2001
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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, 2001.
or
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number: 0-12742
SPIRE CORPORATION
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(NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
Massachusetts 04-2457335
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(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION IDENTIFICATION NUMBER)
One Patriots Park, Bedford, Massachusetts 01730-2396 781-275-6000
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (ISSUER'S TELEPHONE
NUMBER, INCLUDING
AREA CODE)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange on Which Registered
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Not applicable Not applicable
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value, Nasdaq
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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 6,693,035 outstanding
shares of the issuer's only class of common equity, Common Stock, $.01 par
value, on April 30, 2001.
Transitional Small Business Disclosure Format (Check One): Yes |_| No |X|
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SPIRE CORPORATION
INDEX
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets at 3
March 31, 2001 (unaudited) and December 31, 2000
Condensed Consolidated Statements of Operations 4
For the Three Months Ended March 31, 2001 and 2000 (unaudited)
Condensed Consolidated Statements of Cash Flows 5
For the Three Months Ended March 31, 2001 and 2000 (unaudited)
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 10
Item 6. Exhibits and Reports on Form 8-K. 10
SIGNATURES
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SPIRE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2001 2000
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(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents $ 7,664,646 $ 7,463,382
Accounts receivable, trade:
Amounts billed 1,876,785 2,210,901
Retainage 45,457 45,457
Unbilled costs 764,561 977,800
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2,686,803 3,234,158
Less allowance for doubtful accounts 108,000 108,000
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Net accounts receivable 2,578,803 3,126,158
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Inventories 3,057,332 2,958,840
Deferred income taxes 260,000 260,000
Prepaid expenses and other current assets 266,111 326,725
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Total current assets 13,826,892 14,135,105
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Property and equipment 14,955,622 15,084,479
Less accumulated depreciation and amortization 12,824,784 12,913,912
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Net property and equipment 2,130,838 2,170,567
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Patents (less accumulated amortization, $483,292 in 2001 and $478,287 in 2000) 147,126 131,128
Other assets 4,867 5,567
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151,993 136,695
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$16,109,723 $16,442,367
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,804,349 $ 1,230,607
Accrued liabilities 1,217,734 1,229,432
Notes payable 675,000 550,000
Advances on contracts in progress 1,677,041 2,100,910
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Total current liabilities 5,374,124 5,110,949
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Stockholders' equity
Common stock, $.01 par value; shares authorized 20,000,000;
issued 6,686,324 shares in 2001 and 6,681,824 shares in 2000 66,863 66,818
Additional paid-in capital 8,884,646 8,877,019
Retained earnings 1,784,090 2,387,581
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Total stockholders' equity 10,735,599 11,331,418
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$16,109,723 $16,442,367
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See accompanying notes to condensed consolidated financial statements.
3
SPIRE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31,
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2001 2000
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Net sales and revenues
Contract research, service and license revenues $ 1,251,200 $ 2,376,954
Sales of goods 1,968,670 2,154,666
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Total sales and revenues 3,219,870 4,531,620
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Costs and expenses
Cost of contract research, services and licenses 890,661 1,531,622
Cost of goods sold 1,618,404 1,313,919
Selling, general and administrative expenses 1,394,252 1,338,360
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Total costs and expenses 3,903,315 4,183,901
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Earnings (loss) from operations (683,445) 347,719
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Interest income, net 79,953 125,093
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Earnings (loss) before income taxes (603,491) 472,812
Income tax expense -- 205,600
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Net earnings (loss) $ (603,491) $ 267,212
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Earnings (loss) per share of common stock - basic $ (0.09) $ 0.04
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Earnings (loss) per share of common stock - diluted $ (0.09) $ 0.04
=========== ===========
Weighted average number of common and common equivalent shares
outstanding - basic 6,685,477 6,590,478
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Weighted average number of common and common equivalent shares
outstanding - diluted 6,685,477 7,030,724
=========== ===========
See accompanying notes to condensed consolidated financial statements.
4
SPIRE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31,
---------------------------------
2001 2000
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Cash flows from operating activities:
Net earnings (loss) $ (603,491) $ 267,212
Adjustments to reconcile net earnings (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 120,735 111,929
Loss (gain) on sale and abandonment of assets 25,740 --
Changes in assets and liabilities:
Accounts receivable 547,355 (1,107,428)
Inventories (98,492) 284,259
Prepaid expenses and other current assets 60,614 (43,173)
Income taxes payable -- (864,400)
Accounts payable and accrued liabilities 562,044 (895,220)
Advances on contracts in progress (423,869) (650,027)
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Net cash provided by (used in) operating activities 190,636 (2,896,848)
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Cash flows from investing activities:
Additions to property and equipment (98,709) (110,362)
Increase in patent costs (24,035) (1,015)
Other assets 700 (3,800)
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Net cash provided by (used in) investing activities (122,044) (115,177)
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Cash flows from financing activities:
Net borrowings (payments) on short-term debt 125,000 --
Exercise of stock options 7,672 151,384
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Net cash provided by (used in) financing activities 132,672 151,384
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Net increase (decrease) in cash and cash equivalents 201,264 (2,860,641)
Cash and cash equivalents, beginning of period 7,463,382 10,709,370
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Cash and cash equivalents, end of period $ 7,664,646 $ 7,848,729
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 18,443 $ 3,000
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Income taxes $ 6,000 $ 1,070,000
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See accompanying notes to condensed consolidated financial statements.
