<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 1998
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.)
113 Tynan Way
Portola Valley, CA 94028
-----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(408) 737-7977
(Registrant's telephone number, including area code)
919 Hermosa Court
Sunnyvale, CA 94086
(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 ____ No __x__
Indicate the number of shares outstanding of each of the issuer's classes of
common stock of the latest practicable date.
<TABLE>
<CAPTION>
Outstanding at
Class March 13, 1999
----- --------------
<S> <C>
Shares of Common 26,020,459
Stock, no par value
</TABLE>
1
<PAGE>
POWER SPECTRA, INC.
Item 1: Financial Statements
BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 33 $ 441
Accounts receivable 38 13
Receivable from affiliate 0 250
Inventories, principally purchased parts 320 232
Other current assets 89 30
-------- ---------
Total current assets 480 966
Equipment, furniture and
leasehold improvements 1,321 1,321
Less accumulated depreciation (1,166) (1,061)
-------- ---------
Net fixed assets 155 260
Patents (net of amortization) 104 78
Other assets 31 27
-------- ---------
TOTAL ASSETS $ 770 $ 1,331
-------- ---------
-------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 967 $ 311
Accrued compensation expense 148 128
Deferred contract revenue 433 433
Allowance for contract losses 100 100
Short term notes payable 138 --
Accrued professional fees 48 74
Preferred stock dividend payable 370 241
Other current liabilities 28 28
-------- ---------
Total current liabilities 2,232 1,315
STOCKHOLDERS' EQUITY:
Preferred stock 1,336 1,666
Common stock 16,852 16,253
Accumulated deficit (19,740) (17,903)
-------- ---------
Total stockholders' equity (deficit) (1,462) 16
-------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 770 $ 1,331
-------- ---------
-------- ---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
2
<PAGE>
POWER SPECTRA, INC.
Item 1: Financial Statements
STATEMENTS OF OPERATIONS
(In thousands except per share data)
<TABLE>
<CAPTION>
Nine months Ended Three Months Ended
------------------------------------------------------------
September 30, September 30,
------------- -------------
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 455 $ 668 $ 1 $ 81
Costs and expenses:
Cost of revenue 1,091 1,284 258 379
Sales and marketing 35 106 1 18
Research and development 457 274 105 121
General and administrative 549 742 112 248
------- ------- ------ ------
Total operating costs 2,132 2,406 476 766
------- ------- ------ ------
Operating loss (1,677) (1,738) (475) (685)
Other income 60 16 16 3
------- ------- ------ ------
Loss before income taxes (1,617) (1,722) (459) (682)
Provision for income taxes 1 1 -- --
------- ------- ------ ------
Net loss $(1,618) $(1,723) $ (459) $ (682)
------- ------- ------ ------
------- ------- ------ ------
Net loss applicable to common
shares $(1,489) $(1,866) $ (238) $ (730)
------- ------- ------ ------
------- ------- ------ ------
Net loss per common share
(basic and diluted) $ (0.06) $ (0.10) $(0.01) $(0.04)
------- ------- ------ ------
------- ------- ------ ------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
POWER SPECTRA INC.
Item 1: Financial Statements
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine months Ended
------------------
September 30,
-------------
1998 1997
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,618) $(1,723)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization 121 104
Common stock issued for services 56 56
Changes in assets and liabilities:
Accounts receivable (25) 27
Receivable from affiliates 250 26
Inventories (88) (221)
Other current assets (59) 17
Accounts payable 656 7
Accrued compensation expense 20 (15)
Preferred dividend -- 143
Short term notes payable 138 --
Other current liabilities (26) 37
------- -------
Net cash used in operating activities (575) (1,542)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in other assets (4) (1)
Patent additions (38) (24)
------- -------
Net cash used in investing activities (42) (25)
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred stock dividend -- (143)
Proceeds from sale of common stock 209 1,341
------- -------
Net cash used in financing activities 209 1,198
------- -------
Net increase (decrease) in cash and cash equivalents (408) (369)
Cash and cash equivalents, beginning of period 441 843
------- -------
Cash and cash equivalents, end of period $ 33 $ 474
------- -------
------- -------
Supplemental schedule of cash flow information:
Cash paid during the period for:
Income taxes $ 1 $ 1
------- -------
------- -------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
POWER SPECTRA INC.
