<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, 2000
------------------------
[ ] 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)
7 (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, 2000, the issuer had 51,581,695 shares of Common Stock,
par value $.0001 per share, issued and outstanding.
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED)
September 30, March 31,
1999 2000
--------------------- ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 21,760 $ 356,377
Accounts receivable, net of allowance for doubtful
accounts of $92,423 at September 30, 1999
and $36,458 at March 31, 2000 647,402 134,166
Inventories 1,261,437 1,157,441
Prepaid expenses and other 122,153 171,800
--------------------- ------------------
Total current assets 2,052,752 1,819,784
--------------------- ------------------
Equipment 704,964 704,964
Less accumulated depreciation (645,163) (660,996)
--------------------- ------------------
Net equipment 59,801 43,968
--------------------- ------------------
Other assets:
Patent costs, net of accumulated amortization of
$1,958,108 at September 30, 1999 and
$1,986,056 at March 31, 2000 65,734 45,551
Technology costs, net of accumulated amortization
of $469,706 at September 30, 1999 and March 31, 2000 -- --
Note refinancing costs, net of accumulated amortization
of $32,920 at September 30, 1999 and $24,090
at March 31,2000 125,096 40,150
Other deferred costs 39,147 65,125
--------------------- ------------------
Total other assets 229,977 150,826
--------------------- ------------------
Total assets $2,342,530 $2,014,578
===================== ==================
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
(UNAUDITED)
September 30, March 31
1999 2000
------------------- -------------------
<S> <C> <C>
Current liabilities:
Bank loan payable 421,949 --
Other current notes payable 250,000 250,000
Accounts payable 272,906 416,001
Deferred salaries 76,353 143,699
Accrued salaries and benefits 199,221 183,524
Accrued warranty 146,282 113,106
Accrued legal, accounting and consulting 70,600 82,300
Accrued commissions 33,799 33,799
Other accrued expenses 93,856 115,409
Customer deposits 37,775 19,516
Interest payable 55,587 44,083
------------------- -------------------
Total current liabilities 1,658,328 1,401,437
Senior convertible notes payable $ 1,621,000 $ 659,000
Notes payable to officers, directors and affiliates 265,000 495,000
------------------- -------------------
Total liabilities 3,544,328 2,555,437
------------------- -------------------
Stockholders' equity (deficiency):
Preferred stock, $.001 par value. Authorized 10,000,000 shares;
207,848 convertible shares issued and outstanding at September
30, 1999 and March 31, 2000; at liquidation value
of $15 per share 3,117,720 3,117,720
Common stock, $.0001 par value. Authorized
150,000,000 shares; 39,831,038 and 48,347,813
shares issued and outstanding at September 30
1999 and March 31, 2000, respectively 3,983 4,835
Additional paid-in capital 29,979,833 31,749,044
Deficit (34,210,476) (35,389,000)
Deferred costs (69,400) --
Stock subscription receivable (23,458) (23,458)
------------------- -------------------
Stockholders' equity (deficiency) (1,201,798) (540,859)
------------------- -------------------
Total liabilities and stockholders' equity (deficiency) $ 2,342,530 $ 2,014,578
=================== ===================
</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,
1999 2000 1999 2000
-------------------- ------------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
Revenues $ 725,938 $ 242,762 $ 1,054,833 $ 839,246
Cost of revenues 340,694 144,929 524,288 526,351
-------------------- ------------------- ------------------- ---------------------
Gross profit 385,244 97,833 530,545 312,895
-------------------- ------------------- ------------------- ---------------------
Operating expenses:
Research, development and
engineering 129,364 90,416 284,161 208,035
General and administrative 284,976 443,292 656,911 762,583
Sales and marketing 166,165 189,114 330,350 345,224
-------------------- ------------------- ------------------- ---------------------
Total operating expenses 580,505 722,822 1,271,422 1,315,842
-------------------- ------------------- ------------------- ---------------------
Loss from operations (195,261) (624,989) (740,877) (1,002,947)
-------------------- ------------------- ------------------- ---------------------
Other income (expense):
Interest expense (82,945) (69,762) (164,114) (176,177)
Interest and other income 1,407 29 7,896 600
-------------------- ------------------- ------------------- ---------------------
Total other income (expense) (81,538) (69,733) (156,218) (175,577)
-------------------- ------------------- ------------------- ---------------------
Net loss $ (276,799) $ (694,722) $ (897,095) $(1,178,524)
==================== =================== =================== =====================
Shares of common stock used in
computing net loss per share 34,688,114 43,201,850 31,126,703 41,579,196
==================== =================== =================== =====================
Net loss per share $ (0.01) $ (0.02) $ (0.03) $ (0.03)
==================== =================== =================== =====================
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
----------------------------------------------- Paid-In
Shares Amount Shares Amount Capital Deficit
------------ ------------ ----------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1999 207,848 $3,117,720 39,831,038 $3,983 29,979,833 (34,210,476)
Common stock issued:
For cash -- -- 981,540 98 178,807 --
For exercise of Class E Warrants -- -- 895,973 90 312,347 --
For exercise of other warrants -- -- 2,173,153 217 241,731 --
For exercise of options -- -- 103,000 10 28,890 --
For conversion of senior convertible
8% notes -- -- 4,182,609 419 900,158 --
For conversion of interest payable to
officers, directors and affiliates -- -- 80,500 8 10,038 --
For services -- -- 100,000 10 26,490 --
Deferred costs recognized -- -- -- -- -- --
Warrants issued for services -- -- -- -- 70,750 --
Net loss -- -- -- -- -- (1,178,524)
------------ ------------ ----------- --------- --------------- ------------