5
SPIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2001
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, 2001 and the results of
operations for the three months ended March 31, 2001 and 2000 and cash flows for
the three months ended March 31, 2001 and 2000. The results of operations for
the three months ended March 31, 2001 are not necessarily indicative of the
results to be expected for the fiscal year ending December 31, 2001.
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, 2000.
The financial statements, with the exception of the December 31, 2000
balance sheet, are unaudited and have not been examined by independent certified
public accountants.
2. INVENTORIES.
Inventories consist of the following:
March 31, December 31,
2001 2000
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Raw materials $1,050,611 $ 588,732
Work in process 1,679,450 1,951,842
Finished goods 327,271 418,266
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$3,057,332 $2,958,840
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3. EARNINGS PER SHARE.
The following table provides a reconciliation of the denominators of the
basic and diluted earnings (loss) per share computations for the Company's
reported earnings (loss):
Three Months Ended March 31,
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2001 2000
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Weighted average number of common shares outstanding - basic 6,685,477 6,590,478
Add net additional common shares upon exercise of common
stock options -- 440,246
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Adjusted weighted average common shares outstanding - diluted 6,685,477 7,030,724
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At March 31, 2001, 263,710 shares of common stock issuable under stock
options were outstanding, but were not included in the calculation of diluted
earnings per share because the Company incurred a net loss for the three months
ended March 31, 2001 and, therefore, the effect would be antidilutive.
6
4. OPERATING SEGMENTS AND RELATED INFORMATION.
The following table presents certain operating division information in
accordance with the provisions of SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information", which was adopted in 1998.
Solar Solar Biomedical Biophotonics Total
Equipment Systems Division Division Company
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For the Three Months Ended March 31, 2001
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Net sales and revenues $ 2,112,956 $ 19,742 $ 883,855 $ 203,717 $ 3,219,870
Earnings (loss) from operations (166,821) (211,301) (230,211) (75,111) (683,444)
For the Three Months Ended March 31, 2000
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Net sales and revenues $ 2,129,899 $ 226,309 $ 1,355,628 $ 819,784 $ 4,531,620
Earnings (loss) from operations 157,902 (27,085) 123,572 93,328 347,719
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS SECTION AND OTHER PARTS OF THIS REPORT CONTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS MAY DIFFER SIGNIFICANTLY FROM
THE RESULTS AND TIMING DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT
COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO,
THOSE DISCUSSED OR REFERRED TO IN THIS REPORT AND IN ITEM 6 OF THE ANNUAL REPORT
OF FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2000.
Overview.
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Spire develops, manufactures and markets highly-engineered solar
electric module manufacturing equipment and systems 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 144 factories and in 42
countries. Spire's value-added biomedical processing services offer surface
treatments to enhance the durability or the antimicrobial characteristics of
orthopedic and other medical devices.
Results of Operations.
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The following table sets forth certain items as a percentage of net
sales and revenues for the periods presented:
Three Months Ended March 31,
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2001 2000
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Net sales and revenues 100% 100%
Cost of sales and revenues 78 63
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Gross profit 22 37
Selling, general and administrative expenses 43 29
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Earnings (loss) from operations (21) 8
Earnings (loss) before income taxes (19) 10
Income tax expense (benefit) -- 5
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Net earnings (loss) (19)% 6%
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7
Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000.
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NET SALES AND REVENUES
Net sales and revenues decreased $1,312,000 or 29% for the three months
ended March 31, 2001 to $3,220,000, compared to $4,532,000 for the three months
ended March 31, 2000. Contract research, service and license revenues decreased
$1,126,000 or 47% to $1,251,000 for the three months ended March 31, 2001
compared to $2,377,000 for 2000. Sales of goods decreased $186,000 or 9% to
$1,969,000 for 2001, compared to $2,155,000 for 2000. Sales in goods decreased
due to lower systems sales in Chicago.
The following table categorizes the Company's net sales and revenues for
the periods presented:
Three Months Ended March 31,
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2001 2000 % Change
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Contract research, service and license revenues $1,251,000 $2,377,000 (47)%
Sales of goods 1,969,000 2,155,000 (9)%
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Net sales and revenues $3,220,000 $4,532,000 (29)%
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COST OF SALES AND REVENUES
The cost of contract research, service and license revenues decreased
$641,000 to $891,000, but increased to 71% of related revenues, for the three
months ended March 31, 2001, compared to $1,532,000 or 64% of related revenues
for the three months ended March 31, 2000. The decrease is due to a change in
product mix, and lower volume. Cost of goods sold decreased $304,000 to
$1,618,000, but increased to 82% of related sales, for the three months ended
March 31, 2001, compared to $1,314,000 or 61% of related sales, for the three
months ended March 31, 2000, due to lower volume.
