<PAGE>
United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
----------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------- -----------
Commission file number 0-17569
-------------
FIBERCHEM, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 84-1063897
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1181 Grier Drive, Suite B, Las Vegas, Nevada 89119
(Address of principal executive offices)
(702) 361-9873
(Issuer's telephone number)
Indicate by check mark 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
----- -----
As of August 9, 1995, the issuer had 20,240,483 shares of Common
Stock, par value $.0001 per share, issued and outstanding.
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
June 30, September 30,
1995 1994
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $1,179,465 3,477,103
Notes receivable from sale of subsidiary 106,390 106,390
Accounts receivable 690,895 223,393
Inventories 1,000,589 715,664
Other 196,997 141,476
----------- -----------
Total current assets 3,174,336 4,664,026
----------- -----------
Equipment 567,955 546,187
Less accumulated depreciation 420,419 378,984
----------- -----------
Net equipment 147,536 167,203
----------- -----------
Other assets:
Notes receivable from sale of subsidiary - non-current portion 106,389 106,389
Technology costs, net of accumulated amortization of $367,815
at June 30, 1995 and $328,591 at September 30, 1994 169,891 209,115
Patent costs, net of accumulated amortization of $1,188,669 at
June 30, 1995 and $1,017,032 at September 30, 1994 676,712 781,265
----------- -----------
Total other assets 952,992 1,096,769
----------- -----------
$4,274,864 5,927,998
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, September 30,
1995 1994
----------- ------------
<S> <C> <C>
Current liabilities:
Current portion of note payable $6,716 --
Accounts payable 229,051 114,876
Accrued expenses 212,244 161,978
------------ -----------
Total current liabilities 448,011 276,854
----------- ----------
Long term liabilities:
Note payable-less current portion 11,618 --
----------- -----------
Total liabilities 459,629 276,854
----------- -----------
Stockholders' equity:
Preferred stock, $.001 par value. Authorized 10,000,000 shares;
216,462 convertible shares issued and 206,462 convertible shares
outstanding at June 30, 1995; 210,240 convertible shares
issued and outstanding at September 30, 1994;
at liquidation value 3,246,930 3,153,600
Common stock, $.0001 par value. Authorized 40,000,000 shares;
20,230,139 and 20,109,354 shares issued and outstanding at
June 30, 1995 and September 30, 1994, respectively 2,023 2,011
Additional paid-in capital 24,798,841 24,629,452
Accumulated deficit (22,413,969) (20,265,615)
----------- -----------
5,633,825 7,519,448
Treasury stock - preferred stock, 10,000 shares at cost (150,000) --
Notes receivable for exercise of options (1,612,510) (1,664,699)
Deferred compensation (56,080) (203,605)
----------- -----------
Total stockholders' equity 3,815,235 5,651,144
----------- -----------
$4,274,864 $5,927,998
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three month period ended Nine month period ended
--------------------------- --------------------------
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $320,534 37,830 874,056 71,300
Cost of revenues 140,822 20,586 398,873 39,441
------------ ------------ ------------ ------------
Gross profit 179,712 17,244 475,183 31,859
------------ ------------ ------------ ------------
Operating expenses:
Engineering, research and
development 294,457 564,234 925,728 1,792,689
General and administrative 359,868 383,752 1,053,483 1,365,983
Financial consulting services 14,306 14,302 42,918 2,123,670
Marketing expenses 153,920 58,248 501,485 115,721
Fees and grants -- -- -- (57,849)
------------ ------------ ------------ ------------
Net operating expenses 822,551 1,020,536 2,523,614 5,340,214
------------ ------------ ------------ ------------
(Loss) from operations (642,839) (1,003,292) (2,048,431) (5,308,355)
------------ ------------ ------------ ------------
Other income (expense):
Interest expense (2,318) (430) (4,450) (1,632)
Interest income 50,297 65,833 171,486 126,696
Other, net 1,606 -- 1,810 1,500
------------ ------------ ------------ ------------
Total other income (expense) 49,585 65,403 168,846 126,564
------------ ------------ ------------ ------------
Net (loss) ($593,254) (937,889) (1,879,585) (5,181,791)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Shares of common stock used in
computing loss per share 20,217,606 19,336,671 20,200,991 16,362,334
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net (loss) per share ($0.03) (0.05) (0.09) (0.32)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
-------------------------------------------------------- Paid-In
Shares Amount Shares Amount Capital
