-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RWEv61NxHeYYDOgld0ZYllP7L91ulIEB2yMtGmDHo4afopbneJcvjknxb0b7SyPJ D5+ryliKUraX5SBqrqSGEg== 0000950135-98-003378.txt : 19980518 0000950135-98-003378.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950135-98-003378 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: SEC FILE NUMBER: 000-12742 FILM NUMBER: 98624282 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 1998 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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 March 31, 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: 0-12742 SPIRE CORPORATION - -------------------------------------------------------------------------------- (Exact Name of Small Business Issuer as Specified in Its Charter) Massachusetts 04-2457335 - -------------------------------------------------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) One Patriots Park, Bedford, Massachusetts 01730-2396 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) 781-275-6000 - -------------------------------------------------------------------------------- (Issuer's Telephone Number, Including Area Code) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. There were 3,241,716 outstanding shares of the issuer's only class of common equity, Common Stock, $.01 par value, on April 30, 1998. Transitional Small Business Disclosure Format (Check One): Yes No X --- --- 2 SPIRE CORPORATION INDEX Page Number ----------- PART I - FINANCIAL INFORMATION Condensed Consolidated Balance Sheets at 3 March 31,1998 (unaudited) and December 31, 1997 Condensed Consolidated Statements of Operations 4 For the Three Months Ended March 31, 1998 and 1997 (unaudited) Condensed Consolidated Statements of Cash Flows 5 For the Three Months Ended March 31, 1998 and 1997 (unaudited) Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial 7 - 9 Condition and Results of Operations PART II - OTHER INFORMATION Item 1. Legal Proceedings 10 Item 6. Exhibits and Reports on Form 8-K 10 2 3 SPIRE CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, 1998 1997 ----------- ----------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 691,644 $ 1,695,727 Accounts receivable, trade: Amounts billed 3,478,098 3,012,701 Retainage 73,392 69,772 Unbilled costs 523,807 621,760 ----------- ----------- 4,075,297 3,704,233 Less allowance for doubtful accounts 40,000 40,000 ----------- ----------- Net accounts receivable 4,035,297 3,664,233 ----------- ----------- Inventories (Note 2) 1,675,830 988,580 Deferred income taxes (Note 3) 300,000 300,000 Prepaid expenses and other current assets 644,812 501,650 ----------- ----------- Total current assets 7,347,583 7,150,190 ----------- ----------- Property and equipment 24,382,076 24,015,445 Less accumulated depreciation and amortization 19,464,148 19,242,437 ----------- ----------- Net property and equipment 4,917,928 4,773,008 ----------- ----------- Computer software costs (less accumulated amortization, $814,017 in 1998 and $810,466 in 1997) 47,585 51,135 Patents (less accumulated amortization, $556,227 in 1998 and $542,344 in 1997) 265,338 274,810 Other assets 17,771 19,679 ----------- ----------- 330,694 345,624 ----------- ----------- $12,596,205 $12,268,822 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 888,461 $ 903,581 Accrued liabilities 843,021 859,093 Advances on contracts in progress 636,994 410,370 ----------- ----------- Total current liabilities 2,368,476 2,173,044 ----------- ----------- COMMITMENTS STOCKHOLDERS' EQUITY Common stock, $.01 par value; shares authorized 20,000,000; issued 3,788,876 shares in 1998 and 3,757,082 shares in 1997 37,889 37,571 Additional paid-in capital 9,759,942 9,645,468 Retained earnings 1,649,586 1,632,427 ----------- ----------- 11,447,417 11,315,466 Treasury stock at cost, 552,160 shares (1,219,688) (1,219,688) ----------- ----------- Total stockholders' equity 10,227,729 10,095,778 ----------- ----------- $12,596,205 $12,268,822 =========== ===========
See accompanying notes to condensed consolidated financial statements. 3 4 SPIRE CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, ---------------------------- 1998 1997 ---------- ---------- NET SALES AND REVENUES Contract research, service and license revenues $3,115,886 $3,133,491 Sales of manufacturing equipment 1,326,640 1,317,208 ---------- ---------- Total sales and revenues 4,442,526 4,450,699 ---------- ---------- COSTS AND EXPENSES Cost of contract research, services and licenses 2,207,178 2,074,106 Cost of manufacturing equipment 803,761 856,108 Selling, general and administrative expenses 1,417,765 1,373,808 ---------- ---------- Total costs and expenses 4,428,704 4,304,022 ---------- ---------- EARNINGS FROM OPERATIONS 13,822 146,677 Interest income, net 12,337 3,617 ---------- ---------- Earnings before income taxes 26,159 150,294 Income tax expense 9,000 -- ---------- ---------- NET EARNINGS $ 17,159 $ 150,294 ========== ========== EARNINGS PER SHARE OF COMMON STOCK - BASIC $ 0.01 $ 0.05 ========== ========== EARNINGS PER SHARE OF COMMON STOCK - DILUTED $ 0.01 $ 0.05 ========== ========== Weighted average number of common shares outstanding - basic 3,216,869 3,020,025 ========== ========== Weighted average number of common and common equivalent shares outstanding - diluted 3,350,910 3,020,025 ========== ==========
