1999

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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                   FORM 10-KSB
(MARK ONE)

|X|   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934 [No Fee Required] For the fiscal year ended December 31, 1999.
      or
|_|   Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 [No Fee Required]
      For the transition period from ______________ to ______________

Commission file number:  0-12742

                                SPIRE CORPORATION
                                -----------------
                 (NAME OF SMALL BUSINESS ISSUER 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)

Securities registered under Section 12(b) of the Exchange Act:

  Title of Each Class               Name of Each Exchange on Which Registered
  -------------------               -----------------------------------------
    Not applicable                               Not applicable

Securities registered under Section 12(g) of the Exchange Act:

                      Common Stock, $.01 par value, Nasdaq
                      ------------------------------------

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 |_|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |_|

State issuer's revenues for its most recent fiscal year:  $11,901,000.

Based on the closing average price for the registrant's voting stock on February
29, 2000, the aggregate market value of such voting stock held by non-affiliates
of the registrant was $9,587,190.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. There were 3,283,088 shares of the
issuer's only class of common equity, Common Stock, $.01 par value, on February
29, 2000.

Transitional Small Business Disclosure Format (Check One):   Yes  |_|   No  |X|

DOCUMENTS INCORPORATED  BY REFERENCE

Portions of the definitive proxy statement for the Special Meeting of
Stockholders in Lieu of 2000 Annual Meeting to be held on May 23, 2000 are
incorporated by reference into Part III of this Report.
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<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.
--------------------------------

       THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS MAY
DIFFER MATERIALLY 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 BELOW AND IN "RISK FACTORS" AND
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."

BUSINESS DEVELOPMENT

       Spire Corporation ("Spire" or the "Company"), a Massachusetts corporation
incorporated in 1969, is organized into three business areas all of which have
developed out of the Company's expertise in semiconductor technologies:

             o  Photovoltaics equipment,
             o  Biomedical, and
             o  Optoelectronics.

The Company's revenues over the past three years have been between $12 and $23
million, but the sources of those revenues have varied among the Company's three
primary business areas.

       On December 30, 1999, the Company sold substantially all of the assets of
its optoelectronics business for cash proceeds of $12,910,003. The assets that
were sold to the purchaser included machinery, equipment and technology. Until
December 30, 2004 the Company may not compete with the purchaser's
optoelectronics business. However, the restrictions on competition do not
prevent the Company from engaging in optoelectronics business activities in
conducting its terrestrial photovoltaic business relating to terrestrial solar
cells and related components, or in conducting its biomedical business relating
to implanted medical devices and related instrumentation and components. The
Company will continue to perform the project management element of its U.S.
government optoelectronics research and development contracts until they are
completed through 2001. The Company has entered into a subcontract with the
purchaser under each of the remaining government contracts for a portion of the
research and development services. In addition, the Company will continue to bid
on new optoelectronics U.S. government funded research and development contracts
which may include additional subcontracts with the purchaser.

BUSINESS OF ISSUER

       Spire develops, manufactures and markets highly-engineered photovoltaic
module manufacturing equipment 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 39 countries.
Spire's value-added biomedical processing services offer surface treatments to
enhance the durability or antimicrobial characteristics of orthopedic and other
medical devices. Spire also conducts research and development activities,
primarily for the U.S. government.

PHOTOVOLTAICS

       Photovoltaics, the technology of using solar cells to convert sunlight
directly into electricity, is a growing alternative energy production method and
an increasingly important component of world energy production, particularly in
the wireless telecommunications sector. With this technology, electricity is
produced by using photovoltaic modules, which consist of a number of solar cells
connected to each other and laminated in reliable and durable support
structures. The Company's module manufacturing equipment and production line
configurations offer its customers a range of manufacturing processes, from
labor intensive to fully automated systems. Spire's products include solar cell
testers, cell tabbing and stringing assemblers, laminators and sun simulator
module testers, as well as turnkey module production lines complete with
comprehensive technology, training and service support.

                                       2
<PAGE>

       Spire's market leadership and international reputation for quality
manufacturing and process technology position the Company to capitalize on the
photovoltaic market. From 1993 to 1997, global usage of terrestrial photovoltaic
power increased substantially, due to such factors as rural electrification in
the developing world, the accelerated growth of wireless telecommunications,
with its need for wireless power, and increased environmental concerns
encouraging the use of renewable energy sources. Awareness and acceptance of
photovoltaics as an energy source are growing as a result of receiving
significant support from initiatives such as the PV Rooftop Program in Japan,
the Building Integration Program in Germany and the Clinton Administration's
"Million Solar Roofs Initiative." During 1998, demand for photovoltaic
manufacturing equipment slowed due to global economic conditions and excess
photovoltaic production capacity. The Asian economic crisis, particularly in
Japan, slowed funding of government backed programs. Many European expansion
plans have also been delayed due to economic concerns. During 1999 demand showed
a resurgence particularly in the Asian and European markets. See "Risk Factors -
Dependence on Market Growth," "- Competition," and "Dependence on Export Sales."

BIOMEDICAL

       The Biomedical division specializes in surface treatment to improve the
performance of medical devices such as catheters, orthopedic prostheses and
vascular grafts. The Company's processes reduce friction and wear, provide
infection resistance, and enhance tissue and blood compatibility by altering
surface composition and chemistry. The Company's surface treatment technologies
include proprietary ion beam and ion-beam-assisted deposition (IBAD) processes.
As the market leader in ion-beam processing, the Company can apply these
technologies to metals, polymers and ceramics.

       The Company's IONGUARD(R) ion-beam processes are chosen by the orthopedic
industry when improved prosthesis performance is demanded. Currently, only a
small percentage of orthopedic devices are treated with the Company's
proprietary processing technologies. The aging of the American population and a
trend to more active lifestyles are driving the need for more durable,
long-lived prostheses.

       SPI-Argent(TM) and SPI-Argent/Implant, two of the Company's surface
treatments for infection resistance, thromboresistance, and reduced friction,
are increasingly demanded as healthcare providers recognize the need to reduce
costs by eliminating device related complications. SPI-Argent processes
incorporate elemental silver, a widely useful antimicrobial agent, into the
surfaces of medical devices for long term efficacy and performance. See "Risk
Factors - Dependence on Market Growth ," and " - Government Regulation."

OPTOELECTRONICS BUSINESS

       Optoelectronics involves the conversion of light into electricity, like
photovoltaics, and/or the conversion of electricity to light. Optoelectronics
uses thin film technology, such as metalorganic chemical vapor deposition
(MOCVD), to create semiconductor devices for telecommunications, biomedical and
electronics applications. In an MOCVD reactor, specialized in semiconductor
materials are deposited onto substrate wafers as single-crystal thin films.
These wafers are then further processed into various semiconductor devices.

       During 1999, the Company utilized its optoelectronics technologies to
perform on various U.S. government funded research and development programs, to
continue to develop its optoelectronics technologies. The Company also produced
and commercially sold optoelectronic products in the form of diode lasers and
compound semiconductor wafers.

       On December 30, 1999, the Company sold substantially all of the assets of
its optoelectronics business, retaining the project management element of its
U.S. government optoelectronics research and development contracts until they
are completed through 2001. See Note (9) of the financial statements and
"Description of Business - Business Development" on page two for a complete
description of the sale of the optoelectronics business.

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                               GENERAL INFORMATION
                               -------------------

RESEARCH AND DEVELOPMENT

       The Company's policy is to support as much of its research and
development as possible through government contract funding, which it recognizes
as revenue. Revenues from the Company's research and development contracts
funded by the U.S. government, and their percent of net revenues, for the last
three years were as follows:

    ----------------------- ------------------------ ------------------------
             1999                    1998                     1997
    ----------------------- ------------------------ ------------------------
          $4,381,000              $6,092,000               $7,972,000
    ----------------------- ------------------------ ------------------------
             37%                      43%                      35%
    ----------------------- ------------------------ ------------------------

As of December 31, 1999, the Company was performing 24 contracts and grants for
the U.S. government, compared with 17 as of December 31, 1998. All contracts
with U.S. government agencies have been audited through December 1996. The
audits for the years ended December 31, 1997, through December 31, 1999 have not
yet been performed.

       The Company's contracts with the U.S. government grant to the Company
proprietary rights in any technology developed pursuant to such contracts and
grant to the U.S. government a non-exclusive license to utilize the technology
for its benefit. The U.S. government retains the right to obtain the patent on
any inventions made under these contracts as to which patent protection is not
sought and obtained by the Company. The Company's rights to technology developed
under contracts with private companies vary, depending upon negotiated terms.
See "Risk Factors - Dependence on Outside Funding for Research and Development,"
" - Protection of Proprietary Technology" and " - Government Regulation."

       The Company's internally funded research and development expenditures for
the last three years were as follows:

    ----------------------- ------------------------ ------------------------
             1999                    1998                     1997
    ----------------------- ------------------------ ------------------------
           $184,000                $344,000                 $133,000
    ----------------------- ------------------------ ------------------------

SALES AND MARKETING

       The Company builds its photovoltaic module manufacturing equipment
generally to order, and usually requires 35% of the total purchase price on
order, 55% on shipment and the final 10% upon acceptance of the equipment by the
customer. The Company receives progress payments under its research and
development contracts on a cost reimbursement or per deliverable basis.
Biomedical processing services generally is sold on a net 30 day basis.

       The Company markets its photovoltaics products and services through
non-exclusive commissioned sales representatives, as well as through its
internal staff. The outside sales representatives are responsible for making
initial contacts with potential customers, after which the representatives work
in conjunction with the Company's internal staff to consummate sales. The
Company believes that use of outside sales representatives is particularly
important in facilitating access into certain foreign countries. Most of the
Company's sales representatives have had long term relationships with the
Company, and work with the Company without written agreements. Sales initiated
through the Company's internal staff arise from a number of sources, including
trade shows, printed advertisements and telephone campaigns.

       In the biomedical area, the Company concentrates on identifying and
serving the leading U.S. manufacturers of orthopedic and other medical devices.
Where possible, the Company seeks to be the sole provider of surface processing
services to its biomedical customers.

       The optoelectronics division will no longer be offering commercial
products.

       The Company's scientists are responsible for submitting proposals to the
U.S. government and other outside sources for sponsored research and development
work, particularly in the optoelectronics area. See "Risk Factors - Dependence
on Outside Funding for Research and Development," " - Reliance on Sales
Representatives" and " Technological Advances; Dependence on Future Product
Development and Market Acceptance."

                                       4
<PAGE>

MANUFACTURING AND QUALITY CONTROL

       The Company manufactures all of its products and performs all of its
biomedical processing services in a single facility. The fulfillment of each
customer order for the Company's photovoltaic module manufacturing equipment
requires customized engineering and systems design. While the time required to
fill orders is slightly different for each item of equipment, it generally takes
approximately six months from date of order to delivery to the customer. The
first few months of this process is devoted to customizing the design of the
item of equipment to meet the customer's requirements. The balance of the time
is spent on internal assembly, wiring and testing of the equipment. The Company
maintains quality control measures throughout each step of the manufacturing
process. Employees are responsible for reviewing incoming materials, conducting
interim testing throughout the Company's processing of the materials, and
servicing and testing final products before shipment to the Company's customers.

         In the biomedical area, customers ship medical devices to be
surface-processed to the Company. These devices are reviewed for surface defects
prior to undergoing the Company's surface processing, and are reviewed again for
defects upon completion of the processing. The devices are then shipped back to
the customer.

       The Company assembles its photovoltaic module manufacturing equipment
from a combination of components purchased from a variety of suppliers and
self-fabricated components. The Company has not experienced any major price
increases, or lack of availability, of its components. For many items, alternate
sources are available. The Company believes that the loss of any supplier would
not be material due to the ability to use alternate suppliers or to substitute
other items with minimal re-engineering. The Company anticipates that it will be
able to manufacture and procure all such parts and materials in sufficient
quantities to meet its needs. See "Risk Factors - Dependence on Single
Manufacturing Facility."

PROPRIETARY RIGHTS

       Through 30 years of research and development, the Company has accumulated
extensive scientific and technological expertise. The Company protects its
technological advances as trade secrets, in part through confidentiality
agreements with employees, consultants and third parties. The Company also seeks
and enforces patents as appropriate. The Company currently has 26 U.S. patents,
of which one is jointly owned, one patent pending in the United States and two
foreign patents pending, all of which cover elements of its materials and
processing technologies.

       The majority of the Company's research and development work is funded by
the U.S. government and other entities. The U.S. government retains the right to
obtain a patent on any invention developed under government contracts as to
which the Company does not seek and obtain a patent, and may require the Company
to grant a third party license of such invention if steps to achieving practical
application of the invention have not been taken. The U.S. government also
retains a non-exclusive, royalty-free, non-transferable license to all
technology developed under government contracts, whether or not patented, for
government use, including use by other parties to U.S. government contracts.
Furthermore, the Company's U.S. government contracts prohibit the Company from
granting exclusive rights to use or sell any inventions unless the grantee
agrees that any product using the invention will be manufactured substantially
in the United States. See "Risk Factors - Protection of Proprietary Technology"
and "Government Regulation."

COMPETITION

       The Company sells its products and services in competitive markets.
Entities now operating in related markets can also enter the Company's markets.
Some of the Company's current and potential competitors have financial and
technical resources greater than those of the Company. Competitive factors for
the Company in its various markets include the amount and pace of technological
innovation, financial resources, product quality, timely delivery, service and
price. The Company believes that there are considerable barriers to entry into
the markets it serves, including a significant investment in specialized capital
equipment and product design and development, and the need for a staff with
sophisticated scientific and technological knowledge.