Balance at March 31, 2000 207,848 $3,117,720 48,347,813 $4,835 31,749,044 (35,389,000)
============ ============ =========== ========= =============== ============
</TABLE>
<TABLE>
<CAPTION>
Receivable
Deferred for Exercise
Costs of Rights Total
----------- ---------------- ---------------
<S> <C> <C> <C>
Balance at September 30, 1999 (69,400) (23,458) (1,201,798)
Common stock issued:
For cash -- -- 178,905
For exercise of Class E Warrants -- -- 312,437
For exercise of other warrants -- -- 241,948
For exercise of options -- -- 28,900
For conversion of senior convertible
8% notes -- -- 900,577
For conversion of interest payable to
officers, directors and affiliates -- -- 10,046
For services -- -- 26,500
Deferred costs recognized 69,400 -- 69,400
Warrants issued for services -- -- 70,750
Net loss -- -- (1,178,524)
----------- ---------------- ---------------
Balance at March 31, 2000 0 (23,458) (540,859)
=========== ================ ===============
</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
----------------- -------------------
1999 2000
----------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(897,095) $(1,178,524)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 21,975 15,833
Amortization of patent and technology costs 64,487 27,948
Amortization of financing costs 38,526 23,523
Common stock and warrants issued for services 136,361 97,250
Deferred costs recognized -- 69,400
Common stock issued for interest expense 21,001 --
Provisions for loss on accounts receivable and
inventories -- 30,773
Gain on sale of fixed assets (750) --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (444,840) 455,228
Decrease in inventories 253,912 131,231
Increase in prepaid expenses and other
current assets (3,963) (49,647)
Increase (decrease) in accounts payable (150,254) 143,095
Increase in accrued expenses 42,063 33,467
Increase (decrease) in interest payable 84,566 (1,458)
----------------- -----------------
Net cash used in operating activities (834,011) (201,881)
----------------- -----------------
Cash flows from investing activities:
Sale of equipment 750 --
Payments for patents (11,194) (7,765)
----------------- -----------------
Net cash used in investing activities (10,444) (7,765)
----------------- -----------------
</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
----------------- -------------------
1999 2000
----------------- -------------------
<S> <C> <C>
Cash flows from financing activities:
Net proceeds from bank loan $43,660 $ --
Proceeds from notes payable, officers, directors and affiliates -- 230,000
Proceeds from issuance of common stock and warrants 922,946 178,905
Proceeds from the exercise of Class E Warrants -- 312,437
Proceeds from the exercise of other warrants -- 241,948
Proceeds from the exercise of options 2,200 28,900
Payments on note payable to bank and others (45,798) (421,949)
Payment of merger costs -- (25,978)
Payment of financing costs (113,504) --
----------------- -----------------
Net cash provided by financing activities 809,504 544,263
----------------- -----------------
Net increase (decrease) in cash and cash equivalents $(34,951) $ 334,617
Cash and cash equivalents at beginning of period 91,354 21,760
----------------- -----------------
Cash and cash equivalents at end of period $56,403 $ 356,377
================= =================
Supplemental Cash Flow Information
Noncash investing and financing activities:
Senior convertible notes payable converted to common stock $ -- $ 962,000
Unamortized deferred financing costs associated with senior
convertible notes payable converted to common stock -- 61,423
Exchange of senior convertible notes payable due
February 15, 1999 for notes due February 15, 2002 1,600,000 --
Notes and interest payable to officers, directors and
affiliates converted to common stock and warrants 420,987 10,046
Notes payable to others converted to common stock
and warrants 60,000 --
Payment of financing costs with common stock and warrants 178,005 --
Issuance of senior convertible notes in payment of accrued interest 21,000 --
================= =================
Interest paid $11,805 $ 84,406
================= =================
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
===========================================================================
(1) PRESENTATION OF UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements include
the accounts of FiberChem, Inc. ("FCI" or the "Company") and its subsidiaries.
All inter-company accounts and transactions have been eliminated.
The unaudited consolidated financial statements have been prepared in
accordance with Item 310 of Regulation S-B 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
September 30, 1999 and March 31, 2000, and the results of operations and cash
flows of the Company for the six-month periods ended March 31, 1999 and 2000.
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. For further
information, refer to the financial statements and footnotes thereto included in
the Company's annual report on Form 10-KSB for the year ended September 30,
1999.
Certain Fiscal 1999 Financial Statement amounts have been reclassified
to conform with the presentation in the Fiscal 2000 Financial Statements.
(2) NOTES PAYABLE
On February 15, 1996, the Company completed an offering under
Regulation S, promulgated under the Securities Act of 1933, as amended (the
"Offering"), of 8% Senior Convertible Notes due February 15, 1999 (the "Notes"),
for $2,825,000. Interest on the Notes was to be paid semi-annually, commencing
August 15, 1996, at a rate of 8% per annum. The Notes were convertible into
shares of Common Stock of the Company at a conversion price (the "Conversion
Price") of, initially, $0.80 per share at any time after March 26, 1996 and
before the close of business on February 14, 1999. The Conversion Price was
adjusted, in accordance with the original note agreement, to $0.4078, a price
representing a 10% discount from the average closing bid price of the Common
Stock for the 30 business days prior to February 15, 1997. As of the maturity
date of the Notes on February 15, 1999, an aggregate face amount of $1,225,000
of the Notes had been converted to Common Stock resulting in the issuance of
1,742,851 shares of Common Stock.