See accompanying notes to condensed consolidated financial statements. 4 5 SPIRE CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, ---------------------------- 1998 1997 ----------- --------- Cash flows from operating activities: Net earnings $ 17,159 $ 150,294 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization 239,144 309,250 Changes in assets and liabilities: Accounts receivable (371,064) (505,986) Inventories (687,250) (932,999) Prepaid expenses and other current assets (143,162) (137,359) Accounts payable and accrued liabilities (31,192) 24,997 Advances on contracts in progress 226,624 311,197 ----------- --------- Net cash used in operating activities (749,741) (780,606) ----------- --------- Cash flows from investing activities: Additions to property and equipment (366,631) (135,435) Increase in patent costs (4,411) (315) Increase in software production costs -- (34,229) Other assets 1,908 219,292 ----------- --------- Net cash provided by (used in) investing activities (369,134) 49,313 ----------- --------- Cash flows from financing activities: Exercise of stock options 114,792 -- Repurchase of common stock -- (20,625) ----------- --------- Net cash provided by (used in) financing activities 114,792 (20,625) ----------- --------- Net decrease in cash and cash equivalents (1,004,083) (751,918) Cash and cash equivalents, beginning of period 1,695,727 970,997 =========== ========= Cash and cash equivalents, end of period $ 691,644 $ 219,079 =========== ========= Supplemental disclosures of cash flow information: Cash paid during the year for: Interest expense $ 723 $ -- =========== ========= Income taxes $ 44,400 $ -- =========== =========
See accompanying notes to condensed consolidated financial statements. 5 6 SPIRE CORPORATION AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 1998 (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 March 31, 1998 and the results of operations and changes in cash flows for the three months ended March 31, 1998 and 1997. The results of operations for the three months ended March 31, 1998 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 1998. 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, 1997. The financial statements, with the exception of the December 31, 1997 balance sheet, are unaudited and have not been examined by independent public accountants. (2) INVENTORIES Inventories consist of the following:
March 31, December 31, 1998 1997 ---------- ------------ Raw materials $ 903,100 $736,930 Work in process 772,730 251,650 ---------- -------- $1,675,830 $988,580 ========== ========
6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Spire develops, manufactures and markets highly-engineered photovoltaic module manufacturing equipment and optoelectronic products and provides biomedical processing services. Spire is the world's leader in the design and manufacture of specialized equipment for the production of terrestrial photovoltaic modules from solar cells, with its equipment installed in 136 factories and in 38 countries. The Company also offers certain optoelectronic products and is continuing to develop additional advanced optoelectronic products for telecommunications, biomedical and electronics applications, including solar cells used to power satellites. Spire's value-added biomedical processing services offer surface treatments to enhance the durability or the antimicrobial characteristics of orthopedic and other medical devices. The Company's net sales and revenues for the quarter ended March 31, 1998 declined slightly, compared to the quarter ended March 31, 1997. The Company's Optoelectronics business showed growth, our Photovoltaic equipment sales were the same and Biomedical revenues showed some decline in net sales and revenues compared to the first quarter of 1997. RESULTS OF OPERATIONS The following table sets forth certain items as a percentage of net sales and revenues for the periods presented:
Three Months Ended March 31, ---------------------------- 1998 1997 ------ ------- Net sales and revenues 100.0% 100.0% Cost of sales and revenues 67.8 65.8 ----- ----- Gross profit 32.2 34.2 Selling, general and administrative expenses 31.9 30.9 ----- ----- Earnings from operations 0.3 3.3 Earnings before income taxes 0.6 3.4 Income tax expense 0.2 0.0 ----- ----- Net earnings 0.4% 3.4% ===== =====
QUARTER ENDED MARCH 31, 1998 COMPARED TO QUARTER ENDED MARCH 31, 1997 Net Sales and Revenues Net sales and revenues decreased $8,000 or less than 1% for the quarter ended March 31, 1998 to $4,443,000, compared to $4,451,000 for the quarter ended March 31, 1997. Contract research, service and license revenues decreased $18,000 or 1% to $3,116,000 for the quarter ended March 31, 1998 compared to $3,134,000 for 1997. Manufacturing equipment sales increased $10,000 or 1% to $1,327,000 for 1998, compared to $1,317,000 for 1997. The following table categorizes the Company's net sales and revenues for the periods presented:
Three Months Ended March 31, -------------------------------------- 1998 1997 Change ---------- ---------- --------- Contract research, service and license revenues $3,116,000 $3,134,000 (1%) Manufacturing equipment sales 1,327,000 1,317,000 1% ---------- ---------- Net sales and revenues $4,443,000 $4,451,000 (<1%) ========== ==========