---------- ---------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1994 210,240 $3,153,600 20,109,354 $2,011 24,629,452
Preferred stock dividend:
In stock 14,362 215,430 -- -- --
In cash -- -- -- -- --
Stock purchased by the Company -- -- -- --
Common stock issued:
Conversion of preferred stock (8,140) (122,100) 81,400 8 122,092
Exercise of options -- -- 39,385 4 47,297
Payments received on notes receivable
for exercise of options -- -- -- -- --
Deferred compensation earned -- -- -- -- --
Net loss -- -- -- -- --
---------- ---------- ---------- -------- -----------
Balance at June 30, 1995 216,462 $3,246,930 20,230,139 $2,023 24,798,841
---------- ---------- ---------- -------- -----------
---------- ---------- ---------- -------- -----------
<CAPTION>
Treasury Notes
Stock - Receivable
Accumulated Preferred for Exercise Deferred
Deficit Stock of Options Compensation Total
-------------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1994 (20,265,615) -- (1,664,699) (203,605) 5,651,144
Preferred stock dividend
In stock (215,430) -- -- -- --
In cash (53,339) -- -- -- (53,339)
Stock purchased by the Company -- (150,000) -- -- (150,000)
Common stock issued:
Conversion of preferred stock -- -- -- -- --
Exercise of options -- -- -- -- 47,301
Payments received on notes receivable
for exercise of options -- -- 52,189 -- 52,189
Deferred compensation earned -- -- -- 147,525 147,525
Net less (1,879,585) -- -- -- (1,879,585)
-------------- ------------ ------------ ------------ ----------
Balance at June 30, 1995
(22,413,969) (150,000) (1,612,510) (56,080) 3,815,235
-------------- ------------ ------------ ------------ ----------
-------------- ------------ ------------ ------------ ----------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine month period ended
----------------------------
June 30, June 30,
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($1,879,585) (5,181,791)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 41,435 62,778
Amortization 210,861 202,446
Common stock issued for:
Financial consulting services 42,918 2,123,670
Other services 141,740 268,350
Changes in operating assets and liabilities:
Accounts receivable (467,502) (8,136)
Inventories (284,925) (254,006)
Other current assets (55,521) (7,811)
Accounts payable 114,175 (70,914)
Accrued expenses 50,266 87,192
------------ ------------
Net cash used in operating activities (2,086,138) (2,778,222)
------------ ------------
Cash flows from investing activities:
Purchase of equipment (21,768) (33,981)
Payments for patents (67,084) (82,809)
------------ ------------
Net cash used in investing activities (88,852) (116,790)
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements
(continued)
6
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine month period ended
------------------------------
June 30, June 30,
1995 1994
-------------- -------------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from note payable $21,000 --
Repayments of note payable (2,666) --
Proceeds from the exercise of options and warrants 47,301 2,937,753
Proceeds from the issuance of preferred stock -- 3,326,174
Repayments of loans from officers -- (37,731)
Proceeds from notes receivable from exercise of options 15,056 19,177
Payment of dividend on preferred stock (53,339) --
Purchase of preferred stock (150,000) --
------------ ------------
Net cash provided by (used in) financing activities (122,648) 6,245,373
------------ ------------
Net (decrease) increase in cash and cash equivalents (2,297,638) 3,350,361
Cash and cash equivalents at beginning of period 3,477,103 809,678
------------ ------------
Cash and cash equivalents at end of period 1,179,465 4,160,039
------------ ------------
------------ ------------
Supplemental Cash Flow Information
Noncash investing and financing activities:
Notes receivable for exercise of options $ -- 1,815,099
Reduction in notes receivable in exchange for services 37,133 103,348
------------ ------------
------------ ------------
Interest paid $4,450 1,632
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(1) PRESENTATION OF UNAUDITED FINANCIAL STATEMENTS
The unaudited consolidated financial statements have been prepared in
accordance with Article 10 of Regulation S-X and, therefore, do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows of the Company, in conformity
with generally accepted accounting principles. The information furnished, in
the opinion of management, reflects all adjustments (consisting primarily of
normal recurring accruals) necessary to present fairly the financial position as
of June 30, 1995 and September 30, 1994, and the results of operations and cash
flows of the Company for the three-month and nine-month periods ended June 30,
1995 and 1994. The results of operations are not necessarily indicative of
results which may be expected for any other interim period or for the year as a
whole.
