AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 5, 1996
REGISTRATION NO. 333-10319
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
FIBERCORE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
Nevada 3229 87-0445729
(State or other jurisdiction (Primary standard industrial (I.R.S. Employer
of incorporation or organization) classification code number) Identification Number)
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174 Charlton Road, Sturbridge, Massachusetts 01566
(508) 347-7744
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
--------------------
Mohd A. Aslami
174 Charlton Road, Sturbridge, Massachusetts 01566
(508) 347-7744
(Name, Address, Including Zip Code, and Telephone Number, Including Area
Code, of Registrant's Agent for Service)
with a copy to:
Bruce S. Coleman, Esq.
Coleman & Rhine LLP, 1120 Avenue of the Americas, New York, New York 10036
(212) 840-3330
Approximate date of commencement of proposed sale to the public: As soon as
practicable as this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
--------------------
CALCULATION OF ADDITIONAL REGISTRATION FEE
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=====================================================================================================================
Title of Each Class of Proposed Maximum Proposed Maximum
Additional Securities Additional Amount Offering Price Aggregate Amount of Additional
to be Registered to be Registered Per Share(1) Offering Price(1) Registration Fee
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock $.001
par value............. 356,975 $ 3.63 1,295,819 $ 447
====================================================================================================================
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(1) Estimated pursuant to Rules 457(c) and 457(h) solely for the purpose of
calculating the registration fee, and based on the average of the bid and
ask prices reported on the OTC Bulletin Board of $3.63 on November 26,
1996.
Pursuant to Rule 416, there are also being registered hereby such additional
indeterminate number of shares of Common Stock as may become issuable by reason
of share splits, share dividends, and similar adjustments as set forth in the
provisions of the Notes, Warrants and Options.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
FIBERCORE, INC.
CROSS-REFERENCE SHEET
REQUIRED BY ITEM 501(b) OF REGULATION S-K
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FORM S-1
ITEM NUMBER LOCATION IN PROSPECTUS
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1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus.................... Facing Page, Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ Inside Front and Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges......................... The Company; Risk Factors
4. Use of Proceeds................................... Use of Proceeds
5. Determination of Offering Price .................. Not Applicable
6. Dilution.......................................... Dilution
7. Selling Securityholders........................... Selling Securityholders
8. Plan of Distribution.............................. Plan of Distribution
9. Description of Securities to be Registered........ Description of Securities
10. Interests of Named Experts and Counsel............ Experts; Legal
11. Information with Respect to the Registrant........ Prospectus Summary; Risk Factors; Stock
Price and Dividend Policy; Capitalization;
Selected Consolidated and Consolidated Pro
Forma Financial Data; Management's Discussion
and Analysis of Results of Operations and
Financial Condition; Business; Management;
Business-Litigation; Certain Transactions;
Principal Securityholders; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.... Not Applicable
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<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 5, 1996
43,306,464 SHARES
LOGO FIBERCORE, INC.
COMMON STOCK
This is a resale prospectus relating to 35,033,946 shares of common stock,
$.001 par value per share (the "Common Stock"), of FiberCore, Inc. (the
"Company") which are held by, for the benefit of or are otherwise issuable to
certain shareholders (the "Selling Shareholders") of the Company. This resale
prospectus also relates to the issuance and sale by the Company of up to
8,272,518 shares of Common Stock (the "Underlying Shares") issuable to holders
upon: (i) conversion of a convertible note issued to AMP Incorporated (the "AMP
Note") into 1,688,845 shares of Common Stock; (ii) conversion of a convertible
note issued to Hedayat Amin-Arsala (the "Arsala Note" and together with the AMP
Note, the "Notes") into 153,773 shares of Common Stock; (iii) exercise of
outstanding or to be issued common stock purchase warrants (the "Warrants") into
2,936,161 shares of Common Stock; and (iv) exercise of outstanding or to be
issued common stock purchase options (the "Options") into 3,493,739 shares of
Common Stock (the Notes, Warrants, and Options are sometimes referred to
collectively as the "Convertible Securities"). The Common Stock and Convertible
Securities include (i) 550,696 shares of Common Stock and 2,101,392 Warrants
held by, for the benefit of or otherwise issuable to Techman International Corp.
("Techman") and Middle East Specialized Cables Co. ("MESC"), which are subject
to the satisfaction of certain conditions (see "Business -- Recent
Developments") and (ii) 2,515,305 shares of Common Stock reserved for issuance
upon the grant of Options in the future. See "Management -- Stock Options."
Until April 17, 2000, the conversion price of the AMP Note is $1.15763 per share
of Common Stock, subject to adjustment; thereafter the conversion price is equal
to the price per share paid by a third party investor in a private sale of
Common Stock by the Company immediately prior to such conversion. The initial
conversion price of the Arsala Note is $1.36 per share of Common Stock, subject
to adjustment. The Warrants and currently outstanding Options were issued by the
Company and its predecessors from 1987 through 1996 and are exercisable into
Common Stock at prices ranging from $0.0027 to $2.00 per share through various
expiration dates. The holders of the Convertible Securities, together with the
Selling Shareholders, are sometimes hereinafter referred to collectively as the
"Selling Securityholders." See "USE OF PROCEEDS," "SELLING SECURITYHOLDERS,"
"PLAN OF DISTRIBUTION" and "DESCRIPTION OF SECURITIES."
The Common Stock and the Underlying Shares offered by this Prospectus may be
sold from time to time by the Selling Securityholders, provided a current
registration statement with respect to such securities is then in effect. The
distribution of shares of Common Stock offered hereby by the Selling
Securityholders may be effected in one or more transactions, including ordinary
broker's transactions, privately negotiated transactions or through sales to one
or more dealers for resale of such securities as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. Usual and customary or specifically negotiated
brokerage fees or commissions may be paid by the Selling Securityholders.
The Selling Securityholders and intermediaries through whom the securities
offered hereby are sold may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
such securities.
The Company will receive all the proceeds from the issuance of shares of
Common Stock upon the exercise of Warrants and Options. However, the Company
will not receive any of the proceeds from the sale of shares of Common Stock
(including the Underlying Shares) by the Selling Securityholders. Expenses of
this Offering, other than fees and expenses of counsel to the Selling
Securityholders and selling commissions, if any, will be paid by the Company.
See "Plan of Distribution."
Prior to the Offering, the Company's Common Stock was quoted on the OTC
Bulletin Board (the "Bulletin Board") under the symbol FBCE. In connection with
the Offering, the Company intends to apply for the Common Stock to be listed on
the NASDAQ Small Cap Market ("Nasdaq") under the symbol FBCE. On
November 26, 1996, the closing bid price of the Common Stock on the Bulletin
Board was $3.63.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE IN NATURE AND INVOLVE A HIGH
DEGREE OF RISK. THESE SECURITIES SHOULD ONLY BE PURCHASED BY INVESTORS WHO CAN
AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS," BEGINNING ON
PAGE 8 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is December __, 1996.
[Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.]
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (such Registration Statement,
together with all amendments and exhibits thereto, being hereinafter referred to
as the "Registration Statement") under the Securities Act, for the registration
under the Securities Act of the outstanding shares of Common Stock and the
Underlying Shares offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement; certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement for further information
with respect to the Company, the Common Stock and the Underlying Shares offered
hereby. Statements herein concerning the provisions of documents filed as
exhibits to the Registration Statement are necessarily summaries of such
documents, and each such statement is qualified in its entirety by reference to
the copy of the applicable document filed with the Commission.
Following completion of this offering (the "Offering"), the Company will
become subject to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance therewith will file
reports, including annual and quarterly reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copied at prescribed rates at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington D.C. 20549 and at the following regional offices of the
Commission: Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60601 and 7 World Trade Center, Suite 1300, New York, New York 10048.
In addition, such reports, proxy statements and other information filed through
the Commission's Electronic Data Gathering, Analysis and Retrieval System may be
accessed through the Commission's Website on the World Wide Web located at
(http: //www.sec.gov). Such reports, proxy statements and other information can
also be inspected at the offices of the National Association of Securities
Dealers, Inc., 1733 K Street, N.W., Washington, D.C. 20006.
The Company publishes its financial statements in United States dollars
("dollars" or "$"). The financial statements of the Company's German subsidiary,
FiberCore Glasfaser Jena GmbH ("FiberCore Jena"), which have been consolidated
with the Company's financial statements, are published in German marks ("DM"),
but were translated into dollars in accordance with generally accepted
accounting principals prior to consolidation.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in the Prospectus Summary and under the captions "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this Prospectus constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different from any future results,
performance, or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: changes in
general economic and business conditions; loss of market share through
competition; introduction of competing products by other companies; changes in
industry capacity; pressure on prices from competition or from purchasers of the
Company's products; availability of qualified personnel; the loss of any
significant customers; and other factors both referenced and not referenced in
this Prospectus. When used in this Prospectus, the words "estimate," "project,"
"anticipate," "expect," "intend," "believe," and similar expressions are
intended to identify forward-looking statements.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus.
Unless otherwise indicated, (i) the information included in this Prospectus
does not give effect to the exercise or conversion of Convertible Securities,
and (ii) references to Convertible Securities do not include unissued options.
Certain statements set forth under this caption constitute "forward-looking
statements" within the meaning of the Reform Act. See "Special Note Regarding
Forward-Looking Statements" on page 2 for additional factors relating to such
statements.
THE COMPANY
The Company manufactures and markets single-mode and multi-mode optical fiber
and optical fiber preforms for the telecommunications, data communications, and
cable television industries and, through its Automated Light Technologies, Inc.
("ALT") subsidiary, develops and markets products capable of identifying and
monitoring faults in fiber optic cables and splice points.
The current organization of the Company resulted from the merger on July 18,
1995 (the "Venturecap Merger") of FiberCore Incorporated ("FiberCore"), a Nevada
corporation organized in November 1993, into Venturecap, Inc. ("Venturecap"), an
inactive Nevada corporation organized in May 1987. Venturecap issued 3.671307
shares in exchange for each outstanding share of FiberCore, and as a result,
Venturecap issued a total of 24,617,133 shares for all of the outstanding shares
of FiberCore. Unless otherwise noted, all share amounts in this prospectus give
effect to the Venturecap Merger. Following the Venturecap Merger, Venturecap
changed its name to FiberCore, Inc.
The Company's strategy in the fiber optic manufacturing and marketing
business is to become a low cost supplier of fiber optic preforms and optical
fiber to independent manufacturers of fiber optic cable. The Company, through
its FiberCore Jena subsidiary, maintains a manufacturing facility in Jena,
Germany (the "Jena Facility"), which was established in 1986 and acquired by the
Company in July 1994. The Company's initial marketing efforts are focused in
Europe and on establishing strategic distribution alliances in developing
countries where demand for fiber optic cable is believed by the Company to be
growing more rapidly than in North America. Management believes that customers
producing fiber from preforms themselves will enjoy the benefit of the Company's
low-cost production methodology and avoid import duties on the value added in
the fiber optic cable manufacturing process.
In pursuit of its strategy, the Company has undertaken to form strategic
alliances on a world-wide basis. These strategic alliances will range from
joint-ventures, particularly in those countries requiring local control, to
direct investments by the Company. The Company expects that product demand will
be generated from these strategic alliances, as well as from independent
manufacturers of fiber optic cable. Independent market forecasters, such as
Kessler Marketing Intelligence of Newport, Rhode Island, have projected strong
growth in the fiber optic market. The Company intends to capitalize on the
projected growth by constructing a number of facilities to produce optical fiber
preforms and optical fiber. Such new facilities and/or expansion of existing
facilities are planned for the United States, Europe, the Middle East and
elsewhere in Asia. The Company intends to use a well-balanced, phased-in
approach for establishment of these facilities. The Company has already begun
upgrading its Jena Facility and has begun planning the construction of a
facility in the United States. The Company's long-term strategy also consists of
constructing both Company owned and joint-venture owned facilities in the Middle
East and elsewhere in Asia. Under this strategy, the Company plans to have at
least two Company owned and at least two
3
<PAGE>
joint-venture owned facilities. The Company will attempt to continually improve
the manufacturing processes at its facilities by implementing its patented
technology and by developing new techniques that lower production costs, thereby
enhancing the Company's already low cost producer strategy.
On April 13, 1995, the Company and MESC entered into an agreement, which was
amended on September 15, 1995 (the "MESC Share Purchase Agreement"), whereby
MESC agreed to purchase 734,262 shares of Common Stock in two blocks of 367,131
shares at a purchase price of approximately $1.36 per share. MESC also received
Warrants, which expires on April 13, 1997, to purchase 550,696 shares of Common
Stock at an exercise price of $1.63 per share. MESC will receive 312,061 shares
of Common Stock, will become entitled to exercise the Warrants and receive an
additional 238,635 shares of Common Stock for no additional consideration upon
delivery of a supply agreement between the Company and the JV Company (as
defined below). Since October 1995, the Company has issued 734,262 shares of
Common Stock in exchange for $1,000,000. Subsequently on January 31, 1996 and in
connection with the MESC Share Purchase Agreement, the Company, through its
subsidiary FiberCore Mid East Ltd., entered into agreements with a subsidiary of
John Royle & Sons ("Royle"), a United States manufacturer of cable manufacturing
systems and equipment, and the owners of Middle East Fiber Optic Manufacturing
Company Limited ("MEOFC"), a Saudi Arabian company and an affiliate of MESC, for
the establishment of a joint venture company (the "JV Company" or "MEFC") to
engage in the manufacture and sale of optical fiber and optical fiber cable both
inside and outside of Saudi Arabia. The Company and Royle have each contributed
$500,000 to the JV Company and each holds a 15% interest in the JV Company.
MEOFC contributed $2,330,000 and holds a 70% interest. The JV Company intends to
borrow approximately $10,000,000 from the Saudi Industries Development Fund for
investment in equipment and working capital and intends to purchase optical
fiber preform and fiber from the Company. See "Business -- Joint Marketing
Arrangements" and "Description of Securities".
On April 17, 1995, the Company issued the AMP Note, a ten year $5,000,000
convertible note bearing interest at LIBOR plus one percent. In July 1996, the
Company and AMP entered into a five year supply agreement (renewable for an
additional five year term at AMP's option), whereby the Company will supply AMP
with a minimum of 50% of AMP's future glass optical fiber needs. On November 27,
1996, the Company obtained an additional $3,000,000 loan from AMP and AMP
converted $3,000,000 of principal plus accrued interest on the AMP Note into
3,058,833 shares of Common Stock. As part of the new $3,000,000 loan from AMP,
Mohd A. Aslami, Charles DeLuca, M. Mahmud Awan and AMP entered into a Voting
Agreement pursuant to which they agreed to vote together to elect a slate of
directors to the Board of Directors of the Company. Such slate of directors
initially consists of Mohd A. Aslami, Charles DeLuca, Hans F.W. Moeller, one
nominee of AMP and three outside directors, one of whom is Dr. M. Mahmud Awan.
The Voting Agreement also requires a classified and three year staggered Board
of Directors. See "Business --Recent Developments," "Certain Transactions --
Dealings With AMP," and "Risk Factors -- Control of the Company."
On September 18, 1995, the Company acquired ALT for the net issuance of
5,139,830 shares of Common Stock. ALT manufactures a patented Fiber Optic Cable
Monitoring System ("FOCMS"), which continuously monitors fiber optic cables for
faults. ALT also manufactures patented long-range Fault Locator Devices, Cable
Protection Devices, which are applied at cable splice joints prior to fiber
optic cable entering a building, and Electro-Optical Talksets, which are used by
field personnel to communicate over optical fiber, twisted pair-cable (regular
telephone cable) and metal sheaths encasing optical fiber and copper cables
(together with FOCMS, the "ALT Products"). Target customers for the ALT Products
include telephone companies worldwide. See "Business -- ALT Products" and
"Certain Transactions -- The ALT Acquisition."
On November 1, 1995, the Company entered into an International Distributor
Agreement with Techman, a company owned by Dr. M. Mahmud Awan, a director of
the Company. The International
4
<PAGE>
Distributor Agreement provides for commissions to be paid in the form of up to
1,000,000 shares of Common Stock based on sales generated by Techman for the
Company of up to $200,000,000.
Subsequently on January 11, 1996, Techman agreed to purchase 734,260 shares
of Common Stock at $1.36 per share and received Warrants exercisable at $1.63
per share to purchase an additional 550,696 shares of Common Stock pursuant to a
written agreement (the "Techman Share Purchase Agreement"). Additionally, under
the Techman Share Purchase Agreement, the Company agreed to issue Techman
312,061 shares of Common Stock upon (i) formation of Fiber Optic Industries
(Private) Ltd. ("FOI"), a joint-venture company in which the Company will hold a
30% ownership interest, to produce optical fiber and cable; and (ii) the
completion of a supply agreement between FOI and the Company. Between February
and September 1996, pursuant to the Techman Share Purchase Agreement and at the
request of Techman, the Company issued 575,477 shares to Dr. Awan. Subsequent to
September 1996, an additional 470,844 shares of Common Stock (representing the
balance of shares to be issued under the Techman Share Purchase Agreement) were
issued to Dr. Awan in exchange for a payment of $450,000 and the delivery by
Techman of a twenty year supply agreement between the Company and FOI which the
Company estimates could generate revenues of up to approximately $93,000,000
over five years, although there can be no assurance. The $450,000 payment was
invested by the Company in FOI as an additional capital contribution (along with
ratable additional capital contributions by FOI's other shareholders). The
Company maintains a 30% ownership interest in FOI. See "Business -- Recent
Developments" and "Certain Transactions -- Dealings With Techman."
Unless otherwise specified, the term "Company", with respect to events prior
to July 18, 1995, refers to FiberCore Incorporated and with respect to events
subsequent to July 18, 1995, refers to FiberCore, Inc. and its subsidiaries
(including ALT, subsequent to September 18, 1995).
The Company incurred net losses of $1,625,368 during the 1994 calendar year
on revenues of $230,888 and net losses of $4,009,163 during the 1995 calendar
year on revenues of $3,093,499. For the nine months ended September 30, 1996,
the Company incurred net losses of $1,652,670 on revenues of $6,244,566.
The executive offices of the Company are located at 174 Charlton Road,
Sturbridge, Massachusetts 01566 and its telephone number is (508) 347-7744.
5
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THE OFFERING
Securities Offered: ................ 43,306,464 shares of Common Stock. As
of the date of this prospectus, the
Selling Securityholders own or, upon
the satisfaction of certain conditions,
have the right to receive, 35,033,946
of such shares, while 8,272,518 shares
are issuable to the Selling
Securityholders upon the conversion or
exercise of the Convertible Securities.
See "Description of Securities."
Shares of Common Stock
outstanding prior to the
Offering:........................ 35,233,250 shares(1) and (2)
Shares of Common Stock out-
standing after the
Offering ........................ 41,541,159 shares(3) and (4) assuming
all Warrants and Options are exercised
and $5,705,167 in principal and accrued
interest on the Notes are converted.
Use of Proceeds:................... The Company will receive all of the
proceeds from the exercise, of which
there can be no assurance, of the
Warrants and the Options, or
approximately $3,864,658. Such proceeds
will be used by the Company for the
purchase of equipment, research and
development and working capital. In the
event any portion of the Notes are
converted, the Company's indebtedness
will be reduced accordingly. None of
the proceeds from the sale of shares of
Common Stock offered hereby by the
Selling Securityholders (including the
Underlying Shares) will go to the
Company. See "Use of Proceeds."
Risk Factors: ..................... The securities offered hereby involve a
high degree of risk. See "Risk
Factors."
Current OTC Bulletin Board
Symbol:.......................... FBCE
Proposed NASDAQ Small Cap
Symbol:.......................... FBCE
- ----------
(1) Includes 750,000 shares of Common Stock of Venturecap that were outstanding
prior to the Venturecap Merger and are not being registered hereunder.
(2) Excludes all Underlying Shares issuable upon the exercise or conversion of
the Convertible Securities. Also excludes an aggregate of 550,696 shares of
Common Stock held by, for the benefit of or otherwise issuable to MESC,
which are subject to the delivery of a supply agreement between the Company
and the JV Company.
(3) Includes an aggregate of 550,696 shares of Common Stock held by, for the
benefit of or otherwise issuable to MESC, which are subject to the delivery
of a supply agreement between the Company and the JV Company
(4) Excludes 2,515,305 shares being registered hereunder which are to be issued
for future awards and grants of employee stock options.
6
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FIBERCORE, INC.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
The following summary financial information and operating data of the Company
is qualified in its entirety by the more detailed information and the Company's
Consolidated Financial Statements and notes thereto appearing elsewhere in this
prospectus.
<TABLE>
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YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
HISTORICAL
PRO FORMA --------------------------------------------------------------------------
1995 (1)(4) 1995 (2) 1994 (3)(5) 1993 (3)(5) 1992 (6) 1991 (6)
------------- ------------- ------------- ------------ --------- ---------
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Operating Data:
Net Sales .................... $ 3,255 $ 3,094 231 $ -- $ -- $ --
Costs and Expenses:
cost of sales ............... 5,093 4,509 1,064 -- -- --
Research and development .... 188 75 90 -- -- --
Selling, general, and
administrative ............. 2,247 2,099 699 1 -- --
Interest expense, net of
interest income ............ 382 369 8 -- -- --
Other expense (income), net . (30) 51 (5) -- -- --
------------- ------------ ------------- ------------ --------- ---------
Income (loss) before
provision for income taxes.. (4,625) (4,009) (1,625) (1) -- --
Provision for income taxes .. -- -- -- -- -- --
------------- ------------ ------------- ------------ --------- ---------
Net income (loss)(7) ........ $ (4,625) $ (4,009) $ (1,625) $ (1) $ -- --
Primary earnings (loss) per
share(7) ................... $ (0.15) $ (0.15) $ (0.07) $ -- $ -- $ --
Fully diluted earnings (loss)
per share................... $ (0.15) $ (0.15) $ (0.07) $ -- $ -- $ --
Weighted average shares
outstanding(7) ............. 30,245,879 26,584,630 22,873,322 21,309,323 955,450 955,450
Weighted average shares
outstanding (fully diluted). 30,980,539 27,319,291 22,873,322 21,309,323 955,450 955,450
Balance Sheet Data:
Working capital (deficit) ... (277) (277) (519) 403 5 5
Total assets ................ 14,167 14,783 4,270 645 5 5
Total liabilities ........... 8,415 8,415 1,687 4 -- --
Accumulated deficit ......... (6,254) (5,638) (1,628) (3) (2) (2)
Stockholders' equity ........ 5,752 6,368 2,583 641 5 5
</TABLE>
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FIBERCORE, INC.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(continued)
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------------------------
PRO FORMA HISTORICAL
------------- ------------------------------
1995 (1)(4) 1996 1995 (2)(5)
------------- ------------- -------------
Operating Data:
Net Sales .................... $ 1,790 $ 6,245 $ 1,628
Costs And Expenses:
Cost of sales ............... 3,048 6,108 2,509
Research and development .... 152 281 34
Selling, general, and
administrative ............. 1,206 1,920 1,050
Interest expense, net of
interest income ............ 248 279 234
Other expense (income), net . (48) (690) (48)
------------- ------------- -------------
Income (loss) before
provision for income taxes.. (2,816) (1,653) (2,151)
Provision for income taxes .. -- -- --
------------- ------------- -------------
Net income (loss)(7) ........ $ (2,816) $ (1,653) $ (2,151)
Primary earnings (loss) per
share(7) ................... $ (0.09) $ (0.05) $ (0.09)
Fully diluted earnings (loss)
per share................... $ (0.09) $ (0.05) $ (0.09)
Weighted average shares
outstanding(7) ............. 30,157,895 30,815,900 25,262,819
Weighted average shares
outstanding (fully diluted). 30,365,796 32,899,366 25,470,719
Balance Sheet Data:
Working capital (deficit) ... 734 223 734
Total assets ................ 16,402 14,018 17,064
Total liabilities ........... 12,254 8,073 12,251
Accumulated deficit ......... (4,444) (7,290) (3,779)
Stockholders' equity ........ 4,148 5,945 4,813
- ----------
(1) Includes the results of ALT as if acquired at the beginning of the period
and as if the conversion of ALT debt and warrants into approximately
4,500,000 shares of ALT common stock occurred immediately prior thereto.
(2) Includes the results of ALT from September 18, 1995 (the date of
acquisition) through December 31, 1995.
(3) Does not include the results of ALT.
(4) The pro forma results reflect higher amortization costs than the historical
financials due to the allocation of the purchase price of the ALT
acquisition to ALT's assets. The pro forma financials also reflect lower
interest costs than the historical financials due to the conversion of ALT
debt at an earlier date than the actual conversion.
(5) Restated to reflect the Venturecap Merger as of the beginning of the
period.
(6) The years 1991 and 1992 reflect the financial position of Venturecap, Inc.,
a development stage company, prior to the merger with FiberCore,
Incorporated in 1995. Venturecap had no significant activities in these
years. FiberCore, Incorporated was formed in November 1993.
(7) Supplementary Earnings Per Share Data: If the convertible debt had been
converted at the beginning of the periods below, the earnings per share and
the basis for this computation would have been as follows:
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------
$ (3,761)
Net loss for the period ........... $ (1,396)
Weighted average shares 29,644,053
outstanding........................ 35,214,743 $ (0.13)
Primary loss per share............. $ (0.04)
7
<PAGE>
RISK FACTORS
The securities offered hereby are highly speculative and subject to numerous
and substantial risks. Therefore, prospective investors should carefully
consider the following risk factors as well as the information contained
elsewhere in this Prospectus.
NEW BUSINESS
The Company, founded in November 1993, is a relatively new business and is
subject to all the risks inherent in early-stage operations. Such risks include,
but are not limited to, rejection or partial acceptance of the Company's
products by its customers, the inability to establish networks for distribution
of the Company's products, inefficient and unreliable manufacturing processes
and the inability to obtain sufficient capital necessary to sustain the Company
and expand its manufacturing capacity. The Company has incurred operating losses
since inception. To achieve profitable operations, the Company must successfully
overcome these and other new business risks. There can be no assurance that any
or all of the Company's efforts will be successful or that the Company will ever
be profitable. If the Company's efforts are unsuccessful, purchasers of shares
of Common Stock offered hereby could lose their entire investment.
NEED FOR ADDITIONAL FINANCING AND CAPITAL RESOURCES
Notwithstanding the fact that the demand for optical fiber currently exceeds
supply, the Company has had net losses in each year of operation. The Company's
history of losses is based principally on the fact that the Company is a new
business, has not fully implemented its more efficient manufacturing technology
and has not increased manufacturing capacity sufficiently in order to achieve
economies of scale leading to lower unit production costs. The Company's ability
to continue operations will depend upon the success of its financing, marketing
and manufacturing efforts. There can be no assurance that any or all of such
efforts will be successful. At least a substantial portion of such additional
financing is required by the end of 1996 in order to finance the Company's
planned expansion of its Jena Facility, which is estimated to cost approximately
$7,800,000. This expansion is necessary for the Company to satisfy its backlog
of orders for 1996 and 1997. The Company, with its current cash and cash
equivalents, cannot fund both the required amount of capital expenditures and
current and projected operating losses.
The Company believes that the planned expansion will enable the Jena Facility
to improve its manufacturing capacity thereby leading to an increase in sales.
The Company (i) has been awarded a grant from the German Government of
approximately $2,700,000; (ii) has received a loan from Berliner Bank of
approximately $5,100,000 to finance the expansion; and (iii) has received a
$3,000,000 loan from AMP which will be used principally as collateral for the
Berliner Bank loan. AMP has also converted $3,000,000 of principal and accrued
interest on the AMP Note into 3,058,883 shares of Common Stock. In connection
with the new AMP loan, the Company issued AMP five year warrants, exercisable at
$1.45 per share, to purchase up to $2,000,000 of Common Stock and has agreed to
issue AMP additional shares of Common Stock in the event the Company's share
price does not exceed certain minimum levels by November 27, 1998. The issuance
of such additional shares would have a dilutive effect on the Company's other
shareholders and could adversely effect the market price of the Common Stock.
See "Business -- Recent Developments."
Except for the partial conversion of the AMP Note, the Company is not relying
on the conversion of other loans or the exercise of any Options or Warrants to
complete the expansion of the Jena Facility. Management anticipates that upon
completion of the technology integration and related equipment upgrades at the
Jena Facility, there will be increases in sales along with efficiencies and
economics of scale, resulting in improved operating results. There can be no
assurance that operating losses will not continue longer than anticipated, in
which case, there may be need for additional capital. Furthermore, there can be
no assurance that additional capital will be available on terms acceptable to
the Company. In addition, revenues of the Company's ALT subsidiary declined
substantially in 1995, compared to 1994. ALT is currently operating at a loss,
and historically has not been profitable.