7 8 Cost of Sales and Revenues The cost of sales and revenues increased $81,000 to $3,011,000, and increased to 68% of net sales and revenues, for the quarter ended March 31, 1998, compared to $2,930,000 or 66% of net sales and revenues for the quarter ended March 31, 1997. The cost of contract research, service and license revenues increased $133,000 to $2,207,000, and increased to 71% of related revenues, for the quarter ended March 31, 1998, compared to $2,074,000 or 66% of related revenues for the quarter ended March 31, 1997. Cost of manufacturing equipment sales decreased $52,000 to $804,000, and decreased to 61% of related sales, for the quarter ended March 31, 1998, compared to $856,000 or 65% of related sales, for the quarter ended March 31, 1997. The increase in total cost of sales and revenues as a percentage of related sales and revenues is due to product mix, and increased product development cost. The following table categorizes the Company's cost of sales and revenues for the periods presented, stated in dollars and as a percentage of related sales and revenues:
Three Months Ended March 31, -------------------------------------- 1998 % 1997 % ---------- --- ---------- --- Contract research, service and license revenues $2,207,000 71% $2,074,000 66% Manufacturing equipment sales 804,000 61% 856,000 65% ---------- ---------- Total cost of sales and revenues $3,011,000 68% $2,930,000 66% ========== ==========
Selling, General and Administrative Expenses Selling, general and administrative expenses for the quarter ended March 31, 1998 increased $44,000 to $1,418,000, and increased to 32% of sales and revenues, compared to $1,374,000 or 31% of sales and revenues for the quarter ended March 31, 1997. Selling, general and administrative expenses increased due to increases in sales and marketing and legal costs. Depreciation and Amortization Expenses Depreciation and amortization expenses for the quarter ended March 31, 1998 decreased $70,000 or 23% to $239,000, compared to $309,000 for the quarter ended March 31, 1997. Capital expenditures increased $231,000 or 171% to $367,000 for the quarter ended March 31, 1998, compared to $136,000 for the quarter ended March 31, 1997. Interest The Company earned $13,000 in interest income for the quarter ended March 31, 1998, compared to $2,000 for the quarter ended March 31, 1997. The Company incurred insignificant interest expense in both periods. Income Taxes The Company recorded income tax expense of $9,000 for the quarter ended March 31, 1998 and no income tax expense for the quarter ended March 31, 1997. At March 31, 1998, the Company had gross deferred tax assets of $300,000, which represents the amount of tax benefits of existing deductible temporary differences or carryforwards that are more likely than not to be realized through the generation of sufficient future taxable income within the carryforward period. Net Earnings The Company reported net earnings for the quarter ended March 31, 1998 of $17,000, compared to net earnings of $150,000 for the quarter ended March 31, 1997. The decline in the Company's profitability resulted in large part from flat net sales and revenues when compared with the prior period, and an increase in product development costs, sales and marketing expenses and legal costs in the first quarter of 1998. 8 9 LIQUIDITY AND CAPITAL RESOURCES The Company has been able to fund its liquidity requirements using cash from operations and available lines of credit. On April 4, 1997, the Company amended and extended its revolving credit agreement with Silicon Valley Bank. This agreement provides for a $2 million revolving credit facility, based upon eligible accounts receivable requirements. 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 line is secured by all assets of the Company. Interest on the line is at the Bank's prime rate plus one-half of one percent. The line contains covenants including provisions relating to profitability and net worth. As of March 31, 1998, the Company had no outstanding debt under this revolving credit facility, which is in the process of being renewed under the existing terms and conditions. The Company has also entered into a $1 million equipment leasing line with Silicon Valley Bank. The Company believes it has sufficient resources to finance its current operations for the foreseeable future through working capital, its existing line of credit and available lease arrangements. Cash and cash equivalents decreased $1,004,000, to $692,000 at March 31, 1998, from $1,696,000 at December 31, 1997. This decrease was primarily due to the Company's funding a $687,000 increase in its raw materials and in process inventories from December 31, 1997 to March 31, 1998, and first quarter 1998 capital purchases of $367,000. To date there are no material commitments by the Company for capital expenditures. At March 31, 1998, the Company's retained earnings were $1,650,000, compared to retained earnings of $1,632,000 as of December 31, 1997. Working capital as of March 31, 1998 increased less than 1% to $4,979,000, compared