       The Company faces competition from various companies in the terrestrial
photovoltaic module manufacturing equipment market. As an industry leader, the
Company has been subject to competitive pricing on some of the components of its
photovoltaic module manufacturing equipment product line. The Company's
automated equipment competes with

                                       5
<PAGE>

more labor intensive, lower priced alternatives. Furthermore, the Company
competes in foreign countries where there may be a preference for doing business
with local companies. In addition, large manufacturers may produce items of
equipment for their own internal use, eliminating the purchase of such equipment
from commercial vendors. With respect to its biomedical services, the Company
competes on the basis of overall quality of service and price, and at times on
the basis of value added. The Company's services also compete against products
based on alternate technologies. In addition, the Company faces competition from
numerous other businesses, particularly small businesses throughout the United
States, for contracts for research and development funded by the U.S. government
and other outside sources.

       Because the Company often markets its photovoltaic products to
governmental agencies or financiers in foreign countries, it faces risks
inherent in international sales, such as regulatory requirements, political and
economic changes and disruptions and transportation delays. The Company also
faces competition from government or private companies in these countries. The
Company addresses these issues by working with local commissioned sales
representatives, seeking to establish a local presence, such as through its
agreements with Marubeni, maintaining technological leadership, and quoting
prices and accepting payment only in U.S. dollars, generally against letters of
credit. Because the Company sells its products only in U.S. dollars, the
Company's sales could be adversely affected to the extent that its customers
have limited access to U.S. dollars and to the extent that fluctuations in
exchange rates may render the Company's prices less competitive relative to
competitors' prices. See "Risk Factors - Competition" and " - Dependence on
Export Sales."

EMPLOYEES

       As of December 31, 1999, the Company employed 88 people, of whom 81 were
full-time. Six of the Company's employees hold Ph.D.'s. The Company has 28
employees on its technical staff and 16 on its manufacturing staff. The Company
has never experienced a work stoppage and considers its relationship with its
employees to be good. See "Risk Factors - Competition" and " - Dependence on
Export Sales."

GOVERNMENT REGULATION

       The Company's government contracts are subject to a large number of
federal regulations and oversight requirements. Compliance with the array of
government regulations requires extensive record keeping and the maintenance of
complex policies and procedures relating to all aspects of the Company's
business, as well as to work performed for the Company by any subcontractors.
The Company believes that it has put in place systems and personnel to ensure
compliance with all U.S. government regulations relating to contracting.

       The Company also is subject to export control regulations that govern the
export of Company products to designated countries, as well as the release of
technical information to non-U.S. individuals and entities. Further, the Company
is subject to federal, state and local governmental environmental regulations
and to federal OSHA regulations. The Company believes that it has complied in
all material respects with all applicable environmental and safety regulations
and has all permits necessary to conduct its business. The Company employs a
full-time Environmental and Safety Engineer to manage its compliance efforts.
The cost of such compliance has not been material to the Company.

       The introduction by the Company's customers of new biomedical products
depends on passage of these products through various stages of review by the
FDA. The process of obtaining regulatory approvals involves lengthy and detailed
laboratory and clinical testing and other costly and time-consuming procedures.
The Company continues to refine its interaction with its customers in the
regulatory approval process in an effort to streamline its customers'
application process. See "Risk Factors - Government Regulation."

                                  RISK FACTORS
                                  ------------

       IN ADDITION TO THE OTHER INFORMATION IN THIS SEC FORM 10-KSB, THE
FOLLOWING RISK FACTORS INHERENT IN AND AFFECTING THE BUSINESS OF THE COMPANY
SHOULD BE CONSIDERED. THE DISCUSSION IN THIS SEC FORM 10-KSB CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS MAY DIFFER MATERIALLY 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 BELOW AND IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS."

                                       6
<PAGE>

       DEPENDENCE ON MARKET GROWTH. The ability of the Company to sustain or
expand its business depends substantially on the stability and growth of the
various markets for the Company's products and services.

       The size of the photovoltaic market depends on the amount of worldwide
need for wireless power, especially in developing countries, and on domestic and
international government funding of initiatives to invest in solar energy as an
alternative to the burning of fossil fuels and other energy production methods.
There can be no assurance that government funding for such initiatives will be
available, or that solar energy will prove to be a cost-effective alternative to
other energy sources and gain acceptance where traditional energy sources
continue to be available. Most of the Company's research and development
revenues are generated by contracts with the U.S. government. There can be no
assurance that the U.S. government will fund the Company's research and
development projects at the same level as it has in the past. The growth of the
Company's biomedical business depends on the condition of the health care system
and the industry sectors serving that system; and on the Company's ability to
introduce new products and services. The health care system recently has been
characterized by pricing pressures and consolidations which could reduce or
eliminate demand for the Company's processing services. The merger or
consolidation of manufacturers of orthopedic and other medical devices could
reduce the number of customers for the Company's biomedical processing services.

       COMPETITION. The Company sells its products and services against existing
competitors, and entities now operating in related markets may enter the
Company's markets. Some of the Company's current and potential competitors have
financial and technical resources greater than those of the Company. Competitive
factors for the Company in its various markets include the amount and pace of
technological innovation, financial resources, product quality, timely delivery,
service and price. Although the Company believes that there are considerable
barriers to entry into the markets it serves, including a significant investment
in specialized capital equipment and product design and development, and the
need for a staff with sophisticated scientific and technological knowledge,
there can be no assurance that new or existing entities will not seek to enter
the Company's markets.

       The Company faces competition from various companies in the terrestrial
photovoltaic module manufacturing equipment market. The Company's more
technologically sophisticated and highly automated photovoltaic module
manufacturing equipment competes with more labor intensive, lower priced
alternatives. Furthermore, the Company competes in foreign countries where there
may be a preference for doing business with local companies. In addition, large
manufacturers produce some of the equipment for their own internal use,
eliminating the purchase of such equipment from commercial vendors. With respect
to its biomedical services, the Company competes on the basis of overall quality
of service and price, and at times on the basis of value added. The Company's
products and services also compete against products based on alternate
technologies. In addition, the Company faces competition from numerous other
businesses, particularly small businesses throughout the United States, for
contracts for research and development funded by the U.S. government and other
outside sources.

       DEPENDENCE ON OUTSIDE FUNDING FOR RESEARCH AND DEVELOPMENT. Substantially
all of the Company's research and development work is funded by the U.S.
government. Loss of outside funding may materially adversely affect the
Company's ability further to develop its proprietary technologies and
applications of these technologies to its current products and products under
development. If the Company is unable to maintain its current level of such
funding for any reason, the Company would need to generate funds for such
research from other sources, reduce its research and development effort or
increase its internal research and development. An increase in internally funded
research and development would have a negative impact on profitability. U.S.
government contracts are cancelable without the Company's consent. Furthermore,
all companies that are parties to cost-plus contracts with the U.S. government
are subject to annual government audit and possible recapture of payments. While
the Company has not incurred significant losses as a result of government audits
to date, the Defense Contract Audit Agency has not yet audited the Company for
the years ended after December 31, 1996 and the rates at which the Company is
reimbursed for future government contracts (see also "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Other Operating
Charges"). Loss of a number of U.S. government or other research and development
contracts could have a material adverse effect on the Company's business,
results of operations or financial condition. The number of contracts performed
by the Company for the U.S. government increased from 17 at December 31, 1998 to
25 at December 31, 1999, or an increase of 25%.

                                       7
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       DEPENDENCE ON EXPORT SALES. For the fiscal years ended December 31, 1999,
1998 and 1997, export sales from the United States accounted for approximately
the following percentages of the Company's net sales and revenues:

    ----------------------- ------------------------ ------------------------
             1999                    1998                     1997
    ----------------------- ------------------------ ------------------------
             22%                      17%                      34%
    ----------------------- ------------------------ ------------------------

The majority of the Company's international revenues are derived from sales of
its photovoltaic module manufacturing equipment. The Company anticipates that
international sales of photovoltaic products will continue to account for a
significant portion of net sales and revenues. The Company's operating results
are subject to the risks inherent in international sales, including, but not
limited to, regulatory requirements, political and economic changes and
disruptions, transportation delays, national preferences for locally
manufactured products and import duties or other taxes which may affect the
prices of the Company's products in other countries relative to competitors'
products. In addition, present or future U.S. government trade restrictions
relating to sales to certain countries may limit the Company's ability to sell
its products in the affected foreign countries.

       The Company currently sells its products only in U.S. dollars. As a
result, the Company's sales could be negatively affected to the extent that its
customers have limited access to U.S. dollars and to the extent that
fluctuations in exchange rates may render the Company's prices less competitive
relative to competitors' prices. If the Company chooses to accept payment for
its products in other currencies, it may be subject to reduced profits from
adverse changes in exchange rates. These factors could have a material adverse
effect on the Company's business, results of operations or financial condition.

       RELIANCE ON SALES REPRESENTATIVES. The Company markets its photovoltaic
manufacturing equipment products through non-exclusive commissioned sales
representatives, as well as though its internal staff. While the Company
believes it has good relationships with its sales representatives, there can be
no assurance that the Company will be able to retain such representatives. In
addition, under the Company's agreements with Marubeni Corporation of Nagoya,
Japan, Marubeni will distribute, and in some cases manufacture under a
technology license, certain Spire photovoltaic module manufacturing equipment
under Spire's name in Japan, and has rights to market this equipment line
throughout certain countries in Southeast Asia and the Pacific Rim. The loss of
a significant number of the Company's commissioned sales representatives or the
inability of Marubeni to market and distribute the Company's products
effectively in Japan, Southeast Asia and the Pacific Rim could adversely affect
the Company's ability to market its photovoltaic products and could have a
material adverse effect on the Company's business, results of operations or
financial condition.

       FLUCTUATIONS IN OPERATING RESULTS. The Company has experienced a net loss
in one out of its most recent three full fiscal years. The Company's revenues
and operating results may vary significantly from quarter to quarter as a result
of a number of factors, many of which are outside of management's control. These
factors include, among others, timing of capital expenditures by customers,
changes in demand for the Company's products, long business procurement cycles,
changes in pricing policies by the Company and its competitors, cancellation or
delay by customers of contracts with the Company and access to U.S. currency by
the Company's customers.

       TECHNOLOGICAL ADVANCES; DEPENDENCE ON FUTURE PRODUCT DEVELOPMENT AND
MARKET ACCEPTANCE. Each of the areas in which the Company maintains a
proprietary technology position is characterized by rapid technological advances
and improvements in manufacturing efficiencies. The Company's ability to operate
profitably depends in large part on its timely access to, or development of,
technological advances, and on its ability to use those advances to improve
existing products, develop new products and manufacture those products
efficiently. In addition, there can be no assurance that the Company will be
able to attain market acceptance for commercial products based on these
technologies. The failure to introduce new or enhanced products on a timely and
cost competitive basis, or to attain market acceptance for commercial products,
could have a material adverse effect on the Company's business, results of
operations or financial condition.

       PROTECTION OF PROPRIETARY TECHNOLOGY. The Company actively protects its
intellectual property and technological advances as trade secrets, in part
through confidentiality agreements with employees, consultants and third
parties. The Company also seeks and enforces patents as it deems appropriate.
The Company currently has 26 U.S. patents, one of which is jointly owned, one
patent pending in the United States and two foreign patents pending, all of
which cover elements of its materials and processing technologies. There can be
no assurance that the Company will be able to assert its intellectual property
rights successfully against allegedly infringing competitors, and the inability
to assert its rights

                                       8
<PAGE>

successfully may have a negative impact on the Company's competitive position
and financial condition. Furthermore, there can be no assurance that the
Company's intellectual property rights will deter others from developing
substantially equivalent or competitive products or from reverse-engineering the
Company's products. Even if a third party's products infringe upon the Company's
patents or other intellectual property, it may be costly to enforce such rights,
and such enforcement efforts may divert management attention from the operations
of the Company. In addition, the foreign legal protection afforded intellectual
property rights, including patents, if issued, may be different from that
afforded under U.S. laws. To the extent the Company relies on non-disclosure
agreements to protect its rights, there can be no assurance that such
information will not be disclosed in breach of these agreements or, if
disclosed, that the Company will be able to recover amounts sufficient to
compensate it for any damage such disclosure may cause.

       Further, although no such claims are currently outstanding against the
Company, there can be no assurance that the Company will not be subject to
patent or other intellectual property rights infringement claims asserted by
others, or if asserted, that the Company will be successful in defending its
position or challenging such claims. In the event that the Company were to be
adjudged to infringe patents or other intellectual property rights of others,
the Company might be required to pay damages, and might be enjoined from making,
using or selling the infringing product or service, or might be required to
obtain a royalty-bearing license, if available on acceptable terms.
Alternatively, in the event a license is not offered or is not available on
commercially acceptable terms, the Company may be required to re-engineer the
affected products or processes to avoid such infringement. There can be no
assurance that any such re-engineering will be successful or will result in
commercially acceptable alternatives, and any such re-engineering may entail
significant or prohibitive expense to the Company.

       In addition to the foregoing, the U.S. government retains the right to
obtain a patent on any invention developed under contract as to which patent
protection is not sought and obtained by the contractor, or to require the
contractor to grant a third party license of such invention if steps to achieve
practical application of the invention have not been taken. The Company has not
sought, and will not seek, patent protection for each of its inventions under
U.S. government contracts, either due to the nature of the invention or the cost
of applying for and obtaining a patent. This practice subjects the Company to
the potential of losing patent rights to the U.S. government. The Company also
may not achieve practical application of an invention in each instance, or in a
timely manner, thus leading to the possibility of a mandatory third party
license. Furthermore, the U.S. government retains a non-exclusive, royalty-free,
non-transferable license to all technology developed under government contracts,
whether or not patented, for government use, including use by other parties to
U.S. government contracts.