8
<PAGE>
LIMITED CAPACITY OF JENA FACILITY
The Company's Jena Facility is currently operating at full capacity. At its
current capacity, the Jena Facility cannot produce sufficient product for the
Company to satisfy its present and long-term supply contracts and for the
Company to achieve profitable operations. Although the Company has received
additional financing for the purchase of additional equipment and the expansion
of its Jena Facility, there can be no assurance that the level of manufacturing
capacity necessary to meet the Company's supply contracts will be achieved.
DEPENDENCE ON CERTAIN CUSTOMERS AND PRODUCTS
During each year of operation, the Company and its predecessors have relied
on a few customers for the majority of sales revenue. During the first nine
months of 1996, FiberCore had net sales to one customer in excess of 61% of
total sales. The loss of its principal customer would have a material adverse
effect on the Company. See "Business -- Customers, Inventory, Backlog and
Advertising."
DEPENDENCE ON THIRD-PARTY SUPPLIERS
The Company will largely rely on outside parties for the manufacture of its
raw materials, including its principal raw material, glass tubing. Accordingly,
the Company will be dependent on the capabilities of these outside parties for
the successful manufacture of its products. Currently, the Company purchases
over 90% of its required glass tubing from one supplier. At the beginning of
each year, the Company negotiates a firm commitment with this supplier for the
Company's annual glass tubing requirements. The Company does not have a
long-term agreement with such supplier and such supplier recently required the
Company to prepay for three months supply of glass tubing. The prepayment terms
did not have any material adverse effect on the Company's results of operations
and subsequently this supplier reestablished normal credit terms with the
Company. The Company has established relationships with two other manufacturers
for supply of the Company's required glass tubing. There can be no assurance
that these manufacturers will be able to meet the Company's needs in a
satisfactory and timely manner in the event the Company's current supplier is
unable or unwilling to do so. Although the Company believes that these
manufacturers would have an economic incentive to perform such manufacturing for
the Company, the amount and timing of resources to be devoted to these
activities are not within the control of the Company, and there can be no
assurance that problems obtaining glass tubing or other raw materials will not
occur in the future. See "Business -- Raw Materials."
COMPETITION
The optical fiber business is highly competitive, and there are several
competitors that have substantially greater resources than the Company. These
companies are providing or are capable of providing products similar to products
produced by the Company at competitive prices. If these competitors were to
aggressively target the Company's market segment, the Company could be
materially adversely affected. If the market for FOCMS products grows, it is
likely that companies with substantially greater resources than the Company will
enter the market, which may adversely affect the Company's business. See
"Business -- Competition."
INDUSTRY CONDITIONS
Based on published market studies, management believes that, currently,
demand for optical fiber products exceeds supply. To the extent future supply
begins to exceed demand, or to the extent the Company's products are no longer
in demand, prices for the Company's products may decline from current levels and
result in substantially lower profitability than has been anticipated by the
Company.
RAPID TECHNOLOGICAL CHANGE
Optical fiber products are characterized by rapid technological advances and
evolving industry standards. Any failure by the Company to anticipate or respond
adequately to technological developments or end-user requirements could damage
the Company's competitive position in the marketplace and reduce revenues and/or
profit.
9
<PAGE>
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon the performance of
its key executive officers. The Company is not a party to an employment
agreement with any of its executive officers, but intends to enter into
non-compete agreements with Dr. Aslami, Mr. DeLuca, Mr. Beecher and Mr. Moeller.
The loss of any of the executives would have a material adverse effect on the
Company. The Company intends to apply for key-man life insurance policies on Dr.
Aslami, Mr. DeLuca, Mr. Beecher and Mr. Moeller with the Company as the sole
beneficiary. The Company's future success will also depend in large part upon
its ability to attract and retain additional highly skilled managerial,
technical and marketing personnel. There can be no assurance that the Company
will be successful in attracting and retaining such personnel. See "Management."
PATENTS AND PROPRIETARY RIGHTS
The Company owns five United States patents relating to the manufacture of
optical fiber preform, fiber optic cable monitoring systems, long range fault
locating systems, optical communications systems and methods and related
products. The Company has filed one additional improvement patent to its basic
fiber optic manufacturing process, and intends to file at least one more
improvement patent in the United States and abroad. The Company also owns three
European and United Kingdom patents covering the ALT Products. One additional
patent filing in Europe, two in Japan and three in other countries related to
the ALT Products are pending. The Company's ability to compete effectively will
depend, in part, on its ability to protect its patents. There can be no
assurance that the steps taken by the Company to protect its intellectual
property will be adequate to prevent misappropriation or that others will not
develop competitive technologies or products. Furthermore, there can be no
assurance that others will not independently develop products that are similar
or superior to the Company's products or technologies, duplicate any of the
Company's technologies, or design around the patents issued to the Company. In
addition, the validity and enforceability of a patent can be challenged after
its issuance. While the Company does not believe that its patents infringe upon
the patents or other proprietary rights of any other party and is unaware of any
claim of such infringement, other parties may claim that the Company's patents
and manufacturing processes infringe upon such patents or other proprietary
rights. There can be no assurance that the Company would be successful in
defending against such a claim of infringement. Moreover, the expense of
defending against such a claim could be substantial. See "Business -- Patents."
In addition, in conjunction with its acquisition of equipment located at the
Jena Facility, the Company acquired the right and title to all patents and
expertise relating to fiber optics developed or owned by Sico Quarzschmelze Jena
GmbH ("Sico"), the seller and former operator of the Jena Facility. While the
Company does not believe the Sico patents infringe upon the patents or other
proprietary rights of any other party, other parties may claim that the Sico
patents infringe upon such patents or proprietary rights. In the event the
Company were to default on its obligations to Sico, the Company's title to these
patents could revert to Sico. Without use of Sico patents and technology, the
Company's expense in manufacturing optical fiber and optical fiber preforms
could increase substantially.
The Company's ALT subsidiary entered into a Purchase and Sale Agreement,
dated as of September 7, 1986, with Norscan Instruments, Ltd. ("Norscan"), for
the acquisition of certain patents and know-how relating to FOCMS. A dispute
exists between ALT and Norscan with respect to Norscan selling FOCMS products in
competition with the ALT Products that utilize technology other than the
technology assigned to ALT pursuant to the terms and conditions of the Purchase
and Sale Agreement. ALT contends that, in so doing, Norscan is violating a
non-competition provision of the Purchase and Sale Agreement. Failure by ALT and
Norscan to resolve this dispute could materially adversely affect the future
sales of ALT Products.
INTERNATIONAL OPERATIONS
The Company is subject to all the risks of conducting business
internationally. These risks include unexpected changes in legislative or
regulatory requirements and fluctuations in the United States dollar and the
German mark, and other currencies in which the Company is doing business from
time to time. The Company has limited foreign currency fluctuation exposure and
does not currently engage in for
10
<PAGE>
eign currency hedging transactions. The business and operations of the Company's
German subsidiary, FiberCore Jena, are subject to the changing economic and
political conditions prevailing from time to time in Germany. Labor costs,
corporate taxes and employee benefit expenses are high and weekly working hours
are shorter compared to the rest of the European Union, the United States and
Japan. The Company's participation in the JV Company and its investment in FOI
are subject to the risks of doing business in Saudi Arabia, and in the Middle
East in general. These risks include, but are not limited to, the threat of
regional conflict.
INABILITY TO RELOCATE MANUFACTURING OPERATION; REVERSION OF EQUIPMENT
The Company is contractually restricted from moving its manufacturing
equipment out of the Jena Facility. In June 1994, the Company leased the Jena
Facility for a fixed monthly sum, and acquired certain equipment located in that
facility from Sico. In the event the Company defaults on its agreement with
Sico, the equipment purchased from Sico could revert to Sico and Sico could
purchase any additional equipment owned by FiberCore Jena at fair market value.
Until the year 2001, the Company's ownership of the equipment is subject to the
right of the German government, from whom Sico purchased the equipment, to
repossess the equipment in the event the Company ceases production. This
contractual limitation could adversely effect the Company's ability to take
advantage of less expensive labor markets and consequently adversely impact the
Company's profitability. In addition, the manufacturing equipment at the Jena
Facility could revert to a German government entity if the Company does not
properly maintain the Jena Facility or continue to employ a minimum number of
employees. See "Certain Transactions -- Dealings With Sico."
USE OF PROCEEDS
Although the Company will receive all of the proceeds from the exercise of
the Warrants and Options (approximately $3,864,658), there can be no assurance
that any of such securities will be exercised by the holders thereof. The
Company currently intends to utilize such proceeds for working capital and
general corporate purposes. None of any such proceeds are intended to be used to
discharge debt prior to maturity. Accordingly, the Company will have broad
discretion as to the application of a substantial portion of the net proceeds,
if any, derived from the exercise of the Warrants and Options. None of the
proceeds from the sale of shares of Common Stock, including the Underlying
Shares offered hereby by the Selling Securityholders, will go to the Company.
NO DIVIDENDS
The Company has never paid cash dividends on its Common Stock and does not
anticipate paying any cash dividends in the foreseeable future. The Company
intends to retain any future earnings to finance the growth and development of
its business. See "Stock Price and Dividend Policy."
SUPPLY CONTRACTS AND COMMITMENTS
The Company is contractually committed to provide at least 50% of AMP's
forecasted quantities of optical fiber for an initial term of five years, and an
additional five year term at AMP's option. In the event AMP's needs change and
AMP does not purchase the forecasted quantity of the Company's products, the
Company may be in the position of having committed significant resources to
accommodate AMP's needs without having a guarantee that AMP will purchase the
Company's products. In addition, the Company has entered into a written twenty
year supply agreement with FOI, which management believes could generate
revenues of up to approximately $93,000,000, although there can be no assurance.
The Company also anticipates entering into a supply agreement with the JV
Company.
LOAN DEFAULTS AND GUARANTEES
On July 31, 1996, the Company entered into a forbearance agreement with
Connecticut Innovation, Inc. ("CII") with respect to $241,869 owed to CII by
ALT. Among the terms of that agreement, and in exchange for a general release
from CII, the Company issued 111,462 shares of Common Stock to CII in full
settlement of the debt.
11
<PAGE>
On August 26, 1996, the Company issued 142,450 shares of Common Stock to
Connecticut Development Authority ("CDA"), in full settlement of a loan in the
amount of $272,489 owed to CDA by ALT.
For both CII and CDA, the Company agreed to register the shares issued to CII
and CDA, and upon registration, to list such shares on Nasdaq as soon as
practical. However, in the event such shares are not listed on Nasdaq by May 15,
1997, the Company has agreed to issue an additional 10,000 shares of Common
Stock each to CII and CDA; in the event such shares are not listed on Nasdaq by
August 18, 1997, the Company has agreed to issue a further 10,000 shares of
Common Stock each to CII and CDA.
In addition, ALT is the primary guarantor of approximately $172,000 in loan
obligations of Allied Controls, Inc. ("Allied"), a former subsidiary of ALT, to
the Department of Economic Development for the State of Connecticut ("DED"),
bearing a 7% interest rate and maturing in November 1999. ALT is also a
secondary guarantor on $538,450 of bank loan obligations of Allied to Lafayette
American National Bank, bearing an interest rate of prime plus 1% and maturing
in June 1999 (see Notes 5 and 6 to the Notes to ALT financial statements). As of
the date of this prospectus, such former subsidiary is making payments to DED as
part of an oral standstill agreement and to the bank under a forbearance
agreement.
With the settlement of the CII and CDA loans, the Company can meet the
payment terms of its remaining outstanding debt. Allied is current on its DED
and bank loans as modified by standstill and forbearance agreements.
LITIGATION
The Company's FiberCore Jena subsidiary is a defendant in a case brought
against it and others by a former customer who alleges that FiberCore Jena
failed to comply with a sales contract. The former customer is seeking damage of
approximately $1,500,000. The Company believes no such sales contract existed
and is aggressively defending this action. The Company has established a reserve
in the amount of $126,000, which includes legal fees. However, there is no
assurance that the Company will prevail in this action or that the reserve of
$126,000 will be adequate. See "Business -- Litigation."
The Company was a defendant in a lawsuit pending in Federal Court in
Worcester, MA seeking to enjoin the Company from using the name "FiberCore," as
well as unspecified monetary damages in excess of $50,000. In August 1996, the
plaintiff, Fibercore, Ltd., withdrew such action without prejudice.
INSURANCE
The Company maintains casualty and liability insurance on the Jena Facility.
There can be no assurance that in the event of a loss, policy limits will not be
exceeded.
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO ISSUE
UNDERLYING SHARES
The Company will be able to issue Underlying Shares upon conversion or
exercise of the Convertible Securities only if a current prospectus relating to
such shares is then in effect and only if the Underlying Shares are qualified
for sale under the securities laws of the applicable state or states or an
exemption from any such qualification is available. Although the Company has
undertaken to maintain such a current prospectus and intends to seek to qualify
the Underlying Shares for sale in applicable jurisdictions, there is no
assurance that it will be able to do so. See "Description of Securities."
LIMITED TRADING MARKET
Prior to the Offering, the Common Stock was quoted on the Bulletin Board and
has traded on a very limited basis. In connection with the Offering, the Company
intends to apply for listing on Nasdaq, but there can be no assurance that such
application will be granted, or if granted that the Company will not
subsequently be disqualified. If the Company is not qualified for inclusion on
Nasdaq and the Company fails to meet certain other criteria, the Common Stock
would be subject to a Commission rule
12
<PAGE>
that imposes additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and accredited
investors. For transactions covered by this rule, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently, if
the Company's securities are not quoted on Nasdaq, the rule may affect the
ability of broker-dealers to sell the Company's securities and the ability of
purchasers in this Offering to sell Common Stock in the secondary market. Upon
completion of this Offering, 41,541,159 shares of Common Stock will be issued
and outstanding (assuming exercise or conversion of all currently outstanding
Convertible Securities and the satisfaction of all conditions relating to the
issuance of Common Stock and Warrants to MESC and Techman).
MARKET OVERHANG FROM OPTIONS, WARRANTS AND NOTES
Immediately after the Offering, the Company will have outstanding a number of
Options, Warrants, and Notes, including the securities described herein. To the
extent that such Options, Warrants and Notes are exercised or converted, as the
case may be, equity interests of the Company's shareholders will be diluted.
Moreover, the terms upon which the Company will be able to obtain additional
equity capital may be adversely affected since the holders of the outstanding
Options, Warrants and Notes can be expected to exercise or convert them, to the
extent they are able to, at a time when the Company would, in all likelihood, be
able to obtain any needed capital on terms more favorable to the Company than
those provided in the Options, Warrants and Notes. Further, the sale of Common
Stock or other securities held by or issuable to the holders of such Options,
Warrants and Notes offered hereby, or merely the potential of such sales, could
have an adverse effect on the market price of the Company's Common Stock.
POSSIBLE VOLATILITY OF STOCK PRICE
The market for the Common Stock could be subject to wide fluctuations in
response to such factors as, among others, variations in the Company's
anticipated or actual results of operations and market conditions (which may be
unrelated to the Company's operating performance). Prior to the Offering, only
750,000 shares of Common Stock were freely tradeable. After the Offering, the
resale of an additional 41,541,159 shares of Common Stock will be registered
under the Securities Act, subject to the requirement of maintaining a current
resale prospectus for such securities. It is therefore possible that the price
of the Common Stock will decline on the Bulletin Board after the Offering
described in this prospectus is priced into the market.
CONTROL OF THE COMPANY
Several persons beneficially own over 5% of the Common Stock. One person
controls 20.2% of the Common Stock. Some of such persons acting alone or
together could control or strongly affect the votes of shareholders for
directors of the Company. Under the new AMP loan, Mohd A. Aslami, Charles
DeLuca, M. Mahmud Awan and AMP, who in the aggregate beneficially own
approximately 47% of Common Stock (after the Offering, assuming the issuance of
all Underlying Shares) have entered into a Voting Agreement pursuant to which
they agreed, to vote together to elect a slate of directors to the Board of
Directors of the Company. Such slate of directors initially consists of Mohd A.
Aslami, Charles DeLuca, Hans F.W. Moeller, one nominee of AMP and three outside
directors, one of whom is Dr. M. Mahmud Awan. The Voting Agreement also requires
a classified and three year staggered Board of Directors. Such Voting Agreement
would remain in effect until the earlier of (i) termination of the new AMP loan
agreement; or (ii) an underwritten public offering by the Company which
generates at least $5,000,000. See "Business -- Recent Developments," "Certain
Transactions -- Dealings With AMP" and "Principal Securityholders."
13
<PAGE>
USE OF PROCEEDS
The Company will receive all of the proceeds from the exercise of the
Warrants and Options. To the extent any part of the Notes are converted, the
Company's indebtedness will be reduced by such amount. If all of the Warrants
and Options are exercised, the net proceeds to the Company will be $3,864,658.
All proceeds from the exercise of the Warrants and Options will be added to
working capital to be used for general corporate purposes. None of the proceeds
from such exercise, if any, are intended to be used to discharge debt prior to
maturity. There can be no assurance that any of the Warrants and Options will be
exercised.
The Company will not receive any of the proceeds from the sale of the shares
of Common Stock being offered hereby (including the Underlying Shares) by the
Selling Securityholders.
CAPITALIZATION
The following table sets forth the capitalization of the Company at September
30, 1996 and as adjusted to give effect to the issuance of the 917,827 shares of
Common Stock to MESC, the issuance of 470,844 shares to the sole shareholder of
Techman, the conversion or exercise of the Convertible Securities as of such
date, and the application of the estimated net proceeds derived therefrom as
described under "Use of Proceeds." This table should be read in conjunction with
the Company's Consolidated Financial Statements appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------
(DOLLARS IN THOUSANDS)
ACTUAL AS ADJUSTED
---------- --------------
<S> <C> <C>
Current portion of long term debt ......................................... $ 200 $ --
Long term debt, less current portion ...................................... 5,500 500
Stockholders' equity.
Preferred Stock, $.001 par value, 10,000,000 authorized; none issued and
outstanding ............................................................. -- --
Common stock, $.001 par value, 100,000,000 shares authorized;
31,336,442(1) shares issued and outstanding; 41,541,159 shares as
adjusted ................................................................ 31 42
Additional paid in capital ............................................... 13,057 23,558
Retained earnings deficit ................................................ (7,290) (7,290)
Aggregate translation adjustment ......................................... 147 147
---------- --------------
Total stockholders' equity ............................................... 5,945 16,457
---------- --------------
Total capitalization ..................................................... $11,645 $16,957
========== ==============
</TABLE>
(1) Subsequent to September 30, 1996, 367,131 shares of Common Stock were
issued to MESC, 470,844 shares of Common Stock were issued to Techman and
3,058,833 shares of Common Stock were issued to AMP.
14
<PAGE>
STOCK PRICE AND DIVIDEND POLICY
The Company intends to apply for the listing of its Common Stock on Nasdaq,
although there is no assurance that its application will be approved. There were
208 holders of record of Common Stock as of November 22, 1996 and 389 beneficial
owners of Common Stock as of October 30, 1996. The public market for the Common
Stock on the Bulletin Board, where the stock trades under the symbol FBCE, is
limited. Set forth below for the periods indicated are the high and low closing
prices for the Common Stock as reported on the Bulletin Board. The prices prior
to July 18, 1995 reflect the price of Venturecap, a predecessor to the Company,
which traded under the symbol VTUR.
<TABLE>
<CAPTION>
PERIOD HIGH BID LOW BID
- --------------------------------------- ---------------------- -----------------------
<S> <C> <C>
1995
1st Quarter .......................... No Reported Trades No Reported Trades
2nd quarter (first reported bid on
May 11, 1995) ....................... $4.94 $2.55
3rd quarter .......................... $4.45 $2.75
4th quarter .......................... $3.25 $2.37
1996
1st quarter .......................... $3.12 $2.00
2nd quarter .......................... $7.25 $1.75
3rd quarter .......................... $7.44 $3.00
4th quarter to November 26, 1996 ..... $4.13 $2.63
</TABLE>
To date, the Company has not paid any cash dividends on its Common Stock. On
August 31, 1995, ALT paid a dividend to its shareholders by the distribution of
its ownership interest in a limited liability company. Such interests were
valued by ALT's Board of Directors as nil. See "Certain Transactions--The Allied
Distribution."
The payment of dividends, if any, in the future is within the discretion of
the Board of Directors and will depend on the Company's earnings, its capital
requirements, financial condition, contractual and legal restrictions and other
relevant factors. The Company does not expect to declare or pay any dividends in
the foreseeable future. In addition, the ability of the Company to pay cash
dividends in the future will be subject to its ability to meet certain other of
its obligations.
DILUTION
At September 30, 1996, the Company's net tangible book value (deficiency) per
share was $(.03). "Net tangible book value per share" represents total tangible
assets minus total liabilities divided by the total number of shares
outstanding. The table below sets forth dilution to shareholders purchasing
shares of Common Stock being offered hereby (including Underlying Shares) from
the Selling Securityholders at $3.63, the closing bid price on the Bulletin
Board on November 26, 1996.
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed offering price per share((1))............................ $3.63
Net tangible book value per share before conversion of the
Convertible Securities......................................... $(.03)
Increase in net tangible book value per share attributable to
issuance of 10,204,717((2)) Underlying Shares upon exercise or
conversion of Convertible Securities .......................... $ .26
Pro forma net tangible book value per share after the offering . $ .23
Dilution of net tangible book value per share of new
shareholders.................................................... $3.40
</TABLE>
(1) The offering price per share of $3.63 is based upon the closing bid on the
Bulletin Board and may not reflect actual trading of shares. Furthermore,
only 750,000 shares of Common Stock are currently eligible for trading on
the Bulletin Board and as a result the reported sales prices of the Common
Stock may not be reflective of the fair market value of the Common Stock.
(2) Excludes 2,515,305 shares being registered hereunder, to be issued for
future awards and grants of employee stock options.
15
<PAGE>
SELECTED CONSOLIDATED AND CONSOLIDATED PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
The following selected financial data of the Company for each of the years
1995, 1994, 1993, 1992 and 1991 have been derived from the audited financial
statements of the Company and its predecessors and notes thereto included
elsewhere in this prospectus. The financial data for the year ended December 31,
1995 on a consolidated pro forma basis was derived from the financial statements
of the Company and ALT included elsewhere in this prospectus. The selected
financial data for the nine month periods ended September 30, 1996 and 1995 and
for the Company on a consolidated pro forma basis for the nine months ended
September 30, 1995 were derived from the unaudited financial statements of the
Company and its predecessors, and in the opinion of management, include all
adjustments necessary to fairly present such data. The information set forth
below is qualified by reference to, and should be read in conjunction with, the
consolidated financial statements and related notes thereto included elsewhere
in this prospectus and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Results for the interim periods are not
necessarily indicative of results for a full year.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
PRO FORMA HISTORICAL
-------------- ----------------------------------------------------------------------
1995 (1)(4) 1995 (2) 1994 (3)(5) 1993 (3)(5) 1992 (6) 1991 (6)
-------------- ------------- ------------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Net Sales .................... $ 3,255 $ 3,094 231 $ -- $ -- $ --
Costs And Expenses:
Cost of sales ............... 5,093 4,509 1,064 -- -- --
Research and development .... 188 75 90 -- -- --
Selling, general, and
administrative ............. 2,247 2,099 699 1 -- --
Interest expense, net of
interest income ............ 382 369 8 -- -- --
Other expense (income), net . (30) 51 (5) -- -- --
-------------- ------------- ------------- ------------ --------- ---------
Income (loss) before
provision for income taxes.. (4,625) (4,009) (1,625) (1) -- --
Provision for income taxes .. -- -- -- -- -- --
-------------- ------------- ------------- ------------ --------- ---------
Net income (loss)(7) ........ $ (4,625) $ (4,009) $ (1,625) $ (1) $ -- $ --
Primary earnings (loss) per
share(7) ................... $ (0.15) $ (0.15) $ (0.07) $ - $ -- $ --
Fully diluted earnings (loss)
per share................... $ (0.15) $ (0.15) $ (0.07) $ -- $ -- $ --
Weighted average shares
outstanding(7) ............. 30,245,879 26,584,630 22,873,322 21,309,323 955,450 955,450
Weighted average shares
outstanding (fully diluted). 30,980,539 27,319,291 22,873,322 21,309,323 955,450 955,450
Balance Sheet Data:
Working capital (deficit) ... (277) (277) (519) 403 5 5
Total assets ................ 14,167 14,783 4,270 645 5 5
Total liabilities ........... 8,415 8,415 1,687 4 -- --
Accumulated deficit ......... (6,254) (5,638) (1,628) (3) (2) (2)
Stockholders' equity ........ 5,752 6,368 2,583 641 5 5
</TABLE>
<PAGE>
SELECTED CONSOLIDATED AND CONSOLIDATED PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
(continued)
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------------------
PRO FORMA HISTORICAL
------------- ----------------------------
1995 (1)(4) 1996 1995 (2)(5)
------------- ------------- --------------
Operating Data:
Net Sales .................... $ 1,790 $ 6,245 $ 1,628
Costs and expenses:
cost of sales ............... 3,048 6,108 2,509
Research and development .... 152 281 34
Selling, general, and
administrative ............. 1,206 1,920 1,050
Interest expense, net of
interest income ............ 248 279 234
Other expense (income), net . (48) (690) (48)
------------- ------------- -------------
Income (loss) before
provision for income taxes.. (2,816) (1,653) (2,151)
Provision for income taxes .. -- -- --
------------- ------------- -------------
Net income (loss)(7) ........ $ (2,816) $ (1,653) $ (2,151)
Primary earnings (loss) per
share(7) ................... $ (0.09) $ (0.05) $ (0.09)
Fully diluted earnings (loss)
per share................... $ (0.09) $ (0.05) $ (0.09)
Weighted average shares
outstanding(7) ............. 30,157,895 30,815,900 25,262,819
Weighted average shares
outstanding (fully diluted). 30,365,796 32,899,366 25,470,719
Balance Sheet Data:
Working capital (deficit) ... 734 223 734
Total assets ................ 16,402 14,018 17,064
Total liabilities ........... 12,254 8,073 12,251
Accumulated deficit ......... (4,444) (7,290) (3,779)
Stockholders' equity ........ 4,148 5,945 4,813
See the Notes to Selected Financial Data.
16
<PAGE>
FIBERCORE, INC.
NOTES TO SELECTED FINANCIAL DATA
(1) Includes the results of ALT as if acquired at the beginning of the period
and as if the conversion of ALT debt and warrants into approximately 4.5 million
shares of ALT common stock occurred immediately prior thereto.
(2) Includes the results of ALT from September 18, 1995 (the date of
acquisition) through December 31, 1995.
(3) Does not include the results of ALT.
(4) The pro forma results reflect higher amortization costs than the
historical financials due to the allocation of the purchase price of the
acquisition of ALT and its assets. The pro forma financials also reflect lower
interest costs than the historical financials due to the conversion of ALT debt
at an earlier date than the actual conversion.
(5) Restated to reflect the Venturecap Merger as of the beginning of the
period.
(6) The years 1991 and 1992 reflect the financial position of Venturecap,
Inc., a development stage company, prior to the merger with FiberCore,
Incorporated in 1995. Venturecap had no significant activities in these years.
FiberCore, Incorporated was formed in November 1993.
(7) Supplementary Earnings Per Share Data: If the convertible debt had been
converted at the beginning of the periods below, the earnings per share and the
basis for this computation would have been as follows:
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1996 1995
-----------------
Net loss for the period .......... $ (1,396) $ (3,761)
Weighted average shares
outstanding....................... 35,214,743 29,644,053
Primary loss per share............ $ (0.04) $ (0.13)
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS AND DEUTSCHE MARKS IN THOUSANDS)
BACKGROUND
Unless otherwise stated, reference to the Company in this section includes
FiberCore and subsidiaries, including ALT, from September 18, 1995.
FiberCore was organized under the laws of the State of Nevada on November 5,
1993. Venturecap was a development stage enterprise, with no significant
operations, no significant assets or liabilities and was inactive from 1990
until the time of the Venturecap Merger with FiberCore on July 19, 1993.
Venturecap issued 24,617,133 common shares for all of the outstanding shares of
FiberCore. The Venturecap Merger has been accounted for as a pooling of
interests. Subsequent to the Venturecap Merger, Venturecap changed its name to
FiberCore, Inc.
The Company operates primarily through its FiberCore Jena subsidiary. The
Company maintains a headquarters in Sturbridge, Massachusetts which is staffed
by executive, engineering, accounting and administrative personnel. The
following discussion and analysis of the results of operations is based on the
Company's audited financial statements for the years ended December 31, 1995,
1994 and 1993, and the unaudited statements of the Company for the nine month
periods ended September 30, 1996 and 1995.