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,
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2001 % 2000 %
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Cost of contract research, service and license revenues $ 891,000 71% $1,532,000 64%
Cost of goods sold 1,618,000 82% 1,314,000 61%
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Total cost of sales and revenues $2,509,000 78% $2,846,000 63%
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months ended
March 31, 2001 increased $56,000 to $1,394,000, and increased to 43% of sales
and revenues, compared to $1,338,000 or 29% of sales and revenues for the three
months ended March 31, 2000. The increase in selling, general and administrative
expenses is due to the Company investing in its sales and marketing activities.
INTEREST
The Company earned $100,000 of interest income for the three months
ended March 31, 2001, compared to $128,000 of interest income for the three
months ended March 31, 2000. The Company incurred interest expense of $20,000 in
the three months ended March 31, 2001 of which none was capitalized, compared to
no interest expense for the three months ended March 30, 2000.
INCOME TAXES
The Company recorded no tax for the three months ended March 31, 2001,
compared to $206,000 of income tax expense for the three months ended March 31,
2000.
8
NET EARNINGS (LOSS)
The Company reported a net loss for the three months ended March 31,
2001 of $603,000, compared to net earnings of $267,000 for the three months
ended March 31, 2000.
Liquidity and Capital Resources.
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To date the Company has been able to fund its operating cash
requirements using proceeds from sale of assets, operations and available lines
of credit. On July 25, 2000, the Company entered into a revolving credit
agreement with the Silicon Valley Bank, replacing its previous credit facility
with the 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. At March 31, 2001,
interest on the line was at the Bank's prime rate plus 1/2 percent (8.5%). The
line contains covenants including provisions relating to profitability and net
worth. The Company was in default of the covenants as of March 31, 2001. The
line is classified as a current liability. As of March 31, 2001, the Company had
$675,000 outstanding under this revolving credit facility.
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 increased
$202,000 to $7,665,000 at March 31, 2001 from $7,463,000 at December 31, 2000.
To date, there are no material commitments by the Company for capital
expenditures. At March 31, 2001, the Company's retained earnings were
$1,784,000, compared to retained earnings of $2,388,000 as of December 31, 2000.
Working capital as of March 31, 2001 decreased 6% to $8,453,000, compared to
$9,024,000 as of December 31, 2000.
Recent Accounting Pronouncements.
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In June 1998, Statement of Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instruments and Hedging Activities." was issued.
The Company adopted SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138,
on January 1, 2001. The adoption of SFAS No. 133 has not had a material impact
on the Company's financial position or overall trends in results of operations
and has not resulted in significant changes to its financial risk management
practices.
In January 2001, the EITF reached a consensus on Issue 00-22, ACCOUNTING
FOR "POINTS" AND CERTAIN OTHER TIME-BASED OR VOLUME-BASED SALES INCENTIVE
OFFERS, AND OFFERS FOR FREE PRODUCTS OR SERVICES TO BE DELIVERED IN THE FUTURE.
Issue 00-22 will require that certain volume-based cash rebates to customers
currently recognized as marketing costs be classified as a reduction of revenue.
The consensus is effective for the first quarter of 2001 and was not material to
our consolidated financial statements.
Impact of Inflation and Changing Prices.
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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 approximately 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 because its procurement-production cycle typically ranges
from two weeks to several months, and prices generally are not fixed for more
than one year. Research and development contracts usually include cost
escalation provisions.
9
Foreign Exchange Fluctuation.
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The Company sells only in U.S. dollars, generally against an irrevocable
confirmed letter of credit through a major U.S. bank. Therefore the Company is
not directly affected by foreign exchange fluctuations on its current orders.
However, fluctuations in foreign exchange rates do have an effect on the
Company's customers' access to U.S. dollars and on the pricing competition on
certain pieces of equipment that the Company sells in selected markets.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is subject, from time to time, to legal proceedings and
claims arising out of its business, which cover a wide range of matters.
Management, after review and consultation with counsel, considers that any
liability from all of these legal proceedings and claims would not materially
affect the consolidated financial position, results of operations or liquidity
of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits.
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No exhibits are filed herewith.
b. Reports of Form 8-K.
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No reports on Form 8-K were filed by the Registrant in the quarter ended
March 31, 2001.
10
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
15 May 2001 By: /s/ Roger G. Little
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Date Roger G. Little
President, Chief Executive Officer
and Chairman of the Board
15 May 2001 By: /s/ Richard S. Gregorio
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Date Richard S. Gregorio
Vice President and Chief Financial
Officer, Treasurer, Clerk and
Principal Accounting Officer
11