The accompanying consolidated financial statements include the
accounts of FiberChem, Inc. ("FCI" or the "Company") and its subsidiaries. All
intercompany accounts and transactions have been eliminated.
Certain Fiscal 1994 Financial Statement amounts have been reclassified
to conform with the presentation in the Fiscal 1995 Financial Statements.
(2) CAPITAL STOCK
During Fiscal 1993 and Fiscal 1994, the Company conducted a private
placement of convertible preferred stock ("Convertible Preferred Stock"). Each
share of the Convertible Preferred Stock is convertible into ten shares of FCI
Common Stock, initially at $1.50 per share. The conversion ratio is subject to
customary anti-dilution provisions. Dividends are cumulative and are payable
annually, at the sole discretion of the holders, in cash (11%) or additional
shares of Convertible Preferred Stock (8% of the number of shares owned at date
of declaration). In November 1994, the Company paid cash dividends of $53,339
and issued 14,362 shares of Convertible Preferred Stock dividends. Subsequent
to the issuance of the Convertible Preferred Stock dividends, the Company
reacquired 10,000 shares of the Convertible Preferred Stock dividend for $15 per
share. The Convertible Preferred Stock entitles the holder to a liquidation
preference of $15 per share upon liquidation, dissolution or winding up of the
Company. The Convertible Preferred Stock is redeemable by the Company when and
if the closing bid price of FCI's Common Stock is at least 200% of the
conversion price for twenty consecutive trading days. Upon redemption, the
Company would issue ten shares of its Common Stock for each share of Convertible
Preferred Stock. During the nine-month period ended June 30, 1995 ("Nine-Month
Period 1995"), an aggregate of 8,140 shares of Convertible Preferred Stock were
voluntarily converted by holders of such shares into 81,400 shares of FCI Common
Stock. As of June 30, 1995, the Company had 206,462 shares of Convertible
Preferred Stock issued, excluding the 10,000 shares repurchased by the Company
and held as treasury stock.
In October 1993, the Company entered into an agreement with an
individual whereunder the individual agreed to introduce the Company to Liviakis
Financial Communications, Inc. ("Liviakis") to provide consulting services to
the Company as discussed below. The individual received a fee of 183,500
restricted shares of FCI's Common Stock, valued at $1.09 per share, which was
equal to 10% of the fee paid to Liviakis. The Company entered into a Consulting
Agreement with Liviakis, effective as of October 22, 1993. Liviakis is to
provide consulting services to the Company for a 24 month period. These
services are in connection with financial public relations, investment markets
and other matters relating to corporate finance. Liviakis received 1,730,000
restricted shares of FCI's Common Stock (valued at $1.09 per share) in
consideration of the foregoing. In addition, the Company also agreed to pay to
Liviakis a fee during the aforementioned period of 4,375 shares of FCI's Common
Stock per month. Of the aggregate consideration for these agreements, the
portion attributable to services to be provided in the future has been deferred
and
8
<PAGE>
is being amortized over the term of the agreement. The Liviakis agreement
provided that Liviakis would provide a significant portion of the services
required under the agreement in the first 30-60 days of the agreement. These
activities included significant and immediate direct communications with
existing shareholders, stockbrokers and others to maintain and enhance
visibility of the Company in the financial and investment community; the
identification, discussion and analysis of candidates for possible mergers and
acquisitions; introductions to corporate financial and technical consultants;
and other financial and corporate matters. Since these activities were not
directly attributable to capital raising activities, they have been expensed by
the Company. The Company expensed an aggregate of $42,918 and $2,123,670
related to these agreements during the nine-month periods ending June 30, 1995
and 1994, respectively.
During the Nine-Month Period 1995, the Company: 1) received $47,301
from the exercise of 39,385 options at exercise prices ranging from $1.00 to
$1.63 per share; 2) received $15,056 cash and $37,133 in exchange for services
as payments on notes receivable for the exercise of stock options that were
issued during Fiscal 1994; 3) expensed an aggregate of $147,525, including the
$42,918 in expenses relating to the Liviakis agreement discussed above, in
connection with certain deferred compensation arrangements, and 4) granted an
aggregate of 367,400, 50,000 and 75,000 options to purchase FCI Common Stock to
employees, directors and to an individual for services, respectively. These
options have exercise prices ranging from $1.00 to $1.125 per share and expire
on September 30, 1998 and September 30, 1999. In addition, the Company granted
150,000 options to purchase FCI Common Stock at an exercise price of $1.50 per
share to a former consultant to the Company for services. These options expired
on June 30, 1995. All of the options granted were at exercise prices not less
than the fair market value of FCI's Common Stock at the date of grant. On
April 7, 1995, the Company reduced the exercise price of 3,309,479 options
granted to current employees and directors during calendar 1993 and 1994 to
$1.00 per share from previous exercise prices ranging from $1.13 to $2.125 per
share.