On February 2, 1999, the Company offered to exchange the Notes at their
maturity on February 15, 1999 for new Notes (the "New Notes") with a conversion
price of $0.23, which was established by using the ten-day average closing price
of the Common Stock prior to February 15, 1999. The New Notes provide for
semi-annual interest payments at 8% per annum in cash or at 12% per annum in
stock (at the Company's option) and are due February 15, 2002. The Company may
require conversion if the closing bid price of the Common Stock exceeds 200% of
the conversion price for 20 consecutive trading days. In all other material
respects, the New Notes have terms similar to those of the old Notes. In order
to encourage exchange of the Notes for New Notes, the Company offered a bonus,
payable in Common Stock valued at approximately current market, of 8% of the
face amount of Notes exchanged for New Notes. The Company offered an additional
Common Stock bonus equal to 4% of the face amount of notes exchanged if the
holder agreed to accept additional New Notes in payment of the semi-annual
interest payment due February 15, 1999. All of the $1,600,000 principal amount
of old Notes were exchanged for New Notes, and an additional $21,000 of New
Notes were issued as payment of interest due on $525,000 of old Notes. An
aggregate of 556,544 shares of Common Stock (valued at $0.23 per share, or a
total of $128,005) were issued as the exchange bonus. The exchange bonus of
$128,005 and legal and other associated costs of $30,011 are being amortized to
interest expense over the three-year term of the New Notes.
During February and March 2000, an aggregate principal amount of
$962,000 of the New Notes were converted to 4,182,609 shares of Common Stock,
resulting in a principal balance outstanding at March 31, 2000 of $659,000 of
New Notes. As of May 8, 2000, an additional $412,000 principal amount had been
converted to Common Stock.
8
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
===========================================================================
During August 1999, the Company exercised its option to pay interest on
the New Notes in shares of Common Stock. In accordance with the provisions of
the New Notes, 1,296,800 shares of Common Stock were issued, valued at $194,520
($0.15 per share), representing interest at 12% per annum for the period
February 16, 1999 through February 15, 2000.
In connection with the 1996 Offering, the Company issued to the
Placement Agent for the Offering, for nominal consideration, warrants to
purchase up to 353,125 shares of Common Stock, at an exercise price of $0.80 per
share (the "Exercise Price"), which were adjusted to $0.4078 per share in
accordance with the original Placement Agent Agreement and has been further
adjusted to $0.23 per share. Also in accordance with the terms of the warrants,
the number of shares exercisable has been adjusted, based on the adjusted
Exercise Price, to 692,742 shares of Common Stock. These warrants are
exercisable at any time on or after August 15, 1996 through February 14, 2001
and contain certain piggyback registration rights. During January 2000, the
Company received offers to convert these and other warrants to Common Stock at
approximately $0.105 per share, which the Company accepted.
On July 7, 1998, the Company arranged a line of credit with Silicon
Valley Bank. The agreement provides for maximum loans of $1 million, and is
secured by accounts receivable, inventories, equipment and intellectual
property. The agreement provides for advances against specific sales invoices at
an annualized interest rate of approximately 19.75%. As of March 31, 2000, the
Company had repaid all borrowings against the line of credit.
In March and August 1998, the Company obtained loans aggregating
$433,000 from Privatbank Vermag AG, a private investment bank with which a
director of the Company is associated. These loans (the "Bridge Loans") were
provided as interim financing until the Company completed its Rights Offering
(See Capital Stock below). The Bridge Loans bear interest at approximately 8.5%
per annum. Also, $50,000 of the Bridge Loans and $1,920 in accrued interest were
converted to Common Stock and Warrants as part of the Rights Offering. The
remaining $383,000 of Bridge Loans were due on July 15, 1999, when principal of
$133,000 and accrued interest of $14,680 were converted to 1,136,000 shares of
Common Stock. The due date of the remaining $250,000 principal amount has been
extended to July 15, 2000.
During Fiscal 1998 and Fiscal 1999, directors and officers of the
Company advanced an aggregate of $265,000 to the Company and an additional
$230,000 during January 2000. These advances bear interest at rates of 8%, 9%
and 12% per annum and are due at various dates between December 14, 2002 and
February 4, 2003 unless converted into Common Stock prior to maturity. Of the
total advances, $125,000 is convertible into Common Stock at $0.13 per share;
$40,000 at $0.11 per share; $200,000 at $0.12 per share and $130,000 is not
convertible.
(3) CAPITAL STOCK
On October 23, 1998, the Company granted, for no consideration to
holders of its Common Stock, Preferred Stock and warrants, transferable rights
(the "Rights") to subscribe for units (the "Units") at a subscription price of
$0.22 per Unit. Each Unit consisted of one share of Common Stock and one
redeemable Class E Warrant exercisable for one share of Common Stock at an
exercise price for one year (through October 23, 1999) of $0.25 per share; then
through October 23, 2000 at $0.35; then through October 23, 2001 at $0.50 per
share; then through October 23, 2002 at $0.70 per share; then through October
23, 2003 (at which time the Class E Warrants expire) at $0.90 per share. Each
holder of record as of October 16, 1998, of Common Stock and Warrants received
one Right for every four shares of Common Stock or Warrants held, and each
holder of Preferred Stock received 2.5 Rights for each share of Preferred Stock
held. An aggregate of 8,976,962 Rights were issued. An aggregate of 7,678,679
Rights were exercised as of the close of the offering on December 22, 1998,
resulting in gross proceeds to the Company of $1,689,309 and the issuance of
7,678,679 shares of Common Stock and a like number of Class E Warrants.
Of the total 7,678,679 Rights exercised, 4,195,209 were exercised for
cash of $922,946; 1,805,677 were exercised in exchange for the payment of
advances (and accrued interest thereon) from officers, directors and affiliates
aggregating $397,249; 272,727 were exercised in payment of a $60,000 note
payable to others; 489,347
9
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
===========================================================================
were exercised in payment of $107,656 of deferred
salaries due to members of management of the Company; and 915,719 were exercised
in payment for legal, consulting and other services totalling $201,458.
The Class E Warrants provide that the Company may call the warrants for
redemption if the closing price of the Common Stock equals or exceeds 200% of
the current exercise price of the warrants for a period of 30 consecutive
trading days. As of March 31,2000, the closing price of the Common Stock had
exceeded $0.70 for each preceding trading day, and on April 4, 2000, the Company
announced its intent to redeem the warrants on June 16, 2000, unless earlier
exercised. As of March 31, 2000, an aggregate of 895,973 Class E Warrants had
been exercised at $0.35 each, resulting in gross proceeds to the company of
$313,591. As of May 9, 2000, an additional 1,372,578 warrants had been
exercised, resulting in additional gross proceeds to the Company of $480,402.
