<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 three months ended June 30, 1999
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
000-23657
AstroPower, Inc.
(Exact name of registrant as specified in its charter)
Delaware 51-0315869
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
Solar Park
Newark, Delaware 19716-2000
(Address of principal executive offices) (Zip Code)
302-366-0400
(Registrant's telephone number, including area code)
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 such shorter period that the Registrant was required
to file such report(s), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
------- -------
( Registrant became subject to filing requirements on February 12, 1998)
The number of shares outstanding of the Registrant's common stock, $0.01 par
value, as of August 11, 1999, was 8,730,797.
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AstroPower, Inc.
FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION Page No.
------------------------------ --------
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
. Balance Sheets - June 30, 1999 (unaudited) and December 31, 1998...............1, 2
. Statements of Income (unaudited) -
Three months and six months ended June 30, 1999 and 1998.......................3
. Statements of Cash Flows (unaudited) -
Six months ended June 30, 1999 and 1998........................................4
. Notes to Financial Statements (unaudited)......................................5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...............................................6-13
PART II: OTHER INFORMATION
---------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............................14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..................................................14
SIGNATURES........................................................................15
</TABLE>
Cautionary Note Regarding Forward-Looking Statements
- ----------------------------------------------------
This quarterly report on Form 10-Q contains forward-looking statements that are
made pursuant to the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements involve risks, uncertainties and
assumptions as described from time to time in registration statements, annual
reports, and other periodic reports and filings which we file with the
Securities and Exchange Commission. All statements, other than statements of
historical facts, which address our expectations of sources of capital or which
express our expectation for the future with respect to financial performance or
operating strategies, including statements with respect to year 2000 compliance,
can be identified as forward-looking statements. As a result, there can be no
assurance that our future results will not be materially different from those
described herein as "believed", "anticipated", "estimated" or "expected", which
reflect our current views with respect to future events. We caution readers that
these forward-looking statements speak only as of the date hereof. We hereby
expressly disclaim any obligation or undertaking to release publicly any updates
or revisions to any such statements to reflect any changes in our expectations
or any change in events, conditions or circumstances on which such statement is
based.
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ASTROPOWER, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
ASSETS 1999 1998
------------------- ----------------
CURRENT ASSETS: (unaudited)
<S> <C> <C>
Cash and cash equivalents........................................................ $ 2,149,598 6,545,095
Accounts receivable:
Trade, net................................................................. 8,685,613 6,531,144
Other...................................................................... 104,940 116,234
Inventories................................................................... 6,299,388 3,596,676
Prepaid expenses.............................................................. 1,008,079 159,948
Deferred tax asset............................................................ 1,483,096 1,796,338
------------------- ---------------
Total current assets................................................ 19,730,714 18,745,435
PROPERTY AND EQUIPMENT:.......................................................... 14,758,451 13,275,675
Less accumulated depreciation and amortization................................ (4,171,783) (3,654,796)
------------------- ---------------
10,586,668 9,620,879
------------------- ---------------
Total assets........................................................ $ 30,317,382 28,366,314
=====================================
</TABLE>
1
See accompanying notes to financial statements.
<PAGE>
ASTROPOWER, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
------------------- -------------------
1999 1998
------------------- -------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable................................................... $ 3,490,597 2,629,068
Accrued payroll and payroll taxes.................................. 856,933 963,243
Accrued expenses................................................... 237,688 313,640
------------------- --------------------
Total current liabilities............................ 4,585,219 3,905,951
OTHER LIABILITIES:
Deferred compensation and other.................................... 1,006,977 1,197,479
------------------- --------------------
Total liabilities.................................... 5,592,195 5,103,430
------------------- --------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock....................................................... 87,169 85,725
Additional paid-in capital......................................... 26,637,422 25,956,474
Unearned compensation.............................................. (196,706) (245,718)
Accumulated deficit................................................ (1,802,698) (2,533,597)
------------------- --------------------
Total stockholders' equity....................................... 24,725,187 23,262,884
------------------- --------------------
Total liabilities and stockholders' equity................. $30,317,382 28,366,314
=================== ====================
</TABLE>
2
See accompanying notes to financial statements.