RESULTS OF OPERATIONS
Nine months ended September 30, 1996 and 1995
Total revenues for the nine months ended September 30, 1996 were $6,245
compared with revenues of $1,628 for the nine month period ended September 30,
1995, an increase of 284%. This increase in revenues was attributable to the
Company's increase of production capacity resulting from an upgrade of the Jena
Facility, and the Company's sales and marketing efforts resulting in the
addition of new customers.
Gross profit for the nine months ended September 30, 1996 was $137 compared
to a loss of $881 for the nine months ended September 30, 1995. This difference
was attributable to the upgrade of the Jena Facility since its acquisition in
July 1994. The improvement and upgrading of machinery and equipment and
production process technology changes resulted in better production yields and
lower per unit production costs.
Selling, general and administrative expenses were $1,920 for the nine months
ended September 30, 1996 compared to $1,050 for the nine months ended September
30, 1995, an increase of 83%. This increase was due primarily to the the
acquisition of ALT, which accounted for $498 of the increase. Additionally, the
commencement of increased production at the Jena Facility, the Company's
increased sales and marketing efforts and the addition of personnel in Germany,
added to this increase in costs.
Interest expense for the nine months ended September 30, 1996 was $280
compared to $315 (a decrease of 11%) from the year-earlier comparable period.
This decrease was due to the repayment in 1995 of a working capital line of
credit that was outstanding for most of 1995, offset by the interest on the AMP
Note.
Other income was $807, an increase of $759 (1,581%) for the nine months ended
September 30, 1996 as compared to the corresponding period in 1995. This
increase was principally due to the receipt of $786 in grants from the German
government.
The net loss for the nine months ended September 30, 1996 was $1,653, a
decrease of $498 (23%) from the loss of $2,151 in the corresponding period in
1995. The primary cause of the decrease was the increase in sales and gross
profit at the Jena Facility and the changes in administrative and interest
income and expense as described above.
18
<PAGE>
Fiscal Years Ended December 31, 1995 and 1994.
Total revenues for the year ended December 31, 1995 were $3,094 compared to
$231 for the prior year, an increase of $2,863 (1,239%). This increase in
revenues was due to the acquisition of the Jena Facility by the Company in July
1994, with sales commencing primarily in the last quarter of the year and
expansion and upgrade of the Jena Facility since its acquisition. The results
for 1995 reflect a full year of operations and the related increase in sales
volume to new customers.
Selling, general and administrative costs increased by $1,399 in 1995, a 200%
increase over 1994. This increase is principally attributable to the full year
of operation at the Jena Facility compared to only six months of operation in
1994. In addition, the acquisition of ALT in September 1995 added $223 to
administrative costs in 1995.
Interest expense was $516 in 1995 compared to $23 in 1994, a 2,143% increase.
This increase was caused by a working capital loan that was outstanding during
1995 and interest on the AMP Note that was closed in April 1995.
Interest income was $148 in 1995 compared to $15 in 1994, an increase of $133
(887%). This increase resulted principally from the short term investment of the
proceeds of the AMP Note.
The net loss for the year ended December 31, 1995 of $4,009 was $2,384, 146%
greater than the loss of $1,625 for the year ended December 31, 1994. The
increase in loss is principally related to the increase in costs as described
above and the full year of operations of the Jena Facility resulting in an
increase in the gross loss on sales of $583 or 70%. The cost of goods sold as a
percent of sales decreased from 461% in 1994 to 146% in 1993. This is typical of
the nature of a capital intensive production operation wherein capacity and
through put increases result in a significant improvement in per unit production
costs, as fixed costs are spread over a higher production volume.
Fiscal Year Ended December 31, 1994 and Period November 5, 1993 to December
31, 1993.
Total revenues for the year ended December 31, 1994 were $231 compared to
$-0- for the prior period in 1993. This was due to the acquisition of the Jena
Facility by the Company in July 1994, with shipments commencing primarily in the
last quarter of the year. The Company was incorporated in November 1993 and had
no products, production or revenues during the two months of 1993.
The operating loss for the year ended December 31, 1994 of $1,625 was due to
startup and production inefficiencies at the Jena Facility, selling, general and
administrative expenses of $699, and research and development expenses of $90.
For the period ended December 31, 1993, the Company had no comparable expenses.
For the year ended December 31, 1994, the Company had net interest expense of
$8, primarily attributable to its capitalized lease obligations of the Jena
Facility.
LIQUIDITY AND CAPITAL RESOURCES
Nine months ended September 30, 1996
During the nine months ended September 30, 1996, the Company used $916 for
operating activities, principally resulting from the loss for the period of
$1,653, reduced by depreciation and amortization of $1,033. Accounts payable was
reduced by $715, while accrued expenses increased by $388, principally from the
increase in accrued interest on the AMP Note. Also, during the period the
Company utilized cash in investing activities of $420, principally for equipment
($353). Cash generated through financing totaled $1,027, principally from the
sale of stock ($550) and new borrowings ($700). These funds were used to finance
operations and to repay a note for $200.
19
<PAGE>
The proceeds from the sale of stock noted above were received from Techman
under the Techman Share Purchase Agreement entered into in January 1996. Under
that Agreement, Techman subscribed to purchase 734,260 shares of the Company for
$1,000. The initial payment of $550 resulted in an increase in equity and was
used as working capital, improving the Company's ability to meet its current
obligations.
The Company expects to continue to incur operating losses until such time as
the Jena Facility's production equipment is expanded and fully upgraded, and
manufacturing inefficiencies are substantially eliminated. The Company has and,
with additional capital, will continue to transfer its more efficient and
productive technology to its Jena Facility with management's expectation of
improved operating results. The planned upgrade and expansion of the Jena
Facility will result in improved production yields thus lowering production
costs per unit of preform and fiber. Additionally, the expansion will increase
throughput resulting in increased production volume. The Company has already
received commitments from current customers to purchase this increase in
production volume. These increased sales combined with lower per unit production
costs will lead to profitability. The Company will require an estimated $7,800
in capital investment. Of this amount approximately $2,000 will be for building
expansion and $5,800 for equipment upgrades and new equipment. The Company, with
its current cash and cash equivalents, cannot fund both the required amount of
capital expenditures and current and projected operating losses, including debt
service payments. Therefore, the Company requires additional financing in the
near term.
The Company, therefore, has sought additional financing from one or more of
the following sources: (i) issuance of convertible instruments or stock in
private or public offerings; (ii) financing for the Jena Facility through a
combination of German bank loans, German federal and state government grants,
loan guarantees, and equity investments generated in all or part from (i) above;
(iii) exercise of stock Options and Warrants; and (iv) loans from officers,
directors, and principal stockholders of the Company. Funds for such loans to
the Company from officers, directors, and principal stockholders would be
derived, in part, from sales or pledges (to obtain loans) of Common Stock by
such individuals. There can be no assurance that financing from all of the
preceding sources will be available to the Company on attractive terms.
The Company believes that its success in raising additional capital is
dependent on investors' beliefs in the Company's technology, its position in the
fiber optics industry, and its strategic business plan. Achieving profitability
is dependent, in part, on raising additional funds to invest in capital
expenditures. In this regard, the Company has received a grant from the German
government of 4,000 Deutsche Marks (DM) (approximately $2,700) and a loan from
the Berliner Bank of 7,700 DM (approximately $5,100). These funds totalling
$7,800, are committed to the upgrade and expansion of the Jena Facility
described above. On November 27, 1996, AMP loaned the Company $3,000, part of
which will be used as collateral for the Berliner Bank Loan. As part of the new
AMP loan, AMP also converted $3,000 of principal plus interest of the existing
$5,000 loan into 3,058,833 shares of Common Stock.
The Company is not relying on the conversion of Warrants and Options to fund
the upgrade and expansion of the Jena Facility; however, if the Warrants and
Options are exercised, the total proceeds that the Company would receive upon
the exercise is approximately $4,800. To the extent that the Warrants and
Options are exercised, the Company intends to use the proceeds from the exercise
of such Warrants and Options for working capital purposes, including debt
service (approximately $93 per quarter beginning January 1997 through December
2001). There are long payment deferral periods on a substantial amount of the
Company's outstanding loans. Under the AMP Note, the remaining $2,000 in
principal and accrued interest are due and payable at maturity on April 2005.
Similarly, under the new $3,000 AMP loan, payments of interest accrue for the
first five years. Thereafter, accrued and unpaid interest is payable quarterly.
The principal and any remaining accrued interest is payable at maturity on
20
<PAGE>
November 27, 2006. As for the German loan, principal is also due and payable at
the tenth anniversary of closing; however, interest at 6.25 % is due and payable
quarterly. The Company does not foresee any inability to meet its current debt
requirements.
The Company currently has a backlog of orders aggregating approximately
$18,600 which is scheduled to be shipped through the end of 1996 and 1997. The
backlog at September 30, 1995 was approximately $4,800. Additionally, the
Company has entered into, or is negotiating, long-term supply agreements which,
in the opinion of management, could generate sales of up to approximately
$251,000 in the aggregate although there can be no assurance. These include
supply agreements with MEFC, AMP, FOI and others. Pursuant to the supply
agreement with AMP, which provides for an initial term of five years and for an
additional five year term at AMP's option, AMP has undertaken to purchase at
least 50% of its global fiber requirements from the Company. The Company
estimates that this could amount to over $60,000 in sales over the five year
period, significantly improving the Company's cash flow and profits, although
there can be no assurance.
For the year ended December 31, 1995
At December 31, 1995, the Company had cash of $833 and non-cash current
assets of $2,304. During 1995, the Company used $2,874 for operating activities.
This cash was used principally to fund the loss of $4,009, adjusted for
depreciation and amortization of $747. Accounts payable and accrued expenses
increased $2,119 and receivables and inventory increased $1,783, due to the
increases in sales, production and material costs and other operating costs.
Cash used in investing activities was $2,005 principally for the purchase of
equipment ($1,817) and reduction in amounts due to related parties of $358
(principally Sico). The Company also had a foreign currency translation
adjustment of $221 related to the Sico equipment transactions. In addition, the
Company acquired ALT in a non-cash transaction for Common Stock valued at
$7,000.
During the year the Company received $5,454 from financing activities,
principally through the sale of common stock ($500) and the issuance of the AMP
Note for $5,000. These funds were used to finance operations and acquire
equipment as noted above.
For the year ended December 31, 1994
At December 31, 1994, the Company had cash of $258 and non-cash current
assets of $453. During the year, the Company used $1,250 in operating activities
principally from the loss for the year of $1,625, adjusted for depreciation and
amortization of $289.
Cash used in investing activities was $178, principally due to the purchase
of equipment ($593) and an increase in amounts due to related parties of $419
for the acquisition of the Jena Facility. The Company also acquired equipment
from Sico of $2,996 in exchange for shares valued at $2,420 and a capital lease
agreement of $576.
Cash from financing activities was $1,284 resulting primarily from the sale
of Common Stock ($1,629), issuance of a note ($200) and repurchase of stock
($500). The proceeds from the sale of stock were used to fund operating costs
and purchase equipment as noted above.
Period -- November 5, 1993 to December 31, 1993
Since its inception, the Company has relied upon private equity and debt
financing and revenues from sales to finance its operations. For the period
November 5, 1993 to December 31, 1993, the Company had a cash inflow of $414
from the sale of Common Stock. The Company also issued Common Stock valued at
$223 to acquire patents ($60) and pay for startup costs ($163).
21
<PAGE>
ALT
ALT was acquired by the Company as of September 18, 1995. ALT has
historically operated at a loss, has cumulative losses from its date of
inception, and requires additional capital to operate. The Company intends to
raise additional funds for ALT, however, there is no assurance that such funds
will be available. ALT has received an order from Pakistan Telecom in the amount
of $152, for a test installation of the fiber optic cable monitoring system. If
the test installation is successful, the Company anticipates that Pakistan
Telecom will place an order for additional installation estimated to be valued
at approximately $1,660, although there can be no assurance. This increase in
revenues, if realized, would provide sufficient cash flow to sustain operations
and improve the profitability of ALT's operations.
22
<PAGE>
BUSINESS
GENERAL
The Company develops, manufactures and markets products primarily for the
fiber optic industry. These products include single-mode and multi-mode optical
fiber and optical fiber preforms. Preforms are the basic component from which
optical fiber is drawn and subsequently cabled. The Company has developed a
patented preform production process which management believes to be more cost
effective than existing production methods in use. Through its ALT subsidiary,
the Company manufactures patented cable monitoring systems, a patented long
range fault locator, cable protection devices, and electro-optical talk sets.
On July 18, 1995, FiberCore merged into Venturecap, an inactive corporation,
organized under the laws of the State of Nevada in 1987. Venturecap issued
3.671307 shares in exchange for each outstanding share of FiberCore, and as a
result, Venturecap issued a total of 24,617,133 shares for all of the
outstanding shares of FiberCore. After the merger, Venturecap changed its name
to FiberCore, Inc.
On September 18, 1995, the Company acquired ALT, a Delaware corporation
organized in 1986 and engaged in the business of manufacturing equipment which
monitors and identifies faults in fiber optic cables, cable protection devices,
and electro-optical talk sets. See "Certain Transactions -- The ALT
Acquisition."
In January 1996, the Company established a subsidiary, InfoGlass Incorporated
("InfoGlass"), through which it intends eventually to conduct its North American
fiber optic business.
The following is an organizational chart depicting the principal subsidiaries
of the Company, all of which are wholly-owned by the Company, except FOI (30%)
and MEFC (15%):
Company and ALT sales by product group for the last two years and for the
nine months ended September 30, 1996, were as follows:
(DOLLARS IN THOUSANDS)
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, 1996
----------------- ------------------
1994 1995
------- ---------
Optical Fiber and
Preform.................. $231 $3,009 $6,096
ALT Products............. 476 246 149
------- --------- ------------------
Total.................... $707 $3,255 $6,245
======= ========= ==================
RECENT DEVELOPMENTS
The Company is engaged in the business of developing, manufacturing, and
marketing single-mode and multi-mode optical fiber and optical fiber preforms
for the telecommunication and data communications industry. It was incorporated
under the laws of the State of Nevada in November 1993. In June 1994, the
Company leased the Jena Facility for a fixed monthly sum, and acquired certain
equipment located in that facility from Sico. Until the year 2001, the Company's
ownership of the equipment is subject to the right of
23
<PAGE>
the German government, from whom Sico purchased the equipment, to repossess the
equipment in the event the Company ceases production. The agreement pursuant to
which the Company acquired the equipment provides for the sale of 2,221,141
shares of Common Stock to Sico in exchange for the equipment. See "Certain
Transactions -- Dealings with Sico." The Jena Facility is an existing 26,500
square foot optical fiber manufacturing plant located in Jena, Germany, which
has been in operation since 1986.
In April 1995, the Company issued the AMP Note, which is a ten year
$5,000,000 convertible note, to AMP, a company listed on the New York Stock
Exchange and a manufacturer of electrical and optical connection devices,
systems and other equipment including fiber optic cable. AMP's annual worldwide
sales for the 1995 fiscal year were in excess of $5,000,000,000. Principal plus
accrued interest on the AMP Note at a rate of LIBOR plus one percent may be
converted into Common Stock through April 17, 2005. Until April 17, 2000, the
conversion price is $1.16 per share; thereafter the conversion price is equal to
the price per share paid by a third party investor in the private sale of Common
Stock immediately prior to such conversion. The AMP Note is initially
collateralized by the Company's patents, patent applications, licenses, rights
and royalties arising from such patents. The AMP Note is subject to prepayment
on demand in the event the Company is the issuer of securities to be sold by the
Company under an effective registration statement. Since this prospectus does
not contemplate the sale and issuance of new securities by the Company, other
than the Underlying Shares, the registration of the Common Stock and Underlying
Shares hereunder will not trigger the prepayment provision under the AMP Note.
In July 1996, AMP entered into a five year supply contract (renewable at
AMP's option for an additional five year period) with the Company whereby AMP
has undertaken to purchase from the Company at least 50% of AMP's future glass
optical fiber needs. On November 27, 1996, the Company obtained an additional
$3,000,000 loan from AMP to fund the expansion of the Jena Facility, in exchange
for a 10 year note and $2,000,000 of common stock purchase warrants exercisable
at $1.45 per share and expiring on November 27, 2001. In connection with the new
AMP loan and the expansion of the Jena Facility, the Company has been awarded a
grant from the German Government of approximately $2,700,000 and has received a
loan from Berliner Bank of approximately $5,100,000, which has been funded
contemporaneously with the new $3,000,000 AMP loan. AMP also converted
$3,000,000 of principal plus accrued interest on the AMP Note into 3,058,833
shares of Common Stock. In connection with the new loan from AMP, the Company
agreed to issue AMP additional shares of Common Stock in the event the Company's
share price does not exceed $1.74 for 30 consecutive trading days by November
27, 1998. The issuance of additional shares under the new AMP Loan would have a
dilutive effect on the Company's other shareholders and could adversely affect
the market price of the Common Stock. As part of the new $3,000,000 loan from
AMP, Mohd A. Aslami, Charles DeLuca, M. Mahmud Awan and AMP entered into a
Voting Agreement pursuant to which they agreed to vote together to elect a slate
of directors to the Board of Directors of the Company. Such slate of directors
initially consists of Mohd A. Aslami, Charles DeLuca, Hans F.W. Moeller, one
nominee of AMP and three outside directors, one of whom is Dr. M. Mahmud Awan.
The Voting Agreement also requires a classified and three year staggered Board
of Directors. Such Voting Agreement would remain in effect until the earlier of
(i) termination of the new AMP loan agreement, or (ii) an underwritten public
offering by the Company which generates at least $5,000,000. See "Business
- --Recent Developments," "Certain Transactions -- Dealings With AMP," and "Risk
Factors -- Control of the Company."
Since October 1995, MESC has purchased 734,262 shares of Common Stock for an
aggregate purchase price of $1,000,000 and MESC has been granted Warrants to
purchase 550,696 shares of Common Stock at an exercise price of $1.63 per share
through April 13, 1997. MESC will also be issued 312,061 shares of Common Stock,
will be entitled to exercise the Warrants and will receive an additional 238,635
shares of Common Stock upon delivery of a supply agreement between the Company
and the JV Company totalling approximately $33,000,000.
See"-- Joint Marketing Arrangements."
On November 1, 1995, the Company entered into an International Distributor
Agreement with Techman. Under such agreement, Techman will be issued Warrants
for the exercise of up to 1,000,000 shares of Common Stock. The Warrants will be
exercised and the applicable shares will be issued ratably by the Company as
commissions on Company sales generated by Techman up to $200 million.
24
<PAGE>
On January 11, 1996, pursuant to the Techman Share Purchase Agreement,
Techman agreed to purchase for $1,000,000 a total of 734,260 shares of Common
Stock and Warrants, exercisable at $1.63 per share into 550,696 shares of Common
Stock expiring on January 11, 1998. Additionally, Techman would be issued
312,061 shares of Common Stock upon the delivery of a supply agreement between
FOI and the Company. Between February 1996 and September 1996, the Company,
pursuant to the Techman Share Purchase Agreement, issued to Dr. Awan at the
request of Techman, 403,843 shares in exchange for $550,000 and 171,634 shares
in conjunction with the formation of FOI. Subsequent to September 1996, an
additional 470,844 shares of Common Stock (representing the balance of shares to
be issued under the Techman Share Purchase Agreement) were issued to Dr. Awan in
exchange for a payment of $450,000 and the delivery by Techman of a twenty year
supply agreement between the Company and FOI, which management believes could
generate revenues of up to approximately $93 million over five years, although
there can be no assurances. This payment was invested by the Company in FOI as
an additional capital contribution (along with ratable additional capital
contributions by FOI's other shareholders). The Company maintains a 30%
ownership interest in FOI. See "Description of Securities -- Techman."
On July 1, 1996, the Company borrowed $500,000 under two loan agreements with
the spouses of the Chairman and Chief Executive Officer and the Executive Vice
President of the Company. The loans are in the amount of $250,000 each, bear
interest at the prime rate plus one percent (currently 9.25%) and are due on
June 30, 1999. In conjunction with the loans, each lender received Warrants to
purchase 115,220 shares of Common Stock at a price of $1.81 per share. The
Warrants expire on July 31, 2001.
FIBER OPTIC PREFORM MANUFACTURING TECHNOLOGIES
Optical fibers are solid strands of hair-thin, high quality glass which are
usually combined to form cables for transmitting information via light pulses
from one point to another. The fibers consist of a core of high-purity glass
which transmits light encased within a covering layer designed to reduce signal
loss through the side walls of the fibers. Information transmitted through
optical fibers is converted from electrical impulses into light waves by a laser
or light emitting diode. At point of reception, the light waves are converted
back into electrical impulses by a photo-detector.
Communication by means of light waves guided through glass fibers offers a
number of advantages over conventional means of transmitting information. Glass
fibers carry significantly more information than metallic conductors and, unlike
metallic conductors, are not subject to electromagnetic or radio frequency
interference. Signals of equal strength can be transmitted over much longer
distances through optical fibers than through metallic conductors and require
the use of fewer repeaters (devices which strengthen a signal). Further,
fiber-optic cables, which typically consists of numerous optical fibers encased
in one or more plastic sheaths, are substantially smaller and lighter than
metallic conductor cables of the same capacity, so they can be less expensive
and more easily installed, particularly in limited conduit or duct spaces.
There are two basic types of communication optical fibers: multi-mode fiber
and single- mode fiber. Multi-mode fiber has a larger core (the area where the
light travels) than single-mode fibers, carries less bandwidth and is more
expensive. It is generally used over relatively short distances in building
wiring and among a group of buildings. The electronics and the connectors
required to work with multi-mode fiber are less costly than the electronics
required for single mode-fiber. For example, the light source for multi-mode
fiber can be light emitting diodes, while single-mode fiber requires laser light
sources. Single-mode fiber is used in long-distance trunk lines (cables between
cities) and fiber-to-the-curb (cable from a central office to the curb in front
of an office building or home).
The three basic technologies widely used to manufacture multi-mode and
single-mode optical fiber are:
1. Outside Vapor Deposition ("OVD"), otherwise known as the "Corning
process."
2. Inside Vapor Deposition ("IVD"), which is also known as Modified Chemical
Vapor Deposition ("MCVD") or the "AT&T process". Due to its flexibility and
relative ease of operation, this process is the most widely used around the
world by independent manufacturers.
3. Axial Vapor Deposition ("AVD"), also known as the "Japanese process". This
process is similar to the Corning process.
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The basic production unit from which fiber "is drawn" is a preform. A preform
is a cylindrical high purity glass rod with a high refractive index glass
material in the central part of the rod (the "core") and a low refractive index
glass material in the outer part of the rod (the "clad"). The rod can be less
than one inch to several inches in diameter and one to several meters in length.
From one such preform many thousands of meters of optical fiber can be drawn.
The OVD and AVD processes both manufacture 100% of the glass composing the final
preform and are comparable in terms of machine speeds that manufacture glass per
unit of time. These speeds are significantly higher than those of the IVD
process. In contrast, the IVD process manufactures only about one-third of the
total glass required in the manufacture of a preform, with the balance of the
glass being purchased in the form of a tube at costs significantly lower than
that of either OVD or AVD, thus balancing the overall expense.
Optical fiber cable is produced from optical fiber by first coloring the
coated fiber and then encasing the fiber in a protective jacket.
THE COMPANY'S PROPRIETARY MANUFACTURING PROCESS AND PRODUCTS
The Company manufactures both multi-mode and single-mode preforms and fiber,
but does not manufacture optical fiber cable, although the JV Company in which
the Company has an interest intends to draw fiber from preforms and to
manufacture fiber optic cable.
The Company's patented technology can be best described as a "rod-and-tube"
process, or as a hybrid of the OVD, IVD and the AVD processes.
<F1>
The Company's process takes advantage of available high quality doped((1)) and
undoped fused silica rods and tubes during the manufacturing process to produce
more efficiently single-mode optical fiber preform and single-mode fiber at a
substantially reduced cost than the alternative processes.
Specifically, the Company's process places a high-purity "core" glass rod
inside a high-purity glass tube or "clad", which has a lower refractive index
than the core, and collapses the tube over the rod to form an intermediate
preform. The Company purchases the glass tubes and manufactures the "core" glass
inside of the purchased glass tube. The composite material is subsequently
converted to a glass rod referred to as an intermediate preform. Such
intermediate preform can also be manufactured by any of the other existing
processes. This intermediate preform is placed inside another purchased tube and
collapsed together to form a final preform, which has the proper ratio of
core-to-outside-diameter-glass. The preform is then drawn into finished fiber by
placing it inside a "draw furnace", heated to approximately 2000 degrees
celcius, and "stretched" into tens of thousands of meters of hair-thin, flexible
glass fiber. The Company believes that its patented process offers
manufacturing-cost and capital-investment advantages over the processes
currently in use by competitors for the manufacture of optical fiber, because
(i) the machine time necessary to produce a given size preform is significantly
less, thereby allowing the Company to produce more preforms in the same time
period; and (ii) the Company purchases the tube while manufacturing a much
smaller portion of the clad and all of the core which accounts for approximately
5% of the perform, while the OVD process, for example, manufactures 100% of the
preform, requiring substantially more capital investment.
Prior to its acquisition by the Company, the Jena Facility was used to
manufacture multi-mode fiber and preform for the Eastern European market. The
Company's lease of the Jena Facility provides a potentially efficient, low-cost,
existing manufacturing operation. Management believes the time and cost required
to achieve manufacturing efficiencies at the Jena Facility can potentially be
minimized as a result of management's knowledge and experience in fiber
production and machine design.
ALT PRODUCTS
The Company's ALT subsidiary has four principal products, all of which are
manufactured at the Company's Sturbridge, Massachusetts facility and are
marketed by independent sales representatives.
ALT's FOCMS facilitate the continuous monitoring of fiber optic and copper
cables. The FOCMS consist of sensors housed in a protective cover placed at
cable splice points and connected to a central monitoring system. ALT holds two
United States patents covering this technology. ALT purchased one of these
patents and know-how relating to fiber optic cable monitoring systems on
September 7, 1986, from
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Norscan, a Canadian company. Norscan retained the right to use the technology in
Canada and the rights to a Canadian reissuance of the purchased patent and has
had the technology in operation on the Trans Canada fiber optic network since
1988. ALT intends to make the technology widespread in other regions worldwide.
A dispute exists between ALT and Norscan with respect to Norscan selling FOCMS
products, in competition with ALT products, that utilize technology other than
the technology assigned to ALT pursuant to its agreement with Norscan. ALT
contends that, in so doing, Norscan is violating a non-competition provision of
Norscan's agreement with ALT. Failure by ALT and Norscan to resolve this dispute
could materially adversely affect the future sales of ALT products. See "--
Patents."
ALT also manufactures patented long range fault locators, which are generally
used in pairs. Typically, each device is applied at a point on a fiber optic
cable, less than 100 miles from the other unit. These devices can detect and
locate cable faults between the units.
In addition, ALT manufactures cable protection devices, which are applied at
cable splice joints prior to cables entering a building to protect against
hazardous electrical currents that could otherwise be carried by metal sheaths
encasing optical fibers, and electro-optical talksets, which are used by field
personnel to communicate over optical fiber, twisted pair-cable (regular
telephone cable), and metal sheaths encasing optical fibers and copper cables.
Customers for the FOCMS and other ALT Products have included telephone
companies worldwide, including MCI Telecommunications Corp., AT&T and Pacific
Telesis.
ALT also has developed flood and leak detection devices for the home. ALT is
not actively marketing these products because of lack of resources, but may
attempt to market such products in the future. See "Trademarks."
RESEARCH AND DEVELOPMENT
The Company conducts research and development activities at its Jena Facility
and Sturbridge offices. The Company's research and development activities
consist primarily of optical fiber manufacturing process improvements and fault
locating technology improvements, as well as the development for sale of new
fault locating products. The Company is currently conducting research in Germany
under two grants from the German government totaling approximately $107,000.
The Company incurred costs of $90,000 and $75,000 for research and process
development for the fiscal years ended December 31, 1994 and 1995, respectively.
For the nine months ended September 30, 1996, research costs were $281,000, of
which approximately $33,000 was attributable to ALT. The principal purpose of
the research activity is to improve the production process for the manufacturing
of fiber preforms, with concentration on reducing production time and reducing
raw material consumption per unit of product. ALT's expenditures are principally
for product development and enhancements of its products.
Three of the Company's employees devote over 90% of their time, and two
employees devote over 50% of their time to research and development, which
includes process and product development.
SALES AND MARKETING
The Company's initial marketing efforts are being primarily targeted at the
overseas markets, particularly toward developing nations whose
telecommunications infrastructure is in the early stages of evolution and where
competition is not well established. The Company is initially targeting the
large fiber optic cable manufacturing companies in Asia, the Middle East, the
Pacific Rim, and certain European and Eastern European markets.