During Fiscal 1993 and Fiscal 1994, the Company conducted a private
placement of convertible preferred stock ("Convertible Preferred Stock"). Each
share of 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). 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. As of March 31, 2000 the Company had 207,848 shares of
Convertible Preferred Stock outstanding. On September 12, 1997, the Board of
Directors determined that, in view of the recent trading price of the Company's
Common Stock and in view of the Company's current cash position, it would not be
appropriate to declare the annual dividend payable on the Convertible Preferred
Stock on November 1, 1997. Likewise, in September 1998 and September 1999, the
Board of Directors determined not to declare the annual dividend payable on
November 1, 1998 and 1999, respectively. As a result, the undeclared dividends,
aggregating $1,028,848 (if elected entirely in cash, or 53,981 additional shares
of Convertible Preferred Stock if elected wholly in additional shares), will
accumulate in accordance with the terms of the Convertible Preferred Stock.
On May 31, 1996, the Company completed an offering under Regulation S,
of 3,333,333 Units, at a price of $0.90 per Unit for total gross proceeds of
$3,000,000 before costs and expenses of the offering. The Company paid fees and
expenses associated with the Unit offering amounting to $345,683. Each Unit
consisted of one share of Common Stock and one warrant to purchase one share of
Common Stock (the "Unit Warrants") the shares and warrants being immediately
separable. The Unit Warrants are each exercisable at $1.00 at any time from May
31, 1996 through May 30, 2001. On April 23, 1999, as an inducement to encourage
exercise of warrants, the Company offered to exchange Unit Warrants for Class E
Warrants on a one-for-one basis. As of the closing of the offer and as of March
31, 2000, 1,696,333 Unit Warrants had been exchanged for Class E Warrants. In
connection with the 1996 Unit offering, the Company issued to the Placement
Agent for the offering, for nominal consideration, warrants to purchase up to
333,333 shares of Common Stock ("the Placement Agent Warrants"), at an exercise
price of $0.90 per share which has been adjusted to $0.2343 per share in
accordance with the Placement Agent Agreement, and the number of shares issuable
upon exercise has been adjusted to 1,280,411. These Placement Agent Warrants
were exercisable at any time from November 30, 1996 through May 30, 2001. During
January 2000, the Company received offers to convert these 1,280,411 warrants
and 692,742 other warrants at an average price of approximately $0.105 per
share, along with the issuance of 75,000 Class E Warrants to certain of the
holders. The Company accepted the offers and issued 1,973,153 shares of common
stock and 75,000 new warrants (with terms similar to the Class E Warrants) for
gross proceeds of $205,948.
In May 1999, the Company issued 300,000 Class E Warrants for cash of
$10,000 and issued 999,000 shares of Common Stock, valued at $0.15 per share,
and warrants to purchase 600,000 shares of Common Stock in exchange for investor
relations and other services through January 2000. These warrants are
exercisable for 3 years at exercise prices of $0.18 per share for 200,000
shares, $0.50 for 200,000 shares and $1.00 for 200,000 shares. The Common Stock
and warrants were valued at a total of $203,850, which is being amortized to
expense monthly over the nine months of the agreement for services. During March
2000, the 200,000 warrants exercisable at $0.18
10
<PAGE>
FIBERCHEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
===========================================================================
were exercised, resulting in the issuance of 200,000 shares of Common Stock and
the receipt of $36,000 in proceeds to the Company.
(4) REVENUES
The Company continues to incur substantial losses and Management
recognizes that the Company must generate additional revenues or reductions in
operating costs and needs additional financing to continue its operations. On
December 6, 1999, the Company entered into an agreement providing for the
combination of its business with that of Intrex Data Communications Corp. The
Company has obtained a commitment for $600,000 of financing to provide operating
funds and to provide funds to consummate the business combination. During the
first six months of fiscal 2000, the Company has received proceeds of
approximately $760,000 from the exercise of warrants and options and the
issuance of additional shares of Common Stock. Since March 31, 2000 and as of
May 9, 2000, an additional $480,402 has been received for the exercise of Class
E Warrants. On April 4, 2000, the Company notified holders of the Class E
Warrants that it intends to redeem the warrants at $0.05 per warrant on June 16,
2000, if not already exercised by that date. As of May 9, 2000, 7,574,000 Class
E Warrants remain outstanding. If all of these were exercised prior to the
redemption date, the Company would receive gross proceeds of approximately
$2,650,000. If none of these warrants are exercised, the total redemption price
would be approximately $379,000, before any associated costs. The Company is
pursuing several potential sources for $5,000,000 in new financing required as a
condition to completion of the business combination. However, no assurance can
be given that this or any financing can be obtained on terms satisfactory to the
Company, or that forecasted sales will be realized to achieve profitable
operations, or that any of the outstanding Class E Warrants will be exercised.
------------------------------------------
11
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This report includes forward-looking statements relating to the
Company's operations that are based on Management's and third parties' current
expectations, estimates and projections. These statements are not guarantees of
future performances and actual results could differ materially. The statements
in this report regarding FCI's proposed business combination with Intrex, the
combined entity's delivery of services over the Internet, the size of the market
for the combined company's services and the proposed bridge financing, are
forward-looking statements that involve risks and uncertainties. These risks and
uncertainties include, FCI's ability to complete the combination and the bridge
financing, the combined entity's ability to market its services using the two
companies' technologies, the timely development and acceptance of new products,
final promulgation and enforcement of regulations, the impact of competitive
products and pricing, the timely funding of customer's projects, customer
payments to the Company and other risks detailed from time to time in the
Company's SEC reports.