<PAGE>
ASTROPOWER, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended June 30
------------------------------------------------------------
(unaudited)
REVENUES: 1999 1998
----------------------- ------------------------
<S> <C> <C>
Product sales $ 7,249,725 $ 4,670,677
Research contracts 740,412 716,134
----------------------- ------------------------
Total revenues 7,990,136 5,386,811
COST OF REVENUES:
Product sales 5,286,429 3,478,329
Research contracts 522,186 582,155
----------------------- ------------------------
Total cost of revenues 5,808,616 4,060,484
----------------------- ------------------------
Gross profit 2,181,521 1,326,327
OPERATING EXPENSES:
Product development expenses 489,349 298,771
General and administrative expenses 738,112 664,136
Selling expenses 333,613 265,037
----------------------- ------------------------
Income from operations 620,447 98,383
OTHER EXPENSE (INCOME):
Interest expense 392 82,958
Interest income (15,942) (203,047)
----------------------- ------------------------
Total other expense (income) (15,550) (120,089)
----------------------- ------------------------
NET INCOME BEFORE INCOME TAXES 635,996 218,472
INCOME TAXES 190,799 10,000
----------------------- -----------------------
NET INCOME $ 445,197 $ 208,472
======================= ========================
NET INCOME DATA:
Net income per share - basic $ 0.05 0.02
======================= ========================
Net income per share - diluted $ 0.05 0.02
======================= ========================
Weighted average shares
outstanding - basic 8,680,964 8,523,820
======================= ========================
Weighted average shares
outstanding - diluted 9,703,198 8,523,820
======================= ========================
<CAPTION>
Six Months Ended June 30
---------------------------------------------------------
(unaudited)
REVENUES: 1999 1998
-------------------- --------------------
<S> <C> <C>
Product sales $ 13,550,281 $ 8,894,825
Research contracts 1,578,840 1,421,102
-------------------- --------------------
Total revenues 15,129,121 10,315,927
COST OF REVENUES:
Product sales 9,973,474 6,530,910
Research contracts 1,136,912 1,137,925
-------------------- --------------------
Total cost of revenues 11,110,386 7,668,835
-------------------- --------------------
Gross profit 4,018,735 2,647,092
OPERATING EXPENSES:
Product development expenses 1,045,759 608,543
General and administrative expenses 1,392,240 1,183,655
Selling expenses 593,461 451,173
-------------------- --------------------
Income from operations 987,273 403,721
OTHER EXPENSE (INCOME):
Interest expense 785 197,589
Interest income (57,653) (338,387)
-------------------- --------------------
Total other expense (income) (56,868) (140,799)
-------------------- --------------------
NET INCOME BEFORE INCOME TAXES 1,044,141 544,519
INCOME TAXES 313,242 25,000
-------------------- --------------------
NET INCOME $ 730,899 $ 519,519
==================== ====================
NET INCOME DATA:
Net income per share - basic $ 0.09 0.07
==================== ====================
Net income per share - diluted $ 0.08 0.07
==================== ====================
Weighted average shares
outstanding - basic 8,639,821 7,336,169
==================== ====================
Weighted average shares
outstanding - diluted 9,543,149 7,336,169
==================== ====================
</TABLE>
3
See accompanying notes to financial statements.