In the past, developing countries would typically purchase older, previously
deployed communication technology and equipment. The lack of a copper cable
infrastructure and a desire to become more technologically advanced, however,
has driven some developing countries to choose fiber optic cable networks
because this technology provides an expeditious and cost-effective means of
developing a sophisticated communication network infrastructure. These countries
must first install a fiber optic infrastructure of trunk and feeder lines
followed by fiber, copper or wireless to the subscriber loop.
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<PAGE>
The Company's sales and marketing objective is to develop long-term,
strategic relationship/supply contracts for both preform and fiber products as
rapidly as practical, emphasizing the cost advantages of the Company's patented
technology.
JOINT MARKETING ARRANGEMENTS
Pursuant to an agreement executed in June 1994 and subsequently amended on
June 17, 1995 (the "Royle Cooperation Agreement"), which expires in June 1999,
the Company has been making joint proposals to sell fiber and preforms with
Royle, a manufacturer, distributor and value added installer of cable
manufacturing systems with customers and sales channels worldwide. Gregory
Perry, a shareholder and a former director of the Company, is Director of Fiber
Technology at Royle. See "Certain Transactions -- Dealings With Royle" and
"Principal Securityholders."
Pursuant to the Royle Cooperation Agreement, Royle agreed to provide a
favorable price for the Company's initial order of draw towers. A draw tower is
a vertical metallic structure designed to draw optical fiber from preforms.
Subsequent Company orders of Royle manufactured equipment are to be sold by
Royle at prices reduced by 10%. In addition, as compensation to the Company for
the provision of certain proprietary designs, until June 17, 1999, Royle has
agreed to pay the Company a 5% royalty on the selling price of any draw towers
that are sold to third parties. Royle also agreed not to enter into any fiber or
preform joint ventures without FiberCore's permission and FiberCore agreed not
to enter into any joint ventures that commence with the fiber coloring operation
without Royle's permission. In October 1995, the Company and Royle amended the
Cooperation Agreement by eliminating the payment of commissions (but not the
royalties described above) to each other and establishing guidelines for
entering into joint ventures with third parties. See "Certain Transactions --
Dealings With Royle."
The Company is attempting to enter into joint ventures with potential foreign
and domestic partners, including cable manufacturers, to build modern plants for
producing optical fiber and optical fiber cable. Most of these plants will
require preform as "raw material". Royle and the Company, each through
subsidiaries, recently entered into such an agreement (the "Mideast JV
Agreement") with MEOFC, a Saudi Arabian company. Pursuant to the agreement, the
parties jointly own the JV Company, a Saudi Arabian joint venture company. The
JV Company will engage in the manufacture and sale of optical fiber and optical
fiber cable both inside and outside of Saudi Arabia. The Company and Royle each
contributed $500,000 to the venture and each holds a 15% interest in the JV
Company. MEOFC contributed $2,330,000 and holds a 70% interest. The JV Company
has placed a $5,500,000 purchase order with Royle for fiber optic cable
manufacturing equipment, and intends to purchase fiber and preforms from the
Company. The Company and the JV Company are in the process of finalizing a
long-term supply agreement for the JV Company to purchase and the Company to
supply fiber and preforms totaling approximately $33,000,000 over the next five
years. There is no obligation for the JV Company to purchase or the Company to
sell fiber until such supply agreement has been completed. The Company may not
transfer its interest in the JV Company to any entity other than Royle or MEOFC
without the permission of such parties.
In connection with the Company's participation in the JV Company, on October
5, 1995, MESC, a Saudi Arabian Company in which the owners of MEOFC have an
interest, purchased 367,131 shares of the Common Stock at an aggregate price of
$500,000. In November 1996, MESC purchased the second block of 367,131 shares of
Common Stock for an additional $5,000,000. See "Business -- Recent
Developments."
The Company is seeking to increase market penetration in optical fiber
markets through strategic alliances and/or joint ventures similar to the JV
Company. Currently, negotiations are underway with several potential new joint
venture partners. These relationships are being structured so that the Company
provides the preforms and the related technology requirements and the partner
provides the financing, operating and local marketing expertise. In this way, it
may be possible for the Company to rapidly obtain market penetration with
little, if any, capital investment. Discussions regarding similar joint ventures
and/or strategic alliances are underway in India, Pakistan, China and several
other countries, although there can be no assurances that such discussions will
lead to the consummation of any transactions. See "Certain Transactions --
Dealings With Techman."
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CUSTOMERS, INVENTORY, BACKLOG AND ADVERTISING
A key element of the Company's marketing strategy is to maintain sufficient
raw material and finished goods inventories to enable the Company to fill
customer orders promptly. This strategy requires a substantial amount of working
capital to maintain inventories at a level sufficient to meet anticipated
demand.
CUSTOMERS REPRESENTING OVER 10% OF SALES
The following table is based on the combined sales of the Company and ALT for
all periods presented.
OPTICAL FIBER AND
PREFORM BUSINESS ALT COMBINED
-------------------- -------- ------------------
1996 (9 months)
Customers
A ................ 62 % -- 61%
B ................ -- 48% Less than 10%
C ................ -- 19% Less than 10%
D ................ -- 16% Less than 10%
1995
Customers .........
A ................ 62% -- 57%
B ................ -- 11% Less than 10%
C ................ -- -- Less than 10%
D ................ -- 11% Less than 10%
E ................ 11% -- 10%
F ................ 10% -- Less than 10%
1994 ..............
Customers .........
A ................ 38% -- 12%
B ................ -- -- --
C ................ -- -- --
D ................ -- 36% 24%
E ................ -- -- --
F ................ -- -- --
G ................ -- 10% Less than 10%
H ................ -- 19% 13%
The Company believes that only the loss of Customer A would have a material
adverse effect on the Company.
The Company currently has orders and/or supply agreements, which, in
management's opinion, are sufficient to consume the Company's current production
capacity and the currently planned expanded capacity of the Jena Facility.
Accordingly, sales of optical fiber and preforms are being made by only one
full-time salaried employee who is engaged in sales as only a portion of his
duties. The Company, however, plans to commence the use of independent local
sales representatives in some international markets during 1997 to coincide with
the Company's planned additional expansion of the Company's production
facilities beyond the current expansion of the Jena Facility. Assisted by local
representatives, management intends to host seminars in key countries to
identify the best possible sales opportunities and to establish potential
relationships with key managers of local cable and telephone companies. In
addition, other management executives are engaged in negotiating long-term
supply agreements with current and potential customers.
Sales of ALT products are made by one salaried full-time Company employee
based in Massachusetts, who is engaged in sales as only a portion of his duties,
as well as by a number of independent sales agents.
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The Company does not currently engage in extensive advertising. Commencing in
1997, and in conjunction with the use of local sales representatives, the
Company intends to advertise in trade journals. The advertising effort will
focus on developing an overall corporate image as well as name recognition of
the product and awareness of its competitive advantages. Advertisements will
also include reader response cards to generate sales leads for direct follow-up.
In addition, the Company intends to exhibit at selected industry trade shows.
COMPETITION
FIBER PREFORM
Management believes that there is limited competition in the sale of preforms
to cable manufacturers who draw their own fiber. Such competition, however, is
expected to grow. At present, the competition for single-mode preforms on a
world-wide basis is limited to two United States manufacturers, SpecTran
Specialty Optics ("SpecTran"), formerly Ensign Bickford Optics/Lightwave
Technologies, Inc., and Alcatel U.S.A. SpecTran's product sales are for unique
fiber applications. Alcatel U.S.A. is marketing single mode preforms and has the
capability to market now and in the future. In Europe, Lycom, Alcatel and Nokia,
Shin-Etsu from Japan and DaiWoo from Korea are marketing single mode preforms.
The predominant practice of most fiber manufacturers is to make fiber optic
preform only for their internal use and not to sell preform to other fiber-optic
manufacturers. Management believes these large companies will not enter the
preform market since demand for fiber currently exceeds supply and fiber
manufacturers have an inherent disincentive in selling preforms; they have
already invested heavily in plant, equipment and technology to convert preforms
into fiber and/or cable, and by selling preforms they would be giving up
value-added margins. The disadvantages associated with selling preforms to third
parties for companies like Corning and AT&T do not apply to the Company,
because, unlike those companies, the Company's customers are not vertically
integrated, and require preforms which are in limited supply.
Due to the current high demand for fiber, the Company has initially
concentrated on manufacturing and selling fiber and currently plans to increase
its fiber manufacturing capability. Because competition in the production of
preforms is somewhat limited, the Company plans to focus its future
manufacturing and marketing efforts on the preform segment of the market.
FIBER
The competition in multi-mode fiber products is limited to a few
manufacturers in North America and Europe. They include Corning, AT&T, Alcatel
and SpecTran in the United States and Plasma Optical Fiber and Alcatel in
Europe. Management believes that Corning, AT&T, and Alcatel generally supply the
bulk of their production to their own cablers or joint venture partners.
The competition in the single-mode fiber market is much more extensive than
in the preform market or the multi-mode fiber market. Most of the competition
for fiber comes from Corning and AT&T. Both Corning and AT&T have several joint
ventures throughout the world, but, it is believed by management, generally play
significantly smaller roles than their partners. Competition in the fiber market
is primarily based on availability and quality. With some exceptions, the
Company's fiber is generally priced at comparable levels to fiber manufactured
by the larger producers.
ALT PRODUCTS
ALT's management believes there is limited or no direct competition for its
FOCMS product line except Norscan (see "Risk Factors -- Patents and Proprietary
Rights"). Most other competing technologies and products are more complementary
to the Company's products than true competitors because these products and the
Company's products are both needed to perform short range and long range fault
locating.
Numerous companies manufacture cable protection devices. The Company
believes, however, that it has the only product approved by U/L Laboratories, an
internationally recognized certifying organization.
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Numerous companies manufacture field talksets that enable personnel to
communicate over either twisted pair, metal sheath or optical fiber. The Company
knows of no other company that manufactures a product that enables personnel to
communicate over all three media, although many companies have or can acquire
the technology to create such a device.
PRODUCT WARRANTIES
Customers may obtain refunds for any defective fiber and fiber preforms
shipped by the Company within 90 days of delivery. The Company extends one year
warranties on ALT Products.
PATENTS
The Company is the registered owner in the United States of U.S. Patent No.
4,596,589 relating to optical fiber fabrication. The patent, which expires in
2003, was acquired in 1993 from Gregory Perry, a co-founder of the Company and
currently a consultant to the Company on an as needed basis. The existing patent
provides a more efficient method for fabricating a single-mode optical fiber
preform by substantially reducing the time and cost required to produce the
preform. The patent also provides an efficient method of attaching cladding
material around a single-mode fiber core. The Company has filed an application
in the United States and European Common Market improving upon the process
covered by the above patent, and intends to file in other foreign jurisdictions,
as well as filing further improvement patents for its process.
In addition, in conjunction with its acquisition of equipment located at the
Jena Facility, the Company acquired the right and title to all Sico patents and
expertise developed or owned by Sico relating to fiber optics. While the Company
does not believe the Sico patents infringe upon the patents or other proprietary
rights of any other party, other parties may claim that the Sico patents
infringe upon such patents or proprietary rights. In the event the Company were
to default on its obligaions to Sico, the Company's title to these patents could
revert to Sico. Without use of Sico patents and technology, the Company's
expense in manufacturing optical fiber and optical fiber preforms could increase
substantially.
The Company is the registered owner in the United States of three patents
covering its cable monitoring systems and fault locating methods. The Company
acquired the first such U.S. patent, Patent No. 4,480,251, which covers cable
monitoring systems and expires in 2001, from Norscan. A Patent issued by the
United Kingdom for the same technology was also acquired by the Company from
Norscan. The Company has filed international patent applications covering this
technology in various other countries around the world, although none have yet
been granted. Pursuant to the Company's agreement with Norscan, Norscan has the
right to a Canadian patent reissuance and may otherwise use the technology in
Canada. The Company has improved upon Norscan's technology and obtained a
European patent and United States patent, Patent No. 5,077,526, which expires in
2008 covering the improvements. The Company also owns a United States patent,
Patent No. 4,947,469 expiring in 2007, and a European patent covering a cable
fault location method. In addition, the Company owns a United States patent
covering the provision of backup power to optical communications systems.
The Company's ability to compete effectively will depend, in part, on its
ability to protect its patents. There can be no assurance that the steps taken
by the Company to protect its intellectual property will be adequate to prevent
misappropriation or that others will not develop competitive technologies or
products. Furthermore, there can be no assurance that others will not
independently develop products that are similar or superior to the Company's
products or technologies, duplicate any of the Company's technologies, or design
around the patents issued to the Company. In addition, the validity and
enforceability of a patent can be challenged after its issuance. While the
Company does not believe that its patents infringe upon the patents or other
proprietary rights of any other party and is unaware of any claim of such
infringement, other parties may claim that the Company's systems do infringe
upon such patents or other proprietary rights. There can be no assurance that
the Company would be successful in defending against such a claim of
infringement. Moreover, the expense of defending against such a claim could be
substantial.
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TRADEMARKS
The Company is the owner of the registered trademark Floodhound(R) which is
used in the sale of the Company's water leak detection devices. These products
are not currently being marketed by the Company.
LITIGATION
The Company's FiberCore Jena subsidiary, Sico and Sico's president, Mr.
Walter Nadrag (who was previously the Managing Director of FiberCore Jena) are
defendants in a lawsuit in Germany brought against them by COIA GmbH, a former
customer, claiming damages of approximately $1.5 million arising from FiberCore
Jena's alleged failure to comply with a sales contract. The Company believes no
sales contract existed and is aggressively defending this action. The Company
has established a reserve in the amount of $126,000, which includes legal fees.
However, there is no assurance that the Company will prevail in this action or
that the reserve of $126,000 will be adequate.
The Company's ALT subsidiary is in a dispute with Norscan, a Canadian
company, with respect to Norscan selling FOCMS products, in competition with ALT
products and in violation of a non-competition agreement between ALT and
Norscan. ALT would be the claimant in any lawsuit brought in connection with
this matter. Failure by ALT and Norscan to resolve this dispute could materially
adversely affect the future sale of ALT Products.
In addition to the above, the Company is subject to various claims which
arise in the ordinary course of business. The Company believes such claims,
individually or in the aggregate, will not have a material adverse effect on the
business of the Company.
SEASONALITY
The Company's business does not have strong seasonal fluctuations and the
Company does not expect material seasonal variations to revenue.
RAW MATERIALS
The Company presently can purchase all its raw material requirements for its
optical fiber and preform business. The major component of a preform is silica
glass tubing which is available in various sizes. Various high purity gases such
as oxygen, nitrogen, argon, helium, chlorine and chemicals such as silicon
tetrachloride, silicon tetra fluoride and germanium tetrachloride are used in
the process of manufacturing preform. During 1994, 1995 and the first nine
months of 1996, the Company's optical fiber and preform business purchased
approximately 90% of its key glass tubing raw material from one supplier. If the
Company becomes unable to continue to purchase raw materials from this supplier,
there can be no assurance that the Company will not face difficulties in
obtaining raw materials on commercially acceptable terms, which could have a
material adverse effect on the Company. See "Risk Factors -- Dependence on Third
Party Suppliers," "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources." To limit future
shortages of key materials, the Company has acquired equipment capable of making
the necessary core glass using readily available "first" tubing and clad glass,
if required. The Jena Facility has the capability to manufacture the high-purity
synthetic core glass using a first purchased cladding tube, as well as adding
additional purchased cladding tubes using the Company's patented production
process.
The Company's ALT subsidiary uses raw materials widely available from
numerous suppliers.
EMPLOYEES
At September 30, 1996, the Company employed 59 persons, of whom five are
executives, 7 are engaged in sales and administration, 42 are engaged in
manufacturing and five are engaged principally in research and development. The
Company considers its relations with employees to be satisfactory and believes
that its employee turnover does not exceed the industry average.
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The Company is not party to any collective bargaining agreements and the
Company does not maintain a pension plan. However, approximately 51 of the
Company's employees are located in Jena, Germany. Under German law, the Company
is required to make lump sum payments to its German employees upon termination
of their employment with the Company.
PROPERTIES
The Company's headquarters are located in a 20,000 sq. ft. leased building,
including 5,000 sq. ft. of office space, in Sturbridge, Massachusetts. The
initial term of the lease is three years and was due to expire on January 31,
1997. The Company has extended the lease to September 1997,
The Company's optical fiber and preform manufacturing facility is located in
Jena, Germany. The facility is leased from Sico. It occupies approximately
26,500 sq. ft., including 17,200 sq. ft. of clean room manufacturing space,
6,100 sq. ft. of office and storage space and an additional 3,200 sq. ft. of
outside facilities for gas storage tanks. The Company owns all machinery and
equipment at the facility, subject to certain restrictions. See "Certain
Transactions -- Dealings With Sico." The lease expires in 2000 and is renewable
for additional terms aggregating 25 years. Existing replacement cost of the Jena
Facility (other than the structure), including machinery and equipment, is
approximately $8.4 million. The Company maintains casualty and liability
insurance on the Jena Facility. There is no assurance that in the event of a
loss, policy limits will not be exceeded. See "Risk Factors -- Insurance."
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following tables set forth certain information with respect to each
person who was an executive officer or director of the Company as of September
30, 1996.
NAME AGE POSITION
- ------------------- ------ ------------------------------------------------
Mohd A. Aslami 50 Chairman of the Board of Directors, Chief
Executive Officer and Director
Charles DeLuca 59 Executive Vice President, Secretary and
Director of the Company and General Manager of
the Company's ALT subsidiary
Michael J. Beecher 52 Chief Financial Officer
Hans F.W. Moeller 66 Managing Director of the Company's FiberCore
Jena subsidiary
Zaid Siddig 59 Director
Steven Phillips 51 Director
M. Mahmud Awan 45 Director
Dr. Aslami is a co-founder, Chairman of the Board of Directors and Chief
Executive Officer of the Company. Dr. Aslami has served as Chairman and Chief
Executive Officer of FiberCore Jena, the Company's wholly-owned subsidiary in
Germany, since 1994. Dr. Aslami also co-founded and became President, Chief
Executive Officer and a director of ALT in 1986. Dr. Aslami received a Ph.D. in
chemical engineering from the University of Cincinatti (1974).
Mr. DeLuca is a co-founder, Executive Vice President, Secretary and a
director of the Company. Mr. DeLuca also co-founded and became an Executive Vice
President and director of ALT in 1986.
Mr. Beecher became Chief Financial Officer of the Company in April 1996. Mr.
Beecher was the Vice President/Treasurer and Chief Financial Officer at the
University of Bridgeport from 1989 through 1995. Mr. Beecher is a Certified
Public Accountant and is a member of the American Institute of Certified Public
Accountants.
Mr. Moeller became Managing Director of FiberCore Jena in the fourth quarter
of 1995 on a part time basis. He served as a director of FiberCore Incorporated
from 1994 through March 1996. As part of a reorganization of the Company, he
resigned his position as a director and agreed to serve as a director of the
Company's newly formed subsidiary InfoGlass. From 1993 to 1994, he served as
Vice Chairman of Schott Corporation ("Schott"), a United States subsidiary of
Schott A.G., a corporation specializing in the production of, among other
things, optical glass. From 1989 to 1993, he served as President of Schott. Mr.
Moeller was a member of the Board of Directors of Schott from 1989 to 1994.
Mr. Siddig became a director of the Company in 1994. He also serves as a
consultant to the Board of Directors of FiberCore Jena. Since 1991, Mr. Siddig
has been active as a private investor and has occasionally served as a
consultant to ALT. Mr. Siddig is the uncle of Dr. Aslami's wife.
Mr. Phillips became a director of the Company in May 1995 and became a
director of ALT in 1989. Since November 1992, Mr. Phillips has served as
Secretary and Chief Financial Officer, and a director, of Winstar Incorporated,
the sole general partner of The Winstar Government Securities Company L.P., a
registered broker-dealer specializing in odd-lot United States Government
securities transactions, of which he is a founder. Since August 1987, Mr.
Phillips has served as a director, Secretary and Chief Financial Officer of
James Money Management, Inc., a private investment company. Since June 1987, Mr.
Phillips has served as director and President of One Financial Group
Incorporated, a financial consulting company of which he is the majority
stockholder.
34
<PAGE>
Dr. Awan is the founder and President of Techman, a Massachusetts company
engaged in providing technical, sales and management consulting services to
various industrial companies in the United States and abroad. Dr. Awan has been
responsible for the development of several high tech companies in Massachusetts
over the past 10 years and serves on the Board of Directors of a number of
professional organizations as well as these companies. He is an active investor
in the Pakistani market and has maintained manufacturing and distribution
operations in Karachi, Islamabad, and Lahore since 1982. Dr. Awan has been
instrumental in promoting satellite networks for Pakistan. His company was
licensed in 1994 by the Government of Pakistan to operate a national and
international satellite data communication network throughout Pakistan. Dr. Awan
received a Ph.D. in economics from Clark University (1974).
VOTING AGREEMENT, AMENDMENTS TO BY-LAWS
Pursuant to the Voting Agreement with AMP, the Company has agreed to revise
its by-laws to create a classified and three year staggered Board of Directors.
Mohd A. Aslami, Charles DeLuca, M. Mahmud Awan and AMP, who in the aggregate
beneficially own approximately 47% of the Common Stock (assuming the issuance of
all underlying Shares in this prospectus), have agreed to vote together to elect
a slate of directors to the Board of Directors. Such slate of directors
initially consists of Mohd A. Aslami, Charles DeLuca, Hans F.W. Moeller, one
nominee of AMP and three outside directors, one of whom is Dr. M. Mahmud Awan.
The Company intends to hold a Special Meeting of shareholders in early 1997
to (i) ratify changes to the by-laws which permit a classified and three year
staggered Board of Directors, and (ii) elect the new Board of Directors.
EXECUTIVE COMPENSATION
The following table sets forth, for the Company's last three fiscal years,
the cash salary and bonuses and non-cash salary and bonuses earned or paid, as
well as certain other compensation paid or accrued for those years, to the
Company's President and Chief Executive Officer and to each of the Company's
other most highly compensated executive officers with compensation in excess of
$100,000:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
NAME AND ---------------------- OTHER ANNUAL COMPENSATION ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION($)(1) STOCK OPTIONS COMPENSATION
- ---------------------------- ------- ----------- ---------- ------------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Mohd A. Aslami 1995 146,500 -- -- -- --
Chairman, Chief Executive 1994 178,729 -- 10,529 -- --
Officer and Director of
the Company and ALT 1993 9,333 -- 188,687 -- --
Charles DeLuca 1995 37,699 -- -- -- --
Executive Vice President,
Secretary and Director 1994 18,000 -- 99,485 -- --
of the Company and
General Manager 1993 5,925 -- 117,269 -- --
of ALT
</TABLE>
- ----------
(1) Includes deferred salary earned by Dr. Aslami and Mr. DeLuca. Interest
accruing on deferred salary at a rate of 13% is not included. Includes
warrants to purchase 27,583, 138,610 and 40,579 shares of ALT common stock
at $1.75 per share in 1994, 1993, and 1992, respectively, issued to Dr.
Aslami and warrants to purchase 57,607, 88,405, and 32,084 shares of ALT
common stock at $1.75 per share, in 1994, 1993, and 1992, respectively,
issued to Mr. DeLuca. Such warrants were issued in connection with
deferment of salary of Messrs. Aslami and DeLuca and interest accrued
thereon. Also includes 2,500 shares per year of ALT common stock awarded to
Dr. Aslami and Mr. DeLuca in 1995 for serving on ALT's Board of Directors.
Shares of ALT common stock were valued at $2.10. Warrants for ALT stock
were valued at $0.35, which represents the difference between the ALT share
value of $2.10 and the ALT warrant exercise price of $1.75.
EMPLOYMENT AGREEMENTS
The Company maintains no written employment or severance agreements with its
executive officers. The Company intends to enter into non-compete agreements
with Dr. Aslami, Mr. DeLuca, Mr.
35
<PAGE>
Moeller, and Mr. Beecher. The loss of any of the aforementioned executive
officers would have a material adverse effect on the Company. The Company
intends to apply for key-man life insurance policies on each of its executive
officers with the Company as the sole beneficiary.
COMMITTEES OF THE BOARD
The Company intends to establish an audit committee, an executive committee,
and a compensation committee. The Company does not have a nominating committee.
The functions of those committees currently are performed by the Board as a
whole.
STOCK OPTIONS
The Board of Directors grants options to purchase Common Stock to directors,
officers and employees of the Company. The Company has no formal stock option
plan. ALT maintained a stock option plan prior to its acquisition by the Company
(the "ALT Acquisition"). The Company intends to adopt a formal Employee Stock
Option Plan.
AGGREGATED OPTION EXERCISES IN 1995
AND OPTION VALUE AT DECEMBER 31, 1995
The following table sets forth information related to options exercised
during 1995 by the Company's Chief Executive Officer and by each of the
Company's other three most highly compensated executive officers and the number
and value of options held at December 31, 1995 by such individuals.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1995 DECEMBER 31, 1995
------------------------------- -------------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- --------------- ----------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Mohd A. Aslami ... -- -- 60,913 -- $124,872 --
Charles DeLuca ... -- -- 46,050 -- 9,375 --
Michael J.Beecher. -- -- 64,248 -- 181,118 --
Hans F.W. Moeller. -- -- 88,235 -- 197,381 --
</TABLE>
There were no options granted and no exercises of Company stock options for
the years ended December 31, 1995 and 1994 by the Chief Executive Officer and
any of the other three most highly compensated executive officers of the
Company.
DIRECTORS' COMPENSATION
During 1995 and 1994, the Company's directors received no compensation for
serving as directors, other than reimbursement for expenses. For each of 1992,
1993, 1994 and 1995, ALT's directors were granted in 1995, 2,500 shares of ALT
common stock for serving as directors of ALT. The Company intends to adopt a
compensation plan for its non-employee directors.
36
<PAGE>
CERTAIN TRANSACTIONS
FORMATION OF THE COMPANY
The Company was organized under the laws of the State of Nevada in November
1993 by Mohd Aslami, Charles DeLuca, Gregory Perry and ALT. Dr. Aslami
contributed $96,667 in services and cash in exchange for 5,914,883 shares. Mr.
DeLuca contributed $50,000 in cash in exchange for 2,957,443 shares. Mr. Perry
assigned a patent to the Company, valued at $60,000, and received 3,671,307
shares. ALT contributed $60,000 worth of services in exchange for 3,671,307
shares. See "Business -- Patents."
DEALINGS WITH SICO
In June 1994, FiberCore Jena entered into a six year capital lease for
equipment in Germany with Sico, in exchange for 2,221,141 shares of Common Stock
issuable to Sico or a designee thereof. Walter Nadrag, managing director and
owner of a majority stock interest in Sico, became managing director of
FiberCore Jena and was designated by Sico to hold the 2,221,141 shares of Common
Stock. In August 1995, Sico and the Company amended the agreement, and the
Company agreed to pay Sico DM 3,775,200 (approximately $2,420,000) for such
assets in 24 quarterly installments (plus 15% refundable value added tax). In
turn, Sico and Mr. Nadrag agreed to the cancellation of all shares of Common
Stock previously issued to them.
In January 1996, the parties entered into a new agreement whereby the
installment debt was eliminated, Sico retained the 2,221,141 shares, the Company
retained the right, title and interest to all equipment and agreed to register
the shares as soon as practicable. Mr. Nadrag resigned as Managing Director of
FiberCore Jena in November 1995 at which time Mr. Hans Moeller was appointed as
the new Managing Director of FiberCore Jena. Mr. Nadrag continues to serve as a
consultant to FiberCore Jena on an as needed basis at an equivalent half-time
monthly salary of DM 3,000. Pursuant to its agreements with Sico, the Company
has the right and title to all Sico patents and expertise developed or owned by
Sico relating to fiber optics. See "Business -- Patents."
Since June 1994, FiberCore Jena has leased its office building in Germany
from Sico. The lease payment is fixed for the initial term of the lease (which
expires on June 30, 2000) at DM 51,376 per month (approximately $34,000). See
"Business -- Properties." Sico is also a reseller customer of the Company. In
1995 and the first nine months of 1996, Sico accounted for approximately 10% and
less than 1%, respectively, of Company total sales.
