
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Total stockholders' equity 212 681
-------- --------
Total liabilities & stockholders' equity $ 1,189 $ 1,673
======== ========
See notes to financial statements.
2
<PAGE>
Power Spectra, Inc.
Item 1: Financial Statements
Statements of Operations
(In thousands except per Share data)
Three Months Ending
-------------------------
March 31, March 31,
1997 1996
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Revenue $ 357 $ 172
Costs and expenses:
Cost of revenue 498 581
Sales and marketing 41 102
Research and development 24 88
General and administrative 230 269
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Total operating costs 793 1,040
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Operating loss (436) (868)
Other income 4 20
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Loss before income taxes (432) (848)
Provision for income taxes -- 1
------- -------
Net loss $ (432) $ (849)
======= =======
Net loss applicable to common shares $ (479) $ (898)
======= =======
Net loss per common share $ (0.03) $ (0.06)
======= =======
See notes to financial statements.
3
<PAGE>
Power Spectra Inc.
Item 1: Financial Statements
Statements of Cash Flows
(In thousands)
Three Months Ending
---------------------
March 31, March 31,
1997 1996
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Cash flows from operating activities:
Net loss $ (432) $ (849)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization 40 34
Common stock issued for services 10 25
Changes in assets and liabilities:
Accounts receivable (16) 165
Unbilled receivables -- (8)
Inventories (67) (26)
Other current assets 22 46
Accounts payable (26) (92)
Accrued compensation expense (43) (28)
Other current liabilities 54 224
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Net cash used in operating activities (458) (509)
Cash flows from investing activities
Furniture and equipment additions and disposals, net -- (32)
Patent additions (9) (25)
Increase in other assets -- (5)
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Net cash used in investing activities (9) (62)
Cash flows from financing activities
Preferred stock dividend (47) (49)
Proceeds from sale of common stock -- 2,057
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Net cash used in financing activities (47) 2,008
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Net increase (decrease) in cash and cash equivalents (514) 1,437
Cash and cash equivalents, beginning of period 843 2,395
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Cash and cash equivalents, end of period $ 329 $ 3,832
======= =======
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest $ -- $ 1
======= =======
Income taxes $ -- $ 1
======= =======
See notes to financial statements
4
<PAGE>
Power Spectra Inc.
Notes to Financial Statements
March 31, 1997
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, 1997 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1997. 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, 1996.
2. Per Share Data:
Per share information for the quarter ended March 31, 1997 is computed
based on the net loss after deducting Series A and Series B Preferred Stock
dividends in 1997. The weighted average number of shares outstanding consists of
the common stock. The effect of common stock equivalents which would arise from
the exercise of common stock options and warrants outstanding (using the
treasury stock method) and the conversion of Series A and Series B Preferred
Stock have not been included for the quarters ended March 31, 1997 and March 31,
1996, as their effect is anti-dilutive. The weighted average number of shares
outstanding at March 31, 1997 and March 31, 1996 were 16,159,440 and 14,147,684,
respectively.
3. Common Stock:
On April 10, 1997 the Company closed on a private placement of 4,370,000
shares of its Common Stock with gross proceeds of $1,092,500. The Company agreed
to pay a selling agent a placement fee equal to 5% of the gross proceeds of the
offering. In addition, the Company has agreed to issue to the selling agent
Warrants to purchase Common Stock in a number of shares equal to 5% of the total
number of shares sold in the offering. The selling agent's Warrants will be
exercisable at $0.25 per share (equal to the offering price of the shares) and
will be exercisable for a period of five years. The Company has agreed to
register for resale the shares of Common Stock issued in the private placement,
as well as the shares issuable upon exercise of the selling agent's warrants.
5
<PAGE>
Power Spectra Inc.
Item 2:
Management's Discussion and Analysis of Financial
Condition and Results of Operations
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 forwardlooking 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,
1996, 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 no 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. The Company has attempted to identify
forward-looking statements contained in this report with an asterisk (*).
Results of Operations:
Revenue for the first quarter ended March 31, 1997 was $357,000 compared to
$172,000 for the same period ending March 31, 1996, an increase of $185,000.
Revenues in the 1997 quarter from the Company's $1,200,000 contract with LandRay
Technologies, Inc. (LandRay), a joint venture partially owned by the Company,
were $250,000, or 70% of total revenues, whereas revenues from a contract from
the U.S. Air Force were $125,000, or 73% of total revenues, in the first quarter
of 1996. Revenues from other contracts and products increased by $60,000 from
the first quarter of 1996.
The 1997 first quarter loss was $432,000, a decrease of $417,000 over the
net loss of $849,000 recorded in the 1996 first quarter. This decrease was
attributable to a $247,000 decrease in expenditures, and a $185,000 increase in
revenues.