<PAGE>
ASTROPOWER, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30
---------------------------------
(unaudited)
1999 1998
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................ $730,899 $519,519
Adjustments to reconcile net income to net
cash (used in) operating activities:
Deferred income taxes .......................................... 313,242 0
Depreciation and amortization .................................. 516,987 328,244
Amortization of unearned compensation .......................... 49,012 93,022
Changes in working capital items:
Accounts receivable ....................................... (2,154,469) (1,629,210)
Inventories ............................................... (2,702,712) (1,407,492)
Prepaid expenses .......................................... (848,131) 47,744
Accounts payable and accrued expenses ..................... 781,931 (266,066)
Accrued payroll and payroll taxes ......................... (291,096) (61,608)
Advance from customer ..................................... 3,646 (289,135)
Other ..................................................... 5,578 64,001
----------- -----------
Net cash used in operating activities ........................... (3,595,113) (2,600,981)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................................ (1,482,776) (3,646,848)
----------- -----------
Net cash used in investing activities ....................... (1,482,776) (3,646,848)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments from line of credit .............................. 0 (203,357)
Repayment of long-term debt ..................................... 0 (1,393,174)
Proceeds from issuance of common stock - stock options .......... 682,392 16,730,939
---------- ------------
Net cash provided by financing activities ............................. 682,392 15,134,408
---------- ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS .................................................. (4,395,497) 8,886,579
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD ............................................... 6,545,095 4,908,177
CASH AND CASH EQUIVALENTS AT END OF ----------- ------------
PERIOD ............................................................ $2,149,598 $13,794,756
=========== ============
</TABLE>
OTHER NONCASH FINANCING AND INVESTING ACTIVITIES:
During the six months ended June 30, 1998, the Company converted all shares of
Series A and Series B Convertible Preferred Stock into common stock on a
one-for-one basis.
During the three months ended June 30, 1998, the Company issued stock options
for 119,000 shares of common stock to Corning Incorporated.
4
See accompanying notes to financial statements.
<PAGE>
AstroPower, Inc.
Notes to Financial Statements
June 30, 1999
(unaudited)
(1) General
-------
The accompanying financial statements for the three month and six month periods
ended June 30, 1999 and 1998 have been prepared by AstroPower, Inc. (Company)
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission . The information furnished herein reflects all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of
management, necessary to present fairly the financial position and operating
results of the Company as of and for the respective periods. Certain information
and footnote disclosures normally included in annual financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. However, management of the
Company believes that the disclosures herein are adequate to make the
information presented not misleading. The accompanying financial statements
should be read in conjunction with the financial statements contained in the
Company's Annual Report Form 10-K for the year ended December 31, 1998.
(2) Recent Events
-------------
On June 16, 1999 we announced the signing of a term sheet with GPU International
Providing for the purchase by GPUI of $7 million of our common stock. We expect
that $5 million of the total will be purchased directly from us, and the
remaining $2 million will be purchased from Astrosystems, Inc., a founding
stockholder which is in the process of a shareholder approved liquidation. GPUI
will also receive a warrant for the purchase of 120,700 shares of our common
stock at a price of $18.85 per share. We expect this transaction to close in
August, after the satisfactory completion of due diligence and the signing of
definitive stock purchase and related agreements.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
We develop, manufacture, market, and sell photovoltaic solar cells, modules
and panels for generating solar electric power. Solar cells are semiconductor
devices which convert sunlight directly into electricity. Solar electric power
is used in on-grid applications by existing electric utility customers to
provide a clean, renewable source of alternative or supplementary electric
power. Solar electric power is also used off the electric utility grid for many
applications in the communications and transportation industries and for rural
electrification.
We were incorporated in 1989 as a successor to a business that was
organized in 1983 to develop thin crystalline silicon photovoltaic and related
optoelectronic technology. Our initial revenue came from contract research
performed primarily for agencies of the United States government. We began
commercial solar cell manufacturing operations in 1988 with silicon wafers
purchased from third parties. Since then the commercial portion of our business
has grown steadily with product sales representing 90.7% of total revenues for
the quarter ended June 30, 1999.
Historically, we have received significant assistance in our transition
from primarily a contract research organization to a commercial manufacturer of
solar cells, modules and panels. This assistance originated from the U.S.
Department of Energy in the form of cost-sharing designed to assist us in
expanding our manufacturing capabilities and in reducing our manufacturing
costs.
We currently generate product revenues from the sale of solar cells,
modules, and panels. Although we are continuing a significant expansion of our
Silicon-Film(TM) manufacturing capacity, the predominant source of our product
revenues to date has been single crystal products. We recognize product sales
revenue upon shipment. Solar cell prices and manufacturing costs vary depending
upon supply and demand in the market for solar cells and modules, order size,
yields, the costs of raw materials, particularly reclaimed silicon wafers
recycled from the semiconductor industry, and other factors. In addition, we
also generate revenue from contracts with various federal government agencies to
conduct research on advanced Silicon-Film(TM) products and optoelectronic
devices. Generally, these contracts last from 6 months to three years. We
recognize research contract revenue at the time costs benefiting the contracts
are incurred, which approximates the percentage of completion method.