DEALINGS WITH ROYLE
In November 1993, Jack Ramsey, the President of Royle, purchased 1,529,710
shares of Common Stock from the Company for $50,000. In July 1994, Royle
subscribed for 458,913 shares of Common Stock and Warrants to purchase 229,457
shares of Common Stock at an exercise price of $1.31. The aggregate price paid
by Royle was $500,000. The Company deposited $500,000 with Royle toward the
purchase of up to $1,400,000 million of equipment used in the manufacture and
testing of optical fiber. The Company, due to the acquisition of the Jena
Facility and delays in raising capital for a facility in the United States, had
to cancel the purchase order with Royle. Royle then returned the subscribed
shares and Warrants, and cancelled its subscription for such securities.
In June 1994, the Company entered into the Royle Cooperation Agreement to
present joint proposals to sell fiber and preform with Royle. The Royle
Cooperation Agreement was amended in November 1995, to eliminate commissions
paid to each other and to establish guidelines for both companies entering into
joint venture agreements. In October 1995, Royle, the Company and MEOFC entered
into the Mideast JV Agreement, whereby each acquired an interest in the JV
Company, a company which intends to produce optical fiber and optical fiber
cable both inside and outside of Saudi Arabia. Gregory Perry is the Director of
Fiber Technology at Royle. See "Business -- Joint Marketing Agreements."
37
<PAGE>
DEALINGS WITH TECHMAN
Since 1995, the Company has maintained a working relationship with Techman, a
technology management company headquartered in Massachusetts since 1982. Dr. M.
Mahmud Awan, the President and sole shareholder of Techman, is a director of the
Company. Techman specializes in sales of fiber optic products and
telecommunication systems. It has served as an international sales distributor
for SpecTran Corporation, Raytheon Company, GTE, Satellite Transmission Systems,
Inc., California Microwave, Inc., SeaBeam Instruments, Channel Technologies,
Inc., and several other European and United States based multinationals. Techman
developed the first wireless Local Area Network ("LAN") in 1984 based on its
proprietary modem design before selling the technology to a local manufacturer.
Techman has offices in Charlton and East Brookfield, Massachusetts, Karachi,
Lahore, and Islamabad, Pakistan and Muscat, Oman.
On November 1, 1995, the Company entered into an International Distributor
Agreement with Techman to market the Company's products worldwide. Techman
agreed to receive customary sales commissions in the form of Warrants
exercisable into 1,000,000 shares of Common Stock to be issued to Techman for
sales of the Company's products up to $200,000,000 of the Company's products.
Such shares will be issued upon receipt of the proceeds of any such sales. Based
on Techman's efforts, in June 1996, ALT was awarded a contract through an
International Tender from Pakistan Telecom for a test of its FOCMS with revenues
of approximately $153,000. Under this agreement, ALT is responsible for
installing a fiber optic cable monitoring system in the Northern region of
Pakistan. If the test is successful, the Company believes that ALT may receive
orders to install additional FOCMS.
Pursuant to the Techman Share Purchase Agreement dated January 11, 1996,
Techman agreed to purchase 734,260 shares of Common Stock and Warrants
exercisable into 550,696 shares of Common Stock at $1.63 per share and the
Company agreed to issue an additional 312,061 shares of Common Stock to Techman
upon (i) the formation of FOI, in which the Company would hold a 30% ownership
interest, and (ii) the delivery of a supply agreement between FOI and the
Company. Between February and September 1996, the Company issued at the request
of Techman, 575,477 shares of Common Stock to Dr. Awan. Of this amount, 403,843
shares were issued on payment of $550,000 and 171,634 shares were issued in
conjunction with the formation of FOI. Subsequent to September 1996, an
additional 470,844 shares of Common Stock (representing the balance of shares to
be issued under the Techman share Purchase Agreement) were issued to Dr. Awan in
exchange for a payment of $450,000 and delivery by Techman of a twenty year
supply agreement between the Company and FOI which management believes could
generate revenues of up to approximately $93,000,000 over five years, although
there can be no assurance. The $450,000 was invested by the Company in FOI as an
additional capital contribution (along with ratable additional capital
contributions by FOI's other shareholders). The Company maintains a 30%
ownership interest in FOI.
FOI, a company incorporated in Islamabad under the laws of Pakistan, was
formed to manufacture optical fiber products in Pakistan, and is in the process
of raising capital to fund the construction of a manufacturing facility. Since
its inception in June 1995, FOI has been funded primarily by Techman. FOI has
contracted with First Capital Securities Corporation Limited to arrange for
listing of FOI on the Karachi Stock Exchange.
In addition, FOI has a 25% ownership interest in Oman Fiber Optic Company
("OFOC"), a company listed on Muskat Stock Exchange. The other founders of OFOC
include, General Telephone Organization, the Omani Government Telephone Company,
and Oman/Emirates Investment Holding Company, a joint venture funded by the
Royal Governments of Oman and the United Arab Emirates.
DEALINGS WITH AMP
In April 1995, the Company issued the AMP Note, which is a ten year
$5,000,000 convertible note, to AMP, a company listed on the New York Stock
Exchange and a manufacturer of electrical and optical connection devices,
systems and other equipment including fiber optic cable. Principal of the AMP
Note plus accrued interest at a rate of LIBOR plus one percent may be converted
into Common Stock through April 17, 2005. Until April 17, 2000, the conversion
price is $1.16 per share; thereafter the
38
<PAGE>
conversion price is equal to the price per share paid by a third party investor
in the private sale of Common Stock immediately prior to such conversion. The
AMP Note is subject to prepayment on demand in the event the Company is the
issuer of securities to be sold by the Company under an effective registration
statement. Since this prospectus does not contemplate the sale and issuance of
new securities by the Company, other than the Underlying Shares, the
registration of the Common Stock and Underlying Shares hereunder will not
trigger the prepayment provision under the AMP Note.
In July 1996, AMP entered into a five year supply contract (renewable at
AMP's option for an additional five year period) with the Company whereby the
Company will supply AMP with at least 50% of AMP's future glass optical fiber
needs. On November 27, 1996 the Company obtained an additional $3 million loan
from AMP to fund the expansion of the Jena Facility, in exchange for a ten year
note and $2 million of common stock purchase warrants exercisable at $1.45 and
expiring on November 27, 2001. In connection with the new AMP loan and the
expansion of the Jena Facility, the Company has been awarded a grant from the
German government of approximately $2,700,000 and has received a loan from
Berliner Bank of approximately $5,100,000. AMP also converted $3,000,000 plus
accrued interest on the AMP Note into 3,058,833 shares of Common Stock. In
connection with the new loan from AMP, the Company agreed to issue AMP
additional shares of Common Stock in the event the Company's share price does
not exceed $1.74 for 30 consecutive trading days by November 27, 1998. The
issuance of additional shares under the new AMP loan would have a dilutive
effect on the Company's other shareholders and could adversely affect the market
price of the Common Stock.
ASLAMI AND DELUCA GUARANTEES
In 1991, Allied acquired the assets and assumed certain liabilities of a
corporation which had filed for bankruptcy protection under Title 11 of the
United States Code. One of the assumed liabilities was a loan held by Lafayette
American National Bank ("Lafayette") in the original amount of $750,000. The
loan bears interest at the prime rate plus 1% per year and matures in June 1999.
The current outstanding balance is $538,450. As a condition of the loan
assumption, in March 1991, Lafayette obtained the guarantees of ALT and Messrs.
Aslami and DeLuca, which guarantees were in addition to the initial loan
guarantees Lafayette already had obtained from other persons. Dr. Aslami and Mr.
DeLuca each guaranteed $150,000. Before Lafayette can commence commencing
proceedings to enforce the guarantee against ALT and Messrs. Aslami and DeLuca,
Lafayette must first take all reasonable steps to realize upon the assets of
Allied and the security of the initial guarantors. As compensation for their
guarantees Messrs. Aslami and DeLuca each received warrants to purchase 25,000
shares of ALT common stock at $1.75 per share. These warrants were converted
into ALT common stock immediately prior to the acquisition of ALT Acquisition in
September 1995.
In 1992, Messrs. Aslami and DeLuca guaranteed a $250,000 loan to Allied from
a Connecticut governmental agency. The current loan balance is $172,000. The
loan bears interest at 7% per year and matures in November 1999. As
consideration for their guarantees, Messrs. Aslami and DeLuca each received
warrants to purchase 62,500 shares of common stock of ALT at $1.75 per share.
These warrants were converted into ALT stock immediately prior to the ALT
Acquisition.
DEFERRED COMPENSATION
Since 1987, Messrs. Aslami and DeLuca have agreed to defer portions of their
salaries from ALT. Interest accrued on such deferred salaries at a rate of 13%
through June 1994, and at a rate of 8 3/4% through August 1995. In addition,
through June 1994, for each dollar of deferred salary and accrued interest,
Messrs. Aslami and DeLuca were each granted warrants to purchase 0.767 shares of
ALT common stock exercisable at $1.75 per share. These loans and warrants were
converted into ALT common stock immediately prior to the ALT Acquisition.
Since 1989, One Financial Group Incorporated ("OFG") has provided financial
services to ALT and since the third quarter of 1995, to ALT and the Company. In
1992, 1993, 1994 and from January 1, 1995 to June 30, 1995, OFG's services were
billed at $66,750, $13,775, $24,350, and $20,825, respectively. For the period
July 1, 1995 through June 30, 1996, OFG billed the Company $60,530 for services
including expenses. Payment of such bills was deferred. Interest accrued thereon
at a rate of 13% through
39
<PAGE>
June 1994 and at a rate of 8 3/4 % through August 1995. In addition, through
June 1994, for each dollar of deferred payment and interest accrued thereon, OFG
was granted warrants to purchase 0.767 shares of ALT common stock at a price of
$1.75 per share. All such deferred amounts, including interest accruing thereon
and warrants were converted into shares of ALT common stock immediately prior to
the ALT Acquisition. Steven Phillips, a director of ALT since 1989 and a
director of the Company, is a director, majority stockholder and President of
OFG.
LOANS
THE COMPANY
In February 1995, Dr. Aslami, Zaid Siddig, currently a director of the
Company, and Royle loaned $110,000 to the Company, at an interest rate of 2%
over prime. In connection with such loans, each lender received 41,667 shares of
Common Stock. These loans were repaid in April 1995.
On July 1, 1996, the Company borrowed $500,000 under two loan agreements from
the spouses of Dr. Aslami and Mr. DeLuca. The loans are in the amount of
$250,000 each and bear interest at the prime rate plus one percent (currently
9.25%), and are due on June 30, 1999. In conjunction with the loans each lender
received warrants to purchase 115,220 shares of Common Stock at the rate of
$1.81 per share. The warrants expire on July 31, 2001.
ALT
In May 1991 and August 1991, Hedayat Amin-Arsala, a director of ALT, loaned
$150,000 and $120,000 to ALT, respectively. These loans were convertible at
$1.50 per share of ALT common stock and bore interest at the rate of 12% per
annum. Through September 30, 1995, for every dollar of principal and accrued
interest on such loans, Mr. Amin-Arsala was granted warrants to purchase one
share of ALT common stock. The loans were convertible into ALT common stock at
$1.50 per share through April 30, 2001. The loans and warrants were converted
into shares of ALT common stock immediately prior to the ALT Acquisition. See
"-- The ALT Acquisition."
In September 1991, Mohd Aslami, Charles DeLuca and OFG each loaned Allied, a
subsidiary of ALT, $25,000. They each earned interest of $1,700 and warrants of
2,672 on such loan through March 1992. In April 1992, ALT substituted its notes,
each in the amount of $25,000, for Allied notes. In conjunction with the notes
and interest accruing thereon through June 1994, each of Dr. Aslami, Mr. DeLuca,
and One Financial Group, Inc. received warrants to purchase 16,319 shares of ALT
common stock at an exercise price of $2.00 per share. The loans bore interest at
a rate of 12% until June 1994, at which time the rate was reduced to 8 3/4%. All
such deferred amounts, including interest accruing thereon, and warrants were
converted into shares of ALT common stock immediately prior to the ALT
Acquisition. See "-- The ALT Acquisition."
In January 1992, Messrs. Aslami and DeLuca each loaned $30,000 to ALT. In
conjunction with the loans and interest accruing thereon through June 1994, each
of Messrs. Aslami and DeLuca received 20,063 warrants to purchase ALT common
stock at an exercise price of $2.00. The loans bore interest at a rate of 12%
until June 1994, at which time the rate was reduced to 8 3/4%. These loans were
convertible into ALT common stock at $2.00 per share through July 1993 and the
loans and warrants were converted into shares of ALT common stock immediately
prior to the ALT Acquisition. See "-- The ALT Acquisition."
In February 1992, Mr. Siddig, loaned $100,000 to ALT at an interest rate of
12%. Such loan was convertible into ALT common stock at $2.00 per share through
July 31, 1993. Through June 1994, for every dollar of principal and accrued
interest on such loans he was granted warrants to purchase 0.66 shares of common
stock. One of the loans was convertible into shares of ALT common stock at $2.00
per share through July 31, 1993 and the loans and warrants were converted into
shares of ALT common stock immediately prior to the ALT Acquisition. See "-- The
ALT Acquisition."
40
<PAGE>
In addition to the above, prior to December 1990, officers and directors of
ALT loaned to ALT funds and/or deferred their compensation and were granted
warrants in conjunction with such loans and deferred compensation. Through June
30, 1994, for every dollar of principal and accrued interest on such loans such
persons were granted warrants to purchase a certain number of shares of common
stock. These loans, and warrants were converted into shares of ALT common stock
immediately prior to the ALT Acquisition. See "Management -- Deferred
Compensation."
The following table sets forth the number of shares of ALT common stock
issued upon conversion of the above loans, and the number of shares of the
Company for which the ALT shares were exchanged in conjunction with the ALT
acquisition.
NUMBER OF NUMBER OF
AMOUNT ACCRUED SHARES OF ALT SHARES OF
DESCRIPTION OF LOAN INTEREST COMMON STOCK THE COMPANY
- -------------------- ---------- ---------- --------------- --------------
M. Aslami:
Loan - Sept. 1991.. 25,000 11,144 19,666 20,646
Loan - Jan. 1992... 30,000 14,435 23,982 25,177
---------- --------------- --------------
$ 55,000 25,579 43,648 45,823
C. DeLuca:
Loan - Sept. 1991.. 25,000 11,144 19,666 20,646
Loan - Jan. 1992... 30,000 14,435 23,982 25,177
---------- --------------- --------------
$ 55,000 25,579 43,648 45,823
One Financial
Group:
Loan - Sept. 1991.. $ 25,000 11,144 19,666 20,646
---------- --------------- --------------
$ 25,000 11,144 19,666 20,646
Hedayat
Amin-Arsala:
Loan - May 1991.... 150,000 60,071 198,448 208,334
Loan - Aug. 1991... 120,000 35,050 149,788 157,250
---------- --------------- --------------
$270,000 95,121 348,236 365,584
Zaid Siddig:
Loan - Feb. 1992... 100,000 29,208 88,401 92,805
---------- ---------- --------------- --------------
$100,000 29,208 88,401 92,805
CONSULTING
Mr. Phillips continues to be a consultant to ALT and the Company without a
formal agreement, but the Company and Mr. Phillips intend to enter into such an
agreement. The Company anticipates that the agreement will provide that Mr.
Phillips will serve as a senior financial advisor to the Company for a term of
one year, renewable at the Company's option. Mr. Phillips will be paid a
retainer of $60,000 per year payable in monthly installments of $5,000, based on
an hourly rate of $185 per hour. The retainer will be adjusted quarterly based
on actual hours of service. For the nine months through September 1996, Mr.
Phillips' fee was $49,380, including expenses.
Since June 1995, Techman has been providing technology consulting services to
the Company at a fee of $3,000 per month. Mr. Awan, a director of the Company,
is President and sole shareholder of Techman.
THE ALT ACQUISITION
In 1994, ALT entered into a restructuring plan with certain debt holders and
warrant holders whereby they agreed to convert their debts and warrants into
shares of ALT, upon the consummation of a transaction with a strategic partner.
On September 18, 1995, ALT Merger Co., a wholly-owned subsidiary of the Company,
merged into ALT. Each shareholder of ALT received approximately 1.0498 shares of
Common Stock in exchange for each outstanding share of ALT common stock.
Approximately 8.4 million shares of ALT common stock were converted into an
aggregate of 8.8 million shares of Common Stock. Approximately 3.7 million
shares of Common Stock held by ALT were canceled.
41
<PAGE>
The following table sets forth the holdings of Messrs. Aslami, DeLuca, Perry,
Siddig, Ramsey, Phillips, and Arsala in ALT and the Company, immediately before
the ALT Acquisition and such persons' holdings in the Company immediately after
the ALT Acquisition.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BENEFICIAL OWNERSHIP IN THE COMPANY IN THE COMPANY
IN ALT IMMEDIATELY IMMEDIATELY IMMEDIATELY
BEFORE ALT ACQUISITION BEFORE ALT ACQUISITION AFTER ALT ACQUISITION
----------------------- ----------------------- ---------------------
SHARES % SHARES % SHARES %
--------- ---- ---------- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Mohd A. Aslami .......... 1,488,932 17.7 6,031,141 23.8 7,594,250 24.9
Charles DeLuca .......... 1,602,865 19.1 2,947,443 11.7 4,640,158 15.2
Gregory Perry ........... -0- 0 3,597,881 14.2 3,597,881 11.8
Zaid Siddig ............. 417,942 5.0 152,972 0.6 591,735 1.9
Jack Ramsey ............. -0- 0 1,682,685 6.6 1,682,685 5.5
Steven Phillips.......... 766,375 9.1 -0- 0 804,553 2.6
Hedayat Amin-Arsala ..... 559,519 6.7 183,565 0.7 770,957 2.5
</TABLE>
Pursuant to a restructuring plan agreed to in 1994, immediately prior to the
ALT Acquisition, more than 98% and 90% of ALT debt and warrants, respectively,
were converted by their holders into shares of ALT common stock. Loans, other
than loans arising from deferred compensation, were converted into shares of ALT
common stock pursuant to each lender's loan agreement or at the exercise price
of the warrants issued in conjunction with the loans less $0.05. Loans arising
from deferred compensation were converted at $1.25 per share. The exercise price
of all warrants exercisable at $2.00 per share was reduced to $1.75 per share,
except for warrants held by Messrs. Aslami and DeLuca and OFG. Warrants were
valued at the value set for ALT shares ($2.10) less the exercise price of each
such warrant. For example, a warrant to purchase one share of ALT common stock
with an exercise price of $1.75 was valued at $0.35. Shares of common stock of
ALT were purchased to the extent of such warrant value. In consideration for all
past due loans, the percentage of warrants each lender was entitled to receive
was increased by 25%.
THE ALLIED DISTRIBUTION
In 1995, ALT transferred its shares in its wholly-owned Allied subsidiary to
Allied Controls Holdings, LLC (the "LLC"). ALT also assigned certain notes
issued by Allied to the LLC. ALT distributed interests in the LLC to
shareholders and placed interests in the LLC in trust for certain warrant
holders and option holders pursuant to the terms of their respective
instruments, payable upon exercise of such instruments. As a result of the
distribution, Messrs. Aslami, DeLuca, Siddig, Phillips and Arsala beneficially
own 17.7%, 19.1%, 5%, 9.1% and 6.7% of the LLC, respectively.
42
<PAGE>
PRINCIPAL SECURITYHOLDERS
The following table sets forth certain information regarding the ownership of
the Common Stock as of November 22, 1996 to reflect the sale of shares of all
Common Stock and Underlying Shares offered hereby, with respect to (i) each
person known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each executive officer named in the Executive
Compensation Table, (iii) each director of the Company and (iv) all the
directors and executive officers of the Company as a group. Unless otherwise
indicated, each of the shareholders has sole voting and investment power with
respect to the shares beneficially owned.
NAME
AND SHARES %
ADDRESSES((1)) OWNED OWNED
- ----------------------------------------------------- -------------- -------
Mohd Aslami.......................................... 7,510,109(2) 18.1
Charles DeLuca....................................... 4,499,055(3) 10.8
Gregory A. Perry..................................... 3,597,881(4) 8.7
Steven Phillips...................................... 846,299(5) 2.0
Zaid Siddig.......................................... 591,735(6) 1.4
M. Mahmud Awan....................................... 2,597,017(7) 6.3
Hans F.W. Moeller.................................... 88,235(8) 0.2
AMP Incorporated .................................... 4,747,678(9) 11.4
Sico Jena Quarzchemelze GmbH......................... 2,221,141 5.3
Michael J. Beecher................................... 64,248(10) 0.2
All directors and executive officers as a group (7
persons)............................................. 16,196,698 39.0%
- ----------
(1) The addresses of the persons and entities named in this table are as
follows: Messrs. Aslami, DeLuca, Perry, Siddig, Beecher, Moeller, Ramsey,
Awan, and the Ariana Trust c/o the Company, P.O. Box 206, 174 Charlton
Road, Sturbridge, MA. 01566; AMP Incorporated, 470 Friendship Road,
Harrisburg, PA 17105; and Sico Quarzchemelze Jena Gmbh, Goscheweitzer Str.
20 07745, Jena, Germany.
(2) Includes 157,473 shares held by Dr. Aslami's wife, 425,085 shares held by
Dr.Aslami's children, 1,998,589 and 608,914 shares held respectively by the
Ariana Trust and the Kabul Foundation, trusts of which Dr. Aslami's wife is
trustee and of which Dr. Aslami's children are beneficiaries, and 284,860
shares held by the Raja Foundation, a trust of which Dr. Aslami's wife and
Mr. DeLuca's wife are trustees and of which various organizations and
family members are beneficiaries. Dr. Aslami disclaims beneficial ownership
of all such shares. Also includes 60,018 currently exerciseable options.
(3) Includes 1,395,097 shares held by Elizabeth DeLuca, Mr. DeLuca's wife,
347,715 shares held by Mr. DeLuca's children, 608,914 shares held by the
Dawn Foundation, a trust of which Mrs. DeLuca is trustee and of which Mr.
DeLuca's children are beneficiaries, and 174,053 shares held by the Raja
Foundation, a trust of which Dr. Aslami's wife and Mr. DeLuca's wife are
trustees and of which various organizations and family members are
beneficiaries. Mr. DeLuca disclaims beneficial ownership of all such
shares. Also includes 46,050 currently exercisable options.
(4) Includes 1,358,384 shares held by Beth Perry, Mr. Perry's wife, and 146,852
shares held by Mr. Perry's children. Mr. Perry disclaims beneficial
ownership of all such shares.
(5) Include 41,746 currently exercisable options issued to One Financial Group
Incorporated.
(6) Mr. Siddig is the uncle of Dr. Aslami's wife.
(7) Includes shares issuable to Techman or its designee upon exercise of
Warrants (550,696), and shares (1,000,000) to be issued on exercise of
Warrants ratably as commissions on Company sales up to $200 million.
(8) Includes 88,235 currently exercisable options.
(9) Includes shares into which the AMP Note is convertible at $1.16 per share.
(10) Includes 64,248 currently exercisable options.
43
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of November 22, 1996 by each Selling
Securityholder, as adjusted to reflect the sale by each Selling Securityholder
of the Common Stock, including the Common Stock and Underlying Shares, offered
hereby. Ownership percentages of less than one percent are depicted by an
asterisk. Except as set forth in the footnotes to the table, the Company
believes that each Selling Securityholder has sole voting power and investment
power with respect to the shares of Common Stock indicated.