       DEPENDENCE ON SINGLE MANUFACTURING FACILITY. The Company has only one
manufacturing facility, and the Company's revenues are dependent upon the
continued operation of such facility. The operation of a manufacturing plant
involves many risks, including potential damage from fire or natural disasters.
In addition, the Company has obtained certain permits to conduct its business as
currently operated at its facility. There can be no assurance that such permits
would continue to be effective at the current location if the facility were
destroyed and rebuilt, or that the Company will be able to obtain similar
permits to operate at another location. While the Company maintains insurance
covering such risks, including business interruption coverage, there can be no
assurance that the occurrence of these or any other operational problems at the
Company's facility would not materially adversely affect the Company's business,
results of operations or financial condition.

       NEED TO MANAGE GROWTH. The future success of the Company will depend
upon, among other factors, the ability of the Company to identify and exploit
new product and services opportunities, to recruit, hire, train and retain
highly educated, skilled and experienced management and technical personnel, to
generate capital from operations and to manage the effects of growth on all
aspects of its business, including research, development, manufacturing,
distribution, sales and marketing, administration and finance. Any failure by
the Company to identify and exploit new product and service opportunities,
attract or retain necessary personnel, generate adequate revenues or conduct its
expansion or manage growth effectively could have a material adverse effect on
the Company's business, results of operations or financial condition.

       DEPENDENCE ON KEY PERSONNEL. The Company's long-term success and its
growth strategy depend on the efforts and abilities of its senior management,
particularly Roger G. Little, the Company's founder and its Chairman, Chief
Executive Officer and President, and on its technical staff. The loss of
services of Mr. Little or one or more of the Company's technical staff, or an
ability of the Company to attract and motivate highly educated and skilled
employees, could result in

                                       9
<PAGE>

the Company's inability to continue certain product offerings, and could have a
material adverse effect on the Company's business, results of operations or
financial condition. Further, there can be no assurance that former employees
will not compete with the Company or disclose Company confidential information,
whether or not in violation of any agreements. While the Company has sought to
enforce its rights, any such competition or disclosure could have a material
adverse effect on the Company's business, results of operations or financial
condition.

       CONTROL BY PRINCIPAL STOCKHOLDER. Roger G. Little, the Chairman of the
Board, Chief Executive Officer and President of the Company, controls
approximately 38.5% of the Company's outstanding Common Stock. In addition, as
one of three Trustees of the Company's 401(k) Plan, Mr. Little may exercise
control over shares of Common Stock held by the Plan. As a result, Mr. Little is
in a position to exert significant influence over actions of the Company which
require stockholder approval and generally to direct the affairs of the Company,
including potential acquisitions, sales and changes in control of the Company.

       GOVERNMENT REGULATION. The process of bidding for, obtaining, retaining
and performing U.S. government contracts is subject to a large number of U.S.
government regulations and oversight requirements. Compliance with these
government regulations requires extensive record keeping and the maintenance of
complex policies and procedures relating to all aspects of the Company's
business, as well as to work performed for the Company by any subcontractors.
Any failure by the Company to comply with applicable regulations, or to require
its subcontractors so to comply, could result in a variety of adverse
consequences, ranging from remedial requirements to termination of contracts,
reimbursement of fees, reduction of fees on a going forward basis and
prohibition from obtaining future U.S. government contracts. While the Company
believes that it has put in place systems and personnel to ensure compliance
with all U.S. government regulations relating to contracting, there can be no
assurance that it will at all times be in compliance or that any failure to
comply will not have a material adverse effect on the Company's business,
results of operations or financial condition. See Note (3) to the financial
statements in Item 7, below. Furthermore, the Company's U.S. government
contracts include provisions prohibiting the Company from granting exclusive
rights to use or sell any inventions unless the grantee agrees that any product
using the invention will be manufactured substantially in the United States.

       The Company is subject to export control regulations, which govern the
export of Company products to certain countries, as well as the release of
technical information to non-U.S. individuals and entities. It also is subject
to the federal Occupational Safety and Health Act ("OSHA"). While the Company
has a full-time compliance officer monitoring compliance with these laws and
regulations, there can be no assurance that it will at all times be in
compliance. Failure to comply with these laws and regulations could result in
penalties to the Company, including fines and requirements to take remedial
action, which would have a material adverse effect on the Company's business,
results of operations or financial condition.

       The Company is also subject to a number of federal, state and local
government regulations relating to the use, storage, discharge and disposal of
toxic, volatile or otherwise hazardous chemicals used in its business. Any
failure to comply with present or future regulations could result in the
imposition of fines and the suspension of production or a cessation of
operations. In addition, such regulations could restrict the Company's ability
to expand, or could require the Company to acquire costly equipment or incur
other significant expenses to comply with environmental regulations or to
remediate any pollution.

       The introduction by the Company's customers of certain new biomedical
products depends on such products' passage through various stages of review by
the United States Food and Drug Administration ("FDA"). The process of obtaining
regulatory approvals involves lengthy and detailed laboratory and clinical
testing and other costly and time-consuming procedures. There can be no
assurance as to the timely or positive outcome of any such review process. The
inability of the Company's customers to obtain such approvals in a timely
manner, or at all, could impede or prevent the introduction of these biomedical
products into the marketplace, and could adversely affect the Company's revenues
from its biomedical services.

       The extent of government regulation that may arise from future
legislative or administrative action cannot be predicted.

                                       10
<PAGE>

       RISK OF UNINSURED LOSS. The use of orthopedic and other medical devices
may entail a risk of physical injury to patients. To the extent the Company has
been involved in the manufacturing of these products, it may be exposed to
potential product liability and other damage claims. Furthermore, the use of the
Company's photovoltaic module manufacturing equipment could result in operator
injury. To date, no product liability or other damage claim has been initiated
against the Company. The Company maintains product liability and umbrella
insurance coverage; however, there can be no assurance that any product
liability claim assessed against the Company would not exceed its insurance
coverage, or that insurance coverage will continue to be available. While the
Company typically obtains agreements of indemnity from manufacturers of
biomedical products for which the Company provides services, there can be no
assurance that any such indemnity agreements will be enforceable or that such
manufacturers will have adequate funds to meet their obligations under such
agreements. The cost of defending a product liability, negligence or other
action, and/or assessment of damages in excess of insurance coverage, could have
a material adverse effect on the Company's business, results of operations, or
financial condition.

       FLUCTUATIONS IN STOCK PRICE. The Company's Common Stock has recently
experienced price and volume fluctuations and may experience such fluctuations
in the future. Factors such as announcements of technological innovations or new
products by the Company or its competitors, changes in domestic or foreign
governmental regulations or regulatory approval processes and fluctuations in
quarterly operating results, have and may continue to have a significant impact
on the market price of the Common Stock. Moreover, the stock market (and in
particular the securities of technology companies such as the Company) has
experienced and could in the future experience extreme price and volume
fluctuations. These fluctuations may be unrelated to operating performance and
could have a significant impact on the market price of the Common Stock.

       NO DIVIDENDS. The Company has paid no dividends since its inception. The
Company anticipates retaining any future earnings for operations and does not
anticipate that dividends will be paid in the foreseeable future. Under its
credit agreement with Silicon Valley Bank, the Company is prevented from paying
dividends without the prior written consent of the Bank.

ITEM 2.  DESCRIPTION OF PROPERTY.
--------------------------------

       The Company leases 74,000 square feet in a building located at One
Patriots Park, Bedford, Massachusetts, and subleases approximately 22,000 square
feet of such space to the purchaser of the assets of its Optoelectronics
business. All of the Bedford space is subleased from Millipore Corporation on
what the Company believes are commercially reasonable terms. Millipore leases
the building from a trust of which Roger G. Little, Chairman, Chief Executive
Officer and President of the Company, is sole trustee and principal beneficiary.
The 1985 sublease originally was for a period of ten years, was extended by the
Company for a five year period expiring on November 30, 2000, and further
extended for an additional five-year period expiring on November 30, 2005. The
Company believes that its facilities are suitable for their present intended
purposes and adequate for the Company's current level of operations. See "Risk
Factors - Dependence on Single Manufacturing Facility" and " - Need to Manage
Growth."

ITEM 3.  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 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
------------------------------------------------------------

       On December 21, 1999, the Company held a Special Meeting of Stockholders
to vote on the following proposals:

1.   To approve a proposal to sell substantially all of the assets of the
     Company's Optoelectronics Division.

2.   To approve a proposal to restructure the Company, by creating subsidiaries
     into which the Company would transfer its photovoltaics and biomedical
     businesses.

3.   To approve an amendment to the Company's 1996 Equity Incentive Plan to
     increase the number of shares that may be offered thereunder from 300,000
     to 500,000.

                                       11
<PAGE>

<TABLE><CAPTION>
                           Shares           Shares Voting Against          Shares           Broker
        Proposal         Voting For         or Authority Withheld        Abstaining        Non-Votes
      ------------    ---------------    --------------------------    --------------    -------------
<S>                       <C>                       <C>                  <C>
      One                 2,213,604                 2,800                21,448
      Two                 2,212,646                 4,535                20,670
      Three               2,200,874               203,463                31,514
</TABLE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
-----------------------------------------------------------------

       The Company's Common Stock, $.01 par value ("Common Stock"), is traded on
the Nasdaq National Market under the symbol "SPIR." The following chart sets
forth the high and low closing sale prices for the Common Stock for the periods
shown:

                                    Closing Sale Price      Closing Sale Price
                                           High                    Low
                                    ------------------      ------------------

               1999
               ----
               First Quarter              $5.00                   $2.75
               Second Quarter              4.25                    2.50
               Third Quarter               4.69                    3.25
               Fourth Quarter              7.13                    2.72

               1998
               ----
               First Quarter             $17.38                  $12.44
               Second Quarter             14.00                    3.50
               Third Quarter               5.38                    2.50
               Fourth Quarter              3.88                    2.63

       These prices do not reflect retail mark-ups, mark-downs or commissions.
The closing price of the Common Stock on February 29, 2000 was $7.50, and on
that date, there were approximately 195 stockholders of record.

       The Company did not pay any dividends during 1999 or 1998.

ITEM 6.  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 BELOW AND IN "RISK FACTORS" AND "BUSINESS." THE FOLLOWING
DISCUSSION IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION
WITH, THE DETAILED INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE OR INCORPORATED BY REFERENCE IN
THIS REPORT.

OVERVIEW

       Spire develops, manufactures and markets highly-engineered photovoltaic
module manufacturing equipment 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 39 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.

       The Company's net sales and revenues for the year ended December 31, 1999
decreased 16%, compared to the year ended December 31, 1998. All of the
Company's three areas of business declined in net sales and revenues.

                                       12
<PAGE>

       The Company's photovoltaics business area declined 2% during 1999 as
compared to 1998. The Company's optoelectronics business area declined 28%. In
this area, the decline was caused by a decrease in U.S. government research and
development programs.

       The biomedical business area also declined 10% during 1999 as compared to
1998 due to: 1) a decline in customer service revenue; and 2) a decline in U.S.
government contract funded research development programs.

       Operating results in any particular quarter will depend upon product mix,
as well as the timing of shipments of higher priced products from the Company's
equipment line. Export sales, which amounted to 22% of net sales and revenues
from the year ended December 31, 1999, continue to constitute a significant
portion of the Company's net sales and revenues.

       On December 30, 1999, the Company sold substantially all of the assets of
its Optoelectronics business for cash proceeds of $12,910,003. The purchaser of
the Optoelectronics assets received machinery, equipment and technology. See
Note (9) of the financial statements and "Description of Business - Business
Development" on page two for a complete description of the sale of the
optoelectronics business.

       The sale of the assets of the Optoelectronics business resulted in a
pre-tax net gain of $9,918,189.

RESULTS OF OPERATIONS

       The following table sets forth certain items as a percentage of net sales
and revenues for the periods presented:

<TABLE><CAPTION>
                                                                      Years Ended December 31,
                                                        -----------------------------------------------------
                                                              1999              1998              1997
                                                        ----------------- ----------------- -----------------
<S>                                                            <C>              <C>              <C>
      Net sales and revenues                                   100.0%           100.0%           100.0%
      Cost of sales and revenues                                89.1             79.3             66.5%
                                                        ----------------- ----------------- -----------------
      Gross profit                                              10.9             20.7             33.5
      Selling, general and administrative expenses              39.3             36.4             24.4
      Other operating charges                                   --                8.7              1.4
                                                        ----------------- ----------------- -----------------
      Earnings (loss) from operations                          (28.4)           (24.4)             7.7
      Gain on sale of assets                                    83.3               --               --
                                                        ----------------- ----------------- -----------------
      Earnings (loss) before income taxes                       54.1            (24.4)             7.8
      Income tax expense                                         9.0              2.5              0.6
                                                        ================= ================= =================
      Net earnings (loss)                                        5.1%             (26.9%)            7.2%
                                                        ================= ================= =================
</TABLE>

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

NET SALES AND REVENUES

       Net sales and revenues decreased $2,242,000 or 16% for the year ended
December 31, 1999 to $11,901,000, compared to $14,143,000 for the year ended
December 31, 1998. Contract research, service and license revenues decreased
$2,018,000 or 18% to $8,906,000 for the year ended December 31, 1999 compared to
$10,924,000 for 1998. Manufacturing equipment sales decreased $224,000 or 7% to
$2,995,000 for 1999, compared to $3,219,000 for 1998. The decline in research,
service and license revenue was attributed mostly to a decline in research and
development contracts with the U.S. Government, as well as a slight decline in
Biomedical processing services. The following table categorizes the Company's
net sales and revenues for the periods presented:

<TABLE><CAPTION>
                                                               Years Ended December 31,

                                                           ----------------------------------
                                                                1999              1998             Change
                                                           ---------------- -----------------   --------------
<S>                                                           <C>              <C>                   <C>
      Contract research, service and license revenues         $8,906,000       $10,924,000           (18%)
      Manufacturing equipment sales                            2,995,000         3,219,000            (7%)
                                                           ---------------- -----------------
      Net sales and revenues                                 $11,901,000       $14,143,000           (16%)
                                                           ================ =================
</TABLE>

                                       13
<PAGE>

COST OF SALES AND REVENUES

       The cost of sales and revenues decreased $609,000 to $10,600,000, but
increased to 89% of net sales and revenues, for the year ended December 31,
1999, compared to $11,209,000 or 79% of net sales and revenues for the year
ended December 31, 1998.