Solar cells that we manufacture are sold to original equipment
manufacturers that assemble the solar cells into modules. We also sell modules
to distributors and value-added resellers. The sale of a module results in
substantially more revenue to us than the sale of solar cells due to the value
of the additional materials, labor and overhead added during the module
6
<PAGE>
assembly process. Accordingly, our product sales are affected not just by
changes in total solar cells produced, but by changes in the mix between solar
cells and modules sold. The gross margin percentages for modules are less than
that of solar cells and as a result, changes in the mix of solar cells and
modules sold may affect total product gross margins.
For the three months ended June 30, 1999, approximately 74.1% of our
product revenues was generated by sales to customers located outside the United
States. We believe that international sales will continue to account for a
significant portion of our product sales for the foreseeable future. Current
sales are denominated in U.S. dollars and foreign exchange rate fluctuations
have not had an impact on our results of operations.
Substantially, all of our revenues from government contracts are subject to
audit under various federal statutes. Although we have received final written
acceptance of our overhead rates through 1993, the Defense Contract Audit Agency
is now disputing certain elements of those submissions as well as the overhead
rates for 1994 and 1995. The dispute is centered on the effect of our
manufacturing operations on our government contract overhead rates during the
years of transition from a contract research and development organization to
commercial manufacturing. The overhead rates for 1996 have been submitted, but
have not yet been audited. This dispute does not affect our overhead rates for
1997, 1998 and 1999, inasmuch as we revised our methodology for determining
overhead rates. We believe that adjustments to revenue, if any, will not have a
material adverse effect on our business and financial condition, but may impact
results of operations.
We have a joint venture with GPU International and we intend to seek
additional alliances with other partners. The terms of certain of these joint
ventures and alliances may not permit us to consolidate the financial results of
such entities with our financial statements. In these circumstances, we will
record our proportionate share of the earnings or loss of the entity using the
equity method of accounting and will present such earnings or loss as a separate
component of our statement of income.
7
<PAGE>
Results of Operations
Three Months Ended June 30, 1999 and 1998
Revenues - Our total revenues were $8.0 million for the three months ended
June 30, 1999, an increase of $2.6 million or 48.3% from 1998. Product sales
were $7.25 million for the three months ended June 30, 1999, an increase of $2.6
million or 55.2% from 1998. Our increase in product sales was due to ongoing
strong demand for our products and improvements in manufacturing productivity
and capacity at both our manufacturing plants. Contract revenues were $740,000
for the three months ended June 30, 1999, an increase of $24,000 or 3.4% from
1998.
Gross profit - Our gross profit was $2.2 million for the three months ended
June 30, 1999, an increase of $855,000 or 64.5% from 1998. Product gross profit
for 1999 was $2.0 million, an increase of $772,000 or 64.7% from 1998. Our
product gross margin was 27.1% for the three months ended June 30, 1999. In the
similar 1998 period, the product gross margin was 25.5% and it was 25.6% for the
three months ended March 31, 1999. Our 1999 product gross margins were affected
earlier this year as a result of manufacturing productivity issues that arose in
the fourth quarter of 1998 and continued into 1999. The increase in product
gross margins in the 1999 second quarter was due to continued improvements in
productivity. The product gross margin for the three months ended June 30, 1998
was affected by startup costs pertaining to our second manufacturing facility.
Our gross profit on research contracts for the three months ended June 30, 1999
was $218,000, an increase of $83,000 or 62.9% from the 1998 period. Our increase
in gross profit on research contracts principally was due to higher effective
government contract overhead rates.
Product development costs - Our product development costs for the three
months ended June 30, 1999 were $489,000, up $190,000 or 63.8% from 1998. The
increase is due to a higher level of development activity as a result of the
incremental government funding.