(3) REVENUES
Revenues during the Nine-Month Period 1995 were from sales to the
Company's customers and its distributors, rental companies and manufacturing
representative organizations, which included customary and reasonable discounts
from the retail price. During the three-month period ended June 30, 1995 ("Third
Quarter 1995") the Company continued to establish its distribution network in
Europe and in Asian countries. Third Quarter 1995 revenues include sales to
these distributors, as well as to end customers in the United States and Canada.
Upon the further development of both the domestic sales organization and
international distribution capabilities, Management anticipates that sales
volume will continue to increase throughout the remainder of calendar 1995 to a
level which will result in profitable operations and positive cash flow on a
monthly basis; however, there can be no assurance that the projected level of
sales activity will occur. Based on the Company's continuing equity capital
funding efforts and the Company's product sales and expected sales, Management
believes that it has adequate capital resources to continue its operations for
the foreseeable future; however, there can be no assurance that forecasted sales
levels will be realized to achieve profitable operations.
(4) SUBSEQUENT EVENTS
On August 1, 1995 the Company reduced the exercise price of its
Class D Common Stock Purchase Warrants from $1.50 to $1.00 per share. As of
August 1, 1995, there were 1,999,385 such warrants outstanding.
--------------------------------------------------------
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction
with the Unaudited Consolidated Financial Statements and notes thereto.
MATERIAL CHANGES IN FINANCIAL CONDITION
The Company had working capital of $2,726,325 at June 30, 1995,
compared with working capital of $4,387,172 at September 30, 1994, a decrease of
$1,660,847. Also, the Company had decreases in cash and cash equivalents of
$2,297,638 and in stockholders' equity of $1,835,909. These decreases are
primarily a result of the Company's net loss for the Nine-Month Period 1995 of
$1,879,585. In addition, during the Nine-Month Period 1995, the Company paid on
its Convertible Preferred Stock, cash dividends of $53,339 and issued 14,362
shares, valued at $215,430, of Convertible Preferred Stock dividends.
Subsequent to the issuance of the Convertible Preferred Stock dividend, the
Company reacquired 10,000 shares of the Convertible Preferred Stock dividend for
$150,000 or $15 per share.
The Company had net cash used in financing activities of $122,648
during the Nine-Month Period 1995 as compared with net cash provided by
financing activities of $6,245,373 during the nine-month period ended June 30,
1994 ("Nine-Month Period 1994"). During the Nine-Month Period 1995, the Company
borrowed $21,000 from a local bank under a 36-month installment note for the
purchase of certain capital equipment, and made repayments on the note totaling
$2,666. Also, the Company received $47,301 from the exercise of 39,385 options
to purchase FCI Common Stock and $15,056 cash payments from notes receivable
from the exercise of options. In addition, the Company paid cash dividends on
its Convertible Preferred Stock and purchased certain Convertible Preferred
Stock dividends as discussed above.
The Company had net cash used in operating activities of $2,086,138
during the Nine-Month Period 1995 as compared with net cash used in operating
activities of $2,778,222 for the Nine-Month Period 1994. The deficit during the
Nine-Month Period 1995 is primarily a result of the Company's net loss of
$1,879,585, offset by adjustments to reconcile net loss to net cash used in
operating activities including increases in accounts receivable of $467,502,
inventory of $284,925, other current assets of $55,521, accounts payable of
$114,175 and accrued expenses of $50,266. In addition, these adjustments
include an aggregate of $184,658 related to the issuance of FCI's Common Stock
for services provided to the Company, amortization of $210,861 and depreciation
of $41,435.
