1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the Fiscal Year Ended December 31, 1996 Commission File Number -------------------------- SPIRE CORPORATION CASH OR DEFERRED PROFIT SHARING 401(k) PLAN ---------------------------------------------------- (Full title of the plan) SPIRE CORPORATION One Patriots Park Bedford, Massachusetts 01730-2396 ---------------------------------------------------- (Name and address of issuer of the securities held pursuant to the plan) Financial Statements December 31, 1996 (With Independent Auditor's Report Thereon) 2 SPIRE CORPORATION CASH OR DEFERRED PROFIT SHARING 401(k) PLAN Index to Financial Statements Independent Auditor's Report Statements of Net Assets Available for Plan Benefits Statements of Changes in Net Assets Available for Plan Benefits Notes to the Financial Statements 3 [GPB LOGO] GERALD P. BONDER & COMPANY, P.C. CERTIFIED PUBLIC ACCOUNTANTS Six Beacon Street, Boston, Massachusetts 02108-3801 * 617/227-1442 * Fax 617/227-7071 INDEPENDENT AUDITOR'S REPORT ---------------------------- The Participants and Administrator of The Spire Corporation Cash or Deferred Profit Sharing 401(k) Plan: We have audited the accompanying statements of net assets available for plan benefits of the Spire Corporation Cash or Deferred Profit Sharing 401(k) Plan as of December 31, 1996 and 1995, and the related statements of changes in net assets available for plan benefits for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits at December 31, 1996 and 1995, and the changes in net assets available for plan benefits for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ Gerald P. Bonder & Company, P.C. March, 1997 Member of the Private Companies Practice Section, American Institute of Certified Public Accountants 4 SPIRE CORPORATION CASH OR DEFERRED PROFIT SHARING 401(k) PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS DECEMBER 31, 1996 1995 - -------------------------------------------------------------------------------- ASSETS: - ------- Investments: At fair value: Common stock - Spire Corporation $ 504,776 428,690 At contract value: Hartford Fixed Income Fund 403,174 474,614 Hartford Group Annuity Contracts 2,831,658 2,177,314 ---------- --------- Total investments 3,739,608 3,080,618 Contribution receivable - employee 33,517 35,688 Contribution receivable - employer 5,016 60,245 Participants' loan receivable 85,992 72,460 Cash 94,734 7,749 ---------- --------- NET ASSETS AVAILABLE FOR BENEFITS $3,958,867 3,256,760 ========== ========= See accompanying notes to the financial statements 5 SPIRE CORPORATION CASH OR DEFERRED PROFIT SHARING 401(K) PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS YEARS ENDED DECEMBER 31, Group Fixed Company 1996 Group LOANS ANNUITY INCOME STOCK TOTAL LOANS ANNUITY ----- ------- ------ ----- ----- ----- ------- Additions to Net Assets attributed to: Investment income: Interest and dividends 22,230 2,769 24,999 Interest-other 7,055 7,055 7885 Realized gains 4,426 4,426 Net appreciation(depreciation) in fair value of investments as determined by quoted market price 396,284 39,875 436,159 64911 ------ --------- -------- ------- --------- ------- --------- 7,055 400,710 22,230 42,644 472,639 7,885 64,911 Contributions: Employer 137,929 137,929 Employees 9,471 353,664 36,633 4,150 403,918 (44,875) 114,708 ------ --------- -------- ------- --------- ------- --------- Total additions 16,526 754,374 58,863 184,723 1,014,486 (36,990) 179,619 ------ --------- -------- ------- --------- ------- --------- Transfers 32,091 (24,344) (7,747) 2,033,383 Deductions from Net Assets attributed to: Benefits paid to participants (2,994) (137,875) (102,551) (66,689) (310,109) Insurance premiums paid for participants (2,270) (2,270) ------ --------- -------- ------- --------- ------- --------- Total deductions (2,994) (137,875) (102,551) (68,959) (312,379) ------ --------- -------- ------- --------- ------- --------- Net increase(decrease) 13,532 648,590 (68,032) 108,017 702,107 (36,990) 2,213,002 Net assets available for plan benefits: Beginning of year 72,460 2,213,002 474,614 496,684 3,256,760 109,450 ------ --------- -------- ------- --------- ------- --------- End of year 85,992 2,861,592 406,582 604,701 3,958,867 72,460 2,213,002 ====== ========= ======== ======= ========= ======= ========= Fixed Mutual Company 1995 Mutual Company 1994 INCOME FUNDS STOCK TOTAL FUNDS STOCK TOTAL ------ ----- ----- ----- ----- ----- ----- Additions to Net Assets attributed to: Investment income: Interest and dividends 7956 57,241 65,197 120,128 120,128 Interest-other 7,885 6,743 6,743 Realized gains 305,825 305,825 Net appreciation(depreciation) in fair value of investments as determined by quoted market price (28,129) 36,782 (141,221) (233,840) (375,061) ------- ---------- ------- --------- --------- -------- --------- 7,956 363,066 (28,129) 415,689 (14,350) (233,840) (248,190) Contributions: Employer 150,852 150,852 155,252 155,252 Employees 12,805 294,830 4,426 381,894 390,614 4,327 394,941 ------- ---------- ------- --------- --------- -------- --------- Total additions 20,761 657,896 127,149 948,435 376,264 (74,261) 302,003 ------- ---------- ------- --------- --------- -------- --------- Transfers 529,389 (2,555,022) (7,750) Deductions from Net Assets attributed to: Benefits paid to participants (75,536) (154,131) (41,690) (271,357) (252,550) (44,218) (296,768) Insurance premiums paid for participants (1,362) (1,362) (2,000) (2,000) ------- ---------- ------- --------- --------- -------- --------- Total deductions (75,536) (154,131) (43,052) (272,719) 252,550 (46,218) (298,768) ------- ---------- ------- --------- --------- -------- --------- Net increase(decrease) 474,614 (2,051,257) 76,347 675,716 123,714 (120,479) 3,235 Net assets available for plan benefits: Beginning of year 2,051,257 420,337 2,581,044 2,036,993 540,816 2,577,809 ------- ---------- ------- --------- --------- -------- --------- End of year 474,614 496,684 3,256,760 2,160,707 420,337 2,581,044 ======= ========== ======= ========= ========= ======== ========= 6 SPIRE CORPORATION CASH OR DEFERRED PROFIT SHARING 401(k) PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 - -------------------------------------------------------------------------------- (1) DESCRIPTION OF PLAN ------------------- The following description of the Spire Corporation (Company) Cash or Deferred Profit Sharing 401(k) Plan (Plan) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions. (a) GENERAL ------- The Plan is a salary reduction (401(k)) plan covering all full-time employees of the Company who have three months of service and are age twenty-one or older. