<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 March 31, 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 May 11, 1995, the issuer had 20,215,724 shares of Common Stock,
par value $.0001 per share, issued and outstanding.
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
----------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $1,706,059 3,477,103
Notes receivable from sale of subsidiary 106,390 106,390
Accounts receivable 565,835 223,393
Inventories 943,300 715,664
Other 195,902 141,476
----------------- -----------------
Total current assets 3,517,486 4,664,026
----------------- -----------------
Equipment 567,554 546,187
Less accumulated depreciation 406,763 378,984
----------------- -----------------
Net equipment 160,791 167,203
----------------- -----------------
Other assets:
Notes receivable from sale of subsidiary 106,389 106,389
Technology costs, net of accumulated amortization of $354,784
at March 31, 1995 and $328,591 at September 30, 1994 182,922 209,115
Patent costs, net of accumulated amortization of $1,130,649 at
March 31, 1995 and $1,017,032 at September 30, 1994 723,837 781,265
----------------- -----------------
Total other assets 1,013,148 1,096,769
----------------- -----------------
$4,691,425 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>
March 31, September 30,
1995 1994
------------------ -----------------
<S> <C> <C>
Current liabilities:
Current portion of note payable $ 6,602 --
Accounts payable 192,361 114,876
Accrued expenses 157,512 161,978
------------------ -----------------
Total current liabilities 356,475 276,854
------------------ -----------------
Long term liabilities:
Note payable-less current portion 13,341 --
------------------ ------------------
Total liabilities 369,816 276,854
------------------ -----------------
Stockholders' equity:
Preferred stock, $.001 par value. Authorized 10,000,000 shares;
216,462 convertible shares issued and 206,462 convertible shares
outstanding at March 31, 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 30,000,000 shares;
20,207,634 and 20,109,354 shares issued and outstanding at
March 31, 1995 and September 30, 1994, respectively 2,021 2,011
Additional paid-in capital 24,776,328 24,629,452
Accumulated deficit (21,820,715) (20,265,615)
------------------- ------------------
6,204,564 7,519,448
Treasury stock - preferred stock, 10,000 shares at cost (150,000) --
Notes receivable for exercise of options (1,627,700) (1,664,699)
Deferred compensation (105,255) (203,605)
------------------- ------------------
Total stockholders' equity 4,321,609 5,651,144
------------------- ------------------
$ 4,691,425 $ 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 Six month period ended
-------------------------------------- ------------------------------------
March 31, March 31, March 31, March 31,
1995 1994 1995 1994
---------------- ------------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Revenues $369,002 33,470 553,522 33,470
Cost of revenues 169,513 18,855 258,051 18,855
--------------- ----------------- ---------------- ---------------
Gross profit 199,489 14,615 295,471 14,615
--------------- ----------------- ---------------- ---------------
Operating expenses:
Engineering, research and
development 319,689 754,230 631,271 1,228,455
General and administrative 348,558 589,215 693,615 982,231
Financial consulting services 14,306 9,536 28,612 2,109,368
Marketing expenses 181,601 14,744 347,565 57,473
Fees and grants -- (19,501) -- (57,849)
--------------- ------------------ ----------------- ---------------
Net operating expenses 864,154 1,348,224 1,701,063 4,319,678
--------------- ------------------ ----------------- ---------------
(Loss) from operations (664,665) (1,333,609) (1,405,592) (4,305,063)
--------------- ------------------ ----------------- ---------------
Other income (expense):
Interest expense (562) (525) (2,132) (1,202)
Interest income 56,139 47,595 121,189 60,863
Other, net -- -- 204 1,500
--------------- ------------------- ------------------ ----------------
Total other income (expense) 55,577 47,070 119,261 61,161
--------------- ------------------- ------------------ ----------------
Net (loss) ($609,088) (1,286,539) (1,286,331) (4,243,902)
=============== =================== ================= ================
Shares of common stock used in
computing loss per share 20,202,276 17,470,175 20,192,684 14,810,232
=============== =================== ================= ================
Net (loss) per share ($0.03) (0.07) (0.06) (0.29)
=============== =================== ================= ================