General and administrative expenses - Our general and administrative
expenses for the three months ended June 30, 1999 were $739,000, an increase of
$75,000 or 11.1% from the similar 1998 period. The increase is primarily due to
higher levels of salaries as a result of additional positions to support our
growth, professional fees and insurance expenses, offset by a reduced level of
employee bonus expense.
Selling expenses - Our selling expenses for the three months ended June 30,
1999 were $334,000, an increase of $68,000 or 25.9% from 1998. The increase is
due to higher salary costs as a result of additions to the sales and marketing
staff, and higher travel costs, offset by a lower level of employee bonus
expense.
8
<PAGE>
Interest expense - Our interest expense for the three months ended June
30, 1999 was $400, as compared with $83,000 in the similar 1998 period. The
decline is due to the paydown of debt in 1998.
Interest income - Our interest income for the three months ended June 30,
1999 was $16,000, as compared with $203,000 in the 1998 period. The reduction
was due to lower cash balances available for investment, as a result of the use
of cash for the funding of working capital, capital equipment, debt reduction
and the purchase of the assignment of wafer supply contracts discussed in
liquidity and capital resources.
Income taxes - Income taxes for the three months ended June 30, 1999 were
$191,000, as compared with $10,000 in 1998. Our 1998 tax provision was limited
to alternative minimum tax. In the fourth quarter of 1998, we eliminated the
valuation allowance pertaining to the remaining net operating loss carryforward.
As a result, our effective tax rate in 1999 has increased to 30% from 4.6% in
the 1998 period.
9
<PAGE>
Results of Operations
Six Months Ended June 30, 1999 and 1998
Revenues - Our total revenues were $15.1 million for the six months ended
June 30, 1999, an increase of $4.8 million or 46.7% from 1998. Product sales
were $13.6 million for the six months ended June 30, 1999, an increase of $4.7
million or 52.3% from 1998. Our increase in product sales was due to ongoing
strong demand for our products and improvements in manufacturing productivity
and increases in capacity at both our manufacturing plants. Contract revenues
were $1,579,000 for the six months ended June 30, 1999, an increase of $158,000
or 11.1% from 1998. The increase is a result of incremental funding in the first
quarter of 1999 on our government contracts for the development of Silicon-
Film(TM).
Gross profit - Our gross profit was $4.0 million for the six months ended
June 30, 1999, an increase of $1.4 million or 51.8% from 1998. Product gross
profit for 1999 was $3.6 million, an increase of $1.2 million or 51.3% from
1998. Our product gross margin was 26.4% for the six months ended June 30, 1999.
In the similar 1998 period, the product gross margin was 26.6%. Our 1999 product
gross margins were affected in the first quarter as a result of manufacturing
productivity issues that arose in the fourth quarter of 1998 and continued into
1999. The 1998 product gross margin was affected by startup costs pertaining to
our second manufacturing facility. Our gross profit on research contracts for
the six months ended June 30, 1999 was $442,000, an increase of $159,000 or
56.1% from the 1998 period. Our increase in gross profit on research contracts
was due to the higher level of funding on the government contracts, and to
higher effective government contract overhead rates.
Product development costs - Our product development costs for the six
months ended June 30, 1999 were $1.0 million, up $437,000 or 71.8% from 1998.
The increase is due to a higher level of development activity due in part to the
incremental government funding in the 1999 first quarter and the contribution of
our resources to supplement this funding in the six months ended June 30, 1999.
General and administrative expenses - Our general and administrative
expenses for the six months ended June 30, 1999 were $1,393,000, an increase of
$209,000 or 17.6% from the similar 1998 period. The increase is primarily
due to higher levels of salaries as a result of additional positions to support
our growth, professional fees and insurance expenses, offset by a reduced level
of employee bonus expense. Certain of these increased expenses were incurred as
a result of our transition to being a public company through an initial public
offering, which was completed in February 1998.
Selling expenses - Our selling expenses for the six months ended June 30,
1999 were $593,000, an increase of $142,000 or 31.5% from 1998. The increase is
due to higher salary costs as a result of additions to the sales and marketing
staff, and higher travel costs, offset by a lower level of employee bonus
expense.