Notes to Financial Statements
September 30, 1998
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, 1998 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1998. For further
information, refer to "Factors Affecting Future Results," and to the
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
2. Computation of Loss Per Share:
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per
Share." The Company has adopted SFAS 128 for the periods presented. The
adoption of SFAS 128 had no impact on previously reported loss per share for
the nine months ended September 30, 1997. Under the provisions of SFAS 128,
primary earnings per share is replaced by basic earnings per share and the
dilutive effect of stock options, warrants, convertible stock, and contingent
stock issuances are excluded from the calculation. For companies like Power
Spectra with potentially dilutive securities such as stock options, warrants,
convertible securities and contingent stock issuances, fully diluted earnings
per share is replaced by diluted earnings per share. Loss per common share is
based on the weighted average of common shares outstanding for all periods
presented, using the net loss after deducting Series A and Series B Preferred
Stock dividends in 1998 and 1997. The assumed exercise of options and
warrants and assumed conversion of convertible securities have not been
included in the diluted loss per share computation as the effect would be
anti-dilutive.
The weighted average number of shares outstanding at September 30, 1998
and September 30, 1997 were 25,903,967 and 18,934,730 for the quarter ended,
respectively, and 24,721,991 and 18,934,730 for the nine months, respectively.
5
<PAGE>
<TABLE>
<CAPTION>
Nine months Ended Three Months Ended
September 30, September 30,
------------------------------------ ------------------------------------
1998 1997 1998 1997
----------------- ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Net loss ($1,618,000) ($1,723,000) ($459,000) ($682,000)
Less: accrual of preferred
dividends 129,000 143,000 37,000 48,000
----------------- ------------------ ------------------ -----------------
Net loss applicable to common
shares ($1,747,000) ($1,866,000) ($496,000) ($657,000)
----------------- ------------------ ------------------ -----------------
Loss per share - basic and diluted ($0.07) ($0.10) ($0.02) ($0.03)
----------------- ------------------ ------------------ -----------------
Weighted average shares of common
stock outstanding 24,721,991 18,934,730 25,903,967 18,934,730
----------------- ------------------ ------------------ -----------------
Common stock equivalent shares
from stock options using the
treasury stock method -- -- -- --
----------------- ------------------ ------------------ -----------------
Number of shares used in the per
share computation 24,721,991 18,934,730 25,903,967 18,934,730
----------------- ------------------ ------------------ -----------------
</TABLE>
3. Common Stock:
As of September 13, 1998, the Company is obligated to issue an additional
896,000 shares of Common Stock to participants of the Company's private
placement of Common Stock which closed on November 11, 1997, as penalties
relating to the registration of shares purchased in that placement. To date this
stock has not been issued.
4. Subsequent Events.
On August 27, 1998, the Company announced that it had laid off all
employees due to lack of operating capital, pending the securing of additional
financing. To date no additional financing has been secured. Additionally, the
Company was required to vacate its leased space, and sold, with the consent of a
majority of the preferred shareholders, a majority of its tangible assets at
auction. Proceeds from the sale of the Company's tangible assets are being
applied to pay former employees wages unpaid at the time of their layoff, and to
pay down other creditors.
6
<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, AS AMENDED (THE "SECURITIES ACT") AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE
ACT"). 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, 1997, 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.
RECENT DEVELOPMENT
Due to a severe financial crisis resulting from the lack of working
capital, which prevented the Company from continuing its operations, on August
27, 1998, the Company's Board of Directors voted to lay off all of the remaining
employees, pending the securing of additional financing. To date no additional
financing has been secured. Additionally, the Company was required to vacate its
leased space, and sold, with the consent of a majority of the preferred
shareholders, a majority of its tangible assets at auction. Proceeds from the
sale of the Company's tangible assets are being applied to pay former employees
wages unpaid at the time of their layoff, and to pay down other creditors.
Although the Company has been trying to avoid filing for protection under the
federal bankruptcy laws and has been successful to date, no decision has been
made about a filing for federal bankruptcy protection in the future. The Company
is currently not conducting its ordinary business, but management is pursuing
various possibilities for restructuring and financing the business, in whole or
in part, on a going forward basis. There is no assurance that the efforts of
management will be successful or that the Company will be able to continue as a
going concern.
RESULTS OF OPERATIONS
Revenues for the third quarter ended September 30, 1998 were $1,000
compared to $81,000 for the same period ended September 30, 1997, a decrease of
$80,000. Revenues for the first nine months ended September 30, 1997 and
September 30, 1998 were $668,000 and $455,000 respectively. Revenues in the
first nine months 1998 from the Company's $1,200,000 LandRay Technologies, Inc.
contract (the "LandRay Contract") were $450,000, or 99% of total revenues
compared to $500,000 or 75% of revenues in the same period in 1997. LandRay
Technologies, Inc. ("LandRay") is a corporation in which the Company remains an
equity owner. The Company has received full payment on the
7
<PAGE>
most recent LandRay Contract. Two SEEKERS-TM- were delivered to LandRay on
June 17, 1998, which was the last deliverable under the $1,200,000 contract.