<TABLE>
<CAPTION>
BEFORE OFFERING AFTER OFFERING
------------------------- ------------------
AMOUNT PERCENT AMOUNT PERCENT
--------------- --------- -------- ---------
<S> <C> <C> <C> <C>
Mohd Aslami, Chairman, Chief Executive Officer and
Director............................................ 7,510,109(1) 18.1% -- --
Charles DeLuca, Executive Vice President, Secretary
and Director and General Manager of ALT ............ 4,499,055(2) 10.8% -- --
M. Mahmud Awan, Director............................ 2,597,017(3) 6.3% -- --
Hans Moeller, Director and Managing Director of
FiberCore Jena ..................................... 88,235(4) 0.2 -- --
Steven Phillips, Director........................... 846,299(5) 2.0% -- --
Zaid Siddig, Director............................... 591,735(6) 1.4% -- --
Michael Beecher, Chief Financial Officer............ 64,248(7) 0.2% -- --
H. Amin-Arsala, Director of ALT..................... 1,114,642(8) 2.7% -- --
AMP Incorporated.................................... 4,747,678(9) 11.4 -- --
PEBCO, Inc.......................................... 1,636,298(10) 3.9% -- --
Gregory A. Perry.................................... 3,597,881(11) 8.7% -- --
Jack Ramsey......................................... 1,682,685(12) 4.1% -- --
Achin, Ron.......................................... 6,582 * -- --
Albany Venture Group................................ 272,103 * -- --
Alpert, Jay......................................... 72,404 * -- --
Anderson, Ron....................................... 5,249 * -- --
Andre, Maurick & Brenda............................. 5,218 * -- --
Arayesh, Mohammad................................... 20,996 * -- --
Arsala, Betsy....................................... 10,499 * -- --
Aslami, Fraidoon.................................... 49,852(13) * -- --
Aslami, Qasim....................................... 241,156(14) * -- --
Aubi, Mohammad...................................... 2,205 * -- --
Ayoubi, Amanollah................................... 45,891 * -- --
Benjamin, G......................................... 12,850 * -- --
Benoit, Ronald ..................................... 79,748(15) * -- --
Bichum, Anthony..................................... 3,671 * -- --
Bonanno, Salvatoro.................................. 25,237 * -- --
Cagatay, Hafiz...................................... 29,336 * -- --
Cagatay, Hafizula................................... 11,014 * -- --
Camelot Investments ................................ 68,837 * -- --
Cannistraci, Anthony................................ 5,249 * -- --
Caprera, John....................................... 12,073 * -- --
Carlin, Jeffrey .................................... 20,188 * -- --
Chamberlain, John................................... 10,498 * -- --
Chapman, John....................................... 31,495 * -- --
Chisson, J.......................................... 3,671 * -- --
Ciesla Associates................................... 36,713 * -- --
Ciesla Construction Corp............................ 18,357 * -- --
Coleman & Rhine LLP ................................ 73,426(16) * -- --
Connecticut Development Authority (CDA)............. 142,540(17) * -- --
Connecticut Innovations, Inc. (CII)................. 111,462(18) * -- --
Damen, William...................................... 2,096 * -- --
Davenport, D........................................ 1,836 * -- --
Dean, R............................................. 36,713 * -- --
DeLoreto, Mario..................................... 73,426 * -- --
DeLuca, M & C ...................................... 2,205(19) * -- --
Dill, Sheldon....................................... 3,149 * -- --
44
<PAGE>
BEFORE OFFERING AFTER OFFERING
------------------------- ------------------
AMOUNT PERCENT AMOUNT PERCENT
--------------- --------- -------- ---------
Doucette, R......................................... 7,342 * -- --
Dow, Cynthia ....................................... 7,390(20) * -- --
Drew, Robert........................................ 21,025 * -- --
Duchaine, Raymond................................... 2,100 * -- --
Duda, Pat........................................... 15,747 * -- --
Dyck, Victor & Lydia................................ 10,498 * -- --
Earnest, Alice ..................................... 61,162(21) * -- --
Eggert, Abida....................................... 2,310 * -- --
Eoll, Christopher................................... 3,149 * -- --
Flood, John......................................... 68,837 * -- --
Frenzel, James...................................... 70,430 * -- --
Fugitive Holding.................................... 1,700 * -- --
Gianaris, Paul...................................... 3,671 * -- --
Gianaris, Zachary................................... 3,671 * -- --
Giardano, Richard................................... 25,237 * -- --
Glickman, Eleanor................................... 36,713 * -- --
Glickman, J......................................... 7,343 * -- --
Global Money Management Corp........................ 344,185 * -- --
Handy, Roland....................................... 1,260 * -- --
Harris, Bernard..................................... 44,427 * -- --
Hillis, Paul........................................ 3,149 * -- --
Hunt, Peter & Ann................................... 9,102 * -- --
Ingraham, Ronwyn.................................... 3,499 * -- --
Jackle, Jack........................................ 3,149 * -- --
Jaeger, Frank....................................... 10,498 * -- --
Jalil, Abdul........................................ 68,628 * -- --
James Money Management, Inc......................... 677,764(22) 1.6 -- --
Jensen, M.L......................................... 7,863 * -- --
Kampf, Andrew....................................... 31,495 * -- --
Kanter, Arlene...................................... 31,190 * -- --
Khatua, H........................................... 10,498 * -- --
Keedwell, Rodney.................................... 5,249 * -- --
Khaki, Mansour...................................... 220,279(23) * -- --
Khatau, Bharatt..................................... 76,007(24) * -- --
Khodadad, F......................................... 10,498 * -- --
Khybery, Kassem..................................... 55,070 * -- --
Krebs, William...................................... 68,837 * -- --
Kusunoki, Alan...................................... 36,713 * -- --
Lai, Richard ....................................... 137,674 * -- --
Lambert, Alfred .................................... 10,498 * -- --
Laurion, Arthur .................................... 71,357(25) * -- --
Lavellee, Ronald ................................... 139,004(26) * -- --
Lees, B. ........................................... 3,175 * -- --
Lees, T. ........................................... 9,178 * -- --
Leyden, Lloyd ...................................... 3,932 * -- --
Looney, R........................................... 7,342 * -- --
Lowenstern, Carl.................................... 48,012 * -- --
Mahoney, J.......................................... 5,511 * -- --
Mainsfield, E. Blaine............................... 73,426 * -- --
Malikyar, Jamila.................................... 24,077 * -- --
Mangual, C.......................................... 18,357 * -- --
Markowicz, Victor................................... 344,185 * -- --
Mastellone, Edward.................................. 137,674 * -- --
Mattison, John ..................................... 215,060(27) * -- --
Mayernick, F.C...................................... 2,100 * -- --
McDermid, Embrer.................................... 5,626 * -- --
McDermid, Rodney.................................... 5,626 * -- --
MacKirdy, J......................................... 7,342 * -- --
Magida, N........................................... 26,542 * -- --
Marinilli, A........................................ 36,713 * -- --
Maziello, W......................................... 36,713 * -- --
45
<PAGE>
BEFORE OFFERING AFTER OFFERING
------------------------- ------------------
AMOUNT PERCENT AMOUNT PERCENT
--------------- --------- -------- ---------
McNaughton, Paul.................................... 23,923 * -- --
McNulty, Dale....................................... 68,837 * -- --
Miller, Bruce....................................... 3,149 * -- --
Miller, Gary........................................ 10,498 * -- --
Moisan, Bernard..................................... 15,675 * -- --
Morales, Ruth....................................... 3,499 * -- --
Morgan and Evans.................................... 83,985 * -- --
Morrison, M......................................... 11,014 * -- --
Muenchmeyer, G...................................... 3,671 * -- --
Muir, Ted........................................... 2,625 * -- --
Munab Investments Limited........................... 1,615,375(28) 3.9 -- --
Nasir, Sayed........................................ 246,422 * -- --
Nava, K............................................. 3,671 * -- --
Norscan Instruments, Ltd............................ 123,360 * -- --
O'Connor, Lawrence ................................. 15,747 * -- --
Osman, Ghulam....................................... 24,966 * -- --
Pilch, Denis........................................ 5,249 * -- --
Pinney, Selby J..................................... 5,249 * -- --
Pitcher, Charles.................................... 3,149 * -- --
Porosoff, Melvin.................................... 30,282 * -- --
Prouty, Daniel...................................... 15,288(29) * -- --
Quinn, Lorne........................................ 6,998 * -- --
Rastgooy, Homa...................................... 32,394 * -- --
Rastgooy, Mahmood................................... 10,498 * -- --
Rauf, A............................................. 52,491 * -- --
Richards, Donald.................................... 1,050 * -- --
Riley, Christopher.................................. 1,060 * -- --
Rossmanith, Jutta................................... 10,498 * -- --
Russo, Thomas ...................................... 73,249 * -- --
Samee, Akbar........................................ 10,498 * -- --
Samee, Dastigar..................................... 2,205 * -- --
Samee, Tamin........................................ 2,205 * -- --
Santoro, Enrico and Ellen Beck...................... 735 * -- --
Sarnecky, Arthur.................................... 3,149 * -- --
Scanlon, Donald .................................... 68,837 * -- --
Schulz, Werner...................................... 10,498 * -- --
Seal Partners....................................... 25,927 * -- --
Sello, Kenneth...................................... 1,050 * -- --
Seraj, Ibrahim...................................... 10,498 * -- --
Shairzay, Abraham & Soforina........................ 55,930 * -- --
Shairzay, Sabrina .................................. 73,426 * -- --
Shairzay, Tahera.................................... 154,323(30) * -- --
Sheppard, Douglas................................... 2,625 * -- --
Sherzai, Abdul Bari ................................ 22,946 * -- --
Sico Jena GmbH...................................... 2,221,141(31) 5.3 -- --
Siddig, Khaled...................................... 222,622(32) * -- --
Siddig, Nicolai..................................... 87,492 * -- --
Smith, Dave......................................... 95,905 * -- --
Smylie, Donn........................................ 10,498 * -- --
Sontag, Ken ........................................ 110,231 * -- --
Steg, Brian......................................... 16,797 * -- --
Sudol, David........................................ 20,554 * -- --
Sutherland, William................................. 8,399 * -- --
Tarakai, Ashraf .................................... 15,747 * -- --
Tessier, Gerald..................................... 2,100 * -- --
Thames Group........................................ 23,863(33) * -- --
Valgardson, Norman.................................. 10,498 * -- --
Vazpaziani, J....................................... 18,357 * -- --
Vazpaziani, P....................................... 18,357 * -- --
Vokey, David........................................ 139,146 * -- --
Vokey, Robert ...................................... 10,498 * -- --
46
<PAGE>
BEFORE OFFERING AFTER OFFERING
------------------------- ------------------
AMOUNT PERCENT AMOUNT PERCENT
--------------- --------- -------- ---------
Vokey, Wayne........................................ 15,850 * -- --
Von Summer, Alexander............................... 36,744 * -- --
Votaw, Gregory...................................... 3,499 * -- --
Warasta, A. Ghafar.................................. 11,188 * -- --
Warasta, Carol...................................... 110,139 * -- --
Wattman, Malcom..................................... 73,249 * -- --
Welles, Edward...................................... 3,499 * -- --
Wu, Dau ............................................ 84,777(34) * -- --
Yankoski, Murray.................................... 10,492 * -- --
Yasin, M............................................ 16,136 * -- --
Young, D............................................ 11,014 * -- --
Young, John......................................... 7,373 * -- --
Yusof, Quyoom....................................... 2,310 * -- --
Zheng, Carl......................................... 110,139 * -- --
Zulfacar, Diane Mavee............................... 20,996 * -- --
</TABLE>
- -------------
(1) Includes 157,473 shares held by Dr. Aslami's wife, 425,085 shares held by
Dr.Aslami's children, 1,998,589 and 608,914 shares held respectfully by the
Ariana Trust and the Kabul Foundation, trusts of which Dr. Aslami's wife is
trustee and of which Dr. Aslami's children are beneficiaries and 284,860
shares held by the Raja Foundation, a trust of which Dr. Aslami's wife and
Mr. DeLuca's wife are trustees and of which various organizations and
family members are beneficiaries. Dr. Aslami disclaims beneficial ownership
of all such shares. Also includes 60,913 currently exercisable options.
(2) Includes 1,395,097 shares held by Elizabeth DeLuca, Mr. DeLuca's wife,
357,715 shares held by Mr. DeLuca's children, 608,914 shares held by the
Dawn Foundation, a trust of which Mrs. DeLuca is trustee and of which Mr.
DeLuca's children are beneficiaries, and 174,053 shares held by the Raja
Foundation, a trust of which Dr. Aslami's wife and Mr. DeLuca's wife are
trustees and of which various organizations and family members are
beneficiaries. Mr. DeLuca disclaims beneficial ownership of all such
shares. Also includes 46,050 currently exercisable options.
(3) Includes shares issuable to Techman or its designees upon exercise of
Warrants (550,696), and shares (1,000,000) to be issued on exercise of
Warrants ratably as commissions on Company sales up to $200 million.
(4) Includes 88,235 currently exercisable options.
(5) Includes 41,746 currently exercisable options to One Financial Group, Inc.
(6) Mr. Siddig is the uncle of Dr. Aslami's wife.
(7) Includes 64,248 currently exercisable options.
(8) Includes 347,450 shares issuable on conversion of debt and exercise of
warrants. Mr. Arsala is a director of ALT, and is a lender to the Company.
(9) Includes shares into which the AMP Note is convertible at $1.16 per share.
AMP is a customer of and lender to the Company.
(10) Shares are held of record by nominee, and includes 43,597 currently
exercisable warrants. PEBCO, Inc. acted as a broker in the private
placement of shares in July 1994.
(11) Includes 1,358,384 shares held by Beth Perry, Mr. Perry's wife, and 146,852
shares held by Mr. Perry children. Mr. Perry disclaims beneficial ownership
of all such shares. Mr. Perry is former director and former employer of the
Company.
(12) Includes 152,972 shares held by Royle, a company controlled by Jack Ramsey.
Mr. Ramsey is a former director of the Company.
(13) Mr. Fraidoan Aslami is the brother of Mohd A. Aslami
(14) Mr. Qasim Aslami is the brother of Mohd A. Aslami
(15) Mr. Benoit is a former employee of ALT.
(16) Coleman & Rhine LLP are legal counsel to the Company.
(17) CDA is a former lender to ALT.
(18) CII is a former lender to ALT.
(19) M. DeLuca and C. DeLuca are the sister-in-law and brother of Charles
DeLuca.
(20) Ms. Dow is a former employee of the Company.
(21) Ms. Earnest is a former employee of ALT.
(22) Mr. Phillips, a director of the Company, is the Chief Financial Officer of
James Money Management, Inc.
(23) Mr. Khaki is an investor in MEFC.
(24) Mr. Khatau is a former consultant to the Company.
(25) Mr. Laurion is an employee of the Company.
(26) Mr. Lavellee is a former employee of ALT.
(27) Mr. Mattison is an employee of the Company.
(28) The principals of Munab Investments, Ltd are also principal investors in
MEFC.
(29) Mr. Prouty is a principal in Cobra Realty Trust, the Company's landlord for
it's offices in Massachusetts.
(30) Ms. Shairzay is the sister of Mohd A. Aslami.
(31) Sico is the landlord of the Jena Facility. Sico is controlled by Mr. Walter
Nadrag, the former Managing Director of FiberCore Ieora.
(32) Mr. Siddig is the father-in-law of Mohd A. Aslami
(33) The principal owner of the Thames Group is the former Chief Financial
Officer of the Company.
(34) Mr. Wu is an employee of the Company.
47
<PAGE>
PLAN OF DISTRIBUTION
All shares being offered pursuant to this resale prospectus are "restricted
securities," as such term is defined in Rule 144 under the Securities Act, and
the certificates evidencing such shares will bear a legend restricting their
transfer under the Securities Act. The Underlying Shares offered hereby
initially are being offered by the Company for issuance to the Selling
Securityholders upon exercise or conversion, as the case may be, of the
Convertible Securities. The Company will receive all of the proceeds derived
from such exercise or conversion.
In addition, all shares of Common Stock offered hereby (including the
Underlying Shares, upon the issuance thereof) are being offered directly by the
Selling Securityholders. The Company will not receive any of the proceeds from
the sale of shares by the Selling Securityholders. The Selling Securityholders
may sell such shares from time to time, provided a current registration
statement with respect to such securities is then in effect. The distribution of
shares of Common Stock offered hereby by the Selling Securityholders may be
effected in one or more transactions, including ordinary broker's transactions,
privately negotiated transactions or through sales to one or more dealers for
resale of such securities as principals, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Securityholders.
Selling Securityholders may also pledge their shares to banks, brokers or
other financial institutions as security for margin loans or other financial
accommodations that may be extended to such Selling Securityholders, and any
such pledgee institution may similarly offer, sell and effect transactions in
such shares. In addition, any securities covered by this prospectus which
qualify for sale pursuant to Rule 144 under the Act may be sold under Rule 144
rather than pursuant to this Prospectus. Each Selling Securityholder (and
pledgee) reserves the sole right to accept and, together with its agents from
time to time, to reject, in whole or in part, any proposed purchase of shares to
be made directly or through agents.
In order to comply with the securities laws of certain states, the shares of
Common Stock offered hereby may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with by the Company
and the Selling Securityholders.
The Selling Securityholders and intermediaries through whom the shares
offered hereby are sold may be deemed to be "underwriters" within the meaning of
the Securities Act with respect to such securities.
Pursuant to applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of securities may not simultaneously engage in
market-making activities with respect to the securities for a period of two
business days prior to the commencement of such distribution. In addition, and
without limiting the foregoing, each Selling Securityholder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation, Rules 10b-6, 10b-6A and 10b-7, which
provisions may limit the timing of the purchases and sales of securities of the
Company by the Selling Securityholders.
The Company has agreed to pay all fees and expenses incident to the
registration of the Common Stock offered hereby, except fees and expenses of
counsel or other professionals or advisors, if any, to the Selling
Securityholders.
48
<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 100,000,000 shares of
Common Stock, par value $0.001, and 10,000,000 shares of preferred stock, par
value $0.001 ("Preferred Stock"). Immediately prior to this Offering, 35,233,250
shares of Common Stock were issued and outstanding, and no shares of Preferred
Stock were issued and outstanding. Assuming all Convertible Securities are
either exercised or converted, there will be 40,791,159 shares of Common Stock
outstanding after the Offering (excludes 2,515,305 shares being registered
hereunder, to be issued for future awards and grants of employee stock options).
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share on all
matters submitted to a vote of shareholders. There is no cumulative voting with
respect to the election of directors. Accordingly, holders of a majority of the
shares entitled to vote in any election of directors may elect all of the
directors standing for election. Under the new AMP loan, the Company, Mohd A.
Aslami, Charles DeLuca, M. Mahmud Awan and AMP entered into a Voting Agreement
pursuant to which they agreed to vote together to elect a slate of directors to
the Board of Directors of the Company. Such slate of directors initially
consists of Mohd A. Aslami, Charles DeLuca, Hans F.W. Moeller, one nominee of
AMP and three outside directors, one of whom is Dr. M. Mahmud Awan. The Voting
Agreement also requires a classified and three year staggered Board of
Directors.
Subject to preferences that may be applicable to any then outstanding
Preferred Stock, the holders of Common Stock are entitled to receive such
dividends, if any, as may be declared by the Board of Directors from time to
time out of legally available funds. Upon liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to share ratably in all
assets of the Company that are legally available for distribution, after payment
of all debts and other liabilities and subject to the prior rights of holders of
any Preferred Stock then outstanding. The holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. The rights,
preferences and privileges of holders of Common Stock are subject to the rights
of the holders of shares of any series of Preferred Stock that the Company may
issue in the future.
PREFERRED STOCK
Ten million shares of Preferred Stock may be issued from time to time. The
Board of Directors, without further approval of the shareholders, is authorized
to issue the Preferred Stock in one or more series and to fix the rights and
terms relating to dividends, conversion, voting, redemption, liquidation
preferences, sinking funds and any other rights, preferences, privileges and
restrictions applicable to each such series of Preferred Stock which could
adversely affect the voting power or other rights of holders of the Common
Stock. In the event of issuance, the Preferred Stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company. Such actions could have the effect of
discouraging bids for the Company and, thereby, preventing shareholders from
receiving the maximum value for their shares. Although the Company has no
present intention to issue any shares of Preferred Stock, there can be no
assurance that the Company will not do so in the future. There are no
outstanding shares of Preferred Stock at the present time, nor any commitments
or options or other rights currently outstanding for the issuance of Preferred
Stock.
NOTES
In April 1995, the Company issued the AMP Note, a ten year $5,000,000
convertible note bearing interest at LIBOR plus one percent. Until April 17,
2000, the conversion price is $1.16 per share; thereafter until April 17, 2005,
the conversion price is equal to the price per share paid by a third party
investor in the private sale of Common Stock immediately prior to such
conversion
In March 1996, the Company issued the Arsala Note, a one year, $200,000
convertible note bearing interest at 8.5%. The conversion price is $1.36 per
share.
49
<PAGE>
On November 27, 1996, the Company issued a $3,000,000 note to AMP bearing
interest at the prime rate plus one percent and converted $3 million of
principal plus accrued interest on the AMP Note into Common Stock.
WARRANTS
Since its formation but prior to the Venturecap Merger, FiberCore
Incorporated issued Warrants to purchase shares of Common Stock exercisable, in
whole or in part, at prices ranging from $1.31 to $1.63 per share and expiring
in periods ranging from April 13, 1997 through July 7, 1999. There are 745,273
shares of Common Stock issuable on exercise of the Warrants, subject to
adjustment in certain circumstances, including in the event of a stock dividend,
payment of a cash dividend from other than earned surplus, recapitalization,
reorganization, merger or consolidation of the Company.
In connection with the ALT Acquisition, there are two outstanding Warrants.
The Warrants were issued to Morgen Evan & Associates and Ivan Mahoney, are
exercisable into an aggregate of 89,496 shares of Common Stock at a weighted
average exercise price of $.98 per share and each expires in 1998. These
warrants are subject to adjustment in certain circumstances, including in the
event of a stock dividend, payment of a cash dividend from other than earned
surplus, recapitalization, reorganization, merger or consolidation of the
Company.
In connection with the MESC Share Purchase Agreement, the Company will issue
MESC Warrants (the "MESC Warrants") to purchase 550,696 shares of Common Stock
which are exercisable, in whole or in part, at $1.63 per share and expire on
April 13, 1997. The MESC Warrants will be issued upon execution of a supply
agreement. The Company is in the process of finalizing the supply agreement. The
number of shares of Common Stock issuable on exercise of the MESC Warrants is
subject to adjustment in certain circumstances, including in the event of a
stock dividend, payment of a cash dividend from other than earned surplus,
recapitalization, reorganization, merger or consolidation of the Company.
In connection with the Techman Share Purchase Agreement between Techman and
the Company, the Company issued Warrants to purchase 550,696 shares of Common
Stock, which are exercisable at $1.63 per share and expire on January 11, 1998.
In connection with the International Distributor Agreement between Techman and
the Company, the Company issued Warrants exercisable for up to 1,000,000 shares
of Common Stock, which will be released ratably as commissions for Company sales
generated by Techman of up to $200,000,000, and expire upon the termination of
the International Distributor Agreement. The Common Stock will be issued upon
receipt by the Company of the proceeds from such sales.
OPTIONS
Prior to the ALT Acquisition, ALT issued several options to employees
pursuant to the 1987 ALT Stock Option Plan, which expire at various dates
through 2005. In connection with the ALT Acquisition, all ALT employee options
immediately vested and were converted into Options to purchase an aggregate of
287,860 shares of Common Stock at a weighted average exercise price of $1.49 per
share.
Prior to the Venturecap Merger, FiberCore Incorporated issued several options
to employees and consultants As a result of the Venturecap Merger, these options
were converted to Options to purchase 308,390 shares of the Company's Common
Stock, with a weighted average exercise price of $0.12 per share.
In addition, the Company has granted various executives options pursuant
to the terms of their employment arrangements, at a weighted average exercise
price of $0.49. See "Certain Transactions- Unrealized Gains on Options."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Interstate Transfer
Company, 10 W. Broadway, Suite 510 Salt Lake City, Utah 84301.
50
<PAGE>
EXPERTS
The financial statements and schedules of the Company at December 31, 1995
and FiberCore Incorporated, a predecessor to the Company at December 31, 1994
and December 31, 1993 have been audited by Mottle McGrath Braney & Flynn, P.C.,
independent auditors, to the extent indicated in their report. The financial
statements and schedules of ALT, as of December 31, 1994, December 31, 1993, and
December 31, 1992 have been audited by Mottle McGrath Braney & Flynn, P.C.
independent auditors, to the extent indicated in their report. The financial
statements of Venturecap, Inc., prior to the merger of Venturecap, Inc. and
FiberCore Incorporated, have been audited by Dwayne Midgley, certified public
accountant. Such financial statements have been included herein in reliance upon
such report given upon the authority of such firms as experts in accounting and
auditing.
LEGAL
The validity of the Common Stock offered hereby will be passed upon for the
Company by Coleman & Rhine LLP, 1120 Avenue of the Americas, New York, New York
10036. Coleman & Rhine LLP holds Warrants to purchase 73,426 shares of Common
Stock of the Company at an exercise price of $1.31 per share. Such warrants
expire on February 28, 1999.
51
<PAGE>
INDEX TO FINANCIAL STATEMENTS
FIBERCORE, INC. AND PREDECESSORS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
HISTORICAL (audited)
Independent Auditors' Report..................................................................... F-3
Consolidated Balance Sheets at December 31, 1995 and 1994........................................ F-4
Consolidated Statements of Operations for the Years Ended December 31, 1995 and 1994............. F-5
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1995
and 1994........................................................................................ F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995 and 1994............. F-7
Notes to Financial Statements for the Years Ended December 31, 1995 and 1994..................... F-9
HISTORICAL AND PRO FORMA (unaudited)
Consolidated Balance Sheets at September 30, 1996 and 1995....................................... F-24
Consolidated Statements of Operations for the Nine Months Ended September 30, 1996 and 1995...... F-25
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995...... F-26
Notes to Consolidated Interim Financial Statements for the Nine Months Ended September 30, 1996
and 1995........................................................................................ F-27
Pro Forma Consolidated Balance Sheet at September 30, 1995....................................... F-29
Pro Forma Consolidated Statement of Operations for the Nine Months Ended September 30, 1995...... F-30
Notes to Pro Forma Consolidated Financial Statements for the Nine Months Ended September 30,
1995............................................................................................ F-31
Pro Forma Consolidated Balance Sheet at December 31, 1995........................................ F-33
Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 1995.............. F-34
Notes to Pro Forma Consolidated Financial Statement for the Year Ended December 31, 1995......... F-35
FIBERCORE INCORPORATED
HISTORICAL (audited)
Independent Auditors' Report..................................................................... F-36
Balance Sheets at December 31, 1994 and 1993..................................................... F-37
Statements of Operations for the Year Ended December 31, 1994 and the Period November 5, 1993
(Date of Inception) to December 31, 1993........................................................ F-38
Statements of Stockholder's Equity for the Year Ended December 31, 1994 and the Period November
5, 1993 (Date of Inception) to December 31, 1993................................................ F-39
Statements of Cash Flows for the Year Ended December 31, 1994 and the Period November 5, 1993
(Date of Inception) to December 31, 1993........................................................ F-40
Notes to Financial Statements for the Years Ended December 31, 1994 and 1993..................... F-42
AUTOMATED LIGHT TECHNOLOGIES, INC.
HISTORICAL (audited)
Independent Auditors' Report..................................................................... F-51
Balance Sheets at December 31, 1994, 1993 and 1992............................................... F-52
Statements of Operations for the Years Ended December 31, 1994, 1993 and 1992.................... F-53
Statements of Stockholder's Deficiency for the Years Ended December 31, 1994, 1993 and 1992...... F-54
Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992.................... F-55
Notes to Financial Statements for the Years Ended December 31, 1994, 1993 and 1992............... F-57
F-1
<PAGE>
PAGE
---------
VENTURECAP, INC.
HISTORICAL (audited)
Independent Auditors' Report .................................................................... F-65
Balance Sheet as of April 30, 1995 and 1994 and December 31, 1993 and 1992....................... F-66
Statement of Operations for the Four Months Ended April 30, 1995 and 1994 and for the Years Ended
December 31, 1993 and 1992...................................................................... F-67
Statement of Shareholders' Equity for the Four Months Ended April 30, 1995 and for the Years
Ended December 31, 1994, 1993, 1992, 1991 and 1990.............................................. F-68
Statement of Cash Flows for the Four Months Ended April 30, 1995 and 1994 and for the Years Ended
December 31, 1993 and 1992...................................................................... F-69
Notes to Financial Statements for the Four Months Ended April 30, 1995 and the Years Ended
December 31, 1994, 1993 and 1992................................................................ F-70
Independent Auditors' Report .................................................................... F-71
Balance Sheet as of June 30, 1995................................................................ F-72
Statement of Operations for the Six Months Ended June 30, 1995................................... F-73
Statement of Shareholders' Equity for the Six Months Ended June 30, 1995 and the Years Ended
December 31, 1994 and 1993...................................................................... F-74
Statement of Cash Flows for the Six Months Ended June 30, 1995 .................................. F-75
Notes to Financial Statements for the Six Months Ended June 30, 1995............................. F-76
</TABLE>
F-2
<PAGE>
LETTERHEAD OF MOTTLE MCGRATH BRANEY & FLYNN, P.C.
INDEPENDENT AUDITORS' REPORT
The Boards of Directors and Stockholders
FiberCore, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of FiberCore, Inc.
and Subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of FiberCore, Inc. and
Subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ MOTTLE McGRATH BRANEY & FLYNN, P.C.
-----------------------------------
MOTTLE McGRATH BRANEY & FLYNN, P.C.
Worcester, Massachusetts
July 29, 1996
F-3
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................................... $ 833,407 $ 257,857
Accounts receivable, less allowance for doubtful accounts of $39,150 in
1995.................................................................... 583,422 13,674
Other receivables........................................................ 286,051 297,243
Inventories.............................................................. 1,406,449 134,324
Prepaid and other current assets......................................... 28,424 7,853
-------------- --------------
Total current assets.................................................... 3,137,753 710,951
-------------- --------------
Property and equipment................................................... 5,044,373 3,591,201
Less accumulated depreciation............................................ 925,351 254,953
-------------- --------------
4,119,022 3,336,248
Other assets:
Patents, less accumulated amortization of $202,939 and $2,086 in 1995 and
1994.................................................................... 7,399,945 81,591
Organizational costs, less accumulated amortization of $42,629 and
$33,315 in 1995 and 1994................................................ 63,944 133,259
Investment in joint venture.............................................. 54,482 --
Security deposits........................................................ 7,750 7,500
-------------- --------------
7,526,121 222,350
-------------- --------------
$14,782,896 $ 4,269,549
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY .....................................