</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 -- -- 16,880 2 24,784
Payments received on notes receivable
for exercise of options -- -- -- -- --
Deferred compensation earned -- -- -- -- --
Net loss -- -- -- -- --
---------- ------------ ------------ --------- ------------
Balance at March 31, 1995 216,462 $3,246,930 20,207,634 $2,021 24,776,328
========== ============ ============ ========= ============
<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 -- -- -- -- 24,786
Payments received on notes receivable
for exercise of options -- -- 36,999 -- 36,999
Deferred compensation earned -- -- -- 98,350 98,350
Net loss (1,286,331) -- -- -- (1,286,331)
------------- ---------- ------------ ---------- ------------
Balance at March 31, 1995 (21,820,715) (150,000) (1,627,700) (105,255) 4,321,609
============= ========== ============ ========== ============
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six month period ended
------------------------------------------------
March 31, March 31,
1995 1994
----------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($1,286,331) (4,243,902)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 27,779 48,167
Amortization 139,810 134,213
Common stock issued for:
Financial consulting services 28,612 2,109,368
Other services 96,571 193,477
Changes in operating assets and liabilities:
Accounts receivable (342,442) 24,707
Inventories (227,636) (117,051)
Other current assets (54,426) 7,647
Accounts payable 77,485 22,471
Accrued expenses (4,466) 83,580
------------- -------------
Net cash used in operating activities (1,545,044) (1,737,323)
------------- -------------
Cash flows from investing activities:
Purchase of equipment (21,367) (19,313)
Payments for patents (56,189) (69,104)
------------- -------------
Net cash used in investing activities (77,556) (88,417)
------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements
(continued)
6
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six month period ended
--------------------------------------
March 31, March 31,
1995 1994
---------------- -----------------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from note payable $ 21,000 --
Repayments of note payable (1,057) --
Proceeds from the exercise of options and warrants 24,786 2,857,532
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 10,166 765
Payment of dividend on preferred stock (53,339) --
Purchase of preferred stock (150,000) --
------------- ------------
Net cash provided by (used in) financing activities (148,444) 6,146,740
------------- ------------
Net (decrease) increase in cash and cash equivalents (1,771,044) 4,321,000
Cash and cash equivalents at beginning of period 3,477,103 809,678
------------- ------------
Cash and cash equivalents at end of period $ 1,706,059 5,130,678
============= ============
Supplemental Cash Flow Information
Noncash investing and financing activities:
Notes receivable for exercise of options $ -- 2,024,099
Reduction in notes receivable in exchange for services 26,833 88,780
============= =============
Interest paid $ 2,132 1,141
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 adjustmen ts (consisting primarily of normal
recurring accruals) necessary to present fairly the financial position as of
March 31, 1995 and September 30, 1994, and the results of operations and cash
flows of the Company for the three-month and six-month periods ended March 31,
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 six-month period ended March 31, 1995 ("Six-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 March 31, 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>
FIBERCHEM, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================
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 $28,612 and $2,109,368 related
to these agreements during the six-month periods ending March 31, 1995 and 1994,
respectively.
During the Six-Month Period 1995, the Company: 1) received $24,786 from
the exercise of 16,880 options at exercise prices ranging from $1.13 to $1.63
per share; 2) received $10,166 cash and $26,833 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 $98,350, including the $28,612
in expenses relating to the Liviakis agreement discussed above, in connection
with certain deferred compensation arrangements, and 4) granted an aggregate of
84,900 and 25,000 options to purchase FCI Common Stock to employees 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, 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 expire on June 30, 1995. All of the options granted were
at amounts not less than the fair market value of FCI's Common Stock at the date
of grant.