Due to financing activities currently underway, LandRay has not exercised its
option to acquire the licenses and to contract for the development work on
the Imager-TM- and Borehole-to-Borehole-TM- ground penetrating radar systems.
The option was exercisable until December 17, 1998 and has now lapsed.
Failure to obtain this or any other follow-on contract has had a severely
adverse impact on the Company. Revenues in future periods, if any, will also be
impacted by the nature and timing of any restructuring and financing the Company
is able to accomplish in its efforts to recommence operations following its
shutdown of operations on August 27, 1998. The Company currently has no
employees on its payroll.
The 1998 third quarter net loss was $459,000, a decrease of $223,000
(32.7%) over the net loss of $682,000 recorded in the 1997 third quarter. In the
third quarter, the decrease in the net loss was due to lower operating costs as
a result of lower payroll expenditures resulting from the layoff and shutdown.
The 1998 first nine months net loss was $1,618,000, a decrease of $105,000
(6.1%) over net loss of $1,723,000 recorded the first nine months in 1997. The
decrease in the net loss for the nine month period was attributable primarily to
personnel cost reductions resulting from the layoff of all employees on
August 27, 1998.
In the aggregate, operating expenses decreased by $274,000 in the first
nine months of 1998 compared to the same period in 1997. The cost of revenue
decreased by $193,000 due to reduced overhead expenditures, and sales and
marketing expenses decreased by $71,000 as advertising and exhibition costs were
reduced compared to 1997. General and administrative costs decreased by $193,000
compared to the 1997 first nine months. Since the Company has ceased operations
as of August 27, 1998, the operating expenses will be expected to decrease or be
eliminated until such time as management is able to restructure the Company and
recommence operations.
Other income increased by $44,000 in the 1998 period over 1997 as the
Company sold some unused or under-utilized equipment, most of which had been
previously written down.
LIQUIDITY AND CAPITAL RESOURCES
During the 1998 first nine months, cash and cash equivalents decreased by
$408,000 due to the net loss from operations, offset primarily by collection of
$450,000 from LandRay.
Inventories increased by 40%, or $88,000, from December 31, 1997 to
September 30, 1998 in pursuit of LandRay contractual obligations and the Vehicle
Mounted GPR (VMR) system program requirements.
8
<PAGE>
Accounts payable increased 311% from December 31, 1997 to $967,000 at
September 30, 1998 due to increased purchases related to the SEEKER-TM- and the
vehicle mounted radar system and the Company's inability to pay vendor bills as
they came due. The accrued compensation expense balance increased by $20,000, a
16% increase over the balance at December 31, 1997, due to the timing of
payrolls, employees taking less paid time off, which resulted in larger accruals
on the books, and the Company's inability to meet payrolls as they came due. The
Company entered into short term notes with officers, directors and a former
officer for $138,000, which was used for working capital requirements. Preferred
stock dividend payable increased by $129,000 over December 31, 1997 as the
Company did not meet California statutory criteria for any dividend
distribution.
There was no backlog at September 30, 1998, whereas at September 30 1997,
backlog was $717,000 of which 98% consisted of commitments under the $1.2
million LandRay Contract. The $1.2 million LandRay Contract was completed late
in the 1998 second quarter.
The Company, due to lack of operating capital, laid off all employees on
August 27, 1998 pending securing additional financing. The Company's management
is actively pursuing all available options for restructuring and financing the
Company, in whole or in part, for the future. However, it currently has no
definitive commitments. Failure to reach some accommodation in this regard may
ultimately lead to the necessity to file for bankruptcy protection. There is no
assurance that management's efforts will be successful.
The Company plans to liquidate its plant and equipment assets, following
approval of its preferred stockholders, to cover obligations to employees and
trade payables. Following payment of at least some current obligations, the
Company will seek to either sell its technology or merge with another company to
preserve and perpetuate its technology. Following any sale or merger, or perhaps
part thereof, any remaining obligations will be satisfied. If no sales or
mergers are forthcoming the Company will distribute the remaining assets to its
stockholders.
FACTORS AFFECTING FUTURE RESULTS:
THE COMPANY CEASED OPERATIONS ON AUGUST 27,1998. MANY OF THE FOLLOWING
RISKS WOULD APPLY ONLY IF THE COMPANY IS SUCCESSFUL IN REORGANIZING AND
RECOMMENCING ITS FORMER BUSINESS AND OPERATIONS. THIS IS AN OUTCOME THAT IS,
TODAY, HIGHLY UNCERTAIN.