Current liabilities:
Current maturities of long-term debt..................................... $ 609,590 $ 207,150
Current maturities of capitalized lease obligation....................... -- 81,052
Accounts payable......................................................... 1,810,689 854,671
Accrued expenses......................................................... 994,629 86,926
-------------- --------------
Total current liabilities .............................................. 3,414,908 1,229,799
-------------- --------------
Long-term debt, less current maturities .................................. 5,000,000 --
Capitalized lease obligation, less current maturities .................... -- 456,476
-------------- --------------
5,000,000 456,476
-------------- --------------
Stockholders' equity:
Common stock, $.001 par value, authorized 100,000,000 shares; 30,506,963
in 1995 and 24,959,568 in 1994 shares issued and outstanding; of which
458,916 shares are held in treasury in 1994 ............................ 30,507 24,960
Preferred stock, $.001 par value, authorized 10,000,000 shares; no shares
issued and outstanding ................................................. -- --
Paid in capital ......................................................... 11,760,034 4,676,531
Accumulated deficit ..................................................... (5,637,550) (1,628,387)
Accumulated translation adjustment....................................... 214,997 10,170
-------------- --------------
6,367,988 3,083,274
Less treasury stock, at cost ............................................ -- 500,000
-------------- --------------
Total stockholders' equity.............................................. 6,367,988 2,583,274
-------------- --------------
$14,782,896 $ 4,269,549
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1995 and 1994
1995 1994
-------------- ---------------
Net sales...................................... $ 3,093,499 $ 230,888
Cost of sales.................................. 4,508,860 1,063,560
-------------- ---------------
Gross loss................................... (1,415,361) (832,672)
Operating expenses:
Selling, general and administrative expenses.. 2,099,015 699,654
Research and development...................... 75,156 90,465
-------------- ---------------
Operating loss............................... (3,589,532) (1,622,791)
Interest income................................ 147,681 14,870
Interest expense............................... (516,318) (22,590)
Other income (expense)......................... (50,994) 5,143
-------------- ---------------
Net loss..................................... $(4,009,163) $(1,625,368)
============== ===============
Loss per share of common stock................. $ (.15) $ (.07)
============== ===============
Weighted average shares outstanding............ 26,584,630 22,873,322
============== ===============
Loss per share of common stock and common
stock equivalents (fully diluted)............. $ (.15) $ (.07)
Weighted average shares and common stock
equivalents outstanding (fully diluted) ...... 27,319,291 22,873,322
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------
ADDITIONAL ACCUMULATED
$.001 PAR PAID-IN SUBSCRIPTION ACCUMULATED TRANSLATION
SHARES VALUE CAPITAL RECEIVABLE DEFICIT ADJUSTMENT
------------- ---------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 .......... 21,309,323 $21,309 $ 702,462 $(80,000) $ (3,019) $ --
Issuance of stock in exchange for
equipment.......................... 2,221,141 2,221 2,417,779 -- -- --
Issuance of stock for cash........... 1,421,714 1,422 1,547,578 -- -- --
Proceeds received.................... -- -- -- 80,000 -- --
Issuance of stock for services ...... 7,390 8 8,042 -- -- --
Proceeds from capital contribution .. -- -- 670 -- -- --
Purchase of treasury stock, (458,916
shares)............................ -- -- -- -- -- --
Currency translation adjustment ..... -- -- -- -- -- 10,170
Net loss............................. -- -- -- -- (1,625,368) --
------------- ---------- ------------ -------------- -------------- --------------
Balance, December 31, 1994........... 24,959,568 24,960 4,676,531 -- (1,628,387) 10,170
Issuance of stock for services
provided........................... 40,434 40 44,010 -- -- --
Reissuance of treasury stock as loan
incentive.......................... -- -- (455,000) -- -- --
Issuance of stock for acquisition of
ALT................................ 8,811,137 8,811 6,991,189 -- -- --
Issuance of stock for investment in
MEFC joint venture................. 367,131 367 499,633 -- -- --
Retirement of shares held by ALT .... (3,671,307) (3,671) 3,671 -- -- --
Currency translation adjustment ..... -- -- -- -- -- 204,827
Net loss............................. -- -- -- -- (4,009,163) --
------------- ---------- ------------ -------------- -------------- --------------
Balance, December 31, 1995........... 30,506,963 $30,507 $11,760,03 $ -- $(5,637,550) $ 214,997
</TABLE>
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1995 and 1994
(continued)
TREASURY
STOCK TOTAL
----------- --------------
Balance, December 31, 1993 .......... $ -- $ 640,752
Issuance of stock in exchange for
equipment.......................... -- 2,420,000
Issuance of stock for cash........... -- 1,549,000
Proceeds received.................... -- 80,000
Issuance of stock for services ...... -- 8,050
Proceeds from capital contribution .. -- 670
Purchase of treasury stock, (458,916
shares)............................ (500,000) (500,000)
Currency translation adjustment ..... -- 10,170
Net loss............................. -- (1,625,368)
----------- --------------
Balance, December 31, 1994........... (500,000) 2,583,274
Issuance of stock for services
provided........................... -- 44,050
Reissuance of treasury stock as loan
incentive.......................... 500,000 45,000
Issuance of stock for acquisition of
ALT................................ -- 7,000,000
Issuance of stock for investment in
MEFC joint venture................. -- 500,000
Retirement of shares held by ALT .... -- --
Currency translation adjustment ..... -- 204,827
Net loss............................. -- (4,009,163)
----------- --------------
Balance, December 31, 1995........... $ -- $ 6,367,988
=========== ==============
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss .......................................................... $(4,009,163) $(1,625,368)
--------------- ---------------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization .................................... 746,518 289,237
Bad debt expense ................................................. 28,303 --
Officers interest for loan incentive ............................. 45,000 --
Increase (decrease) in operating assets:
Accounts receivable ............................................. (555,436) (13,674)
Other receivables ............................................... (96,681) (120,119)
Inventories ..................................................... (1,131,103) (134,324)
Prepaid and other current assets ................................ (20,353) (2,727)
Increase (decrease) in operating liabilities:
Accounts payable ................................................ 1,319,339 269,771
Accrued expenses ................................................ 799,393 86,926
--------------- ---------------
Total adjustments .............................................. 1,134,980 375,090
--------------- ---------------
Net cash used in operating activities .......................... (2,874,183) (1,250,278)
--------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment ................................ (1,816,647) (592,673)
Increase in patent costs .......................................... (4,145) (15,642)
Investment in joint venture ....................................... (54,482) --
Cash acquired from ALT acquisition ................................ 7,233 --
Foreign currency translation adjustment ........................... 220,908 11,287
Due to related parties, net ....................................... (357,567) 419,225
--------------- ---------------
Net cash used in investing activities .......................... (2,004,700) (177,803)
--------------- ---------------
Cash flows from financing activities:
Proceeds from subscriptions receivable ............................ -- 80,000
Proceeds from sale of common stock................................. 500,000 1,549,000
Proceeds from long-term debt ...................................... 5,000,000 --
Proceeds from notes payable ....................................... -- 200,000
Proceeds from capital contribution ................................ -- 670
Repayment of notes payable ........................................ (7,150) --
Security deposits ................................................. (250) (7,500)
Repayment of capitalized lease obligation ......................... (38,167) (38,167)
Purchase of treasury stock ........................................ -- (500,000)
--------------- ---------------
Net cash provided by financing activities ...................... 5,454,433 1,284,003
--------------- ---------------
Net change in cash ............................................. 575,550 (144,078)
--------------- ---------------
Cash, beginning of year ............................................ 257,857 401,935
--------------- ---------------
Cash, end of year .................................................. $ 833,407 $ 257,857
=============== ===============
</TABLE>
F-7
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest ........................................................... $ 182,850 $ 290
Supplemental disclosure of noncash investing and financing activities:
FiberCore, Inc. issued 8,811,137 shares at approximately $.80 per share to
acquire ALT for $7,000,000. Assets and liabilities acquired from ALT
acquisition are as follows:
Cash ................................................................. 7,233 --
Accounts receivable, less allowance of $11,025 ....................... 42,615 --
Inventories .......................................................... 141,022 --
Prepaid and other current assets ..................................... 218 --
Property and equipment, net of accumulated depreciation of $130,874 .. 5,012 --
Patents, net of accumulated amortization of $11,700 .................. 7,506,733 --
Accounts payable ..................................................... 146,169 --
Accrued expenses ..................................................... 108,310 --
Deferred revenue ..................................................... 39,400 --
Notes payable, net of discount ....................................... 408,954 --
Reduction of property and equipment book value due to cancellation of
obligation under capitalized lease ................................... 499,361 --
Retirement of 3,671,307 shares of FiberCore, Inc., (1,000,000 shares
of FiberCore Incorporated) owned by ALT before acquisition ........... 3,671 --
Common stock issued in exchange for services .......................... 44,050 8,050
Equipment acquired in exchange for common stock and capital lease .... -- 2,995,695
Accounts payable reclassed to notes payable ........................... -- 7,150
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Incorporation and nature of operations
FiberCore, Inc. (Company) was organized under the laws of the State of Nevada on
November 5, 1993. The Company is involved in the research, development and
commercialization of a patented, new and more efficient method of producing
single-mode optical fiber preforms.
On July 14, 1994, the Company established a wholly-owned subsidiary, FiberCore
Glasfaser Jena GmbH (FCJ) which is organized and operates under the laws of
Germany. FCJ is involved in the production and selling of optical fiber and
preforms for the telecommunications market.
On May 19, 1995, the Board of Directors approved a merger agreement with
Venturecap, Inc., (Venturecap). On July 18, 1995, Venturecap exchanged 100% of
the outstanding shares of FiberCore Incorporated for shares of restricted common
stock of Venturecap. Effective at the closing all officers and directors of
Venturecap resigned and were replaced with designees of FiberCore Incorporated.
Venturecap changed its name to FiberCore, Inc. The merger has been accounted for
under the pooling of interests method.
On May 19, 1995, a merger under the purchase method of accounting between
Automated Light Technologies, Inc. (ALT), an affiliate, and a wholly-owned
subsidiary of FiberCore, Inc. (ALT Merger Co.) was approved by the Boards of
Directors of both Companies. The merger took place on September 18, 1995.
Accordingly, effective immediately prior to the merger, loans and warrants of
consenting ALT holders were converted, resulting in the issuance of
approximately 4.5 million additional shares of common stock. FiberCore, Inc.
acquired 100% of all the outstanding shares of ALT in exchange for shares of
restricted common stock of FiberCore, Inc. Following the acquisition, ALT
operates as a subsidiary of FiberCore, Inc. ALT is a manufacturer and
distributor of fiber optic cable monitoring and fault locating systems for the
telecommunications industry.
In August 1995, ALT distributed the stock of its wholly-owned subsidiary, Allied
Controls, Inc. (Allied), to its shareholders thereby making Allied a separate
independent entity. ALT transferred all of its shares in Allied, together with
notes and advances of Allied to ALT to Allied Controls Holding LLC in exchange
for a membership interest. Thereafter, on August 31, 1995, ALT transferred the
membership interest to its shareholders.
(b) Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(c) Principles of consolidation
For 1995, the consolidated financial statements include the accounts of
FiberCore, Inc. and its subsidiaries, FiberCore Glasfaser Jena GmbH and
Automated Light Technologies, Inc. All material intercompany balances and
transactions have been eliminated in consolidation.
For 1994, the consolidated financial statements include the accounts of
FiberCore, Inc. and its subsidiary, FiberCore Glasfaser Jena GmbH. All material
intercompany balances and transactions have been eliminated in consolidation.
F-9
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) Inventories
Inventories are stated at the lower of cost (average) or market. Cost for FCJ
inventory, approximately 84% and 73% of total inventory, is based upon a normal
utilization of production capacities. The Cost of unutilized production
capacities is charged directly to expense. Cost for Company inventory,
approximately 7% and 27% of total inventory in 1995 and 1994, respectively, and
FCJ materials inventory, is determined by the first-in, first-out method. ALT
inventory cost, approximately 9% of total inventory in 1995, is determined based
upon standard costs which approximate actual cost using the first-in, first-out
method.
(e) Property and equipment
All property and equipment acquisitions are stated at cost. The cost of
maintenance and repairs is charged to expense as incurred. Expenditures for
significant renewals or improvements to properties and equipment are added to
the basis of the asset.
The Companies' policy is to depreciate property and equipment using the
straight-line method over the estimated useful lives of the assets.
(f) Other assets
Organizational costs are amortized using the straight-line method over a five
year period.
The Company and ALT have made various filings for patents on new products and
product improvements. Total related costs amount to $4,145 and $15,642 at
December 31, 1995 and 1994, respectively, and are amortized over seventeen years
beginning with the period in which the patent rights are granted.
It is the Company's policy to account for patents at the lower of amortized cost
or net realizable value. On an ongoing basis the Company reviews the valuation
and amortization of its patents. As a part of this review, the Company estimates
the net realizable value of its patents, taking into consideration any events
and circumstances which might have diminished the value.
(g) Fair value of financial instruments
The Company, FCJ and ALT have financial instruments which consist of cash,
short-term receivables, accounts payable and notes payable for which their
carrying amounts approximate fair value due to the short maturity of those
instruments.
The carrying amount of the long-term debt approximates fair value because the
interest rate on this instrument changes with market interest rates.
(h) Translation of foreign currencies
The translation of foreign currencies into U.S. dollars is performed for balance
sheet accounts using current exchange rates in effect at the balance sheet date
and for revenue and expense accounts using an average exchange rate for the
period. The gains and losses resulting from translation are included in
stockholders' equity.
F-10
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i) Income taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". Deferred taxes are
recognized based on the temporary difference between the recognition of certain
costs and expenses for financial statement and tax purposes.
(j) Loss per share of common stock
Primary loss per share of common stock as computed is based on the weighted
average of the shares outstanding during the year. The stock purchase warrants
and stock options have not been included in the computation of primary loss per
share since the effect would be anti-dilutive.
Fully diluted loss per share of common stock is computed by taking into account
the weighted average of the shares outstanding during the year and taking all
shares of common stock issued for consideration below the registration price and
all common stock warrants, options, or other potentially dilutive instruments
with exercies prices below the registration price issued within one year prior
to the filing of a registration statement with the Securities and Exchange
Commission, as outstanding for all reported periods, even if the effect was
anti-dilutive.
(2) MERGERS, ACQUISITIONS AND STRATEGIC INVESTMENTS
On July 18, 1995, the Company completed a merger with Venturecap, Inc., whereby
FiberCore Incorporated was merged directly into Venturecap. Approximately
24,600,000 shares of Venturecap common stock were exchanged for all of the
outstanding shares of FiberCore Incorporated. In addition, all outstanding stock
options, warrants and convertible securities to purchase FiberCore Incorporated
stock were converted into stock options, warrants and convertible securities to
purchase Venturecap common stock at the per share merger consideration. The per
share merger consideration states that each share of FiberCore Incorporated
stock shall be converted into 3.6713070 shares of Venturecap stock. The merger
has been accounted for as a pooling of interests and, accordingly, the Company's
consolidated financial statements have been restated for all prior periods as if
the merger took place at the beginning of such periods.
The following pro forma information has been prepared assuming that this
acquisition had taken place at the beginning of the respective periods. The pro
forma financial information is not necessarily indicative of the results of
operations as they would have been had the transactions been effected on the
assumed dates.
1995 1994
--------------- --------------
Net sales: ...........................
Venturecap, Inc...................... $ $
FiberCore Incorporated and Subsidiary 3,093,499 230,888
--------------- --------------
Total............................... $ 3,093,499 $ 230,888
=============== ==============
Net loss:
Venturecap, Inc...................... $ (4,300) $ (455)
FiberCore Incorporated and Subsidiary (4,004,863) (1,624,913)
--------------- --------------
Total .............................. $(4,009,163) $(1,625,368)
=============== ==============
F-11
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(2) MERGERS, ACQUISITIONS AND STRATEGIC INVESTMENTS (CONTINUED)
On September 18, 1995, FiberCore, Inc. acquired all the outstanding stock of
Automated Light Technologies, Inc. The purchase method of accounting for
business combinations was used. The operating results of ALT have been included
in the Company's consolidated results of operations from the date of acquisition
which included net sales of $84,209 and a net loss of $189,176 for the period
September 18, 1995 to December 31, 1995. The acquisition for $7,000,000 was made
with the issuance of 8,811,137 shares of restricted common stock of the Company
valued at approximately $0.80 per share. The fair value of assets acquired was
approximately $7,700,000, of which approximately $7,500,000 is attributable to
patents developed or acquired by ALT over the years. The Company had an
appraisal performed on ALT patents by an outside valuation consultant which
substantiates the fair value used by the Company in recording the ALT patents at
fair value. The only adjustment recorded was recording the patents at fair
market value by adjusting the basis of the patents by $7,436,794. ALT now
operates as a wholly-owned subsidiary of the Company.
ALT on September 18, 1995 merged with a newly formed wholly-owned subsidiary of
the Company, called ALT Merger Co. under the purchase method of accounting.
Under the terms of this merger, ALT was the surviving corporation. All shares of
FiberCore, Inc. common stock owned by ALT were cancelled and each share of ALT
was converted into 1.0498172 shares of the Company's stock at the effective
date, on a fully diluted basis (excluding 251,917 shares underlying warrants
issued to entities which are not waiving their registration rights as holders of
debt convertible into ALT stock and 275,000 shares underlying certain incentive
stock options.) As stated, prior to the merger, approximately 4.5 million of
additional shares of ALT common stock were issued to warrant holders and
debenture holders exercising their warrants or converting their debt at the time
of merger. Approximately 8.8 million shares of FiberCore, Inc. common stock were
issued to ALT shareholders, warrant holders and debenture holders after taking
into account the 3.6713070 conversion ratio of FiberCore stock to Venturecap
stock, as stated above.
The following proforma unaudited consolidated operating results of the Company,
Jena and ALT for the years ended December 31, 1995 and 1994, assuming the
acquisition had been made as of January 1, 1995 and 1994, are summarized below:
1995 1994
----------- -----------
Net sales .................. $ 3,255,021 $ 707,269
Net loss ................... (4,624,892) (2,358,959)
These proforma results have been prepared for comparative purposes only and
include certain adjustments for additional amortization expense as a result of a
step-up in the basis of ALT patents, and the reduction of interest expense
accrued on debt which was converted for common stock. They do not purport to be
indicative of the results of operations which actually would have resulted had
the combination been in effect on January 1, 1995 and 1994 or of future results
of operations of the consolidated entities.
F-12
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(2) MERGERS, ACQUISITIONS AND STRATEGIC INVESTMENTS (CONTINUED)
In April 1995, the Board of Directors ratified actions by FiberCore Incorporated
to enter into a joint venture with John Royle & Sons Co. and Middle East
Specialized Cables Company (MESC) for a period of 15 years to be known as Middle
East Fiber Cables Co. (MEFC). The Company shall issue and sell to MESC 734,260
shares of common stock at approximately $1.36 per share. The agreement also
states MESC will receive 312,061 shares of additional common stock and 550,696
warrants upon the completion and execution of a product supply contract between
the Company and the joint venture entity, MEFC. MESC must exercise the warrants
to purchase shares of the Company's common stock at approximately $1.63 per
share, within a two year period to receive an additional 238,635 shares. The
Company will invest $500,000 of the $1,000,000 purchase price in MEFC as a
capital contribution to the joint venture and in the process acquire a 15%
interest in MEFC. The Company issued 367,131 shares to MESC at approximately
$1.36 per share in October 1995.
On May 19, 1995, the Board of Directors of Fibercore Incorporated authorized the
establishment of a wholly owned subsidiary, FiberCore Mid East Ltd., to be
located in the Cayman Islands for the purpose of holding the Company's eventual
15% ownership of Middle East Fiber Cables Co. (MEFC). At December 31, 1995 the
Company had not made the $500,000 capital contribution to acquire the 15%
interest in MEFC.
On June 23, 1995 the Board of Directors authorized 200,000 shares of FiberCore
Incorporated common stock (734,261 shares of the Company) to be exchanged with
Techman International Corporation (Techman) for shares of Fiber Optic Industries
Limited (FOI), a joint venture located in Pakistan. The President and sole
shareholder of Techman is a director of the Company. The transaction would give
the Company a 51% ownership in the joint venture. This transaction is contingent
upon the closing of financing arrangements of FOI. This agreement was
subsequently replaced in January 1996, (see note 15).
(3) OTHER RECEIVABLES
Other receivables consist of the following:
1995 1994
-------- --------
Value added tax ........................ $189,105 $118,984
SICO ................................... 69,251 175,334
MEFC ................................... 24,823 --
Other .................................. 2,872 2,925
-------- --------
$286,051 $297,243
======== ========
The value added tax receivable comprises principally advance payments to the
German tax authorities that are to be refunded to FCJ.
(4) INVENTORIES
Inventories consist of the following:
1995 1994
---------- ----------
Raw materials ........................ $ 735,653 $ 11,929
Work-in-process ...................... 17,107 --
Finished goods ....................... 653,689 122,395
---------- ----------
$1,406,449 $ 134,324
========== ==========
F-13
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(5) PROPERTY AND EQUIPMENT
Property and equipment, together with their estimated useful lives, consist of
the following:
ESTIMATED
USEFUL LIVES 1995 1994
--------------- ------------- ------------
Office equipment ........ 3 - 5 years $ 109,493 $ 24,707
Machinery and equipment 2 - 12 years 4,808,659 3,522,346
Furniture and fixtures . 5 - 7 years 18,055 5,421
Leasehold improvements . 3 - 10 years 4,707 4,707
Construction in progress 103,459 34,020
------------- ------------
$5,044,373 $3,591,201
============= ============
Depreciation on property and equipment charged to expense was $523,443 in 1995
and $253,836 in 1994.
Included in the above amounts for 1994 is property and equipment acquired from
SICO Jena GmbH Quarzschmelze (SICO) under capital lease obligations of
$2,995,695. 2,221,141 shares of common stock of the Company, valued at
$2,420,000, which were received by FCJ as a consideration for the issuance of
profit participation rights to the Company, were given as a consideration for
the major portion of the lease obligation.
Under an agreement dated August 19, 1995 and amended in January 1996, the
capital lease agreement between SICO and FCJ was revised. It was agreed that
SICO would keep the 2,221,141 shares as payment in full for the obligation under
a capital lease. The outstanding lease obligation, which amounted to $499,361 on
August 19, 1995, was cancelled. As a result, the net book value of the assets
was reduced by $499,361.
(6) ACCRUED EXPENSES
Accrued expenses consist of the following:
1995 1994
-------- --------
Accrued interest ..................... $350,794 $ --
Accrued wages and benefits ........... 323,278 645
Accrued legal and audit .............. 210,922 42,002
Accrued expenses - other ............. 109,635 44,279
-------- --------
$994,629 $ 86,926
======== ========
F-14
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(7) LONG-TERM DEBT
Long-term debt consist of the following:
<TABLE>
<CAPTION>
1995 1994
------------- ----------
<S> <C> <C>
Note payable to AMP Incorporated ............................................... $5,000,000 $ --
Note payable to Connecticut Innovation, net of unamortized discount of $834,
with interest at 8.5% and due September 1,1996 .............................. 210,050 --
Note payable Connecticut Development Authority, net of unamortized discount of
$2,736, with interest at 12% (default rate) and due January 1, 1996 ......... 199,540 --
Note payable to Harkerside Trust, interest at 10.5% payable semi-annually, due
December 6, 1995, issued with non-qualified warrants expiring January 1, 2000
to purchase 36,713 shares of common stock at approximately $1.63 per share
(note paid in January, 1996) ................................................ 200,000 200,000
Note payable to John Royle and Sons, with interest at prime plus 2%, due
February 2, 1996 ............................................................ -- 7,150
------------- ----------
5,609,590 207,150
Less current portion ........................................................... 609,590 207,150
============= ==========
$5,000,000 $ --
============= ==========
</TABLE>
In April 1995, FiberCore Incorporated issued to AMP Incorporated (AMP), a
floating rate, collateralized, ten year debenture in the amount of $5,000,000
due April 17, 2005, with interest, at an annualized rate adjusted quarterly,
equal to the sum of 1% and the 3-month London Interbank Offered Rate (6.9375% at
December 31, 1995). No interest is due until the earlier of: AMP conversion of
debt to stock, a public financing by the Company and AMP elects to call the
loan, or maturity. AMP has the option to convert the outstanding loan plus
accrued interest into common stock of the Company at approximately $1.16 per
share in years 1-5 or the per share price provided for in the last third party
private equity financing in years 6-10.
The note payable to Connecticut Innovation, Inc. (CII) with interest at 8.5%
payable monthly, was issued with detachable stock warrants to purchase shares of
common stock of ALT at $1.50 per share. The note was due September 1, 1996 but
is in arrears as the contractual principal and interest payments were not made
by ALT. On July 10, 1996, CII agreed to exchange the balance of the note plus
accrued interest for approximately 103,000 shares of the Company.
The note payable to Connecticut Development Authority (CDA) with interest at 12%
payable monthly, was issued with detachable stock warrants to purchase 100,000
shares of common stock of ALT at $1.50 per share. The number of shares into
which these warrants are exercisable increases to 200,000 if ALT does not
maintain certain contacts with the State of Connecticut. Between December 1,
1995 and December 1, 1997, CDA can require ALT to repurchase the warrants at
$150,000 or buy back all shares underlying the warrants at $300,000. Upon the
occurrence of certain defaults, the redemption prices increase to $300,000 and
$600,000, respectively. The note was due January 1, 1996 but is in arrears as no
principal and interest payments were made by ALT. The note is collateralized by
the personal guarantee of two officers of the Company. In July 1996, the Company
and CDA initiated discussions to negotiate a settlement of this note.
F-15
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(7) LONG-TERM DEBT (CONTINUED)
Scheduled maturities on long-term debt for the next five fiscal years are as
follows:
1996 ........................................... $609,590
1997 - 2000 ........................................... --
(8) OBLIGATION UNDER A CAPITAL LEASE
1995 1994
------- -----------
Obligation under a capital lease to SICO Jena
Quarzschmelze GmbH, with interest at
approximately 8%, expiring June 2000 ........ $ -- $537,528
Less current portion ......................... -- 81,052
------- -----------
$ -- $456,476
======= ===========
The obligation under the capital lease was cancelled at August 19, 1995 as FCJ
purchased the machinery and equipment which had been originally leased from
SICO, (see Note 5).
(9) COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries have entered into various leases for its office
and production space. The Company's office lease expires on January 31, 1997
with an option to extend for two successive three year periods after the initial
term of the lease. The leased property may be acquired for amounts ranging from
$1,200,000 to $1,450,000 over the first three years of the lease term.
FCJ conducts its operations from premises under an operating lease with SICO.
The lease expires within the next five years, and contains various renewal
options. The rental payments for the facility is fixed per month through June
30, 2000. On July 1, 1995, the lease rental was changed from $21,224 to $31,348
per month.
Future minimum lease payments under noncancellable operating leases (with
minimum or remaining lease terms in excess of one year) are as follows:
FISCAL YEAR ENDING DECEMBER AMOUNT
--------------------------- ----------
1996 .................................................... $ 471,619
1997 .................................................... 387,919
1998 .................................................... 376,671
1999 .................................................... 376,176
2000 .................................................... 188,088
----------
Total minimum payments ................................. $1,800,473
==========
Included in the statement of operations for the years ended December 31, 1995
and 1994 is rent expense of $412,919 and $169,244, respectively, under the above
described operating leases. Substantially, all lease payments pertain to
payments to a related party (SICO).
FCJ is a defendant in a case brought against it by a German firm, COIA GmbH,
Hasenhdgweg 73, D- 63 741 Aschaffenburg, F.R. Germany. COIA GmbH is suing FCJ,
SICO and SICO's president, Mr. Walter Nadrag, (who was previously the managing
director of FCJ) (the "Defendants") for approximately $1.5 million, alleging
that the Defendants failed to comply with a sales contract. The Company believes
no such sales contract existed because COIA GmbH failed to provide the
F-16
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(9) COMMITMENTS AND CONTINGENCIES (CONTINUED)
required end user certificate which the Company believes was required under
United States law and failed to pay FCJ for previous sales to COIA and money is
still due from COIA. The Company is aggressively defending this action and has
established a reserve in the amount of $126,000, which includes legal fees.
In addition to the above, the Company is subject to various claims which arise
in the ordinary course of business. The Company believes such claims and legal
actions, individually or in the aggregate, will not have a material adverse
effect onthe business of the Company.
ALT is contingently liable for debt of a former subsidiary, Allied,
approximating $900,000, details of which are described below.
ALT and two of its key officers have issued the following guarantees and/or
security interests with respect to certain loans of its spun off former
subsidiary (Allied). In a $250,000 financing of Allied from the State of
Connecticut acting through the Department of Economic Development ("DED"), dated
as of October 9, 1992, DED received a guarantee and security interest in certain
assets from ALT. In a $250,000 financing of Allied from the State of
Connecticut, acting through the Connecticut Development Authority ("CDA"), dated
as of June 9, 1992, CDA received a guarantee from two key officers of ALT. As
consideration for their guarantee, each officer received warrants to purchase
62,500 shares of common stock of ALT at $1.75 per share, expiring in 1998.
Under a plan of reorganization, on May 14, 1991, the present Allied acquired the
assets and assumed certain liabilities of a corporation that had filed for
voluntary protection under Chapter 11 of the U.S. Bankruptcy Code. One of the
assumed liabilities was a $650,000 SBA loan dated May 29, 1989, (originally in
the amount of $1,000,000) from American National Bank, now Lafayette American
National Bank ("Lafayette"). As a condition of the loan assumption on March 21,
1991, Lafayette obtained the guarantees of ALT and two key officers of ALT which
guarantees were in addition to the initial loan guarantees Lafayette already had
from other persons. Before commencing proceedings to enforce the guarantees
first against ALT and second against the two key officers, Lafayette must first
take all reasonable steps to realize upon the assets of Allied and the security
provided by the initial guarantors. In the event of a deficiency, Lafayette may
enforce its guarantee against ALT, provided that at all times it simultaneously
and diligently pursues actions to enforce its guarantees from the initial
individual loan guarantors. Each of the key officers guaranteed $150,000 and
received in consideration warrants to purchase 25,000 shares of common stock of
ALT at $1.75, expiring in 1998. Allied is now current with its payments under
this loan. In addition, management has been in discussions with several
potential buyers of Allied which, if successful, would eliminate the
aforementioned security interests and guarantees that have been provided by ALT
and the two key officers.
ALT extends performance warranties on its telecommunications products for
extended periods. Liability under such warranties is contingent upon future
product performance and durability and the ultimate liability is not reasonably
estimable at this time. Management does not believe that such warranties will
result in material expense to ALT.
F-17
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(10) STOCKHOLDERS' EQUITY
The following employee stock options were granted during the years ended
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
EXERCISABLE AT PRICE PER SHARE
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.003 $ 1.09 $ 1.43 $ 1.50 $ 1.51
---------- --------- --------- --------- ----------
Granted in 1994 .................................. 110,139 -- -- -- --
---------- --------- --------- --------- ----------
Balance, December 31, 1994 ....................... 110,139 -- -- -- --
Granted in 1995 .................................. 55,070 33,042 -- -- --
Granted in 1995 in connection with the ALT
acquisition ...................................... -- -- 67,188 41,993 178,679
---------- --------- --------- --------- ----------
Balance, December 31, 1995 ....................... 165,209 33,042 67,188 41,993 178,679
========== ========= ========= ========= ==========
</TABLE>
Options vest at rates stated in each employees contract, principally the
anniversary date of the employee's date of hire. The options have no expiration
dates and no options were exercised in 1995 and 1994.