The cost of revenue decreased by $83,000 for the first quarter of 1997 over
the same period in 1996 due to reduced overhead personnel expenditures. Sales
and marketing expenses decreased by $61,000 from first quarter 1996 as a result
of reduced personnel, consulting, and travel costs, while research and
development expenses also decreased by $64,000. The 1997 decrease in R&D was
attributable to reduced expenditures on consulting and other outside services.
General and administrative costs also decreased by $39,000 from 1996 levels due
primarily to reduced personnel costs.
Other income decreased in the first quarter of 1997 compared to the same
period of 1996 by $16,000 as a result of lower interest income.
6
<PAGE>
Liquidity and Capital Resources:
During the 1997 first quarter, cash and cash equivalents decreased by
$514,000 due primarily to the net loss from operations and increased
inventories. Accounts receivable increased by $16,000, or 23% as product
shipments increased. Inventories increased by 31%, or $67,000, from December 31,
1996, in anticipation of increased industrial product sales. Other current
assets decreased by $22,000 primarily due to expiration of prepaid insurance
during the period.
Accounts payable decreased 16% from December 31, 1996, to $135,000 at March
31, 1997 due primarily to reduced operating costs. The accrued compensation
expense balance decreased by $43,000, a 30% decrease over the balance at
December 31, 1996, primarily due to the timing of payroll expenditures. The
$54,000 increase in other current liabilities was due primarily to deferral to
later periods of the accrued dividends on the Series A and Series B Preferred
Stock.
Backlog at March 31, 1997, was $953,000 of which 99% consisted of
commitments under the LandRay contract as opposed to the March 31, 1996 where
backlog was $690,000 of which 88% was related to the Air Force contract.
Management expects the LandRay contract to be completed by December 31, 1997.*
On April 10, 1997 the Company closed on a private placement of 4,370,000
shares of its Common Stock with gross proceeds of $1,092,500. The Company agreed
to pay a selling agent a placement fee equal to 5% of the gross proceeds of the
offering. In addition, the Company has agreed to issue to the selling agent
Warrants to purchase Common Stock in a number of shares equal to 5% of the total
number of shares sold in the offering. The selling agent's Warrants will be
exercisable at $0.25 per share (equal to the offering price of the shares) and
will be exercisable for a period of five years. The Company has agreed to
register for resale the shares of Common Stock issued in the private placement,
as well as the shares issuable upon exercise of the selling agent's warrants.
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, 1997.* However, the actual amount of
time that the Company's cash resources last is dependent upon a variety of
factors including the timing of obtaining new contracts, the timing of new
financings, the success of its current joint ventures and the competition with
other vendors. If the Company determines that it requires additional funds prior
to December 31, 1997, there can be no assurance that additional funds will be
obtainable on reasonable terms, or at all. Any such failure could result in the
Company becoming unable to meet its obligations as they come due. In addition,
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. The Company does not
presently have access to any credit facilities.
7
<PAGE>
Power Spectra Inc.
Part II - Other Information
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
a. The company held a Special Meeting of Shareholders (the
"Meeting") on January 13, 1997. Proxies were solicited for
the Meeting.
b. The only matter voted on at the Meeting was a proposal to
amend the Company's Articles of Incorporation to increase the
number of authorized shares of Common Stock to 55,000,000. The
proposal was approved. Of the 18,234,191 shares eligible to
vote at the Meeting, 12,951,008 were voted in favor of the
proposal, 762,877 were voted against the proposal, and 20,035
were abstained from voting.
ITEM 5. OTHER INFORMATION.
None.
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, 1997
During the period covered by this report, the Company did not
file any reports on Form 8-K.
8
<PAGE>
Power Spectra Inc.
March 31, 1997
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.
Date: May 13, 1997 By: /s/ Edward J. Lamb
------------------ ---------------------
Edward J. Lamb
Chief Financial Officer, Secretary
(Principal Accounting and
Finance Officer)
9
<PAGE>
Exhibit Index
Exhibit
No. Description
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27.1 Financial Data Schedule
10
<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, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 329
<SECURITIES> 0
<RECEIVABLES> 86
<ALLOWANCES> 0
<INVENTORY> 285
<CURRENT-ASSETS> 753
<PP&E> 1,355
<DEPRECIATION> 1,021
<TOTAL-ASSETS> 1,189
<CURRENT-LIABILITIES> 977
<BONDS> 0
<COMMON> 14,088
0
1,666
<OTHER-SE> (15,542)
<TOTAL-LIABILITY-AND-EQUITY> 1,189
<SALES> 357
<TOTAL-REVENUES> 357
<CGS> 498
<TOTAL-COSTS> 793
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (432)
<INCOME-TAX> 0
<INCOME-CONTINUING> (432)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (432)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