       The cost of contract research, service and license revenues decreased
$716,000 to $7,386,000, and increased to 83% of related revenues, for the year
ended December 31, 1999, compared to $8,102,000 or 74% of related revenues for
the year ended December 31, 1998. Cost of contract research, service and license
revenues decreased, but increased as a percentage of sales, due to a decline in
volume. Cost of manufacturing equipment sales increased $107,000 to $3,214,000,
and increased to 107% of related sales, for the year ended December 31, 1999,
compared to $3,107,000 or 97% of related sales, for the year ended December 31,
1998. The increase in total cost of sales and revenues as a percentage of
related sales and revenues is caused by product mix and lower volume, and a one
time write down to market value of certain work in process inventories.

       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:

<TABLE><CAPTION>
                                                                 December 31, 1999       %        December 31, 1998       %
                                                             ------------------------ -------- ----------------------- -------
<S>                                                                  <C>                <C>           <C>                <C>
      Contract research, service and license revenues                $ 7,386,000         83%           $8,102,000        74%
      Manufacturing equipment sales                                    3,214,000        107%            3,107,000        97%
                                                             ========================          =======================
      Total cost of sales and revenues                               $10,600,000         89%          $11,209,000        79%
                                                             ========================          =======================
</TABLE>

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

       Selling, general and administrative expenses for the year ended December
31, 1999 decreased $465,000 to $4,682,000, and increased to 39% of sales and
revenues, compared to $5,147,000 or 36% of sales and revenues for the year ended
December 31, 1998. Selling, general and administrative expenses increased as a
percentage of sales due to the lower volume.

OTHER OPERATING CHARGES

       Other operating charges in 1998 included expenses of a non-recurring
nature, and amounted to $1,244,000, or 9% of total revenues. Included in the
1998 charge are a $547,000 payment to the U.S. government to settle a dispute
involving contracting requirements in proposals and contract fulfillment,
associated legal costs, other legal costs incurred in the enforcement of
non-competition agreements of two former employees, and severance costs and
related fringe benefits incurred in downsizing the Company's workforce. These
downsizing efforts, which were completed in February 1999, included the
reduction of 24 employees and resulted in an annualized savings of $1,100,000,
primarily in the contract research and manufacturing areas. No such charges were
incurred in 1999.

GAIN ON SALE OF ASSETS

       On December 30, 1999, the Company sold substantially all of the assets of
its Optoelectronics business for cash proceeds of $12,910,003. Additionally, the
purchaser of the Optoelectronics assets received machinery, equipment and
technology. The sale of the assets of the Optoelectronics business resulted in a
pre-tax net gain of $9,918,189. See "Description of Business - Business
Development" on page two and Note (9) of the financial statements for a complete
description of the sale of the optoelectronics business.

INTEREST

       The Company earned $3,000 in interest income for the year ended December
31, 1999, compared to $22,000 for the year ended December 31, 1998. The Company
incurred interest expense of $132,000 in 1999 and $19,000 in 1998, of which
$28,000 was capitalized in 1999 related to internally constructed assets and $0
in 1998.

                                       14
<PAGE>

INCOME TAXES

       The Company recorded $1,070,000 of tax expense for the year ended
December 31, 1999, compared to $359,000 for the year ended December 31, 1998.
Tax expense for the year ended December 31, 1999 benefited from the realization
of a $1,668,000 deferred tax asset for net loss and other credit carryforwards,
which was fully reserved at December 31, 1998. At December 31, 1998, the Company
had gross deferred tax assets of $2,859,000, against which a valuation allowance
of $2,172,000 had been established. Total gross deferred tax liabilities of
$687,000 were applied against the net deferred tax asset resulting in a net
deferred tax asset of zero. At December 31, 1999, the Company had a gross
deferred tax asset of $807,000, against which a valuation allowance of $505,000
was applied. Gross deferred tax liability of $302,000 were applied against the
net deferred tax asset resulting in a net deferred tax asset of zero.

NET EARNINGS (LOSS)

       The Company reported net earnings for the year ended December 31, 1999 of
$5,366,000, compared to net loss of $3,811,000 for the year ended December 31,
1998. Net earnings for the year ended December 31, 1999 resulted from the gain
on sale of assets of $9,918,189, which offset operating losses of $3,380,249.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

NET SALES AND REVENUES

       Net sales and revenues decreased $8,871,000 or 39% for the year ended
December 31, 1998 to $14,143,000, compared to $23,014,000 for the year ended
December 31, 1997. Contract research, service and license revenues decreased
$1,718,000 or 14% to $10,924,000 for the year ended December 31, 1998 compared
to $12,642,000 for 1997. Manufacturing equipment sales decreased $7,153,000 or
69% to $3,219,000 for 1998, compared to $10,372,000 for 1997. The following
table categorizes the Company's net sales and revenues for the periods
presented:

<TABLE><CAPTION>
                                                                  Years Ended December 31,
                                                              ----------------------------------
                                                                   1998              1997             Change
                                                              ---------------- -----------------   --------------
<S>                                                             <C>               <C>                  <C>
      Contract research, service and license revenues           $10,924,000       $12,642,000          (14%)
      Manufacturing equipment sales                               3,219,000        10,372,000          (69%)
                                                              ---------------- -----------------
      Net sales and revenues                                    $14,143,000       $23,014,000          (39%)
                                                              ================ =================
</TABLE>

COST OF SALES AND REVENUES

       The cost of sales and revenues decreased $4,093,000 to $11,209,000, but
increased to 79% of net sales and revenues, for the year ended December 31,
1998, compared to $15,302,000 or 66% of net sales and revenues for the year
ended December 31, 1997.

       The cost of contract research, service and license revenues decreased
$613,000 to $8,102,000, and increased to 74% of related revenues, for the year
ended December 31, 1998, compared to $8,715,000 or 69% of related revenues for
the year ended December 31, 1997. Cost of manufacturing equipment sales
decreased $3,480,000 to $3,107,000, but increased to 97% of related sales, for
the year ended December 31, 1998, compared to $6,587,000 or 64% of related
sales, for the year ended December 31, 1997. The increase in total cost of sales
and revenues as a percentage of related sales and revenues is caused by product
mix and 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:

                                       15
<PAGE>

<TABLE><CAPTION>
                                                            December 31, 1998        %        December 31, 1997      %
                                                         ------------------------ -------- ----------------------- -------
<S>                                                              <C>                 <C>          <C>                <C>
      Contract research, service and license revenues            $ 8,102,000         74%          $ 8,715,000        69%
      Manufacturing equipment sales                                3,107,000         97%            6,587,000        64%
                                                         ========================          =======================
      Total cost of sales and revenues                           $11,209,000         79%          $15,302,000        66%
                                                         ========================          =======================
</TABLE>

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

       Selling, general and administrative expenses for the year ended December
31, 1998 decreased $459,000 to $5,147,000, but increased to 36% of sales and
revenues, compared to $5,606,000 or 24% of sales and revenues for the year ended
December 31, 1997. Selling, general and administrative expenses decreased due to
decreases in staffing, commissions, marketing and travel costs related to
decreased sales of products and services.

OTHER OPERATING CHARGES

       Other operating charges included expenses of a non-recurring nature, and
amounted to $1,244,000 and $332,000, or 9% and 1% of total revenues, for the
years 1998 and 1997, respectively. Other operating charges in 1997 included
outside costs incurred in an unsuccessful attempt at a secondary offering. The
following table summarizes other operating charges for the years 1998 and 1997:

<TABLE><CAPTION>
                                                                                          Year Ended December 31,
                                                                                    -------------------------------------
                                                                                          1998               1997
                                                                                    ------------------ ------------------
<S>                                                                                      <C>                    <C>
      Settlement of Government claim                                                     $ 547,000              $ --
      Legal costs incurred in settlement of Government claim                               159,000                --
      Legal costs incurred in enforcing non-competition agreements
          with former employees                                                            295,000                --
      Severance and associated fringe benefit costs incurred in
          downsizing the Company                                                           243,000                --
      Costs incurred in unsuccessful secondary offering attempt                                --             332,000
                                                                                    ================== ==================
                                                                                        $1,244,000          $332,000
                                                                                    ================== ==================
</TABLE>

INTEREST

       The Company earned $23,000 in interest income for the year ended December
31, 1998, compared to $33,000 for the year ended December 31, 1997. The Company
incurred interest expense of $19,000 in 1998 and $2,000 in 1997.

INCOME TAXES

       The Company recorded $359,000 of tax expense for the year ended December
31, 1998, compared to $141,000 for the year ended December 31, 1997. At December
31, 1998, the Company had gross deferred tax assets of $2,859,000, against which
a valuation allowance of $2,172,000 was applied. Total gross deferred tax
liabilities of $687,000 were applied against the net deferred tax asset
resulting in a net deferred tax asset of zero.

NET EARNINGS (LOSS)

       The Company reported a net loss for the year ended December 31, 1998 of
$3,811,000, compared to net earnings of $1,667,000 for the year ended December
31, 1997. The loss resulted in large part from decreased net sales and revenues
in all areas of the Company's business, particularly in photovoltaic equipment
sales.

                                       16
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

       To date the Company has been able to fund its liquidity requirements
using cash from operations and available lines of credit. On August 30, 1999,
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 $3 million revolving credit facility, based upon eligible
accounts receivable requirements and 50% of the liquidation value of the
Company's fixed assets. 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 December 31, 1999, interest on the line was at the Bank's prime
rate plus two percent on receivable loans and prime plus 2 3/4% on fixed asset
loans. The line contains covenants including provisions relating to
profitability and net worth. The Company is currently compliant with the terms
of this credit agreement. As of December 31, 1999, the Company had no
outstanding debt under this revolving credit facility using proceeds from the
sale of assets to pay down the debt on December 30, 1999.

       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. In addition, the Company has taken
steps to conserve its resources by reducing its cost of operations. Cash and
cash equivalents increased $10,587,000 to $10,709,000 at December 31, 1999, from
$122,000 at December 31, 1998, as a result of the previously discussed sale of
assets. To date there are no material commitments by the Company for capital
expenditures. At December 31, 1999, the Company's retained earnings were
$3,188,000, compared to accumulated deficit of $2,179,000 as of December 31,
1998. Working capital as of December 31, 1999 increased 846% to $9,718,000,
compared to $1,501,000 as of December 31, 1998.

RECENT ACCOUNTING PRONOUNCEMENTS

       In 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." The Company will
adopt SFAS 133 on January 1, 2001. The impact of SFAS 133 on the consolidated
financial statements is not expected to be material.

       Also in 1998, the American Institute of Certified Public Accountants
issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use", and SOP 98-5, "Reporting on the Costs of Start-Up
Activities". The Company adopted SOP 98-1 and SOP 98-5 on January 1, 1999. The
adoption of these statements did not have a material effect on the consolidated
financial statements.

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 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.

FOREIGN EXCHANGE FLUCTUATION

       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.

YEAR 2000

       The Company's Year 2000 initiative was successful. No interruptions to
Spire business processes have occurred, and no material problem is expected.
Program spending was budgeted, expensed as incurred and not material.

                                       17
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS
-----------------------------

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                                   Page
                                                                                                                   ----
<S>                                                                                                                <C>
Independent Auditors' Report                                                                                        19

Consolidated Financial Statements:

     Consolidated Balance Sheets as of December 31, 1999 and 1998                                                   20

     Consolidated Statements of Operations for the Years Ended December 31,  1999, 1998 and 1997                    21

     Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1999, 1998 and 1997           22

     Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997                     23

     Notes to Consolidated Financial Statements                                                                     24
</TABLE>

                                       18
<PAGE>


                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Spire Corporation:

       We have audited the consolidated balance sheets of Spire Corporation and
subsidiary as of December 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1999. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Spire
Corporation and subsidiary at December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1999 in conformity with generally accepted accounting
principles.