The following discussion and analysis should be read in conjunction
with the Unaudited Consolidated Financial Statements and notes thereto.
MATERIAL CHANGES IN FINANCIAL CONDITION
During the six-month period ended March 31, 2000 (the "Six-Month Period
2000"), the Company received approximately $583,000 in gross proceeds from the
exercise of options and Common Stock purchase warrants, and received
approximately $179,000 from other issuances of Common Stock. The Company also
borrowed $230,000 from an officer of the Company in return for a three-year
convertible promissory note. During February and March 2000, $962,000 of the
Company's 8% Senior Convertible Notes were converted into Common Stock.
Working capital at March 31, 2000, was $418,347, compared to $394,424
at September 30, 1999, an increase of $23,923. Cash and cash equivalents
increased by $334,617 to $356,377 at March 31, 2000 from $21,760 at September
30, 1999. Stockholders' deficit improved by $660,939 from $1,201,798 at
September 30, 1999 to $540,859 at March 31, 2000. These changes are primarily
the results of the financing activities outlined above, offset by the Company's
net loss for the Six-Month Period 2000 of $1,178,524.
Net cash used in operating activities during the Six-Month Period 2000
was $201,881 compared to net cash used in operating activities during the
six-month period ended March 31, 1999 (the "Six-Month Period 1999") of $834,011.
The deficit during the Six-Month Period 2000 is primarily the result of the
Company's net loss of $1,178,524, and adjustments to reconcile net loss to net
cash used in operating activities. These adjustments consider changes in current
assets and liabilities, as well as non-cash transactions including depreciation
and amortization expense of $67,304, and common stock and warrants issued for
services of $166,650. The deficit during the Six-Month Period 1999 was primarily
a result of the Company's net loss of $897,095, and adjustments to reconcile net
loss to net cash used in operating activities. These adjustments include
depreciation and amortization expense of $124,988 and common stock issued in
exchange for services of $136,361.
Net cash used in investing activities during the Six-Month Period 2000
was $7,765, as compared to net cash used in investing activities of $10,444
during the Six-Month Period 1999. During the Six-Month Period 2000, the Company
paid $7,765 for United States and foreign patent applications, and during the
Six-Month Period 1999, the Company paid $11,194 for patent applications.
Net cash provided by financing activities during the Six-Month Period
2000 was $544,263 as compared to net cash provided by financing activities
during the Six-Month Period 1999 of $809,504. During the Six-Month Period 1999,
cash proceeds of $922,946 were received from the exercise of Rights issued to
shareholders resulting in the issuance of 4,195,209 shares and warrants. Costs
associated with the Rights Offering and the exchange of the Company's 8% Senior
Convertible Notes paid during the period were $113,504. Payments on advances
against the Company's line of credit with Silicon Valley Bank and other notes
were $45,798 and the Company borrowed an additional $43,660 against the line of
credit. During January 2000, the Company borrowed $230,000 from an officer of
the Company, and during December 1999 and January and February 2000, issued
961,540 restricted shares of Common Stock to four directors and officers of the
Company for an aggregate of $178,905. Also during January 2000, the
12
<PAGE>
Company received offers to convert warrants issued in connection with its 1996
placement of 8% Convertible Notes and Common Stock. The Company received
$154,153 from the exercise of 1,541,526 warrants, and agreed to issue 75,000
Class E Common Stock Purchase Warrants in exchange for the exercise of the
remaining 431,627 1996 warrants outstanding for cash in the amount of $51,795.
During February and March 2000, the trading price of the Company's
Common stock had appreciated substantially from its earlier trading level. As a
result, holders of Class E Common Stock Purchase Warrants exercised an aggregate
of 895,073 warrants at an exercise price of $0.35 per share resulting in net
proceeds to the Company of $312,437 after deducting $1,154 in costs associated
with the exercises. Other holders exercised options and warrants during February
and March 2000 at exercise prices of from $0.15 to $1.00 for 303,000 shares of
Common Stock resulting in gross and net proceeds to the Company of $64,890. Also
as a result of the improved market price for the Company's Common Stock, holders
of the Company's 8% Senior Convertible Notes converted $962,000 of their notes
into 4,182,609 shares of Common Stock and will receive warrants exercisable for
three years to purchase 4,182,609 additional shares of Common Stock at $0.23 per
share, in accordance with the terms of the notes.
During the Six-Month Period 2000, the Company reduced its trade
accounts receivable by over $455,000 and repaid associated loans from Silicon
Valley Bank of $421,949.
As discussed in Note 4 to the Consolidated Financial Statements, the
Company continues to incur substantial losses and needs additional financing to
continue its operations. On December 6, 1999, the Company entered into an
agreement providing for the combination of its business with that of Intrex Data
Communications Corp. The Company has obtained a commitment for $600,000 of
financing to provide operating funds and to provide funds to consummate the
business combination. During the first six months of fiscal 2000, the Company
has received proceeds of approximately $760,000 from the exercise of warrants
and options and the issuance of additional shares of Common Stock, as described
above. Since March 31, 2000 and as of May 9, 2000, an additional $480,402 has
been received from the exercise of Class E Common Stock Purchase Warrants. On
April 4, 2000, the Company notified holders of the Class E Warrants that it
intends to redeem the warrants at $0.05 per warrant on June 16, 2000, if not
already exercised by that date. As of May 9, 2000 approximately 7,574,000 Class
E Warrants remain outstanding. If all of these were exercised prior to the
redemption date, the Company would receive gross proceeds of approximately
$2,650,000. If none of these warrants were exercised, the total redemption price
would be approximately $379,000, before any associated costs. The Company is
pursuing several potential sources for $5,000,000 in new financing required as a
condition to completion of the business combination. However, no assurance can
be given that this or any financing can be obtained on terms satisfactory to the
Company, or that forecasted sales will be realized to achieve profitable
operations, or that any of the outstanding Class E Warrants will be exercised.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
In 1998, FiberChem's Board of Directors authorized Management to
undertake a strategy of diversification away from total reliance on the
regulated markets on which the Company depended for its livelihood. This was
primarily due to the persistent delays in promulgation and then, more
importantly, enforcement of those regulations on which the Company's revenues
depended. This strategy was outlined in the proxy material for the Annual
Meeting held on August 31, 1998 and received overwhelming support from the
FiberChem shareholders. Over the next several months, Management evaluated
several opportunities for mergers and acquisitions and in July of 1999 announced
a Letter of Intent and then in December of 1999 an agreement to combine
FiberChem with Intrex Data Communications Group of Vancouver, British Columbia.