10
<PAGE>
Interest expense - Our interest expense for the six months ended June 30,
1999 was $1,000, as compared with $197,000 in the similar 1998 period. The
decline is due to the paydown of debt in 1998.
Interest income - Our interest income for the six months ended June 30,
1999 was $58,000, as compared with $339,000 in the 1998 period. The reduction
was due to lower cash balances available for investment, as a result of the use
of cash for the funding working capital, capital equipment, debt reduction and
the purchase of the assignment of wafer supply contracts discussed in liquidity
and capital resources.
Income taxes - Income taxes for the six months ended June 30, 1999 were
$313,000, as compared with $25,000 in 1998. Our 1998 tax provision was limited
to alternative minimum tax. In the fourth quarter of 1998, we eliminated the
valuation allowance pertaining to the remaining net operating loss carryforward.
As a result, our effective tax rate in 1999 has increased to 30% from 4.6% in
the 1998 period.
Liquidity and Capital Resources
At June 30, 1999, we had cash of $2.15 million, as compared with $6.5
million at December 31, 1998. The decrease in the cash balance during the 1999
first half was due to increases in accounts receivable and inventory balances
and to increases in capital expenditures. In addition to these uses of cash, we
made payments totaling $700,000 in the first six months of 1999 for the
assignment to us of wafer supply contracts. We will be making additional
payments totaling $200,000 over the remainder of 1999. We purchased the
assignment of these contracts in order to have more direct access to the wafer
manufacturers, which has given us better control over incoming wafers. For the
six months ended June 30, 1999, our capital equipment expenditures totaled
approximately $1.5 million, with total 1999 expenditures expected to total
approximately $2.5 million.
Our sources of liquidity as of June 30, 1999 consist principally of cash of
$2.15 million, and available bank credit lines of $4 million. Any borrowings
under our bank facilities will be secured by accounts receivable, inventory and
machinery and equipment.
On June 16, 1999 we announced the signing of a term sheet with GPU
International providing for the purchase by GPUI of $7 million of our common
stock. We expect that $5 million of the total will be purchased directly from
us, and the remaining $2 million will be purchased from Astrosystems, Inc., a
founding stockholder which is in the process of a shareholder approved
liquidation. GPUI will also receive a warrant for the purchase of 120,700 shares
of our common stock at a price of $18.85 per share. We expect this transaction
to close in August, after the satisfactory completion of due diligence and the
signing of definitive stock purchase and related agreements.
We expect that our available cash balance, together with projected cash
generated from operations, available bank credit lines and the issuance of
shares to GPUI will be sufficient to fund our activities through December 31,
2000.
11
<PAGE>
Impact of Recently Issued Accounting Standards
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use (SOP 98-1). This standard requires
companies to capitalize qualifying computer software costs, which are incurred
during the application development stage and amortize them over the software's
estimated useful life. SOP 98-1 is effective for fiscal years beginning after
December 15, 1998. We have adopted this standard effective January 1, 1999. The
adoption of SOP 98-1 did not have a material effect on our results of
operations.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, Reporting for the Costs of Start-Up
Activities (SOP 98-5). This standard requires companies to expense the cost of
start-up activities and organization costs as incurred. In general, SOP 98-5 is
effective for fiscal years beginning after December 15, 1998. We have adopted
this standard effective January 1, 1999. The adoption of SOP 98-5 did not have a
material impact on our results of operations.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS
133). SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts, and
for hedging activities. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The statement is not expected to
affect us because we do not hold any derivative instruments or conduct any
hedging activities.
In June 1999, the FASB issued Statement of Financial Accounting Standards
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the effective date of FASB Statement No. 133 (SFAS 137). SFAS 137 delays the
implementation of SFAS No. 133 until the year 2001.