The Company had net cash used in investing activities of $88,852 during
the Nine-Month Period 1995 compared to net cash used in investing activities of
$116,790, for the Nine-Month Period 1994. During the Nine-Month Period 1995,
the Company made payments in the amount of $67,084 for new United States and
foreign patent applications as well as payments in the amount of $21,768 for the
purchase of equipment. As of July 1995, the Company has 20 United States and 10
foreign patents issued and 6 United States and 16 foreign patent applications
pending.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
During the Nine-Month Period 1995 and the three-month period ended
June 30, 1995 (Third Quarter 1995), the Company had revenues of $874,056 and
$320,534, respectively, compared to revenues of $71,300 for the Nine Month
Period 1994 and $37,830 for the three month period ended June 30, 1994 ("Third
Quarter 1994"). These revenues included the sale of its PetroSense-Registered
Trademark- Portable Hydrocarbon Analyzer, PetroSense-Registered Trademark-
Continuous Monitoring System, PetroSense -Registered Trademark- Digital
Hydrocarbon Probe and associated products to distributors and customers of the
Company. The revenues for the Nine-Month Period 1995 included sales to the
Company's customers, distributors, rental companies and manufacturing
representative organizations in the United States, Canada, Europe and Asia, and
included discounts comparable to industry norms for manufacturers
representatives and distributors. Revenues for Third
10
<PAGE>
Quarter 1995 included sales of $107,000 (or 33% of Third Quarter 1995 revenues
and 12% of Nine-Month Period 1995 revenues) to a single customer. Revenues for
the Nine-Month Period 1995 include sales of $206,000 (or 24% of revenues) to a
second single customer. Similar sales to major petroleum producing, refining
and distribution companies, including recurring sales to the same companies, are
expected to reoccur. However, as the Company's sales and customer base grow
such individual sales are expected to represent lesser percentages of total
revenues. Nine-Month Period 1994 and Third Quarter 1994 revenues represent the
initial sales of the Company's current products. During the Nine-Month Period
1995 and Third Quarter 1995, the Company incurred cost of revenues amounting to
$398,873 and $140,822, respectively, resulting in gross profit of 54% and 56%,
respectively. Cost of revenues for the Nine-Month Period 1994 and Third Quarter
1994 were $39,441 and $20,586, respectively, resulting in a gross profit of 45%
and 46%, respectively.
Engineering, research and development expenditures decreased by
$866,961, or 48%, during the Nine-Month Period 1995 over the Nine-Month Period
1994 and decreased by $269,777, or 48%, over Third Quarter 1994. These
decreases are primarily attributable to the Company's current focus on
commercialization of its inventions and technology rather than on new research
activities. During the Nine-Month Period 1994 and Third Quarter 1994, the
Company incurred significant prototyping, testing and other development costs
to ready its current products for manufacturing and marketing. During the
Nine-Month Period 1995 and Third Quarter 1995, most of the Company's reduced
engineering, research and development expenditures were devoted to continued
improvement of its current products. The Company has eliminated most of its
consulting agreements for the development of new sensor technologies. The
Company is, however, actively pursuing its electronic semi-conductor chemical
sensor being developed with Texas Instruments, Inc. and hopes to generate
revenue from this product in 1996, although there is no assurance that this
will occur.
General and administrative expenditures decreased by $312,500, or 23%,
during the Nine-Month Period 1995 over the Nine-Month Period 1994 and decreased
by $23,884, or 6% during Third Quarter 1995 over Third Quarter 1994. These
decreases are primarily attributable to reduced expenditures for legal fees,
salaries and consulting fees. As discussed below, the Company placed more
emphasis on its marketing activities during the latter part of Fiscal 1994 and
for the Nine-Month Period 1995, and reduced its general and administrative
expenditures as well as research and development expenditures.
Marketing expenditures increased by $385,764 or 333%, during the
Nine-Month Period 1995 over the Nine-Month Period 1994 and increased by
$95,672, or 164% during Third Quarter 1995 over Third Quarter 1994. These
increases are attributable to the addition of salaried sales and marketing
staff, training expenses for the Company's manufacturing representative
organizations, advertising, marketing literature, sales commissions and field
sales travel. The Company sells its products through distributors, rental
companies, manufacturing representative organizations, and directly to
customers. A network of independent manufacturer's representatives, plus a
number of distributors and rental companies in the United States, Canada and
Mexico have been assembled into a North American sales force organization. A
network of international distributors has been established including the major
European and Asian markets.