(3) REVENUES
Revenues during the Six-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. As of mid-December 1994, the Company had recruited and
trained a domestic United States sales force consisting of twenty-one
manufacturer's representative organizations comprising over 50 professional
sales personnel. During the three-month period ended March 31, 1995 ("Second
Quarter 1995") distributors were established in several European and Asian
countries. Second 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 Fiscal 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,
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 April 7, 1995, the Company granted an aggregate of 332,500 options to
purchase FCI Common Stock to employees, directors and two individual
consultants. These options are excercisable at $1.00 per share (which was the
fair market value of FCI's Common Stock on April 7, 1995) and expire on
September 30, 1998. Also, on April 7, 1995, the Company reduced the exercise
price of 1,334,507 options granted to current employees and directors during
calendar 1993 and 1994 to $1.00 per share from exercise prices ranging from
$1.13 to $2.125 per share.
-----------------------------------------------------
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 $3,161,011 at March 31, 1995, compared
with working capital of $4,387,172 at September 30, 1994, a decrease of
$1,226,161. Also, the Company had decreases in cash and cash equivalents of
$1,771,044 and in stockholders' equity of $1,329,535. These decreases are
primarily a result of the Company's net loss for the six-month period ended
March 31, 1995 ("Six-Month Period 1995") of $1,286,331. In addition, during the
Six- 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 $148,444 during
the Six-Month Period 1995 as compared with net cash provided by financing
activities of $6,146,740 during the six-month period ended March 31, 1994
("Six-Month Period 1994"). During the Six-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
$1,057. Also, the Company received $24,786 from the exercise of 16,880 options
to purchase FCI Common Stock and $10,166 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. During the Six-Month Period 1994, the
Company received an aggregate of $2,857,532 from the exercise of FCI Common
Stock options and warrants. Also, the Company received $3,326,174 (net of cost
of issuance and expenses of offering aggregating $734,326) from the issuance of
270,700 shares of Convertible Preferred Stock at $15 per share.
The Company had net cash used in operating activities of $1,545,044 during
the Six-Month Period 1995 as compared with net cash used in operating activities
of $1,737,323 for the Six-Month Period 1994. The deficit during the Six-Month
Period 1995 is primarily a result of the Company's net loss of $1,286,331,
offset by adjustments to reconcile net loss to net cash used in operating
activities including increases in accounts receivable of $342,442, inventory of
$227,636, other current assets of $54,426 and accounts payable of $77,485 and a
decrease in accrued expenses of $4,466. In addition, these adjustments include
an aggregate of $125,183 related to the issuance of FCI's Common Stock for
services provided to the Company, amortization of $139,810 and depreciation of
$27,779.
The Company had net cash used in investing activities of $77,556 during
the Six-Month Period 1995 compared to net cash used in investing activities of
$88,417, for the Six- Month Period 1994. During the Six-Month Period 1995, the
Company made payments in the amount of $56,189 for new United States and foreign
patent applications as well as payments in the amount of $21,367 for the
purchase of equipment. As of May 1995, the Company has twenty United States and
nine foreign patents issued and eight United States and fifteen foreign patent
applications pending.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
During the Six-Month Period 1995 and the three-month period ended
March 31, 1995 ("Second Quarter 1995"), the Company had revenues of $553,522 and
$369,002, respectively, compared to revenues of $33,470 for the Six Month Period
1994 and the three month period ended March 31, 1994 ("Second Quarter 1994").
These revenues included the sale of its PetroSense-Registeres Trademark-
Portable Hydrocarbon Analyzer, PetroSense Continuous Monitoring System,
PetroSense-Registered Trademark- Digital Hydrocarbon Probe and associated
10
<PAGE>
products to distributors and customers of the Company. The revenues for the
Six-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 Second
Quarter 1995 included sales of $206,000 (or 56% of Second Quarter 1995 revenues
and 37% of Six-Month Period 1995 revenues) to a single customer and $35,500 (or
10% of Second Quarter 1995 revenues and 6% of Six-Month Period 1995 revenues) to
another 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.