12
<PAGE>
Year 2000
Our current data processing systems and certain embedded processing systems
are not year 2000 compliant. We have developed and are currently executing a
comprehensive risk-based plan designed to make our computer systems, those
certain embedded processing systems, applications and facilities Year 2000
ready. Our plan covers four stages including (i) inventory, (ii) assessment,
(iii) remediation, and (iv) testing and certification. At year end 1997, we had
substantially completed the inventory stage for our owned systems and
applications. The assessment and remediation processes are currently underway
and we are utilizing both internal and external resources to reprogram, or
replace where necessary, and test the software for Year 2000 modifications. The
remediation process has been largely completed by June 30, 1999. Testing and
certification of these systems and applications are targeted for completion by
September 30, 1999.
Our ongoing transformation from a government research and development
organization to a manufacturing company has necessitated system enhancements to
accommodate this growth. We are therefore addressing the Year 2000 issue through
these planned system augmentations. Total Year 2000 costs for our owned systems
and applications were approximately $250,000 in 1998 and currently estimated to
be approximately $250,000 in 1999, which we expect to fund through operating
cash flows. A majority of these costs are currently believed to be incremental
costs that will not recur in the Year 2000 or thereafter.
We are initiating communications with our critical third party
relationships, consisting of both customers and suppliers, to determine the
extent to which we may be vulnerable to such parties' failure to resolve their
own Year 2000 issues. Where practicable, we will assess and attempt to mitigate
our risks with respect to the failure of these entities to be Year 2000 ready
through the development of appropriate contingency plans. The effect, if any, on
our results of operations from the failure of any of these parties to be Year
2000 ready, is not presently reasonably estimable.
13
<PAGE>
AstroPower, Inc.
FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 30, 1999
PART II: OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on June 16, 1999
for the purpose of the following:
1. To elect two directors
2. To amend the Company's 1989 Stock Option Plan so as to increase
the number of shares available.
3. To approve the proposed 1999 AstroPower, Inc. Stock Option Plan.
4. To ratify the appointment of independent accountants.
Shareholders votes on these proposals follow:
Election of Directors:
<TABLE>
<CAPTION>
Name For Against Broker Non-Votes
---- --- ------- ----------------
<S> <C> <C> <C>
Clare E. Nordquist 6,671,472 34,180 -
Charles R. Schaller 6,671,472 34,180 -
</TABLE>
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--------- ------- ------- ----------------
<S> <C> <C> <C> <C>
Proposal to amend 1989 Stock Option Plan 5,260,497 181,156 54,787 1,209,212
Proposal to approve 1999 5,231,722 243,381 21,337 1,209,212
AstroPower, Inc. Stock Option Plan
Proposal to ratify appointment of independent 6,695,157 5,500 4,995 -
accountants
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
14
<PAGE>
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.
AstroPower, Inc.
Date: August 13, 1999 By: /s/ Allen M. Barnett
------------------------------------------
Allen M. Barnett
President and Chief Executive Officer
Date: August 13, 1999 By: /s/ Thomas J. Stiner
------------------------------------------
Thomas J. Stiner
Vice President and Chief Financial Officer
(Principal Financial Officer)
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,149,598
<SECURITIES> 0
<RECEIVABLES> 8,790,553
<ALLOWANCES> 88,596
<INVENTORY> 6,299,388
<CURRENT-ASSETS> 19,730,714
<PP&E> 14,758,451
<DEPRECIATION> 4,171,783
<TOTAL-ASSETS> 30,317,382
<CURRENT-LIABILITIES> 4,585,219
<BONDS> 0
0
0
<COMMON> 87,169
<OTHER-SE> 24,638,018
<TOTAL-LIABILITY-AND-EQUITY> 30,317,382
<SALES> 13,550,281
<TOTAL-REVENUES> 15,129,121
<CGS> 9,973,474
<TOTAL-COSTS> 11,110,386
<OTHER-EXPENSES> 3,013,461
<LOSS-PROVISION> 18,000
<INTEREST-EXPENSE> 785
<INCOME-PRETAX> 1,044,141
<INCOME-TAX> 313,242
<INCOME-CONTINUING> 730,899
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 730,899
<EPS-BASIC> 0.09
<EPS-DILUTED> 0.08
</TABLE>