CESSATION OF OPERATIONS. On August 27, 1998, the Company's Board of
Directors voted to lay off the Company's remaining employees due to a lack of
operating capital and no immediate source of funding available. Unless
management is successful in its efforts to find new sources of capital and to
restructure the Company, the Company will be unable to continue in existence as
an independent company.
9
<PAGE>
NEED FOR ADDITIONAL CAPITAL/ABILITY TO CONTINUE AS A GOING CONCERN. The
Company's independent accountants, in their report regarding the Company's
financial statements for the year ended December 31, 1997, have included an
explanatory paragraph noting the Company's recurring substantial losses from
operations raise substantial doubt about the Company's ability to continue as a
going concern. The ability of the Company to continue as a going concern is
contingent upon its ability to secure additional financings, as to which the
Company currently has no specific or definitive commitments. There is no
assurance that the Company will be able to secure adequate financing or to carry
out its current business plan. The Company had commenced efforts to obtain
additional equity and/or debt financing, but during the last 18 months it has
been unable to secure the funds necessary to sustain operations. An alternative
is to seek to merge the Company with another entity or to negotiate an
acquisition by a more liquid entity. If any additional funds are raised through
the issuance of equity securities, or if a merger or acquisition is successfully
negotiated, the ownership percentage of the shareholders of the Company will be
reduced, shareholders may experience significant dilution, and such equity
securities may have rights, preferences or privileges senior to those of the
Company's Common Stock. There can be no assurance that additional financing will
be available, or that if available, such financing will have terms favorable to
the Company or its present shareholders. Failure to successfully realize
existing plans or to secure adequate funding could result in the Company
necessarily filing for bankruptcy protection and/or liquidating remaining assets
or dissolving the corporation.
HISTORY OF LOSSES; ACCUMULATED DEFICIT. Since its inception, the Company
has generally operated at a loss since government contract revenues, which
represent most of the historical revenues of the Company, and other sources of
income were insufficient to cover general and administrative, research and
development and other costs incurred by the Company. The Company recorded net
losses of $2,647,399, $3,788,299, and $2,562,230 for the years ended December
31, 1997, December 31, 1996 and December 31, 1995, respectively. At December 31,
1997, the Company had an accumulated deficit of $17,902,959, which had increased
to $19,740,000 at September 30, 1998. Assuming the Company can recommence
operations (see "--Cessation of Operations"), the Company will continue to incur
losses until substantial contract revenues are generated or the Company begins
to receive significant product sales and license and/or royalty income. There is
no assurance that the Company will be able to resume operations or achieve
profitable operations in the foreseeable future, if at all. Although the Company
has substantially reduced the size of its operations over the last two years and
has currently ceased operations, there can be no assurance that the Company will
be able to successfully reorganize and recommence operations or that sufficient
revenues and proceeds from such actions will be obtained.
DEPENDENCE UPON LANDRAY. The Company's relationship with LandRay has been a
significant source of revenues, since the first contract was awarded to the
Company in 1996. The Company's relationship with LandRay was an extremely
significant source of revenue during 1996 and 1997 and throughout the first half
of 1998. The Company recognized revenue from the LandRay Contract based upon
attainment of milestones
10
<PAGE>
delineated in the contract. The most recent LandRay Contract was completed in
the 1998 second quarter on June 17, 1998. LandRay did not exercise its option
to obtain the licenses and enter into a development contract for the Imager
and Borehole to Borehole GPR systems, which it was required to do by
December 17, 1998, if at all. Since the Company had no other options or
contracts for near term revenue, the Company was significantly affected by
the termination of this revenue source.
NEED TO SUCCESSFULLY LAUNCH AND FUND NEW VENTURES. The Company must
continue to seek a partner or continue to seek and obtain other sources of
working capital to reinitiate operations. Since its inception nearly all of the
Company's revenues have come from defense-related research and development
contracts related to the BASS-TM- development and applications. The Company
currently is seeking to exploit its technology for applications in commercial
and industrial markets to provide such revenue. Participating in the founding of
LandRay and entering into the license and development contracts with LandRay
were steps in this commercialization process. The LandRay venture and any future
ventures would require significant funding in order to enable the Company and
its strategic partners to carry out their respective plans of operations. To
date, LandRay has been unable to raise adequate funding on acceptable terms to
continue development of the GPR systems with the Company. In addition, there can
be no assurances that the Company will be able to successfully enter into any
additional suitable strategic partnership, mergers or joint venture arrangements
or that such arrangements, when entered into, will prove to be beneficial for
the Company and its shareholders. There also can be no assurance that any future
agreements, if consummated, will generate sufficient revenues to replace the
LandRay contract, which was completed in June 1998. Failure to succeed in one or
more strategic partnerships or joint venture relationships will have a material
adverse effect on the Company's ability to resume its plan of operations and on
its results.
