0000950135-95-001737.txt : 19950815 0000950135-95-001737.hdr.sgml : 19950815 ACCESSION NUMBER: 0000950135-95-001737 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPIRE CORP CENTRAL INDEX KEY: 0000731657 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 042457335 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-12742 FILM NUMBER: 95563206 BUSINESS ADDRESS: STREET 1: ONE PATRIOTS PARK CITY: BEDFORD STATE: MA ZIP: 01730-2396 BUSINESS PHONE: 6172756000 MAIL ADDRESS: STREET 2: ONE PATRIOTS PARK CITY: BEDFORD STATE: MA ZIP: 01730-2396 10QSB 1 SPIRE CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 1995 or ------------------- [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ------------------- ------------------- Commission File Number 0-12742 --------------------------------------------------------- SPIRE CORPORATION -------------------------------------------------------------------------------- Exact name of registrant as specified in its charter Massachusetts 04-2457335 -------------------------------------------------------------------------------- State or other jurisdiction (I.R.S. Employer of incorporation or organization Identification No.) One Patriots Park, Bedford, Massachusetts 01730-2396 -------------------------------------------------------------------------------- Address of principal executive offices Zip Code Registrant's telephone number, including area code: 617-275-6000 ---------------------------- Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period 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 --- --- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of July 31, 1995, there were outstanding 3,065,200 shares of the issuer's common stock, $.01 par value. 2 SPIRE CORPORATION INDEX
Page Number ----------- PART I - FINANCIAL INFORMATION ------------------------------ Condensed Consolidated Balance Sheets 3 June 30, 1995 and December 31, 1994 Condensed Consolidated Statements of Operations 4 For the Three Months Ended June 30, 1995 and 1994 and For the Six Months Ended June 30, 1995 and 1994 Condensed Consolidated Statements of Cash Flows 5 For the Six Months Ended June 30, 1995 and 1994 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial 7 & 8 Condition and Results of Operations PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings. 9 Item 6. Exhibits and Reports on Form 8-K. 9
- 2 - 3 SPIRE CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS ------
June 30, December 31, 1995 1994 ------------- ------------- (Unaudited) Current assets: -------------- Cash $ 222,717 $ 166,567 Accounts receivable: Amounts billed 2,292,840 3,136,544 Retainage 133,708 143,614 Unbilled costs 680,564 701,468 ----------- ----------- 3,107,112 3,981,626 ----------- ----------- Less allowance for doubtful accounts 95,000 45,000 ----------- ----------- Net accounts receivable 3,012,112 3,936,626 ----------- ----------- Inventories (Note 2) 796,974 888,747 Prepaid expenses and other current assets 290,862 411,816 ----------- ----------- Total current assets 4,322,665 5,403,756 ----------- ----------- Property and equipment 21,767,615 21,590,475 Less accumulated depreciation and amortization 16,758,924 16,134,705 ----------- ----------- Net property and equipment 5,008,691 5,455,770 ----------- ----------- Computer software costs (less accumulated amortization, $780,343 in 1995 and $776,524 in 1994) 26,471 26,381 Patents (less accumulated amortization, $347,568 in 1995 and $319,060 in 1994) 508,097 475,015 Other assets 298,711 378,745 ----------- ----------- 833,279 880,141 ----------- ----------- $10,164,635 $11,739,667 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: ------------------- Note payable - Bank $ 0 $ 750,000 Current portion of capital lease obligation 13,717 47,838 Accounts payable 1,146,065 1,788,215 Accrued liabilities 691,426 890,532 Advances on contracts in progress 275,087 229,710 ----------- ----------- Total current liabilities 2,126,295 3,706,295 Capital lease obligation, net of current portion 9,635 9,635 ------------------------------------------------ Stockholders' equity: -------------------- Common Stock, $.01 par value; shares authorized 6,000,000; issued 3,560,360 shares in 1995 and 3,559,860 shares in 1994 35,604 35,604 Additional paid-in capital 8,468,903 8,468,903 Retained earnings 568,261 563,293 ----------- ----------- 9,072,768 9,067,800 Treasury stock at cost, 495,160 shares in 1995 and 1994 1,044,063 1,044,063 ----------- ----------- Total stockholders' equity 8,028,705 8,023,737 ----------- ----------- $10,164,635 $11,739,667 =========== ===========