The surviving entity will be renamed DecisionLink Incorporated.
Intrex is a private company that provides proprietary Internet and
communications technology for communicating data to or from remote or mobile
assets on a real-time basis using wireless, satellite and cellular data systems.
Data is routed through Intrex's Universal Data Network which acts as a data
gateway and applications service provider allowing customers to monitor and
control remote or mobile assets such as gas wells, pipelines, compressors,
storage tanks, offshore platforms, or service vehicles directly from a desktop
PC.
Intrex is a licensed reseller of the Orbcomm Global LP low earth orbit
or LEO satellite data and messaging communications services. Orbcomm is a
partnership owned by Teleglobe, Inc. of Canada and Orbital Sciences Corporation.
Bell Canada Enterprises is a significant investor in Teleglobe. Intrex also has
communications agreements that provide satellite services through Norcom, Inc.
as well as digital cellular services.
13
<PAGE>
ORBCOMM held its Global Solutions Conference in Atlanta, Georgia, April
9-13, 2000 where Intrex was invited to introduce its development of
SensorFusion(TM) products to its future partners and customers. In a paper
entitled "Seamless Integration of Sensor Data via the Internet using the ORBCOMM
Network," Peter Lagergren, President of Intrex, outlined the benefits to the
Orbcomm community of the combination of Intrex and FiberChem's SensorFusion(TM)
technology. Intrex, with ORBCOMM's assistance, is developing a new generation of
ORBCOMM satellite communicators married to specialized sensors in a single
monitoring and communications package. These very highly integrated chip sets
reduce the size, power consumption and cost of the application. The combining of
these chip sets with on-board, high technology sensors leads to changes in
industrial market paradigms. It is expected to alter the markets' perception of
what can and should be remotely monitored because costs are reduced by an order
of magnitude compared with current merchant communications implementations.
The concept of SensorFusion(TM) is to find a large-scale application
where the customer requires the functionality of very high technology sensors,
or controls, and fuse the highly integrated sensors and the communications
engine. This has led to a family of products that are easy to use, reliable and
reduce costs. The final step is to integrate the sensing and messaging engine
seamlessly into the Internet through Intrex's Universal Data Network. By using
the Internet's TCP/IP as the base protocol, it is possible to take advantage of
many powerful existing tools including publish/subscribe topologies that allow
an easy interface with nearly any customer-supplied, data management system. The
end result is the migration of laboratory quality science and engineering such
as FiberChem's Sensor-on-a-Chip(R) into very small, rugged and very low cost
systems.
One important role of the conference was to bring together ORBCOMM
licensees from around the world with solution providers such as Intrex. Senior
management from both Intrex and FiberChem met with International Partners of
ORBCOMM and several major potential customers over the four-day conference. The
interest in the SensorFusion(TM) concept led to discussions with prospective
customers and business partners from South America, Europe, Africa, the Middle
East, Central Asia, South East Asia, Australia and China. It is expected that
business arrangements with these groups will be concluded within the next twelve
months and will give DecisionLink a great launch into the global markets for
monitoring and reporting for the oil and gas, pipelines, storage tanks,
utilities, environmental, transportation and marine industries.
On May 4, 2000, FiberChem announced that it had obtained a commitment
for bridge financing to assist in the consummation of the business combination
of FiberChem and Intrex with the assistance of RP&C International, of London and
Dallas on terms acceptable to both FiberChem and Intrex. This short term funding
allows the continuation of the process of integrating the operations of the two
companies and the completion of the various regulatory steps along the way. The
two companies have begun to combine certain of their operations and are working
together on a number of large projects.
The completion of this business combination is subject to the
satisfaction or waiver of certain conditions, including, among others: (i) the
approval of the arrangement by Intrex common shareholders and the Supreme Court
of British Columbia, (ii) the delivery of fairness opinions to both FiberChem
and Intrex shareholders, (iii) the accuracy of representations and warranties
and other usual closing conditions and (iv) $5,000,000 in new financing proceeds
being available to FiberChem immediately following the combination on terms and
conditions satisfactory to FiberChem and Intrex.
FiberChem will continue to pursue its existing aboveground storage
tank, offshore and sensor markets and intends, upon completion of the
transaction, to incorporate Intrex's technology where appropriate. FiberChem
also intends to pursue new business in Intrex markets that can incorporate
FiberChem technology.
The primary target for the Company's products has been the Florida
AST market. On July 13, 1998, after a four-year process, the State of Florida
passed into law its new storage tank regulations with a compliance date of
December 31, 1999. Under the law, the regulated community had various options
for compliance. The lowest cost option was believed to be an internal tank liner
with an external, certified, continuous leak detection device. Currently, the
Company's PetroSense(R) product line is the only continuous leak detection
device certified for use at all sites. The Company generated about $1.1million
in revenue from this market in the six months ended December 31, 1999, less than
anticipated.