The Company's interest income increased by $44,790, or 35%, during the
Nine-Month Period 1995 over the Nine-Month Period 1994. This increase is
attributable to the short-term investment of cash received during Fiscal 1994
through the Company's private placement of Convertible Preferred Stock and from
the exercise of common stock options and Class D Warrants. The short-term
investments include money market savings accounts deposited at a local bank.
The funds are readily available to the Company. The increase is also
attributable to interest accrued on promissory notes for the exercise of FCI
Common Stock options by directors, officers and employees of the Company.
Interest income decreased by $15,536 or 24% during Third Quarter 1995 over Third
Quarter 1994. This decrease is attributable to the decrease in cash and cash
equivalents from Third Quarter 1994 to Third Quarter 1995, which were invested
in interest-bearing accounts.
11
<PAGE>
As a result of the foregoing, the Company incurred a net loss of
$1,879,585, or a net loss of $.09 per share, for the Nine-Month Period 1995 as
compared to a net loss of $5,181,791, or a net loss of $.32 per share, for the
Nine-Month Period 1994. The net loss during the Nine-Month Period 1994 includes
a $2,123,670 expense relating to consulting services in accordance with the
Consulting Agreement with Liviakis Financial Communications, Inc. (see note 2 of
the notes to the unaudited consolidated financial statements). The Company
incurred a net loss of $593,254 for Third Quarter 1995 as compared to a net loss
of $937,889 for Third Quarter 1994.
Management does not consider that inflation has had a significant
effect on the Company's operations to date, nor is inflation expected to have a
material impact over the next year.
Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders ("the Meeting") was held
at the Company's offices on May 8, 1995. At the Meeting, the following
directors were re-elected to serve three-year terms or until their successors
have been duly elected and qualified:
<TABLE>
<CAPTION>
Nominee For Election Against Election Authority Withheld
------- ------------ ---------------- -------------------
<S> <C> <C> <C>
Leonard Chill 15,026,065 500 66,486
Gerald T. Owens 15,009,615 --- 69,486
</TABLE>
Also at the Meeting, the Stockholders: 1) ratified the adoption of the
Company's 1995 Employee Stock Option Plan, providing for the issuance of options
to purchase up to 1,000,000 shares of the Company's stock, by a vote of
14,552,984 FOR, 429,672 AGAINST and 110,395 ABSTAINING; 2) approved an amendment
to the Corporation's Certificate of Incorporation increasing the number of
authorized shares of Common Stock from 30,000,000 to 40,000,000 by a vote of
14,213,657 FOR, 803,936 AGAINST and 75,458 ABSTAINING; and 3) ratified the
appointment of KPMG Peat Marwick LLP as the independent public accountants for
the Company for the fiscal year ending September 30, 1995 by a vote of
15,025,471 FOR, 49,750 AGAINST and 17,830 ABSTAINING.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A report on Form 8-K was filed by the Company during the three month
period ended June 30, 1995 under Item 5, for June 15, 1995 concerning the
Company's entering into an intellectual property License Agreement and a
cooperative Development Agreement with Texas Instruments Incorporated.
No other reports on Form 8-K were filed by the Company during the
three-month period ended June 30, 1995.
------------------------------------------------------
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIBERCHEM, INC.
August 14, 1995 By: /s/ Scott J. Loomis
--------------- --------------------------
Date Scott J. Loomis, President
August 14, 1995 By: /s/ Melvin W. Pelley
--------------- --------------------------
Date Melvin W. Pelley, Chief
Financial Officer and
Secretary
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS AS OF JUNE 30, 1995 AND FOR THE THREE- AND NINE-
MONTH PERIODS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,179,465
<SECURITIES> 0
<RECEIVABLES> 690,895
<ALLOWANCES> 0
<INVENTORY> 1,000,589
<CURRENT-ASSETS> 3,174,336
<PP&E> 567,955
<DEPRECIATION> 420,419
<TOTAL-ASSETS> 4,274,864
<CURRENT-LIABILITIES> 448,011
<BONDS> 11,618
<COMMON> 2,023
0
3,246,930
<OTHER-SE> 566,282
<TOTAL-LIABILITY-AND-EQUITY> 4,274,864
<SALES> 874,056
<TOTAL-REVENUES> 874,056
<CGS> 398,873
<TOTAL-COSTS> 2,922,487
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,450
<INCOME-PRETAX> (1,879,585)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,879,585)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,879,585)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> 0<F1>
<FN>
<F1>Omitted because of antidilutive effect of net loss.
</FN>
</TABLE>