See accompanying notes to consolidated financial statements. - 3 - 4 SPIRE CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended June 30, Six Months Ended June 30, --------------------------- ------------------------- 1995 1994 1995 1994 ----------- ---------- ---------- ---------- Net sales and revenues: ---------------------- Contract research and service revenues $3,355,067 $3,632,230 $6,813,682 $7,585,958 Sales of manufacturing equipment 1,303,563 623,891 2,428,170 1,296,316 ---------- ---------- ---------- ---------- 4,658,630 4,256,121 9,241,852 8,882,274 ---------- ---------- ---------- ---------- Costs and expenses: ------------------ Cost of contract research and service 2,412,826 2,796,624 4,875,214 5,731,460 Cost of manufacturing equipment 1,150,212 394,238 2,144,979 725,322 Research and development expenses 1,018 49,692 (176) 71,052 Selling, general and administrative expenses 1,071,871 1,296,507 2,178,693 2,551,129 ---------- ---------- ---------- ---------- 4,635,927 4,537,061 9,198,710 9,078,963 ---------- ---------- ---------- ---------- Earnings (loss) from operations 22,703 (280,940) 43,142 (196,689) ------------------------------- Interest expense, net 20,540 32,037 38,174 56,477 ---------- ---------- ---------- ---------- Earnings (loss) before income taxes 2,163 (312,977) 4,968 (253,166) Income tax expense/(benefit) 0 (18,000) 0 -- ---------- ---------- ---------- ---------- Net earnings (loss) $ 2,163 $ (294,977) $ 4,968 $ (253,166) ========== ========== ========== =========== Earnings (loss) per share of Common Stock $ 0.00 $ (0.10) $ 0.00 $ (0.08) ----------------------------------------- ========== ========== ========== =========== Weighted average number of common and common equivalent shares outstanding 3,065,722 3,065,200 3,068,394 3,064,852
See accompanying notes to condensed consolidated financial statements. - 4 - 5 SPIRE CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, ---------------------------------- 1995 1994 --------------- ------------ Cash flows from operating activities: Net earnings (net loss) $ 4,968 $ (253,166) Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 672,823 673,672 Changes in assets and liabilities: Accounts receivable 924,514 1,399,389 Inventories 91,773 (76,635) Prepaid expense and other current assets 120,954 (191,293) Accounts payable and accrued liabilities (841,256) (205,430) Advances on contracts in progress 45,377 426,557 ----------- ----------- Net cash used for operating activities 1,019,153 1,773,094 ----------- ----------- Cash flows from investing activities: Additions to property and equipment (177,140) (993,052) Increase in patent costs (61,590) (8,299) Other assets 59,848 (187,522) ----------- ----------- Net cash used for investing activities (178,882) (1,188,873) ----------- ----------- Cash flows from financing activities: Net payments on short-term debt (750,000) -- Payments on long-term borrowing (34,121) (536,263) Exercise of stock options 0 1,250 ----------- ----------- Net cash used for financing activities (784,121) (535,013) ----------- ----------- Net increase in cash and cash equivalents 56,150 49,208 Cash, beginning of period 166,567 46,543 ----------- ----------- Cash, end of period $ 222,717 $ 95,751 =========== =========== Supplemental disclosures of cash flow information: Cash paid during the quarter for: Interest expense $ 38,174 $ 29,789 =========== =========== Income taxes $ 0 $ 0 =========== ===========
See accompanying notes to condensed consolidated financial statements. - 5 - 6 SPIRE CORPORATION AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended June 30, 1995 and 1994 (1) Interim Financial Statements ---------------------------- In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company's financial position as of June 30, 1995 and December 31, 1994 and the results of operations and changes in cash flows for the six months ended June 30, 1995 and 1994. The results of operations for the six months ended June 30, 1995 are not necessarily indicative of the results to be expected for the fiscal year ended December 31, 1995. The accounting policies followed by the Company are set forth in Note 2 to the Company's consolidated financial statements in its Annual Report on Form 10-KSB for the year ended December 31, 1994. The financial statements, with the exception of the December 31, 1994 balance sheet, are unaudited and have not been examined by independent public accountants. (2) Inventories -----------
Inventories consist of the following: June 30, December 31, 1995 1994 ----------- ------------ (Unaudited) Raw materials $411,588 $400,519 Work in process 385,386 488,228 -------- -------- $796,974 $888,747 ======== ========
- 6 - 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND --------------------------------------------------------------- RESULTS OF OPERATIONS. ---------------------- Results of Operations --------------------- Net sales and revenues for the quarter ended June 30, 1995 increased 9% to $4,659,000 compared to $4,256,000 for the quarter ended June 30, 1994. For the quarter ended June 30, 1995, the Company had net earnings of $2,000 compared to a net loss of $295,000 for the quarter ended June 30, 1994. Retained earnings were $568,000 as of June 30, 1995 compared to $563,000 as of December 31, 1994. Working capital as of June 30, 1995 was $2,196,000 compared to $1,697,000 as of December 31, 1994.