                                                   /s/ KPMG LLP
                                                   ---------------------------
                                                   KPMG LLP

Boston, Massachusetts
March 10, 2000


                                       19
<PAGE>

                        SPIRE CORPORATION AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

<TABLE><CAPTION>
                                                                                            DECEMBER 31,
                                                                                   ------------------------------
                                                                                       1999              1998
                                                                                   ------------      ------------
                                              ASSETS
<S>                                                                                <C>               <C>
Current assets
--------------
    Cash and cash equivalents                                                      $ 10,709,370      $    121,866
    Accounts receivable, trade (Notes 3 and 7):
        Amounts billed                                                                2,017,865         2,799,037
        Retainage                                                                        50,878            62,173
        Unbilled costs                                                                  343,242           355,716
                                                                                   ------------      ------------
                                                                                      2,411,985         3,216,926
        Less allowance for doubtful accounts                                            107,000           102,000
                                                                                   ------------      ------------
            Net accounts receivable                                                   2,304,985         3,114,926
                                                                                   ------------      ------------

    Inventories (Note 4)                                                              1,862,933         2,254,043
    Prepaid expenses and other current assets                                           351,948           363,649
                                                                                   ------------      ------------
            Total current assets                                                     15,229,236         5,854,484
                                                                                   ------------      ------------

Property and equipment (Note 6)                                                      14,640,003        25,675,700
    Less accumulated depreciation and amortization                                   12,621,001        20,986,170
                                                                                   ------------      ------------
            Net property and equipment                                                2,019,002         4,689,530
                                                                                   ------------      ------------

Patents (less accumulated amortization, $448,507 in 1999 and $611,650 in 1998)          106,956           214,758
Other assets                                                                              8,271            15,071
                                                                                   ------------      ------------
                                                                                        115,227           229,829
                                                                                   ------------      ------------
                                                                                   $ 17,363,465      $ 10,773,843
                                                                                   ============      ============
                               LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
-------------------
    Accounts payable                                                               $  1,280,951      $  1,555,019
    Accrued liabilities (Note 5)                                                      1,197,624           836,846
    Notes payable (Note 7)                                                                 --             850,000
    Federal and State income taxes payable                                            1,070,000              --
    Advances on contracts in progress                                                 1,962,300         1,112,058
                                                                                   ------------      ------------
        Total current liabilities                                                     5,510,875         4,353,923
                                                                                   ------------      ------------
Commitments (Notes 7 and 11)
----------------------------
Stockholders' equity (Note 8)
-----------------------------
    Common stock, $.01 par value; shares authorized 20,000,000;
        issued 3,818,926 shares in 1999 and 3,795,926 shares in 1998                     38,189            37,959
    Additional paid-in capital                                                        9,846,239         9,780,494
    Retained earnings (deficit)                                                       3,187,850        (2,178,845)
                                                                                   ------------      ------------
                                                                                     13,072,279         7,639,608
    Treasury stock at cost, 552,160 shares in 1999 and 1998                          (1,219,688)       (1,219,688)
                                                                                   ------------      ------------
        Total stockholders' equity                                                   11,852,591         6,419,920
                                                                                   ------------      ------------
                                                                                   $ 17,363,465      $ 10,773,843
                                                                                   ============      ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       20
<PAGE>

                        SPIRE CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE><CAPTION>
                                                                             YEARS ENDED DECEMBER 31,
                                                                 ------------------------------------------------
                                                                     1999              1998              1997
                                                                 ------------      ------------      ------------
<S>                                                              <C>               <C>               <C>
Net sales and revenues
----------------------
    Contract research, service and license revenues              $  8,905,528      $ 10,924,062      $ 12,642,251
    Sales of manufacturing equipment                                2,995,240         3,219,181        10,372,190
                                                                 ------------      ------------      ------------
        Total sales and revenues                                   11,900,768        14,143,243        23,014,441
                                                                 ------------      ------------      ------------

Costs and expenses
------------------
    Cost of contract research, services and licenses                7,385,649         8,102,075         8,714,713
    Cost of manufacturing equipment                                 3,213,643         3,106,948         6,587,331
    Selling, general and administrative expenses                    4,681,725         5,146,930         5,605,507
    Other operating charges (Note 14)                                    --           1,243,989           331,511
                                                                 ------------      ------------      ------------
        Total costs and expenses                                   15,281,017        17,599,942        21,239,062
                                                                 ------------      ------------      ------------

Earnings (loss) from operations                                    (3,380,249)       (3,456,699)        1,775,379
-------------------------------                                    -----------       -----------        ---------
Gain on sale of assets (Note 9)                                     9,918,189              --                --

Interest income (expense), net (Note 7)                              (101,245)            4,005            32,856
                                                                 ------------      ------------      ------------

Earnings (loss) before income taxes                                 6,436,695        (3,452,694)        1,808,235

Income tax expense (Note 10)                                        1,070,000           358,578           141,000
                                                                 ------------      ------------      ------------

Net earnings (loss)                                              $  5,366,695      $ (3,811,272)     $  1,667,235
-------------------                                              ============      ============      ============

Earnings (loss) per share of common stock - basic                $       1.65      $      (1.18)     $       0.54
-------------------------------------------------                ============      ============      ============

Earnings (loss) per share of common stock - diluted              $       1.64      $      (1.18)     $       0.52
---------------------------------------------------              ============      ============      ============

Weighted average number of common shares outstanding - basic        3,246,112         3,235,271         3,086,326
                                                                 ============      ============      ============

Weighted average number of common and  common equivalent
    shares outstanding - diluted                                    3,274,713         3,235,271         3,217,467
                                                                 ============      ============      ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       21
<PAGE>

                        SPIRE CORPORATION AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE><CAPTION>
                                         COMMON STOCK     ADDITIONAL       TREASURY STOCK         RETAINED
                                     ------------------    PAID-IN     ----------------------     EARNINGS
                                      SHARES     AMOUNT    CAPITAL      SHARES      AMOUNT        (DEFICIT)       TOTAL
                                     ---------  -------  ------------  -------   ------------   ------------   ------------

<S>                                  <C>        <C>      <C>           <C>       <C>            <C>            <C>
Balance, December 31, 1996           3,567,185  $35,672  $  8,491,066  547,160   $ (1,199,063)  $    (34,808)  $  7,292,867
    Exercise of stock options          189,897    1,899       680,095     --             --             --          681,994
    Tax benefit of disqualifying
       dispositions of stock option

       exercises                          --       --         474,307     --             --             --          474,307
    Repurchase of treasury stock          --       --            --      5,000        (20,625)          --          (20,625)
    Net earnings                          --       --            --       --             --        1,667,235      1,667,235
                                     ---------  -------  ------------  -------   ------------   ------------   ------------

Balance, December 31, 1997           3,757,082   37,571     9,645,468  552,160     (1,219,688)     1,632,427     10,095,778
    Exercise of stock options           38,844      388       135,026     --             --             --          135,414
    Net loss                              --       --            --       --             --       (3,811,272)    (3,811,272)
                                     ---------  -------  ------------  -------   ------------   ------------   ------------

Balance, December 31, 1998           3,795,926   37,959     9,780,494  552,160     (1,219,688)    (2,178,845)     6,419,920
    Exercise of stock options           23,000      230        65,745     --             --             --           65,975
    Net earnings                          --       --            --       --             --        5,366,695      5,366,696
                                     ---------  -------  ------------  -------   ------------   ------------   ------------

Balance, December 31, 1999           3,818,926  $38,189  $  9,846,239  552,160   $ (1,219,688)  $  3,187,850   $ 11,852,590
                                     =========  =======  ============  =======   ============   ============   ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       22
<PAGE>

                        SPIRE CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE><CAPTION>
                                                                                          YEARS ENDED DECEMBER 31,
                                                                                --------------------------------------------
                                                                                    1999            1998            1997
                                                                                ------------    ------------    ------------
<S>                                                                             <C>             <C>             <C>
Cash flows from operating activities:
    Net earnings (loss)                                                         $  5,366,695    $ (3,811,272)   $  1,667,235
    Adjustments to reconcile net earnings (loss) to net
        cash provided by operating activities:
            Depreciation and amortization                                            970,646       1,018,112       1,079,572
            Gain on sale of assets                                                (9,918,189)           --              --
            Deferred income taxes                                                       --           300,000        (300,000)
            Changes in assets and liabilities (excluding the impact of assets
            sold):
                Accounts receivable                                                  850,291         549,307        (650,085)
                Inventories                                                          289,910      (1,265,463)         32,348
                Prepaid expenses and other current assets                            (11,701)        138,001        (214,137)
                Income taxes payable                                               1,070,000            --              --
                Accounts payable and accrued liabilities                              86,711         629,191        (125,106)
                Advances on contracts in progress                                    850,242         701,688        (975,092)
                                                                                ------------    ------------    ------------
                     Net cash (used in) provided by operating activities            (445,395)     (1,740,436)        514,735
                                                                                ------------    ------------    ------------
Cash flows from investing activities:
    Proceeds from sale of assets (net of related expenses)                        12,204,007            --              --
    Additions to property and equipment                                             (351,522)       (798,654)     (1,101,686)
    Increase in patent costs                                                         (30,383)        (24,793)        (39,546)
    Other assets                                                                      (5,178)          4,608         215,551
                                                                                ------------    ------------    ------------
                     Net cash provided by (used in) investing activities          11,816,924        (818,839)       (925,681)
                                                                                ------------    ------------    ------------
Cash flows from financing activities:
    Net borrowings (payments) on short-term debt                                    (850,000)        850,000            --
    Tax benefit of disqualifying dispositions of stock
         option exercises                                                               --              --           474,307
    Exercise of stock options                                                         65,975         135,414         681,994
    Repurchase of treasury stock                                                        --              --           (20,625)
                                                                                ------------    ------------    ------------
                     Net cash provided by (used in) financing activities            (784,025)        985,414       1,135,676
                                                                                ------------    ------------    ------------

Net increase (decrease) in cash and cash equivalents                              10,587,504      (1,573,861)        724,730

Cash and cash equivalents, beginning of year                                         121,866       1,695,727         970,997
                                                                                ------------    ------------    ------------
Cash and cash equivalents, end of year                                          $ 10,709,370    $    121,866    $  1,695,727
                                                                                ============    ============    ============

Supplemental disclosures of cash flow information:
        Cash paid during the year for:
            Interest                                                            $    132,294    $     19,030    $      5,118
                                                                                ============    ============    ============
            Income taxes                                                        $          0    $     44,400    $     51,595
                                                                                ============    ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       23
<PAGE>

                        SPIRE CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997

(1)    NATURE OF THE BUSINESS

       Spire develops, manufactures, and markets highly engineered photovoltaic
manufacturing equipment and provides biomedical processing services. Spire
designs and manufactures specialized equipment for the production of terrestrial
photovoltaic modules from solar cells. Spire's value-added service offerings to
biomedical customers provide surface treatments to enhance the performance of
medical products. Spire also conducts research and development activities,
primarily for the U.S. government.

(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       (A)   PRINCIPLES OF CONSOLIDATION

       The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Spire International Sales Corporation. All
significant intercompany balances and transactions have been eliminated in
consolidation.

       (B)   REVENUE RECOGNITION

       Revenue for equipment sales is recognized upon shipment. Revenue for
service contracts is recognized upon performance of the service. Revenue on
government research contracts is recorded as costs are incurred and includes a
pro-rated portion of the estimated profit.

       (C)   INVENTORIES

       Inventories are stated at the lower of cost or market, cost being
determined by the average cost method, on a first-in, first-out (FIFO) basis.

       (D)   PROPERTY AND EQUIPMENT

       Property and equipment is stated at cost. Depreciation and amortization
are provided using the straight-line method over the estimated useful lives of
the respective assets, as follows:

           Machinery and equipment            5 and 7 years
           Furniture and fixtures             5 years
           Leasehold improvements             Lesser of 10 years or remaining
                                              life of facility lease

       Maintenance and repairs are charged to expense as incurred. Major
renewals and betterments are added to property and equipment accounts at cost.

       (E)   PATENT COSTS

       Patent costs are capitalized and amortized over five years using the
straight-line method.

       (F)   INCOME TAXES

       The Company accounts for income taxes under the asset and liability
method. Under this method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

                                       24
<PAGE>

                        SPIRE CORPORATION AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

       (G)   RESEARCH AND DEVELOPMENT COSTS

       Research and development costs are charged to operations as incurred,
except where such costs are reimbursable under customer funded contracts. During
the years ended December 31, 1999, 1998 and 1997, unfunded research and
development costs were $184,000, $344,000 and $133,000, respectively.

       (H)   EARNINGS (LOSS) PER SHARE

       Basic earnings (loss) per share is computed by dividing income available
to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted earnings (loss) per share gives effect to
all dilutive potential common shares outstanding during the period. The
computation of diluted earnings (loss) per share does not assume conversion,
exercise or contingent exercise of securities that would have an antidilutive
effect on earnings.

       (I)   USE OF ESTIMATES

       The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

       (J)   FINANCIAL INSTRUMENTS

       Financial instruments of the Company consist of cash and cash
equivalents, accounts receivable, accounts payable and notes payable. The
carrying amounts of these financial instruments approximate their fair value.

       (K)   LONG-LIVED ASSETS

       The Company reviews its long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable.

       (L)   STOCK-BASED COMPENSATION

       During 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, which
permits entities to recognize as expense over the vesting period the fair value
of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also
allows entities to continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net earnings (loss) and pro forma earnings (loss) per share
disclosures for employee stock option grants made in 1995 and future years as if
the fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosure provisions of SFAS No. 123.

       (M)   RECLASSIFICATION OF PRIOR YEARS

       Prior year financial statements have been reclassified to conform to the
1999 presentation.

       (N)   CASH AND CASH EQUIVALENTS

       Cash and cash equivalents include cash, time deposits and all highly
liquid debt with an original maturity of three months or less. Included in Cash
and Cash Equivalents on December 31, 1999 was $750,000 in an escrow account
relating to the sale of assets of the Optoelectronics business.

                                       25
<PAGE>

                        SPIRE CORPORATION AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

       (O)   NEW ACCOUNTING STANDARDS

       In 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." The Company will
adopt SFAS 133 on January 1, 2001. The impact of SFAS 133 on the consolidated
financial statements is not expected to be material.

       Also in 1998, the American Institute of Certified Public Accountants
issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use", and SOP 98-5, "Reporting on the Costs of Start-Up
Activities". The Company adopted SOP 98-1 and SOP 98-5 on January 1, 1999. The
adoption of these statements did not have a material effect on the consolidated
financial statements.