Six-Month Period 1994 and Second Quarter 1994 revenues represent the initial
sales of the Company's current products. During the Six-Month Period 1995 and
Second Quarter 1995, the Company incurred cost of revenues amounting to $258,051
and $169,513, respectively, resulting in gross profit of 53% and 54%,
respectively. Cost of revenues for the Six-Month Period 1994 and Second Quarter
1994 were both $18,855, resulting in a gross profit of 44%.
Research and development expenditures decreased by $597,184, or 49%,
during the Six-Month Period 1995 over the Six-Month Period 1994 and decreased by
$434,541, or 58%, over Second 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 Six
Month Period 1994 and Second Quarter 1994, the Company incurred significant
prototyping, testing and other development costs to ready its current products
for manufacturing and marketing. During the Six-Month Period 1995 and Second
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 anticipates to generate revenue from this product in
early fiscal 1996, although there is no assurance that this will occur.
General and administrative expenditures decreased by $288,616, or 29%,
during the Six-Month Period 1995 over the Six-Month Period 1994 and decreased by
$240,657, or 41% during Second Quarter 1995 over Second 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 Six-Month Period 1995, and reduced its general and administrative
expenditures as well as research and development expenditures.
Marketing expenditures increased by $290,092 or 505%, during the Six-Month
Period 1995 over the Six-Month Period 1994 and increased by $166,857, or 1132%
during Second Quarter 1995 over Second Quarter 1994. These increases are
attributable to the addition of salaried sales and marketing staff, training
expenses for the Company's manufacturing representative organizations and for
advertising and marketing literature. The Company sells its products through
distributors, rental companies, manufacturing representative organizations, and
directly to customers. A network of twenty-one 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 is being developed. Several distributors
in Europe and Pacific Rim countries are in place, and additional distributors
are expected to be established in European, Asian and South American countries
over the next six months, although there is no assurance that the Company will
enter into any such new agreements.
The Company's interest income increased by $60,326, or 99%, during the
Six-Month Period 1995 over the Six-Month Period 1994 and increased by $8,544, or
18% during Second Quarter 1995 over Second Quarter 1994. These increases are
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
11
<PAGE>
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.
As a result of the foregoing, the Company incurred a net loss of
$1,286,331, or a net loss of $.06 per share, for the Six-Month Period 1995 as
compared to a net loss of $4,243,902, or a net loss of $.29 per share for the
Six- Month Period 1994. The net loss during the Six-Month Period 1994 includes a
$2,109,368 expense relating to the Liviakis agreement (see note 2 of the notes
to the unaudited consolidated financial statements). The Company incurred a net
loss of $609,088 for Second Quarter 1995 as compared to a net loss of $1,286,539
for Second 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 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed by the Company during
the three-month period ended March 31, 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.
May 12, 1995 By: /s/ Scott J. Loomis
- - -------------------- -----------------------------------
Date Scott J. Loomis, President
May 12, 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 MARCH 31, 1995 AND FOR THE
THREE- AND-SIX-MONTH PERIODS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,706,059
<SECURITIES> 0
<RECEIVABLES> 672,225
<ALLOWANCES> 0
<INVENTORY> 943,300
<CURRENT-ASSETS> 3,517,486
<PP&E> 567,554
<DEPRECIATION> 406,763
<TOTAL-ASSETS> 4,691,425
<CURRENT-LIABILITIES> 356,475
<BONDS> 18,341
<COMMON> 2,021
0
3,246,930
<OTHER-SE> 1,072,658
<TOTAL-LIABILITY-AND-EQUITY> 4,691,425
<SALES> 553,522
<TOTAL-REVENUES> 553,522
<CGS> 258,051
<TOTAL-COSTS> 1,959,114
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,132
<INCOME-PRETAX> (1,286,331)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,286,331)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,286,331)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> 0<F1>
<FN>
<F1>OMITTED BECAUSE OF ANTIDILUTIVE EFFECT OF NET LOSS
</FN>
</TABLE>