June 30, June 30, % Revenues for the quarter ended: 1995 1994 Change ------------------------------ -------------- ------------- ------ Contract research and service revenues $3,355,000 $3,632,000 (8%) Manufacturing equipment sales 1,304,000 624,000 109% ---------- ----------- Net sales and revenues $4,659,000 $4,256,000 9% ========== ==========
June 30, June 30, % Revenues for the six months ended: 1995 1994 Change --------------------------------- -------------- ------------- ------ Contract research and service revenues $6,814,000 $7,586,000 (10%) Manufacturing equipment sales 2,428,000 1,296,000 87% ---------- ----------- Net sales and revenues $9,242,000 $8,882,000 4% ========== ==========
Net sales and revenues for contract research and services declined 16% in 1995 to $3,355,000 compared to $3,632,000 in 1994. The decline in contract revenues is largely the result of the government's move toward programs requiring significant cost sharing, which management has elected to pursue cautiously. The orthopaedic processing service business has experienced price pressures due to competition and changes in the health care market which have negatively affected revenues and margins. Manufacturing equipment sales increased 103% to $1,304,000 compared to $624,000 in the same period of 1994 primarily due to increased interest in photovoltaic lines.
June 30, % of June 30, % of % Cost of Sales for the quarter ended: 1995 Revenues 1994 Revenues Change ----------------------------------- -------------- -------- -------------- -------- ------ Contract research and service cost of sales $2,413,000 72% $2,797,000 77% (5%) Manufacturing equipment cost of sales 1,150,000 88% 394,000 63% 25% ---------- ---------- Total cost of sales $3,563,000 76% $3,191,000 75% 1% ========== ==========
June 30, % of June 30, % of % Cost of Sales for the six months ended: 1995 Revenues 1994 Revenues Change -------------------------------------- ---------- -------- ---------- -------- ------ Contract research and service cost of sales $4,875,000 72% $5,732,000 76% (4%) Manufacturing equipment cost of sales 2,145,000 88% 725,000 56% 32% ---------- ---------- Total cost of sales $7,020,000 76% $6,457,000 73% 3% ========== ==========
- 7 - 8 The cost of contract research and service revenues decreased to 72% for the six months ended June 30, 1995 compared to 76% for the six months ended June 30, 1994. The decrease in cost of research and service sales is attributable to cost reduction steps management implemented in 1994 and 1995. Cost of manufacturing equipment was 88% compared to 56% for the six months ended June 30, 1994. Cost of manufacturing equipment was lower in the prior year primarily due to the sale of a photovoltaic module line including technology transfer. Selling, general and administrative expenses for the six months ended June 30, 1995 were 24% of sales compared to 29% of sales for the six months ended June 30, 1994. The decrease in selling, general and administrative expenses as a percentage of sales is attributable to cost reduction steps management implemented in 1994 and 1995. Depreciation and amortization expenses for the six months ended June 30, 1995 decreased .2% to $673,000 compared to $674,000 in 1994. Expenditures for capital equipment were $177,000 for the six months ended June 30, 1995 compared to $993,000 for the six months ended June 30, 1994. Management continues on its efforts to control capital spending. The Company incurred interest expense of $38,000 in the first six months of 1995 and $70,000 in the same period of 1994, of which $500 was capitalized in 1995 compared to $14,000 in 1994 in connection with internally constructed machinery and equipment. Liquidity and Capital Resources ------------------------------- On September 30, 1993, the Company entered into a revolving credit facility with a bank. This agreement established a $2 million revolving credit agreement, subject to the availability of eligible accounts receivable. This line of credit has been established to provide the Company with resources for general working capital purposes and Standby Letter of Credit guarantees for foreign customers. The loan is secured by all assets of the Company. This loan has now been extended through April 5, 1996. Interest on the loan is now at the prime rate. The note contains restrictive covenants including provisions relating to profitability and net worth. As of June 30, 1995, the Company had no outstanding balance under this revolving credit line. The Company believes it has sufficient resources to finance its anticipated capital expenditures through working capital, existing lines of credit or available lease arrangements. Impact of Inflation and Changing Prices --------------------------------------- Historically, the Company's business has not been materially impacted by inflation. Manufacturing equipment sales are generally quoted, manufactured and shipped within a cycle of less than six months, allowing for orderly pricing adjustments to the cost of labor and purchased parts. The Company has not experienced any negative effects from the impact of inflation on long-term contracts. The Company's service business is not expected to be seriously affected by inflation, with typically a two-week to several month procurement-production cycle and prices generally not fixed for more than one year. Contracted research and development usually includes cost escalation provisions. - 8 - 9 PART II - OTHER INFORMATION --------------------------- ITEM 1. LEGAL PROCEEDINGS. --------------------------- In May, 1985, Electronic Space Systems Corporation ("ESSCO") filed suit against the Company in the Commonwealth of Massachusetts, Middlesex County, Civil Action No. 85-3126. ESSCO sought to recover for, inter alia, alleged breach of contract, breach of implied covenant of good faith and fair dealing, breach of fiduciary duty and for alleged unfair or deceptive acts or practices in violation of Massachusetts General Laws Chapter 93A ("M.G.L. Ch. 93A") in connection with ESSCO's allegation that the Company wrongfully repudiated certain contractual obligations and a partnership agreement for the marketing of photovoltaic products in the People's Republic of China and certain other markets. The Company filed an answer denying liability to ESSCO and also filed counterclaims against ESSCO alleging, INTER ALIA, ESSCO's breach of contract, misrepresentation, breach of fiduciary duty, tortious interference with the Company's contracts, interference with the Company's advantageous business relationships and unfair or deceptive practices in violation of M.G.L. Ch. 93A and seeking a declaratory judgment that certain agreements between the Company and ESSCO relating to the marketing of photovoltaic products are void. The trial to determine the liability of the parties commenced on March 11, 1992, and on March 27, 1992, the jury returned a verdict that, INTER ALIA, each party had breached various obligations to the other. Various post-trial motions by both parties were rejected in all material respects by the Court. A trial to assess the compensation due as a result of the liability determinations made by the first jury was held from September 27, 1993 to October 15, 1993. The Company was awarded compensation on one claim; ESSCO's previously agreed upon base compensation was reduced by the full amount of the Company's counterclaim on a second issue; and the jury was unable to reach a verdict on the third issue, involving ESSCO's misuse of the Company's proprietary information. The Company intends to pursue vigorously its claim for damages resulting from ESSCO's misuse of the Company's proprietary information. A retrial date has not yet been established. The net result of the two trials to date is that neither party has a material liability to the other, although the Company's claim for damages resulting from ESSCO's misuse of the Company's proprietary information and the parties' M.G.L. Ch. 93A claims against each other have yet to be decided. A hearing on the M.G.L. Ch. 93A issues was held in December 1993, but the Court has not yet ruled on those issues. Based on the proceedings to date and discussion with legal counsel, the Company believes that the outcome of this matter will not have a material negative effect on the Company's financial position and results of operations but may have a positive impact. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. ------------------------------------------ A. Exhibits - No exhibits have been included. B. The Company filed no reports on Form 8-K during the quarter ended June 30, 1995. - 9 - 10 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. SPIRE CORPORATION (Registrant) By: /s/ Roger G. Little 11 August 1995 ---------------------------------- ----------------- Roger G. Little Date President & CEO and Chairman of the Board By: /s/ Richard S. Gregorio 11 August 1995 --------------------------------- ----------------- Richard S. Gregorio Date Vice President & CFO, Treasurer Assistant Clerk and Principal Accounting Officer - 10 - EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATION ON FORM 10Q-SB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10Q-SB. 1 U.S. DOLLARS 3-MOS DEC-31-1995 APR-01-1995 JUN-30-1995 1 222,717 0 3,107,112 95,000 796,974 4,322,665 21,767,615 16,758,924 10,164,635 2,126,295 0 35,604 0 0 8,468,903 10,164,635 0 4,658,630 0 3,563,038 1,072,889 0 20,540 2,163 0 2,163 0 0 0 2,163 0 0