(3)    ACCOUNTS RECEIVABLE

       Unbilled costs on contracts in progress represent revenues recognized on
contracts for which billings have not been presented to customers as of each
balance sheet date. These amounts are billed and generally collected within one
year.

       Retainage represents revenues on certain United States Government
sponsored research and development contracts. These amounts, which usually
represent 15% of the Company's research fee on each applicable contract, are not
collectible until a final cost review has been performed by government auditors.
Included in retainage are amounts expected to be collected after one year which
totaled $51,000 and $62,000 at December 31, 1999 and 1998, respectively. All
other accounts receivable are expected to be collected within one year.

       All contracts with United States Government agencies have been audited
through December 1996. Except as discussed in the following paragraph, the
Company has not incurred significant losses as a result of government audits.

       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. Rather than
continuing to incur the legal costs and expend management resources in
litigating this matter, the Company settled with the government on August 18,
1998 for $547,000.

(4)    INVENTORIES

       Inventories consist of the following:

                                                    December 31,
                                         ------------------------------------
                                               1999              1998
                                         ----------------- ------------------
      Raw materials                          $  653,695         $  776,933
      Work in process                         1,044,331          1,307,088
      Finished goods                            164,907            170,022
                                         ----------------- ------------------
                                             $1,862,933         $2,254,043
                                         ================= ==================

(5)    ACCRUED LIABILITIES

       Accrued liabilities include the following:

                                                    December 31,
                                         ------------------------------------
                                               1999              1998
                                         ----------------- ------------------

      Accrued payroll and payroll taxes      $ 575,401           $568,193
      Accrued other                            622,223            268,653
                                         ================= ==================
                                            $1,197,624           $836,846
                                         ================= ==================


                                       26
<PAGE>

                        SPIRE CORPORATION AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

 (6)   PROPERTY AND EQUIPMENT

       Property and equipment consists of the following:

                                                    December 31,
                                         ------------------------------------
                                               1999                 1998
                                         ----------------- ------------------
      Machinery and equipment               $10,416,381        $20,757,776
      Furniture and fixtures                  2,716,215          2,988,993
      Leasehold improvements                  1,503,452          1,765,043
      Construction in progress                    3,955            163,888
                                         ----------------- ------------------
                                            $14,640,003        $25,675,700
                                         ================= ==================

(7)    NOTES PAYABLE AND CREDIT ARRANGEMENTS

       On August 30, 1999, the Company entered into a new revolving credit
agreement for a one year period with Silicon Valley Bank. This agreement
established a $3 million revolving credit facility, based upon eligible accounts
receivable requirements and 50% of the liquidation value of the Company's fixed
assets. This line of credit was 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 two percent
(11.25% at December 31, 1999) on receivable loans and prime plus 2 3/4% on fixed
asset loans (12% at December 31, 1999). The line contains restrictive covenants
including provisions relating to profitability and net worth. The Company is
currently compliant with the terms of this credit agreement. As of December 31,
1999, the Company had no outstanding debt under this revolving credit line, and
the related interest expense in 1999 was $128,000.

       As of December 31, 1998, the Company had $850,000 of outstanding debt
under a predecessor revolving credit line. Interest on the line was at the
bank's prime rate plus 1% (8.75% at December 31, 1998). Interest expense related
to this debt for the year ended December 31, 1998 was $19,000.

 (8)   STOCK COMPENSATION PLANS

       The Company has two employee stock option plans: the 1985 Incentive Stock
Option Plan, and the 1996 Equity Incentive Plan. These plans provide that the
Board of Directors may grant options to purchase the Company's common stock to
key employees of the Company. Incentive options must be granted at least at the
fair market value of the common stock or, in the case of certain optionees, at
110% of such fair market value at the time of grant. The exercise price of
options is determined by the Board of Directors. The options may be exercised,
subject to certain vesting requirements, for periods up to ten years from the
date of issue.

       Through December 31, 1999, the Company has outstanding under its
Directors Stock Option Plan and the 1996 Equity Incentive Plan, 60,150
non-qualified stock options to the unaffiliated directors of the Company for the
purchase of common stock at an average price of $8.58 per share. The options may
be exercised, subject to certain vesting requirements, for periods up to ten
years from the date of issue. The Company may no longer award options under any
plans except the 1996 Equity Incentive Plan.

                                       27
<PAGE>

                        SPIRE CORPORATION AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

      A summary of the activity of these plans follows:

<TABLE><CAPTION>
                                                                          Weighted
                                                     Number of Shares      Average
                                                                        Option Price
                                                     ----------------- ----------------
<S>                                                       <C>               <C>
      Outstanding, December 31, 1996                      359,175           $3.28
           Granted                                         76,825           $5.36
           Exercised                                     (189,897)          $3.57
           Canceled                                       (26,222)          $3.24
                                                     ----------------- ----------------

      Outstanding, December 31, 1997                      219,881           $3.75
           Granted                                         99,663          $11.52
           Exercised                                      (38,844)          $3.49
           Canceled                                       (40,850)          $3.68
                                                     ----------------- ----------------

      Outstanding, December 31, 1998                      239,850           $7.02
           Granted                                        113,450            3.59
           Exercised                                      (23,000)           2.86
           Canceled                                       (30,950)           7.73
                                                     ================= ================

      Outstanding, December 31, 1999                      299,350           $6.01
                                                     ================= ================
      Options Exercisable at December 31, 1999             88,403           $5.59
                                                     ================= ================
</TABLE>

       The following table summarizes information about stock options
outstanding at December 31, 1999:

<TABLE><CAPTION>
                                                   Options Outstanding                                Options Exercisable
                               ------------------------------------------------------------   -------------------------------------
                                                   Weighted Average      Weighted Average                        Weighted Average
           Range of                Number       Remaining Contractual       Exercise               Number            Exercise
        Exercise Price           Outstanding             Life                 Price              Exercisable           Price
     ----------------------    ---------------- ----------------------- -------------------   ------------------ ------------------

<S>                                  <C>              <C>                     <C>                   <C>                 <C>
     $  2.50 to $  5.00              190,737          7.9 years               $ 3.49                56,500              $3.16
     $ 5.01 to $10.00                 63,613          8.2 years               $ 6.88                19,403              $6.48
     $10.01 to $15.88                 45,000          8.2 years               $15.48                12,500             $15.19
                               ----------------                                               ------------------
                                     299,350          8.1 years               $ 6.01                88,403              $5.62
                               ================                                               ==================
</TABLE>

       There were 491,787 shares reserved for issuance under all plans at
December 31, 1999. The per-share weighted-average fair value of stock options
granted in 1999, 1998 and 1997 was $3.28, $8.13 and $4.24, respectively, on the
date of grant using the Black Scholes option-pricing model with the following
weighted-average assumptions:

<TABLE><CAPTION>
                              Expected               Risk-Free            Expected               Expected
              Year         Dividend Yield          Interest Rate         Option Life         Volatility Factor
              ----         --------------          -------------         -----------         -----------------
              <S>                 <C>                  <C>                 <C>                     <C>
              1999                0%                   5.89%               5 years                 93.1%
              1998                0%                   5.50%               5 years                 85.4%
              1997                0%                   5.50%               5 years                 68.4%
</TABLE>

       The Company applies APB Opinion No. 25 in accounting for its plans and,
accordingly, no compensation cost has been recognized for its stock options in
the consolidated financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its options under SFAS No.
123, the Company's net earnings (loss) would have been reduced (increased) to
the pro forma amounts indicated below.

                                       28
<PAGE>

                        SPIRE CORPORATION AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

<TABLE><CAPTION>
                                                                                1999            1998             1997
                                                                           --------------- ---------------- ---------------
<S>                                                                           <C>            <C>               <C>
      Net earnings (loss) as reported                                         $5,366,695     $(3,811,272)      $1,667,235
      Earnings (loss) per share of common stock - diluted, as reported              1.64           (1.18)            0.52
      Net earnings (loss) pro forma                                            4,467,018      (4,068,390)       1,592,349
      Earnings (loss) per share of common stock - diluted, pro forma                1.39           (1.26)            0.49
</TABLE>

       Pro forma net earnings (loss) reflect only options granted in 1999, 1998,
1997 and 1996. Therefore, the full impact of calculating compensation cost for
stock options under SFAS No. 123 is not reflected in the pro forma net earnings
(loss) amounts presented above because compensation cost is reflected over the
options' vesting period of five years and compensation cost for options granted
prior to January 1, 1995 is not considered.

(9)    SALE OF ASSETS

       On December 30, 1999, the Company sold substantially all of the assets of
its optoelectronics business for cash proceeds of $12,910,003. The assets that
were sold to the purchaser included machinery, equipment and technology. Until
December 30, 2004 the Company may not compete with the purchaser's
optoelectronics business. However, the restrictions on competition do not
prevent the Company from engaging in optoelectronics business activities in
conducting its terrestrial photovoltaic business relating to terrestrial solar
cells and related components, or in conducting its biomedical business relating
to implanted medical devices and related instrumentation and components. The
Company will continue to perform the project management element of its U.S.
government optoelectronics research and development contracts until they are
completed through 2001. The Company has entered into a subcontract with the
purchaser under each of the remaining government contracts for a portion of the
research and development services. In addition, the Company will continue to bid
on new optoelectronics U.S. government funded research and development contracts
which may include additional subcontracts with the purchaser.

       Revenues for the optoelectronics business amounted to $4,419,000,
$6,106,000 and $7,241,000 for the years ended December 31, 1999, 1998 and 1997,
respectively. Operating income (loss) for the optoelectronics business was
$(1,047,000), $(1,421,000) and $132,000 for the years ended December 31, 1999,
1998 and 1997, respectively.

       The sale of the assets of the Optoelectronics business resulted in a
pre-tax net gain of $9,918,189.

(10)   INCOME TAXES

       Total federal and state income tax expense (benefit) for the years ended
December 31, 1999, 1998 and 1997, consists of the following:

                                    1999             1998           1997
                              ----------------- --------------- --------------
      Current:
           State                   $ 317,234        $ 9,000        $ 68,663
           Federal                   752,766         49,578         372,337
                              ----------------- --------------- --------------
                                   1,070,000         58,578         441,000
                              ----------------- --------------- --------------
      Deferred:
           State                          --         46,474          (46,710)
           Federal                        --        253,526         (253,290)
                              ----------------- --------------- --------------
                                           --        300,000         (300,000)
                              ================= =============== ==============
                                  $1,070,000      $ 358,578       $ 141,000
                              ================= =============== ==============

       Actual income tax expense (benefit) for the years ended December 31,
1999, 1998 and 1997 differs from the "expected" income tax expense (benefit) for
the year (computed by applying the U.S. federal corporate income tax rate of 34%
to earnings (loss) before income taxes) as follows:

<TABLE><CAPTION>
                                                                1999             1998            1997
                                                           --------------- ----------------- --------------
<S>                                                         <C>                <C>              <C>
      Computed "expected" income tax expense (benefit)      $ 2,188,477      $(1,114,746)      $614,800
      State tax, net of federal benefit                         404,401          (89,660)       119,453
      Increase (decrease) in valuation allowance             (1,667,514)       1,582,790       (498,247)
      Permanent differences                                       4,446            8,194         32,953
      Increase in tax credit carryforwards                           --          (28,000)      (103,089)
      Other                                                     140,190              --         (24,870)
                                                           =============== ================= ==============
                                                             $1,070,000         $358,578       $141,000
                                                           =============== ================= ==============
</TABLE>

                                       29
<PAGE>

                        SPIRE CORPORATION AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

       The amount recorded as a deferred income tax asset as of December 31,
1999 represents the amount of tax benefits of existing deductible temporary
differences that are more likely than not to be realized through the generation
of sufficient future taxable income within the carryforward period. During 1999,
the valuation allowance decreased by $1,667,514. The decrease in the valuation
allowance resulted from a significant decrease in the Company's gross deferred
tax asset balance due to the utilization of net loss and credit carryforward to
off-set the gain on the sale of the Optoelectronics assets.

       The tax effects of temporary differences that give rise to significant
portions of net deferred tax assets at December 31, 1998 and 1997 are presented
below:

<TABLE><CAPTION>
                                                                 1999             1998
                                                           ---------------- ----------------
<S>                                                            <C>             <C>
    Deferred tax assets:
      Charitable contributions                                 $      --       $    8,976
      Accounts receivable                                         43,089           41,075
      Accruals                                                    95,310           90,498
      Inventories                                                103,636           60,405
      Federal net operating loss carryforwards                        --        1,153,016
      General business credit carryforwards                      222,923          752,998
      Alternative minimum tax credit carryforwards               342,030          342,030
      Foreign tax credit                                              --           51,475
      State net operating loss and investment tax credit              --          358,092
                                                           ---------------- ----------------
           Total gross deferred tax assets                       806,988        2,858,565
           Less: valuation allowance                            (504,531)      (2,172,045)
                                                           ---------------- ----------------
           Net deferred tax assets                               302,457          686,520
                                                           ---------------- ----------------
         Deferred tax liabilities:

      Property and equipment                                     (302,457)       (686,520)
      Patents                                                          --              --
      Research agreements                                              --              --
                                                           ---------------- ----------------
           Total gross deferred tax liabilities                  (302,457)       (686,520)
                                                           ---------------- ----------------
      Net deferred tax assets                                  $       --      $       --
                                                           ================ ================
</TABLE>

       The valuation allowance for deferred tax assets as of December 31, 1999
was $505,000. The net change in the total valuation allowance for the year ended
December 31, 1999 was a decrease of $1,668,000.

       At December 31, 1999, the Company had no general business tax credits
available to offset future taxable income, and no net operating loss
carryforwards for federal and state purposes. The Company also had no
alternative minimum tax credits to offset future taxable income.