to $4,977,000 as of December 31, 1997. RECENT ACCOUNTING PRONOUNCEMENTS In December 1997, the Company adopted Financial Accounting Standards Board Statement No. 128, "Earnings per Share." (SFAS 128). All previously reported net earnings per share data have been restated to conform to the provisions of SFAS No. 128. Under SFAS 128, basic earnings per share are computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the maximum dilution that would have resulted from the assumed exercise and share repurchase related to dilutive stock options and are computed by dividing net earnings by the weighted average number of common shares and all dilutive securities outstanding. In June 1997, the Financial Accounting Standards Board issued SFAS 130, "Reporting Comprehensive Income," which establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. Under this concept, all revenues, expenses, gains and losses recognized during the period are included in income, regardless of whether they are considered to be results of operations of the period. The Company adopted SFAS 130 in March 1998, and it had no impact on the Consolidated Financial Statements of the Company. In June 1997, the Financial Accounting Standards Board issued SFAS 131, "Disclosures about Segments of an Enterprise and Related Information," which establishes standards for the way that public business enterprises report selected information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports to stockholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. SFAS 131, which becomes effective for the Company in its year ending December 31, 1998, is not expected to have a material impact on the Company's results of operations. The Company is in the process of determining the impact of SFAS 131 on its footnote disclosures. 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), which establishes guidelines for the accounting for the costs of all computer software developed or obtained for internal use. SOP 98-1 is effective for the Company in 1999 and is not expected to have a material effect on the Company's financial statements. THE FOREGOING STATEMENTS MAY INCLUDE FORWARD-LOOKING STATEMENTS SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED OR REFERRED TO IN THIS REPORT AND IN ITEM 6 OF THE ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1997. 9 10 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On March 2, 1998 the Company received a letter from the Office of the United States Attorney for the Eastern District of Virginia stating that it was considering the commencement of a civil action concerning seven research initiatives undertaken by the Company in the period from 1990 to the present. The letter alleged that, in certain instances, the Company had failed to inform the government of pending or previously submitted proposals for work the government alleges was related to proposals which were funded. The Company is in the process of reviewing the allegations, and gathering the information necessary to respond. The Company is unable to determine at this time what effect, if any, this matter will have on the Company's financial condition or results of operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. The following exhibits are filed herewith: 11 Statement Regarding Computation of Per Share Earnings 27 Financial Data Schedule B. During the quarter ended March 31, 1998, the Company filed no reports on Form 8-K. 10 11 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SPIRE CORPORATION (Registrant) 14 May 1998 By: /s/ Roger G. Little - ------------------- ---------------------------------------- Date Roger G. Little President, Chief Executive Officer and Chairman of the Board 14 May 1998 By: /s/ Richard S. Gregorio - ------------------- ---------------------------------------- Date Richard S. Gregorio Vice President and Chief Financial Officer, Treasurer, Clerk and Principal Accounting Officer 11 EX-11 2 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 SPIRE CORPORATION STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months Ended March 31, ---------------------------- 1998 1997 ---------- ---------- NET EARNINGS PER COMMON SHARE - (BASIC) Net earnings $ 17,159 $ 150,294 ========== ========== Weighted average number common shares outstanding 3,216,869 3,020,025 ========== ========== Net earnings per common share - (basic) $ 0.01 $ 0.05 ========== ========== NET EARNINGS PER COMMON SHARE - (DILUTED) Net earnings $ 17,159 $ 150,294 ========== ========== Weighted average number common shares outstanding 3,216,869 3,020,025 Add net additional common shares upon exercise of common stock options 134,041 0 ---------- ---------- Adjusted average common shares outstanding 3,350,910 3,020,025 ========== ========== Net earnings per common share - (diluted) $ 0.01 $ 0.05 ========== ==========
12 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB. 1 U.S. DOLLARS 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1 691,644 0 4,075,297 40,000 1,675,830 7,347,583 24,382,076 19,464,148 12,596,205 2,368,476 0 0 0 37,889 10,189,840 12,596,205 1,326,640 4,442,526 803,761 4,428,704 12,337 0 0 26,159 9,000 17,159 0 0 0 17,159 0.01 0.01
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