14
<PAGE>
After discussions with Florida DEP, Management believes that as of
today, a significant population of the regulated community has not taken action
to achieve compliance. Florida DEP has begun its inspection program to identify
out-of-compliance sites. They have set up a program with the acronym SNIC or
"Sites Not In Compliance." This inspection program is expected to be the
motivating factor for compliance, with the result being ongoing revenues to the
Company from this market through Fiscal 2000, although inspection activity did
not begin in time to impact on revenues in this Quarter. The Company is waiting
to hear whether certain sites are characterized as contaminated or
uncontaminated prior to a final decision on a compliance strategy. The US EPA
reports that 85% of all AST sites are contaminated.
Other states are expected to follow Florida in promulgating AST
regulations; giving the Company an opportunity for further growth, although
there can be no assurance such regulations will be promulgated or enforced.
California has had regulations for several years, but lacked enforcement due to
funding issues. Recently, the Company was approached to update certain regional
authorities on its activities in the Florida market, after a recommendation from
Florida DEP. This contact was made on the assumption that, in the future, there
would be funding for enforcement. There are 60,000 regulated tanks in
California. Virginia, New Jersey, New York, Minnesota, Alaska and Wisconsin are
examples of states that have promulgated AST regulations of some kind.
Recently, the Company received certification from Florida DEP for its
PetroSense(R) product line for use as a leak detection strategy for pipelines at
airports and military bases, when used in conjunction with an approved liner.
This is expected to open up a new market with a presently undetermined size
potential for the Company's products. Certain military facilities had been
allowed various exemptions from compliance with the Florida regulations. These
exemptions are now expiring and installations are expected to commence shortly.
The Company is also in discussions with a third party to replace obsolete
equipment at up to 350 government and privately owned tanks around the nation.
In the UST marketplace, the Company has identified that certain large,
high throughput diesel tanks located at truck stops may present an opportunity
for the Company's leak detection equipment. The size and throughput of these
tanks is problematic for conventional compliance technologies. The Company is
working with a regional chain of truck stops to offer a solution for this
problem. The Company has also identified an opportunity in the Japanese retail
gasoline marketplace for leak detection equipment potentially for a large number
of urban installations.
While the development of the offshore market for the Company's
OilSense(R)-4000 and PHA-100WL continued to be slower than originally
anticipated, existing customers continue to purchase units for more locations.
In August 1999, CNG Producing Company placed a blanket order for portable units
for twelve of its Gulf of Mexico platforms and took delivery of six units. An
additional four units were delivered during the First Quarter 2000. Five more
were ordered by CNG and seven units were delivered in the Second Quarter 2000
bringing the total to 17 delivered units. Other new orders came from Ocean
Energy and Union Pacific Resources.
The Company is continuing its marketing efforts in other major offshore
production areas including the North Sea and the Persian Gulf. It has been
invited to present a technical paper on field experiences in the Gulf of Mexico
at an important meeting in Aberdeen, Scotland this month.
Revenues for the three-month period ended March 31, 2000 (the "Second
Quarter 2000") were $242,762 compared to revenues of $725,938 for the three
month period ended March 31, 1999 (the "Second Quarter 1999"); revenues for the
Six-Month Period 2000 were $839,246 compared with revenues of $1,054,833 for the
Six-Month Period 1999. Sales of AST leak detection products, primarily in the
State of Florida were substantially below expectations in the Second Quarter
2000 and were the primary contributor to the decreases in sales during the 2000
periods compared to the 1999 periods.
Gross profit for the Second Quarter 2000 was $97,833, or 40% of
revenues, compared to $385,244, or 53% of revenues for the Second Quarter 1999.
Gross profit for the Six-Month Period 2000 was $312,895, or 37% of revenues,
compared to $530,545, or 50% of revenues, for the Six-Month Period 1999. The
decline in gross margin from the 1999 periods reflects a higher proportion of
relatively lower margin installation revenues during the 2000 periods versus
higher margin equipment sales comprising a substantial part of the revenues
during the 1999 periods.
The Company's sensor development project with Gilbarco (now renamed
Marconi Commerce Systems) has moved ahead with the announcement by California
Air Resources Board (CARB) on March 23, 2000, of a timetable for certification
of products to meet Onboard Refueling and Vapor Recovery (ORVR) requirements
beginning April 1, 2001.
15
<PAGE>
Certification by CARB to its newly defined test protocol is expected to lead to
introduction by Gilbarco of a full range of products to meet present and future
national regulations and for the Company to supply its Sensor-on-a-Chip(R) to
meet Gilbarco's needs. Gilbarco and the Company recently signed a support
agreement where Gilbarco provides financial and other support through this
period.
During Fiscal 1999, the Company signed a five-year agreement with Bosch
Telecom ("Bosch") whereby the two companies cross license certain proprietary
sensor technologies for certain specified markets. Bosch gets access to
proprietary chemistry technologies owned by FCI for use in the areas of security
systems, automotive and other markets. The Company gets access to certain sensor
technologies and has access to these technologies in certain regulated and
non-regulated markets. These allow the Company to branch out into certain
non-regulated markets of interest such as the medical sensor market. This is
part of the Company's strategy to lessen its dependence on regulated markets.
In conjunction with the Bosch agreement, the Company entered into an
agreement for a feasibility study with a medical instrument manufacturing
company to supply certain gas sensor technology for a neonatal application. This
company requires a low-cost, disposable sensor package to replace its existing
sensing technology. The manufacturer estimates the market to be 2,000,000 units
per year in the U.S. alone. Recent results indicate that the project may well be
feasible and discussions are beginning to define the next phase.