                                       30
<PAGE>

                        SPIRE CORPORATION AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

(11)   COMMITMENTS

       The Company subleases the majority of its facilities from a company that
leases the building from a trust; the principal beneficiary of the trust is the
principal stockholder of the Company. The sublease originally was for a period
of ten years, after which the Company exercised its options to extend for
additional five-year periods expiring on November 30, 2005. The agreement
provides for minimum rental payments plus annual increases linked with the
Consumer Price Index. Total rent expense under this lease was $922,000, $907,000
and $889,000 in 1999, 1998 and 1997, respectively. The Company has entered into
a sublease with the purchaser of its Optoelectronics business. The sublease
expires on November 30, 2005. The purchaser subleases approximately 29% of the
total facility.

       The Company has also entered into other noncancelable operating leases.
Total rent expense charged to these noncancelable leases was $133,000, $128,000,
and $110,000 in 1999, 1998 and 1997, respectively.

       Future minimum lease payments under operating leases are as follows:

             2000                                              $ 660,000
             2001                                                653,000
             2002                                                653,000
             2003                                                653,000
             2004                                                653,000
             2005 and beyond                                     599,000
                                                         ----------------
                                                              $3,871,000
                                                         ================

(12)   PROFIT SHARING PLAN

       In 1985, the Company adopted a profit sharing plan under Section 401(k)
of the Internal Revenue Code. This plan allows employees to defer up to 17.5% of
their income up to certain dollar limits on a pretax basis through contributions
to the plan. Through December 31, 1998, the Company contributed its Common Stock
in an amount equal to 40% of the employee's contribution up to a maximum of 15%
of the employee's cash compensation. The Company temporarily suspended such
contribution beginning in 1999 and has reinstituted matching effective January
1, 2000. Expense recognized under the plan in 1999, 1998 and 1997 was $0,
$46,000 and $199,000, respectively.

(13)   EARNINGS (LOSS) PER SHARE

       The following table provides a reconciliation of the denominators of
diluted earnings (loss) per share computations for the years ended December 31:

<TABLE><CAPTION>
                                                                         1999             1998            1997
                                                                    ---------------- --------------- ----------------
<S>                                                                      <C>              <C>              <C>
      Weighted average number of common shares outstanding               3,246,112        3,235,271        3,086,326
      Add net additional common shares upon exercise of common
          stock options                                                     28,601              --           131,141
                                                                    ================ =============== ================
      Adjusted weighted average common shares outstanding                3,274,713        3,235,271        3,217,467
                                                                    ================ =============== ================
</TABLE>

                                       31
<PAGE>

                        SPIRE CORPORATION AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

(14)   OTHER OPERATING CHARGES

      Other operating charges, which included expenses of a non-recurring
nature, consisted of the following:

<TABLE><CAPTION>
                                                                           Years Ended December 31,
                                                                        -------------------------------
                                                                             1998            1997
                                                                        ---------------- --------------
<S>                                                                          <C>                <C>
      Settlement of Government claim                                         $ 547,000          $  --
      Legal costs incurred in settlement of Government claim                   158,895             --
      Legal costs incurred in enforcing non-competition
           agreements  with former employees                                   294,489             --
      Severances and associated fringe benefit costs incurred in
           downsizing Company                                                  243,605             --
      Costs incurred in unsuccessful secondary offering attempt                    --          332,000
                                                                        ================ ==============
                                                                            $1,243,989        $332,000
                                                                        ================ ==============
</TABLE>

       The downsizing program initiated by the Company during 1998 resulted in
the reduction of 24 employees. The program was completed in February 1999 and
the entire severance provision was utilized.

(15)   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.

<TABLE><CAPTION>
                                      Photovoltaics     Optoelectronics        Biomedical                             Total
                                        Division            Division            Division            Other            Company
                                    ------------------ ------------------- ------------------- ----------------- -----------------
<S>                                      <C>                  <C>                <C>                   <C>           <C>
December 31, 1999
-----------------
Net sales and revenues                   $ 3,851,663         $ 4,353,711        $ 3,695,394       $        --        $11,900,768
Loss from operations                      (1,644,499)         (1,046,647)          (689,103)               --         (3,380,249)
Identifiable assets                        3,204,553             755,192          1,620,609        11,783,111         17,363,496
Capital expenditures                         119,929              30,620            146,588            54,385            351,522
Depreciation                                  50,660             453,771            191,795           148,569            844,795

December 31, 1998
-----------------
Net sales and revenues                   $ 3,949,000         $ 6,106,000        $ 4,088,000       $        --        $14,143,000
Loss from operations                      (1,465,000)         (1,421,000)          (571,000)               --         (3,457,000)
Identifiable assets                        3,822,000           3,690,000          1,942,000         1,320,000         10,774,000
Capital expenditures                         126,000             290,000            197,000           186,000            799,000
Depreciation                                 133,000             577,000            308,000                --          1,018,000
Other operating charges                      396,000             497,000            351,000                --          1,244,000

December 31, 1997
-----------------
Net sales and revenues                   $ 9,701,000         $ 7,241,000        $ 6,072,000       $        --        $23,014,000
Earnings (loss) from operations            1,313,000             132,000            662,000          (332,000)         1,775,000
Identifiable assets                        2,382,000           4,454,000          2,127,000         3,306,000         12,269,000
Capital expenditures                          92,000             244,000            262,000           504,000          1,102,000
Depreciation                                 150,000             585,000            345,000                --          1,080,000
Other operating charges                           --                  --                 --           332,000            332,000
</TABLE>

                                       32
<PAGE>

                        SPIRE CORPORATION AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                        DECEMBER 31, 1999, 1998 AND 1997

       During 1999, the Company's three separate operating divisions were:
Photovoltaics; Optoelectronics; and Biomedical. All divisions operated out of
the Company's facility in Bedford, Massachusetts.

       The Photovoltaics division develops, manufactures and markets
photovoltaic module manufacturing equipment and production lines. The Biomedical
division uses ion beam technology to provide processing services to the medical
industry by treating the surfaces of products such as orthopedic devices and
catheters used in the human body. The Optoelectronics division uses thin film
technology such as metalorganic chemical vapor deposition (MOCVD) to create
semiconductor devices for total communications for biomedical and electronics
applications. On December 30, 1999, the Company sold substantially all the
assets of its optoelectronics business. See Note (9) of the financial statements
for a complete description of this transaction.

       Each operating division is individually managed and has separate
financial results that are reviewed by the Board of Directors, Chief Executive
Officer, and the vice president and general manager of each operating division.

       Profit (loss) from operations is net sales less cost of sales, selling,
general and administrative expenses and other operating charges (Note 14), but
is not affected either by non-operating income or by income taxes. Non-operating
income consists principally of net interest income. In calculating profit from
operations for individual operating divisions, substantial administrative
expenses incurred at the operating level that are common to more than one
statement are allocated on a net sales basis. Certain corporate expenses of an
operational nature are also allocated to the divisions based on factors
including occupancy, employment, and purchasing volume. All intercompany
transactions have been eliminated.

       Revenues from contracts with United States government agencies for the
years ended December 31, 1999, 1998 and 1997 were $4,381,000, $6,092,000 and
$7,972,000 or 37%, 43% and 35% of consolidated net sales and revenues,
respectively. In 1999, 1998 and 1997, export revenues were $2,610,000,
$2,400,000 and $7,890,000, respectively, or 22%, 17% and 34% of consolidated net
sales and revenues, respectively.

(16)   QUARTERLY FINANCIAL DATA (UNAUDITED)

       The following is a summary of the consolidated quarterly results for the
years ended December 31, 1999 and 1998:

<TABLE><CAPTION>
                                                                                1999
                                                                         Three Months Ended
                                               ------------------------------------------------------------------------
                                                   March 31           June 30        September 30       December 31
                                               ------------------ ---------------- ------------------ -----------------
<S>                                                <C>            <C>                  <C>               <C>
      Net sales and revenues                       $3,817,716     $  2,681,578         $2,722,028        $2,679,446
      Costs and expenses                            3,940,070        3,218,571          3,550,823         4,571,553
      Earnings (loss) before income taxes            (149,153)        (558,306)          (862,104)       (1,810,686)
      Gain on sale of assets                               --               --                 --         9,918,189
      Income tax expense                                   --               --                 --         1,070,000
      Net earnings (loss)                            (149,153)        (558,306)          (862,104)        6,936,259
      Net earnings (loss) per share                     (0.05)           (0.17)             (0.27)             2.10

                                                                                1998
                                                                         Three Months Ended
                                               ------------------------------------------------------------------------
                                                   March 31           June 30        September 30       December 31
                                               ------------------ ---------------- ------------------ -----------------

      Net sales and revenues                   $    4,442,526     $  3,445,291         $3,719,917        $2,535,509
      Costs and expenses                            4,428,704        5,226,785          4,057,225         3,887,228
      Earnings (loss) before income taxes              26,159       (1,775,344)          (335,278)       (1,368,231)
      Income tax expense (benefit)                      9,000               --                 --           349,578
      Net earnings (loss)                              17,159       (1,775,344)          (335,278)       (1,717,809)
      Net earnings (loss) per share                      0.01            (0.55)             (0.10)            (0.53)
</TABLE>

                                       33
<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------------------------------------------------------------------------
         FINANCIAL DISCLOSURE.
         --------------------

      None.

                                    PART III
                                    --------

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
----------------------------------------------------------------------
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
         -------------------------------------------------

      Information concerning the directors and executive officers of the Company
is set forth under "Election of Directors" and "Executive Officers" in the Proxy
Statement for the Special Meeting in Lieu of 2000 Annual Meeting of Stockholders
("Proxy Statement") and is incorporated herein by reference. Information
concerning compliance with Section 16(a) of the Exchange Act during 1999 is set
forth under "Compliance with Section 16(a) of the Securities Exchange Act of
1934" in the Proxy Statement and is incorporated herein by reference.

ITEM 10.  EXECUTIVE COMPENSATION.
--------------------------------

      Information concerning executive compensation is set forth under
"Executive Compensation" in the Proxy Statement and is incorporated herein by
reference.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
------------------------------------------------------------------------

      Information concerning security ownership of certain beneficial owners and
management is set forth under "Ownership of Securities" in the Proxy Statement
and is incorporated herein by reference.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------------------------------------------------------

      Information concerning certain relationships and related transactions is
set forth under "Other Transactions and Relationships" in the Proxy Statement
and is incorporated herein by reference.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.
------------------------------------------

     (1)   EXHIBITS
           --------

           The following Exhibits are either filed herewith or are incorporated
by reference as may be indicated.

           3(a)      Articles of Organization as amended, incorporated by
                     reference to Exhibit 3 (a) to the Company's Form 10-QSB for
                     the quarter ended June 30, 1997.

           3(b)      By-Laws, as amended, incorporated by reference to
                     Exhibit 3 (b) to the Company's Form 10-K for the year ended
                     December 31, 1989.

           10(a)     Sublease Agreement with Millipore Corporation as
                     landlord for facility at Bedford, Massachusetts dated
                     November 25, 1985, incorporated by reference to Exhibit 10
                     (a) to the Company's Form 10-K for the year ended December
                     31, 1985 ("1985 10-K").

           10(b)     Amendment to Sublease Agreement with Millipore
                     Corporation as landlord for facility at Bedford,
                     Massachusetts dated December 30, 1999.

           10(c)     Sublease Agreement with Methode Electronics, Inc. as tenant
                     for portion of facility at Bedford, Massachusetts dated
                     December 29, 1999.

                                       34
<PAGE>

           10(d)     Asset Purchase Agreement dated as of November 18, 1999
                     with Methode Electronics, Inc. and Methode Massachusetts,
                     Inc., incorporated by reference to Exhibit 1 to the
                     Company's Form 8-K dated December 29, 1999.

           10(e)     Employment Agreement with Roger G. Little dated October 3,
                     1983, as amended.

           Employee and Director Benefit Plans
           -----------------------------------

           10(f)     Spire Corporation 1985 Incentive Stock Option Plan
                     incorporated by reference to Exhibit 10 (d) to the
                     Company's Form 10-K for the year ended December 31, 1984
                     ("1984 10-K").

           10(g)     Spire Corporation 401(k) Profit Sharing Plan, including
                     Adoption Agreement, incorporated by reference to Exhibit 10
                     (e) to the 1984 10-K.

           10(h)     Spire Corporation Directors' Stock Option Plan,
                     incorporated by reference to Exhibit 10 (f) to the 1985
                     10-K.

           10(i)     Spire Corporation 1996 Equity Incentive Plan, incorporated
                     by reference to Exhibit 99 to Registration Statement
                     333-22223, filed February 21, 1997.

           11        Statement Regarding Computation of Per Share Earnings
                     (Loss).

           22        Subsidiary of the Company, incorporated by reference to
                     Exhibit 22 to the Company's Form 10-K for the year ended
                     December 31, 1988.

           23.1      Accountants' Consent.

           27        Financial Data Schedule.

     (2)   REPORTS ON FORM 8-K
           -------------------

           The Company filed one Report on Form 8-K during the last quarter of
1999.

                                     PART IV
                                     -------

                                      11-K

Supplemental Information Pursuant to Rule 15d-21 Regarding Annual Report of
Employee Benefit Plans for the fiscal year ended December 31, 1999.