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). (b) CONTRIBUTIONS ------------- 1. EMPLOYER CONTRIBUTION --------------------- The Company will contribute to the Plan an amount equal to 40% of an employee's contributions up to a maximum of 6% of an employee's cash compensation. The Company's contribution will always be used to purchase/acquire Company common stock on the open market. 2. EMPLOYEE CONTRIBUTION --------------------- Employees electing to participate in the Plan may defer receipt of up to 17.5% of their compensation subject to the limitation imposed by the Internal Revenue Code in any one calendar year, by directing the Company to invest the deferred amount in various investment vehicles. The investment choices are the Company's common stock and several investment funds offered by Hartford Life Insurance Company. (c) PARTICIPANTS' ACCOUNTS ---------------------- Each participant's account is credited with the participant's contribution and the Company's match contribution, plus an allocation of (a) plan earnings, and (b) forfeitures of terminated participants' nonvested accounts. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. (d) VESTING ------- Participants are immediately vested in their voluntary contributions plus actual earnings thereon. Vesting in other amounts is based on years of continuous service. A participant is 100 percent vested after six years of credited service. 7 SPIRE CORPORATION CASH OR DEFERRED 2 PROFIT SHARING 401(k) PLAN NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (e) PAYMENTS OF BENEFITS -------------------- On termination of service, a participant may elect to receive either a lump-sum amount equal to the value of his or her account, or annual installments over a period no longer than ten years. In addition, a participant is eligible to receive distributions under financial hardship rules for medical, housing and education needs. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ (a) USE OF ESTIMATES ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires the plan administrator to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. (b) CONCENTRATION OF CREDIT RISK ---------------------------- Financial instruments which subject the Plan to concentration of credit risk principally of guaranteed investment contracts. The Plan restricts investment of guaranteed investment contracts to financial institutions with high credit standing. (3) INVESTMENTS AND ADMINISTRATION OF PLAN ASSETS --------------------------------------------- Effective for the 1995 plan year, the trustees of the plan have entered into a contract with Hartford Life Insurance Company (Hartford) to maintain custody of assets of the plan. Under the terms of the contract, certain assets of the plan are held in a Deposit Administration Account for the benefit of the participants. The Deposit Administration Account consists of: (a) The Fixed Income Fund, which includes amounts allocated to Hartford's General Investment Account. These amounts are guaranteed as to principal and minimum interest earnings. The interest rate guaranteed for the year ended December 31, 1996 was 5.35%. (b) The Direct Participation Account, which consists of amounts allocated to Separate Investment Accounts. The Separate Investment Accounts offered include a growth stock fund, an international investment fund and a capital appreciation stock fund. The amounts invested in the Direct Participation Account are not guaranteed as to principal or minimum interest earnings. 8 SPIRE CORPORATION CASH OR DEFERRED 3 PROFIT SHARING 401(k) PLAN NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (3) INVESTMENTS AND ADMINISTRATION OF PLAN ASSETS (continued) --------------------------------------------- The common shares of the Company and the mutual fund shares are valued at fair value on December 31 of each year. Fair value is determined by using quoted market values. The fixed income fund and group annuity contracts are stated at contract value, which approximates fair value, as reported to the plan by Hartford. During the years ended December 31, the Plan's investments appreciated (depreciated) in value by $436,159 in 1996 and $36,782 in 1995, and $(375,061) in 1994. (4) INCOME TAXES ------------ The Plan qualifies for certain tax benefits under Section 401(a) and 401(k) of the Internal Revenue code. The Federal tax consequences to employees participating in the Plan, and to the Company, under present tax laws are as follows: Salary reductions designated by employees to be contributed to the Plan from their compensation are not includable in employees' taxable income and are not subject to Federal tax withholding at the time such contributions are made. Additionally, interest, dividends and other earnings on such contributions are not subject to tax when earned. Employees will be taxed on such contributions and earnings at the time such amounts are returned as withdrawals or distributions. (5) PLAN TERMINATION ---------------- Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contribution at any time and to terminate the Plan subject to the provisions of ERISA. In the event of plan termination, participants will become 100 percent vested in their accounts. (6) EXPENSES NOT INCLUDED IN THE FINANCIAL STATEMENTS ------------------------------------------------- The Company pays all professional fees and other expenses related to the Profit Sharing 401(k) Plan.