PRODUCT DEVELOPMENT AND ENHANCEMENTS. The development of GPR systems and
other remote sensing products as well as high power switching components and
products is a complex engineering effort involving significant risk. While the
Company believes it has completed development of its core technology,
significant additional development efforts must be made in order to achieve
commercial acceptance of its products. Such efforts will require substantial
additional capital, the source and timing of which is unknown. There is no
assurance that the Company will succeed in raising the needed capital or in the
product development efforts, even if the necessary funding is raised.
COMPLEX MANUFACTURING PROCESS; MANUFACTURING CAPACITY. Due to the cessation
of operations as of August 27, 1998, the Company currently is not engaged in any
manufacturing activity and has sold a majority of its manufacturing equipment at
auction in January ,1999. However, assuming it is able to resume operations, its
manufacturing processes present material risks. The manufacture of GPR systems
and remote sensing products as well as semiconductor-based power switching
devices is highly complex and sensitive to a wide variety of factors, including
the level of contaminants in the manufacturing environment, impurities in the
materials used, and the performance of personnel as well as vendors and
suppliers. The Company has periodically experienced
11
<PAGE>
yield problems, and there can be no assurance that these problems will not
recur. Should the Company experience protracted production delays
attributable to manufacturing complexity, its ability to deliver products
would be materially affected. In the event that the Company commences
significant commercial shipments, it may be required to obtain third party
manufacturing services.
LIMITED SALES AND MARKETING CAPABILITY; FUTURE RELIANCE ON DISTRIBUTORS.
The Company currently as no marketing or sales force and is pursuing no
marketing activities. Assuming the Company is able to recommence operations, as
to which there is no assurance, it will be required to establish such marketing
and sales staff in order to execute its plans for increasing commercial sales.
In addition, in order to materially increase revenues and achieve sustained
profitability, of which there is no assurance, as the Company continues to
commercialize its products, it expects that it will be required to depend upon
distributors. While any particular distributor may have an extensive
distribution network, distributors typically represent other third-party
suppliers, including competitors of the Company, to whom they may devote greater
time, effort, and attention. There can be no assurance that the Company will
successfully establish the requisite distribution relationships or that those
relationships will result in revenues.
COMPETITION. The markets for the Company's products are competitive and
characterized by rapid technological change and changes in market demand. The
Company's competitive position is affected by all of these factors and by
industry competition for effective sales and distribution channels. The
Company's potential and existing competitors include major ultrasonic proximity
sensor vendors, a small number of which dominate the market, and major defense
contractors with substantially larger resources than those possessed by the
Company. All of the Company's competitors have substantially greater financial,
technical, marketing and other resources than does the Company. The Company
expects that its markets will become more competitive in the future, and there
is no assurance, assuming the Company is able to recommence operations that it
will be able to successfully compete in its selected markets.
VOLATILITY OF STOCK PRICE. The market price of the Common Stock is highly
volatile. Factors such as variations in the Company's operating results and
announcements of technological innovations or price reductions by the Company,
its competitors or providers of alternative products and processes may cause the
market price of the Common Stock to fluctuate substantially. In addition, the
securities markets have recently experienced substantial price and volume
fluctuations that have particularly affected technology-based companies, and
resulted in changes in the market prices of the stocks of many companies that
have not been directly related to the operating performance of those companies.
The price of the Company's Common Stock is particularly susceptible to extreme
fluctuation because of thin trading volume in the Common Stock and lack of
widely available pricing information.
12
<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.
None.
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 September 30, 1998
During the period covered by this report, the Company
did not file any reports on Form 8-K.
13
<PAGE>
POWER SPECTRA INC.
September 30, 1998
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: April 1, 1999 By: /s/ Charles C. Byer
---------------------- -----------------------------
Charles C. Byer
Interim Chief Executive
14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
- -------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
15
<TABLE> <S> <C>
<PAGE>
<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 NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> DEC-31-1997
<PERIOD-END> SEP-30-1998
<CASH> 33
<SECURITIES> 0
<RECEIVABLES> 38
<ALLOWANCES> 0
<INVENTORY> 320
<CURRENT-ASSETS> 480
<PP&E> 1,321
<DEPRECIATION> 1,166
<TOTAL-ASSETS> 770
<CURRENT-LIABILITIES> 2,232
<BONDS> 0
0
1,336
<COMMON> 16,852
<OTHER-SE> (19,740)
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