                  Spire Corporation 401(k) Profit Sharing Plan
                              Financial Statements

                                December 31, 1999
                   (With Independent Auditor's Report Thereon)




                                       35
<PAGE>

                  SPIRE CORPORATION 401(K) PROFIT SHARING PLAN

                                TABLE OF CONTENT

                                                                     Page Number
                                                                     -----------

Independent Auditor's Report                                            37

Financial Statements:

     Statements of Net Assets Available for Plan Benefits               38

     Statement of Changes in Net Assets Available for Plan Benefits     39

     Notes to the Financial Statements                                  42




                                       36
<PAGE>

To the Participants and Administrator of
Spire Corporation 401(k) Profit Sharing Plan
Bedford, Massachusetts

We have audited the accompanying statements of net assets available for plan
benefits of the Spire Corporation 401(k) Profit Sharing Plan as of December 31,
1999 and 1998, 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, 1999.
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 requrie 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, 1999 and 1998, and the changes in net assets available for plan benefits for
each of the three years in the period ended December 31, 1999, in conformity
with generally accepted accounting principles.

CARLIN, CHARRON & ROSEN LLP

March 9, 2000


                                       37
<PAGE>

               SPIRE CORPORATION 401(k) PROFIT SHARING 401(k) PLAN
              STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS

                        AS OF DECEMBER 31, 1999 AND 1998

                                                     1999           1998
                                                --------------- --------------

ASSETS:

INVESTMENTS:
    At fair value:

        Common stock - Spire Corporation           $1,293,359      $ 715,536
        Mutual funds                                5,467,156      4,314,473

At contract value:

    Hartford Fixed Income Fund                        287,724        288,937
                                                --------------- --------------

        TOTAL INVESTMENTS                           7,048,239      5,318,946

RECEIVABLES:

    Employer's contribution                                --         17,120
    Participant's contribution                         39,843         43,160
    Participants' loan receivables                    149,292        176,238
                                                --------------- --------------

        TOTAL RECEIVABLES                             189,135        236,518
                                                --------------- --------------

CASH                                                       10             65
                                                =============== ==============

NET ASSETS AVAILABLE FOR BENEFITS                  $7,237,384     $5,555,529
                                                =============== ==============


               See accompanying notes to the financial statements.


                                       38
<PAGE>
SPIRE CORPORATION 401(K) PROFIT SHARING PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEARS ENDED DECEMBER 31,


<TABLE><CAPTION>
                                                                     1999                                 1998            1997
                                        ---------------------------------------------------------------  ------------   ------------
                                                   Fixed     Company              Mutual
                                         Loans    Income      Stock    Other       Funds     Total        Total          Total
                                        ---------------------------------------------------------------  ------------   ------------
<S>                                        <C>       <C>       <C>        <C>       <C>        <C>
Additions to Net Assets attributed to:

Investment income:
Interest and dividends                               13,906                  68      22,409     36,383        77,965         21,351
Interest-other                             14,675                                               14,675        13,732          8,837
Realized gains                                                                       14,161     14,161       148,391          5,022
Net appreciation(depreciation) in
  fair value of investments as
  determined by quoted market price                            62,3047            1,128,137  1,751,184    -2,387,089      4,029,249

                                        ---------------------------------------------------------------  ------------   ------------
                                           14,675    13,906    623,047       68   1,164,707  1,816,403    -2,147,001      4,064,459

Contributions:
  Employer                                                                   48                     48        97,517        162,411
  Employees                                             889                         393,984    394,873       509,294        663,519

                                        ---------------------------------------------------------------  ------------   ------------
Total additions                            14,675    14,795    623,047      116   1,558,691  2,211,324    -1,540,190      4,890,389

                                        ---------------------------------------------------------------  ------------   ------------
Transfers                                 -17,356    -7,503     29,627  -20,608      15,840          0             0              0
Deductions from Net Assets
  attributed to:

Benefits paid to participants             -24,265    -8,505    -74,851             -421,848   -529,469      -494,203     -1,259,334

                                        ---------------------------------------------------------------  ------------   ------------
Total deductions                          -24,265    -8,505    -74,851        0    -421,848   -529,469      -494,203     -1,259,334

                                        ---------------------------------------------------------------  ------------   ------------
Net increase(decrease)                    -26,946    -1,213    577,823  -20,492   1,152,683  1,681,855    -2,034,393      3,631,055

Net assets available for plan benefits:
Beginning of year                         176,238   288,937    715,536   60,345   4,314,473  5,555,529     7,589,922      3,958,867
                                        ---------------------------------------------------------------  ------------   ------------
End of year                               149,292   287,724  1,293,359   39,853   5,467,156  7,237,384     5,555,529      7,589,922
                                        ===============================================================  ============   ============
</TABLE>


               See accompanying notes to the financial statements

                                       39
<PAGE>
SPIRE CORPORATION 401(K) PROFIT SHARING PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEARS ENDED DECEMBER 31,

<TABLE><CAPTION>
                                                                    1998
                                        --------------------------------------------------------------------------
                                                       Fixed      Company                  Mutual
                                           Loans      Income       Stock        Other       Funds       Total
                                        --------------------------------------------------------------------------
<S>                                          <C>         <C>          <C>          <C>       <C>          <C>
Additions to Net Assets attributed to:

Investment income:

Interest and dividends                                   13,255                      232      64,478       77,965
Interest-other                               13,732                                                        13,732
Realized gains                                                                               148,391      148,391
Net appreciation(depreciation) in
  fair value of investments as
  determined by quoted market price                               -2,516,520                 129,431   -2,387,089

                                        --------------------------------------------------------------------------
                                             13,732      13,255   -2,516,520         232     342,300   -2,147,001

Contributions:
  Employer                                                            80,396      17,121                   97,517
  Employees                                                 445        3,797       4,160     461,892      509,294

                                        --------------------------------------------------------------------------
Total additions                              13,732      13,700   -2,432,327      60,513     804,192   -1,540,190

                                        --------------------------------------------------------------------------
Transfers                                    32,630     -16,695       35,850     -14,990     -36,795            0

Deductions from Net Assets
  attributed to:

Benefits paid to participants               -23,129     -42,398     -170,860                -257,816     -494,203

                                        --------------------------------------------------------------------------
Total deductions                            -23,129     -42,398     -170,860           0    -257,816     -494,203

                                        --------------------------------------------------------------------------
Net increase(decrease)                       23,233     -45,393   -2,567,337      45,523     509,581   -2,034,393

Net assets available for plan benefits:

Beginning of year                           153,005     334,330    3,282,873      14,822   3,804,892    7,589,922
                                        --------------------------------------------------------------------------
End of year                                 176,238     288,937      715,536      60,345   4,314,473    5,555,529
                                        ==========================================================================
</TABLE>
                                       40
<PAGE>

SPIRE CORPORATION 401(K) PROFIT SHARING PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS(continued)
YEARS ENDED DECEMBER 31,

<TABLE><CAPTION>
                                                                               1997
                                        -------------------------------------------------------------------------------------
                                                      Group        Fixed      Company                 Mutual
                                          Loans      Annuity      Income       Stock       Other       Funds       Total
                                        -------------------------------------------------------------------------------------
<S>                                         <C>          <C>         <C>        <C>           <C>       <C>          <C>
Additions to Net Assets attributed to:

Investment income:

Interest and dividends                                               21,351                                           21,351
Interest-other                               8,122                                              251         464        8,837
Realized gains                                            5,022                                                        5,022
Net appreciation(depreciation) in
  fair value of investments as
  determined by quoted market price                     453,989               3,170,741                 404,519    4,029,249

                                        -------------------------------------------------------------------------------------
                                             8,122      459,011      21,351   3,170,741         251     404,983    4,064,459

Contributions:
  Employer                                                                       78,018      84,393                  162,411
  Employees                                             356,642      13,377                   1,926     291,574      663,519

                                        -------------------------------------------------------------------------------------
Total additions                              8,122      815,653      34,728   3,248,759      86,570     696,557    4,890,389

                                        -------------------------------------------------------------------------------------
Transfers                                   62,556   -3,590,738       2,580      99,147    -171,430   3,597,885            0

Deductions from Net Assets
  attributed to:

Benefits paid to participants               -3,665      -86,507    -109,560    -569,809        -243    -489,550   -1,259,334

                                        -------------------------------------------------------------------------------------
Total deductions                            -3,665      -86,507    -109,560    -569,809        -243    -489,550   -1,259,334

                                        -------------------------------------------------------------------------------------
Net increase(decrease)                      67,013   -2,861,592     -72,252   2,778,097     -85,103   3,804,892    3,631,055

Net assets available for plan benefits:

Beginning of year                           85,992    2,861,592     406,582     504,776      99,925                3,958,867
                                        -------------------------------------------------------------------------------------
End of year                                153,005            0     334,330   3,282,873      14,822   3,804,892    7,589,922
                                        =====================================================================================
</TABLE>

                                       41
<PAGE>

                  SPIRE CORPORATION 401(K) PROFIT SHARING PLAN
                          Notes to Financial Statements

1. DESCRIPTION OF PLAN

      The following description of the Spire Corporation (Company) 401(k) Profit
      Sharing Plan (Plan) provides only general information. Participants should
      refer to the Plan agreement for a more complete description of the Plan's
      provisions.

      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).

      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. As of
           January 1, 1999 the Company has suspended the employer contribution.

      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, several mutual
           funds and a fixed income fund offered by Hartford Life Insurance
           Company.

           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.

           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.

           Employee Loans
           --------------
           Participants may borrow from their fund accounts a loan up to a
           maximum equal to the lesser of $50,000 or 50% of their vested account
           balance. Loan transactions are treated as a transfer from the
           investment fund to the Participant Loan fund. Loan terms range from
           1-5 years or up to 25 years for the purchase of a primary residence.
           The loans are secured by the balance in the participant's account and
           bear interest at a rate commensurate with local prevailing rates as
           determined by the Plan administrator. Interest rates range from 8% to
           11%. Principal and interest is paid ratably through payroll
           deductions.

           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.

                                       42
<PAGE>

                  SPIRE CORPORATION 401(K) PROFIT SHARING PLAN
                    Notes to Financial Statements - Continued

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      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 the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the
      date of the financial statements and the reported amounts of revenue and
      expenses during the reporting period. Actual results could differ from
      those estimates.

      Concentration of Credit Risk
      ----------------------------
      Financial instruments which subject the Plan to concentration of credit
      risk principally consist 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

      During 1997, the plan trustees entered into an agreement with USI
      Consulting Group to provide investment options and record keeping for the
      participants of the plan. Under the terms of the agreement, 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, 1999 was 4.7%.

      (b)  The Direct Participation Account, which consists of amounts allocated
           to Separate Investment Accounts. The Separate Investment Accounts
           include investments in international and domestic equity growth
           funds, balanced funds, income funds and money market funds. The
           amounts invested in the Direct Participation Account are not
           guaranteed as to principal or minimum interest earnings.

      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 $1,751,184 in 1999 and
      ($2,387,089) in 1998 and $4,029,249 in 1997.

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.

                                       43
<PAGE>

                  SPIRE CORPORATION 401(K) PROFIT SHARING PLAN
                    Notes to Financial Statements - Continued

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.

7. SUBSEQUENT EVENT

      The Company has reinstated the employer contribution effective January 1,
      2000.



















                                       44
<PAGE>

FINANCIAL STATEMENTS AND EXHIBITS.
---------------------------------

A.   FINANCIAL STATEMENTS
     --------------------

     1.   Audited Statements of Net Assets Available for Plan Benefits as of
          December 31, 1999 and 1998.

     2.   Audited Statements of Changes in Net Assets Available for Plan
          Benefits for each of the years in the three year period ended December
          31, 1999.

B.   EXHIBITS
     --------

     1.   Statement Regarding Computation of Per Share Earnings (Loss).

     2.   Accountants' Consent.

     3.   Financial Data Schedules.









                                       45
<PAGE>


                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                     SPIRE CORPORATION

                                     (Registrant)

                                     By: /s/ Roger G. Little  March 30, 2000
                                         -------------------------------------
                                         Roger G. Little
                                         President, Chief Executive Officer
                                         and Chairman of the Board

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

<TABLE><CAPTION>
             Signature                                Title                          Date
             ---------                                -----                          ----
<S>                                   <C>                                        <C>
  /s/ Roger G. Little                 President ,Chief Executive Officer         March 30, 2000
---------------------------------     and Chairman of the Board
Roger G. Little

  /s/ Richard S. Gregorio             Vice President and Chief Financial         March 30, 2000
---------------------------------     Officer, Treasurer, Clerk,
Richard S. Gregorio                   Principal Accounting Officer

  /s/ Michael T. Eckhart              Director                                   March 30, 2000
---------------------------------
Michael T. Eckhart

  /s/ A. John Gale                    Director                                   March 30, 2000
---------------------------------
A. John Gale

  /s/ Udo Henseler                    Director                                   March 30, 2000
---------------------------------
Udo Henseler

  /s/ Roger W. Redmond                Director                                   March 30, 2000
---------------------------------
Roger W. Redmond

  /s/ John A. Tarello                 Director                                   March 30, 2000
---------------------------------
John A. Tarello

 /s/ Anthony G. Viscogliosi           Director                                   March 30, 2000
---------------------------------
Anthony G. Viscogliosi
</TABLE>

                                       46
<PAGE>

                                  EXHIBIT INDEX


EXHIBIT                                DESCRIPTION
-------                                -----------

10(b)         Amendment to Sublease Agreement with Millipore Corporation as
              landlord for facility at Bedford, Massachusetts dated December 30,
              1999.

10(c)         Sublease Agreement with Methode Electronics, Inc. as tenant for
              portion of facility at Bedford, Massachusetts dated December 29,
              1999.

10(e)         Employment Agreement with Roger G. Little dated October 3, 1983,
              as amended.

11            Statement Regarding Computation of Per Share Earnings (Loss).

23.1          Accountants' Consent.

27            Financial Data Schedule