The Company's Port of Rotterdam projects with the Dutch engineering
firm IWACO appear to be reaching satisfactory conclusions. The Company became an
equal partner in two IWACO programs relating to bioremediation and monitoring
technologies. The Company continues to benefit from access to data, technology,
resources and personnel of the programs' member companies that include Shell
International Products, Solvay S.A. and TNO, the Dutch government research
organization. The first project, to extend the utility of the Company's
detection technology into the low parts per billion (ppb) range, has been
successfully completed, with the detection limits improved from 200 ppb to 20
ppb. This should allow the Company to introduce a new line of products aimed at
both the clean and drinking water markets. The second project, to develop a new
concept in bioremediation, awaits an assessment of the feasibility of the
various options. In the event one of the bioremediation technologies is selected
for use, there would be a significant need for monitoring instrumentation to
ensure long-term satisfactory operation.
The Company also entered into an agreement whereby TNO, Coca-Cola
Enterprises - NL and FCI will cooperate in the development of certain sensors of
interest to the food and beverage industry. The first phase of the program came
to a satisfactory conclusion with TNO reporting that the Company's proprietary
FOCS(R) technology exhibited better sensitivity than anything currently
available. It is expected that meetings to initiate phase two of the project
will be held in early summer.
Research, development and engineering expenses decreased by $76,126, or
27%, to $208,035 during the Six-Month Period 2000 from the Six-Month Period
1999, and by $38,948, or 30% to, $90,416 during the Second Quarter 2000 from the
Second Quarter 1999. These decreases are primarily a result of lower charges for
amortization of technology costs, which were fully amortized as of September 30,
1999
General and Administrative expenses increased by $105,672, or 16%, to
$762,583 during the Six-Month Period 2000 over the Six-Month Period 1999, and
increased by $158,316, or 56%, to $443,292 during the Second Quarter 2000 over
the Second Quarter 1999. The Company incurred non-cash expenses during the
Second Quarter 2000 aggregating approximately $154,000 in legal and financial
consulting services, provisions for inventory obsolescence and loss on
uncollectible accounts receivable, and provision for settlement of claims by a
former distributor of the Company's products.
Sales and marketing expenses increased by $14,874, or 5%, to $345,224
during the Six-Month Period 2000 over expenses for the Six-Month Period 1999,
and increased by $22,949, or 14%, to $189,114 during the Second Quarter 2000
over expenses for the Second Quarter 1999 primarily due to timing of promotional
and sales training costs during the Second quarter 2000.
Interest expense increased by $12,063, or 7%, to $176,177 during the
Six-Month Period 2000 over the Six-Month Period 1999, but decreased by $13,183,
or 16%, to $69,762 during the Second Quarter 2000 from the Second Quarter 1999,
reflecting the conversion of a substantial portion of notes to Common Stock and
reduced borrowing against the line of credit during the Second Quarter 2000.
16
<PAGE>
As a result of the foregoing, the Company incurred a net loss of
$694,722, or a net loss of $0.02 per share, for the Second Quarter 2000 as
compared to a net loss of $276,799, or a net loss of $0.01 per share, for the
Second Quarter 1999, and incurred a net loss of $1,178,524, or a net loss of
$0.03 per share, for the Six-Month Period 2000 as compared to a net loss of
$897,095, or a net loss of $0.03 per share, for the Six-Month Period 1999.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A former distributor has filed an action in French national courts
claiming improper termination by FCI Environmental, Inc. The Company has
responded that the distribution agreement provides for arbitration, in Nevada,
of any disputes and that therefore, the French courts do not have jurisdiction,
and further that the claims are without merit. The French Court has ruled that
the former distributor may be entitled to approximately $80,000 (approximately
one-half of the original claim); however, either party may appeal the decision.
The Company has appealed the decision, and has accrued a provision for
settlement of the claims.
On September 23, 1998, OCS, Inc., a Texas corporation and customer of
the Company's subsidiary, FCI Environmental, Inc., filed a lawsuit against FCIE
in the District Court of Harris County, Texas, 165th Judicial District. The
lawsuit was based on an alleged breach of warranty for goods purchased from
FCIE. The lawsuit was dismissed without prejudice to either party on January 19,
1999. On February 18, 1999, the Company filed an action in Nevada against OCS to
collect amounts due from OCS for products sold to OCS, fees, expenses and
damages totaling approximately $200,000. The action was subsequently removed to
the U.S. District Court of Nevada, and OCS filed counter claims including an
alleged breach of warranty and claims for incidental and consequential damages
for $750,000. OCS has failed to file verified pleadings and has failed to engage
Nevada counsel as required by the Rules of the U. S. District Court. The
Company's motion to dismiss OCS's counter claims and pleadings has been granted
by the Court. The Company expects to file for a default judgment against OCS.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders
during the three-month period ended March 31, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. None.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the
three-month period ended March 31, 2000.
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, 2000 By: /s/ GEOFFREY F. HEWITT
- ------------- ---------------------------
Date Geoffrey F. Hewitt
President and Chief Executive Officer
MAY 12, 2000 By: /s/ MELVIN W. PELLEY
- ------------- ---------------------------
Date Melvin W. Pelley
Chief Financial Officer and Secretary
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 356,377
<SECURITIES> 0
<RECEIVABLES> 170,624
<ALLOWANCES> (36,458)
<INVENTORY> 1,157,441
<CURRENT-ASSETS> 1,819,784
<PP&E> 704,964
<DEPRECIATION> (660,996)
<TOTAL-ASSETS> 2,014,578
<CURRENT-LIABILITIES> 1,401,437
<BONDS> 1,154,000
0
3,117,720
<COMMON> 4,835
<OTHER-SE> (3,663,414)
<TOTAL-LIABILITY-AND-EQUITY> 2,014,578
<SALES> 839,246
<TOTAL-REVENUES> 839,246
<CGS> 526,351
<TOTAL-COSTS> 1,842,193
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 176,177
<INCOME-PRETAX> (1,178,524)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,178,524)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,178,524)
<EPS-BASIC> (0.03)
<EPS-DILUTED> 0<F1>
<FN>
<F1>OMITTED BECAUSE OF ANTIDILUTIVE EFFECT ON NET LOSS
</FN>
</TABLE>