The following warrants have been issued during the years ended December 31, 1995
and 1994:
<TABLE>
<CAPTION>
EXERCISE AT PRICE PER SHARE
----------------------------------------
<S> <C> <C> <C> <C>
$ 0.95 $ 1.31 $ 1.42 $ 1.63
--------- ---------- -------- ----------
Issued in 1994 ....................... -- 598,423 -- --
--------- ---------- -------- ----------
Balance, December 31, 1994 ........... -- 598,423 -- --
Issued in 1995 ....................... -- -- -- 550,696
Issued in 1995 in connection with the
ALT acquisition ...................... 83,985 -- 5,511 --
--------- ---------- -------- ----------
Balance, December 31, 1995 ........... 83,985 598,423 5,511 550,696
========= ========== ======== ==========
</TABLE>
As noted above, in connection with the acquisition of ALT by the Company,
certain options and warrants were converted into options and warrants of the
Company. Certain warrant holders in ALT elected not to convert their warrants.
At December 31, 1995 warrants to acquire shares of ALT are outstanding as
follows:
Connecticut Development
Authority ..................................... 100,000
Connecticut Innovation, Inc. .................. 66,667
Other ......................................... 85,250
Subsequent to December 31, 1995, CII agreed to accept stock in the Company in
settlement of the debt (see note 7). The ALT warrants connected with the debt
will be canceled.
F-18
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(11) INCOME TAXES
The significant components of the net deferred tax asset (liability) as of
December 31, 1995 and 1994 were as follows:
1995 1994
-------------- --------------
Net operating loss carryforwards $ 3,474,000 $ 2,142,000
Less valuation allowance ........ (3,474,000) (2,142,000)
-------------- --------------
Net deferred tax asset .......... $ -- $ --
============== ==============
The liability method of accounting for deferred income taxes requires a
valuation allowance against deferred tax assets if, based on the weight of
available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized.
The Company has a net operating loss carryforward available of approximately
$1,800,000 at December 31, 1995 for financial, federal and state tax purposes.
The net operating loss carryforward expires in the years 2009 and 2010. FCJ has
net operating loss carryforwards at December 31, 1995 of approximately
$2,700,000 for corporation tax and trade income tax purposes available to offset
future taxable income. Under German tax law the losses can be carried forward
indefinitely. Because future profitability is uncertain, such benefits have been
fully reserved.
ALT has net operating loss carryforwards available of approximately $4,400,000
at December 31, 1995 for financial, federal and state tax purposes, of which
only approximately $180,000 is available to the Company for consolidated tax
purposes for the year ended December 31, 1995. The loss carryforwards expire
between the years 2001 through 2010. Because future profitability is uncertain,
such benefits have been fully reserved.
(12) CONCENTRATION OF CREDIT RISK OF FINANCIAL INSTRUMENTS
The customers listed below accounted for approximately the following amounts and
related percentages of the trade accounts receivable balance of FiberCore, Inc.
and Subsidiaries at December 31, 1995 and 1994:
CUSTOMER 1995 1994
-------- -------- --------
AMOUNT % AMOUNT %
-------- -------- -------- --------
A .............................. $132,000 23 $ -- --
B .............................. 233,000 40 9,000 66
C .............................. 134,000 23 -- --
The approximate net product sales by FiberCore, Inc. and Subsidiaries to its
major customers and related percentages are as follows:
CUSTOMER 1995 1994
-------- ---------- ----------
AMOUNT % AMOUNT %
---------- ---------- ---------- ----------
A .......................... $ 137,000 4 $ -- --
B .......................... 1,855,000 60 88,000 38
C .......................... 319,000 10 -- --
(13) RELATED PARTY TRANSACTIONS
In 1994, FCJ was the lessee of machinery and equipment under a capital lease
with SICO expiring in 2001. 2,221,141 shares of the common stock of the Company,
valued at $2,420,000 by the parties, was
F-19
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(13) RELATED PARTY TRANSACTIONS (CONTINUED)
given as consideration to SICO in exchange for plant and equipment under the
capital lease. At December 31, 1994, the remaining capital lease obligation
amounted to $537,528.
Effective August 19, 1995 and amended in January 1996, the capital lease
agreement between SICO and FCJ was revised. It was agreed that SICO will keep
the 2,221,141 shares as payment for the obligation under a capital lease. The
outstanding lease obligation, which amounted to $499,361 on August 19, 1995, was
cancelled. As a result, the net book value of the assets was reduced by
$499,361.
The managing director of FCJ was the controlling shareholder of SICO. In
November 1995, this officer resigned from his position with FCJ.
Transactions with SICO during the years ended December 31, 1995 and 1994 consist
of the following:
1995 1994
---------- -------------
Property and equipment under capital lease .. $ -- $2,995,695
Purchase price reduction of property and
equipment under capital lease ................ 499,361 --
Rent of premises ............................. 315,373 127,342
Purchase of services ......................... 601,366 407,252
Purchase of heating and energy ............... 273,128 --
Purchase of materials ........................ 350,610 69,076
Interest ..................................... 25,823 --
Other expenses ............................... 22,061 --
Sales of fibers .............................. 131,077 166,079
FCJ at December 31, 1995 and 1994 had a net payable due to SICO of $61,658 and
$958,543, respectively. The balance at December 31, 1994 included the remaining
portion of the obligation under a capitalized lease. Included in the statements
of operations for the years ended December 31, 1995 and 1994 are $327,162 and
$127,342, respectively, for lease expenses under an operating lease.
With the transfer of the employees from SICO, FCJ is now the official employer
of 48 employees with all legal obligations. The former obligation to use 30
employees of SICO at SICO's direct cost no longer exists.
In 1994, SICO was FCJ's main supplier of materials and its main customer
accounting for approximately 72% of its sales. In 1995, SICO was no longer the
main supplier of materials and accounted for only 5% of FCJ sales.
See also notes 2 and 15 regarding transactions with Techman.
F-20
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(14) FOREIGN OPERATIONS
FiberCore, Inc. and Subsidiaries operates principally in 2 geographic areas:
the United States (Company and ALT) and Germany (FCJ). Following is a summary
of information by area for the years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Net sales to customers:
United States ............................................ $ 305,142 $ --
Germany .................................................. 2,788,357 230,888
--------------- ---------------
Net sales as reported in the accompanying statements of
operations ............................................. $ 3,093,499 $ 230,888
=============== ===============
Inter-company sales:
United States ............................................ $ 1,644,619 $ 488,838
Germany .................................................. -- --
--------------- ---------------
Total intercompany sales ................................ $ 1,644,619 $ 488,838
=============== ===============
Loss from operations:
United States ............................................ $(1,756,568) $ (644,232)
Germany .................................................. (1,832,964) (978,559)
--------------- ---------------
(3,589,532) (1,622,791)
Interest income ........................................... 147,681 14,870
Interest expense .......................................... (516,318) (22,590)
Other income (expense) .................................... (50,994) 5,143
--------------- ---------------
Net loss as reported in the accompanying statements of
operations ............................................. $(4,009,163) $(1,625,368)
=============== ===============
Identifiable assets:
United States ............................................ $ 8,488,198 $ 496,000
Germany .................................................. 6,294,698 3,773,549
--------------- ---------------
Total assets as reported in the accompanying balance
sheets ................................................. $14,782,896 $ 4,269,549
=============== ===============
</TABLE>
Inter-company sales are eliminated in consolidation and are excluded from net
sales reported in the accompanying consolidated statements of operations.
Identifiable assets are those that are identifiable with operations in each
geographic area.
F-21
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(15) SUBSEQUENT EVENTS
In January 1996, the Company reached an agreement with Techman, a related party,
(see note 2), whereby Techman will purchase 734,260 shares for $1 million ($1.36
per share). The price per share was based on private sales of shares in 1995.
Techman made an initial $100,000 down payment in February 1996 and executed and
delivered to the Company a secured promissory note of $900,000. The note will be
paid by Techman in nine equal monthly installments of $100,000 beginning March
31, 1996 and ending November 30, 1996. Interest will accrue on the unpaid
principal balance at the London Interbank Offered Rate (LIBOR), 6.41% at
December 31, 1995, for six month deposits as quoted in the Wall Street Journal
on each business day preceding each payment due date. The note is collateralized
by Techman's right, title and interest in the shares and warrants to purchase
the Company's stock.
Upon acceptance of the offer and delivery of the 734,260 shares, the Company
will deliver to Techman warrants, granting Techman the right to purchase 550,696
shares of the Company at $1.63 per share exercisable in whole or in part within
a 2 year period. The Company will also issue an additional 312,061 shares to
Techman upon all partners of FOI completing all documents required to form FOI,
and FOI and the Company executing an exclusive supply agreement for preforms.
On July 10, 1996, the Company and AMP agreed that on the date of closing, AMP
will convert $3,000,000 (principal and interest) relating to the original
$5,000,000 ten year debenture (see note 7), into shares of common stock of the
Company at the rate of approximately $1.16 per share and to enter into a
multi-year supply agreement. This agreement was made to provide capital for
additional production capacity. The remaining principal balance shall remain
subject to the terms of the original debenture agreement. The conversion
agreement contains certain valuation guarantees of the market value of the
Company's common stock. Unless the closing price of the Company's common shares
equals or exceeds $1.7364 for 30 consecutive trading days during the first two
(2) years following the closing at a time when AMP was not restricted from
selling such shares, then effective on the second anniversary of the closing, an
additional number of shares of Company common stock shall be issued to AMP and
an adjustment shall be made in the conversion rate for the outstanding balance
of the debenture such that the total number of shares held and convertible by
AMP would have a market value (based on the average closing price of Company's
shares during the last thirty (30) trading days preceding the second anniversary
of the closing) equal to $7,500,000; provided, however, that not more than
6,478,810 Company shares will be issued or issuable to AMP as a result of the
conversion of the $5,000,000 debenture and this guarantee.
In the alternative, the Company may satisfy this guarantee on the second
anniversary of the closing by offering or arranging for its designee to offer to
purchase from AMP the converted shares and the outstanding balance of the
debenture, including accrued interest, for $7,500,000, reduced prorata for any
intervening sales of shares by AMP. Such offer to purchase shall be for cash
only in immediately available funds.
As an additional part of this agreement, AMP will loan the Company $3,000,000
under a ten-year note, secured by equipment owned by the Company, with interest
at prime plus one percent, to the Company. Terms of the note payable state that
interest shall be accrued, but not paid, for the first five years of the loan
and the proceeds are required to be used as collateral for the estimated $7.8
million planned expansion of its FCJ facility, the financing of this project is
to be obtained by FCJ from a financial institution in Germany. The principal
will become due before the maturity date if the major financing is repaid or the
collateral is released by the German financial institution.
In conjunction with the loan agreement, AMP will be issued five year warrants to
acquire $2,000,000 of the Company's stock at an exercise price of approximately
$1.45 per share. The Company has guaranteed the market value of their stock.
Unless the closing price of the Company's common shares equals or exceeds
$2.1697 for a period of thirty (30) consecutive trading days during the first
two (2) years following the closing at a time when AMP was not restricted from
selling such shares, then the exercise price of the warrants shall be adjusted
effective as of the second anniversary of the closing by multiplying $1.4465 per
share by a fraction the denominator of which is $2.1697 and the
F-22
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(15) Subsequent Events (continued)
numerator of which is the average closing price of the shares during the last
thirty (30) trading days preceding the second anniversary of the closing;
provided, however, that the adjusted exercise price shall not be less than
$0.7232 per share (50% of $1.4465). In the alternative, the Company or its
designee may offer to purchase the warrants on the second anniversary of the
closing for an amount equal to $1,000,000. Provided, however, that AMP shall
have the right not to sell, in which case the guarantee will no longer be
available.
In the event that additional shares are issued as a result of the guarantees,
the net book value of all shares and earnings per share would be diluted. There
would be no effect on the net income of the Company.
These statements are effective for financial statements for fiscal years that
begin after December 15, 1995. The Company is of the position that if these
statements had been implemented for fiscal year 1995, the effect would be
immaterial to the overall financial statements.
(16) Accounting Pronouncements
Effective January 1, 1996, the Company has adopted Financial Accounting
Standards Board, (FASB) Statements No. 121 "Accounting for the Impairment of
Long-Lived Assets to be Disposed of" and No. 123 "Accounting for Stock-Based
Compensation". The Company has reviewed these pronouncements and expects that
there will be no impairment of any of its long-lived assets under FASB Statement
No. 121. FASB Statement No. 123 defines a fair value based method of accounting
for an employee stock option or similar equity instrument. However, the Company
may continue to measure compensation cost for employee stock compensation
transactions using the intrinsic value based method of accounting prescribed by
APB Opinion No. 25 "Accounting for Stock Issued to Employees". If the Company
elects to remain with the accounting in Opinion 25 it then must make proforma
disclosures of net income and earnings per share, as if the fair value based
method of accounting, as defined under FASB Statement No. 123 had been applied.
F-23
<PAGE>
FIBERCORE, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA.
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash.................................................................... $ 524 $ 4,268
Accounts receivable, net of allowance for doubtful
accounts of $39 and $11 in 1996 and 1995, respectively................. 859 559
Inventory............................................................... 1,347 889
Other current assets.................................................... 66 75
--------- ---------
Total Current Assets................................................... 2,796 5,791
Property and equipment, net of depreciation.............................. 3,950 3,618
Patents, net of amortization............................................. 6,906 7,556
Other assets............................................................. 366 99
--------- ---------
Total Assets........................................................... $14,018 $17,064
========= =========
LIABILITIES and STOCKHOLDERS' EQUITY Current Liabilities:
Notes payable........................................................... $ 200 $ 3,441
Accounts payable........................................................ 1,096 1,389
Accrued liabilities..................................................... 1,277 227
--------- ---------
Total Current Liabilities.............................................. 2,573 5,057
Long-term debt, less current maturities................................. 5,500 7,194
--------- ---------
Total Liabilities...................................................... 8,073 12,251
Stockholders' Equity:
Common stock, $0.001 par value, authorized 100,000,000 shares; 31,336,442 and
27,919,691 issued and outstanding in 1996 and 1995,
respectively........................................................... 31 28
Additional paid-in capital.............................................. 13,057 8,843
Accumulated deficit..................................................... (7,290) (3,779)
Accumulated translation adjustment...................................... 147 (279)
--------- ---------
Total Stockholders' Equity............................................. 5,945 4,813
--------- ---------
Total Liabilities and Stockholders' Equity............................. $14,018 $17,064
========= =========
</TABLE>
See the notes to the consolidated financial statements.
F-24
<PAGE>
FIBERCORE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA.
1996 1995
------------ ------------
Net Sales.......................................... $ 6,245 $ 1,628
Cost of Sales...................................... 6,108 2,509
------------ ------------
Gross Profit (Loss)............................... 137 (881)
Research and Development........................... 281 34
Selling, General and Administrative Expenses ...... 1,920 1,050
------------ ------------
Loss from Operations.............................. (2,064) (1,965)
Interest Income.................................... 1 81
Interest Expense................................... 280 315
Other Income....................................... 807 48
Other Expense...................................... 117
------------ ------------
Net Loss.......................................... $ (1,653) $ (2,151)
============ ============
Primary Earnings (Loss) Per Share................. $ (0.05) $ (0.09)
============ ============
Weighted Average Shares Outstanding............... 30,815,900 25,262,819
============ ============
Fully Diluted Earnings (Loss) Per Share........... $ (0.05) $ (0.09)
============ ============
Weighted Average Shares Outstanding (Fully
Diluted)......................................... 32,899,366 25,470,719
============ ============
See the notes to the consolidated financial statements.
F-25
<PAGE>
FIBERCORE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.......................................................... $(1,653) $(2,151)
---------- -----------
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization.................................... 1,033 480
Officers interest for loan incentive............................. 45
Increase (decrease) in operating assets:
Accounts receivable............................................. 84 205
Inventories..................................................... (59) 614
Prepaid and other current assets................................ (56) 67
Increase (decrease) in operating liabilities:
Accounts payable................................................ (715) 389
Accrued expenses................................................ 388 145
---------- -----------
Total adjustments................................................. 737 173
---------- -----------
Net cash from (used in) operating activities..................... (916) (1,978)
Cash flows from (used in) investing activities:
Purchase of property and equipment................................ (353) (1,224)
Foreign currency translation adjustment........................... (67) (67)
Decrease in deferred expenses..................................... 2
Cash acquired from ALT acquisition................................ 7
Increase in patent costs..........................................
---------- -----------
Net cash from (used in) investing activities...................... (420) (1,282)
---------- -----------
Cash flows from financing activities:
Proceeds from sale of stock....................................... 550
Proceeds from notes............................................... 700 7,315
Repayment of notes................................................ 200 7
Increase in deposits.............................................. 23
Repayment of capital lease liability.............................. 38
---------- -----------
Net cash from (used in) financing activities..................... 1,027 7,270
Net charge in cash................................................. (309) 4,010
Cash, beginning of period.......................................... 833 258
---------- -----------
Cash, end of period................................................ $ 524 $ 4,268
========== ===========
Supplemental disclosure of non-cash financing activities:
Net assets acquired from acquisition of ALT for stock............. $ 7,000
Reduction in value of equipment due to cancellation of capital
lease............................................................ $ 499
Common stock issued for services.................................. $ 44
Retirement of shares owned by ALT before acquisition.............. $ 4
Note issued to SICO for equipment in exchange for Company shares
previously issued................................................ $ 2,642
Common stock issued for retirement of debt........................ $ 514
Common stock issued for investment in joint venture............... $ 233
</TABLE>
See the notes to the consolidated financial statements.
F-26
<PAGE>
FIBERCORE, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1. The consolidated interim financial statements include all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results for the periods. These adjustments are of a normal recurring nature.
2. NOTES PAYABLE AND LONG-TERM DEBT:
In August 1996, the Company issued 111,642 shares of common stock in full
settlement of the note payable to Connecticut Inovations, Inc. in the amount of
$210,884 plus accrued interest of $30,984. Also in August 1996, the Company
issued 142,540 shares of common stock in full settlement of the note payable to
the Connecticut Development Authority in the amount of $202,276 plus accrued
interest of $70,213.
In March 1996 the Company issued a convertible promissory note in the amount of
$200,000 to a director of ALT. The note bears interest at 8.5% and is due on
April 1, 1997. The note plus accrued interest, if any, is convertible into
common stock of the Company at the rate of $1.36 per share. In addition, the
Company issued warrants to purchase 146,850 common shares of the Company at
$1.63 per share. The warrants expire on March 15, 1998.
On July 1, 1996 the Company borrowed $500,000 under two loan agreements with the
spouses of the President and the Vice-President of the Company. The loans are in
the amount of $250,000 each and bear interest at the prime rate plus one
percent, (currently 9.25%) and are due on June 30, 1999. In conjunction with the
loans each lender received warrants to purchase 115,220 common shares of the
Company at the rate of $1.81 per share. The warrants expire on July 31, 2001.
3. STOCKHOLDERS' EQUITY
During the period the Company issued 403,843 shares of the Company's common
stock to Dr. M. Mahmud Awan, a director, under a share purchase agreement dated
January 11, 1996. The Company received $550,000 ($1.36 per share) in payment for
the shares. Also under the agreement the Company issued 171,634 shares as part
of the shares to be issued for the formation of and interest in a joint venture
( FOI).
4. EARNINGS PER SHARE
The fully diluted earnings per share amounts assume exercise of outstanding
common stock equivalents ( warrants and options ) issued subsequent to June 30,
1995, using the treasury stock method. In accordance with SEC staff accounting
bulletin topic 4D these shares are included even though the effect may be
anti-dilutive.
5. The interim financial statements should be read in conjunction with the
audited financial statements for the year ended December 31, 1995, including the
notes thereto.
F-27
<PAGE>
FIBERCORE, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
The Pro forma Financial Statements are presented for the year ended December 31,
1995 and the nine months ended September 30, 1995 to reflect the acquisition by
the Company of ALT (the only transaction for which the pro forma statements are
presented) as if the acquisition had occurred at the beginning of the respective
periods, January 1, (the acquisition actually occured on September 18, 1995).
The entities included are FiberCore, Inc. and ALT, Inc. The pro forma
presentation shows what the effect on net income, assets and net equity would
have been if the acquisition had occurred on January 1, 1995. The acquisition
was accounted for as a purchase.
F-28
<PAGE>
FIBERCORE, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
--------------------------- ------------- ----------
FIBERCORE,
ASSETS INC. ALT, INC. ADJUSTMENTS COMBINED
--------------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
Current Assets:
Cash.............................................. $ 4,260 $ 8 $ $ 4,268
Accounts receivable, net of allowance for doubtful
accounts......................................... 518 44 562
Inventory......................................... 750 139 889
Other current assets.............................. 74 1 75
--------------- ----------- ------------- ----------
Total Current Assets............................. 5,602 192 -- 5,794
Property and equipment, net of depreciation ....... 3,613 5 3,618
Patents, net of amortization....................... 82 7,034 (225)(2,3) 6,891
Other assets....................................... 7,139 7,040 (1,5) 99
--------------- ----------- ------------- ----------
Total Assets..................................... $16,436 $7,231 $6,815 $16,402
=============== =========== ============= ==========
LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable..................................... $ 2,963 $ 478 $ $ 3,441
Accounts payable.................................. 1,239 153 1,392
Accrued liabilities............................... 173 94 40 (5) 227
--------------- ----------- ------------- ----------
Total Current Liabilities........................ 4,375 725 40 5,060
Long-term debt, less current maturities............ 7,194 7,194
--------------- ----------- ------------- ----------
Total Liabilities................................ 11,569 725 40 12,254
--------------- ----------- ------------- ----------
Stockholders' Equity:
Common stock...................................... 28 9 9 (1) 28
Additional paid-in capital........................ 8,843 6,991 6,991 (1) 8,843
Accumulated deficit............................... (3,725) (494) (225) (4,444)
Accumulated translation adjustment................ (279) -- (279)
--------------- ----------- ------------- ----------
Total Stockholders' Equity....................... 4,867 6,506 6,775 4,148
--------------- ----------- ------------- ----------
Total Liabilities and Stockholders' Equity....... $16,436 $7,231 $ 6,815 $16,402
=============== =========== ============= ==========
</TABLE>
See the notes to the pro forma consolidated financial statements.
F-29
<PAGE>
FIBERCORE, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
--------------------------- ------------- ------------
FIBERCORE,
INC. ALT, INC. ADJUSTMENTS COMBINED
--------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Net Sales.......................................... $ 1,617 $ 173 $ $ 1,790
Cost of Sales...................................... 2,504 109 435 (2) 3,048
--------------- ----------- ------------- ------------
Gross Profit (Loss)............................... (887) 64 (435) (1,258)
Research and Development........................... 31 121 152
Selling, General and Administrative Expenses ...... 1,033 278 105 (4) 1,206
--------------- ----------- ------------- ------------
Loss from Operations.............................. (1,951) (335) (330) (2,616)
Interest Income.................................... 81 81
Interest Expense................................... 262 277 (210)(3) 329
Other Income....................................... 35 118 (105)(4) 48
--------------- ----------- ------------- ------------
Net Loss.......................................... $(2,097) $(494) $ (225) $ (2,816)
=============== =========== ============= ============
Primary Earnings (Loss) Per Share................. $ (0.09)
============
Weighted Average Shares Outstanding............... 30,157,895
============
Fully Diluted Earnings (Loss) Per Share........... $ (0.09)
============
Weighted Average Shares Outstanding (Fully
Diluted)......................................... 30,365,796
============
</TABLE>
See the notes to the pro forma consolidated financial statements.
F-30
<PAGE>
FIBERCORE, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
1. The consolidated interim financial statements include all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results for the periods. These adjustments are of a normal recurring nature.
2. Explanation of Pro forma Adjustments:
(1) Elimination of investment by FiberCore in ALT.
(2) Additional amortization expense on patents for the period January 1, 1995
to September 18, 1995 that would have been charged had the acquisition occurred
at the beginning of the period.
(3) Reduction of interest expense on ALT debt that was capitalized
immediately prior to the acquisition, that would not have been incurred had the
acquisition occurred at the beginning of the period.
(4) Elimination of intercompany charges vs income.
(5) Elimination of deferred costs on FiberCore's books resulting from charges
from ALT that were included in deferred revenue on ALT's books.
F-31
<PAGE>
FIBERCORE, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
(Unaudited)
The Pro forma Financial Statements are presented for the year ended December 31,
1995 and the nine months ended September 30, 1995 to reflect the acquisition by
the Company of ALT (the only transaction for which the pro forma statements are
presented) as if the acquisition had occurred at the beginning of the respective
periods, January 1, (the acquisition actually occured on September 18, 1995).
The entities included are FiberCore, Inc. and ALT, Inc. The pro forma
presentation shows what the effect on net income, assets and net equity would
have been if the acquisition had occurred on January 1, 1995. The acquisition
was accounted for as a purchase.
F-32
<PAGE>
FIBERCORE, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
---------------------------- ------------- ----------
ASSETS FIBERCORE, INC. ALT, INC. ADJUSTMENTS COMBINED
---------------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
Current Assets:
Cash............................................... $ 793 $ 40 $ $ 833
Accounts receivable, net of allowance for doubtful
accounts.......................................... 832 74 36 (6) 870
Inventory.......................................... 1,280 127 1,407
Other current assets............................... 27 1 28
---------------- ----------- ------------- ----------
Total Current Assets.............................. 2,932 242 36 3,138
Property and equipment, net of depreciation ........ 4,114 5 4,119
Patents, net of amortization........................ 77 6,896 (189)(2,3) 6,784
Other assets........................................ 7,162 7,036 (1,5) 126
---------------- ----------- ------------- ----------
Total Assets...................................... $14,285 $7,143 $6,883 $14,167
================ =========== ============= ==========
LIABILITIES and STOCKHOLDERS'
EQUITY
Current Liabilities:
Notes payable...................................... $ 200 $ 410 $ $ 610
Accounts payable................................... 1,658 188 35 (6) 1,811
Accrued liabilities................................ 870 161 37 (5) 994
---------------- ----------- ------------- ----------
Total Current Liabilities......................... 2,728 759 72 3,415
Long-term debt, less current maturities............. 5,000 5,000
---------------- ----------- ------------- ----------
Total Liabilities................................. 7,728 759 72 8,415
---------------- ----------- ------------- ----------
Stockholders' Equity:
Common stock....................................... 31 9 9 (1) 31
Additional paid-in capital......................... 11,760 6,991 6,991 (1) 11,760
Accumulated deficit................................ (5,449) (616) (189) (6,254)
Accumulated transalation adjustment................ 215 215
---------------- ----------- ------------- ----------
Total Stockholders' Equity........................ 6,557 6,384 6,811 5,752
---------------- ----------- ------------- ----------
Total Liabilities and Stockholders' Equity........ $14,285 $7,143 $6,883 $14,167
================ =========== ============= ==========
</TABLE>
See the notes to the pro forma consolidated financial statements.
F-33
<PAGE>
FIBERCORE, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
---------------------------- ------------- ------------
FIBERCORE, INC. ALT, INC. ADJUSTMENTS COMBINED
---------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Net Sales.................................... $ 3,009 $ 246 $ $ 3,255
Cost of Sales................................ 4,467 175 451 (2) 5,093
---------------- ----------- ------------- ------------
Gross Profit (Loss)......................... (1,458) 71 (451) (1,838)
Research and Development..................... 55 133 188
Selling, General and Administrative
Expenses.................................... 1,922 432 107 (4) 2,247
---------------- ----------- ------------- ------------
Loss from Operations........................ (3,435) (494) (344) (4,273)
Interest Income.............................. 148 148
Interest Expense............................. 485 307 (262)(3) 530
Other Income................................. 85 185 (107)(4) 163
Other Expense................................ 133 133
---------------- ----------- ------------- ------------
Net Loss.................................... $(3,820) $(616) $(189) $ (4,625)
================ =========== ============= ============
Primary Earnings (Loss) Per Share........... $ (0.15)
============
Weighted Average Shares Outstanding......... 30,245,879
============
Fully Diluted Earnings (Loss) Per Share..... $ (0.15)
============
Weighted Average Shares Outstanding (Fully
Diluted)................................... 30,980,539
============
</TABLE>
See the notes to the pro forma consolidated financial statements.
F-34
<PAGE>
FIBERCORE, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
(Unaudited)
1. The consolidated pro forma financial statements include all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results for the periods. These adjustments are of a normal recurring nature.
2. Explanation of Pro forma Adjustments:
(1) Elimination of investment by FiberCore in ALT.
(2) Additional amortization expense on patents for the period January 1, 1995
to September 18, 1995 that would have been charged had the acquisition occurred
at the beginning of the period.
(3) Reduction of interest expense on ALT debt that was capitalized
immediately prior to the acquisition, that would not have been incurred had the
acquisition occurred at the beginning of the period.
(4) Elimination of intercompany charges vs income.
(5) Elimination of deferred costs on FiberCore's books resulting from charges
from ALT that were included in defered revenue on ALT's books.
(6) Elimination of intercompany accounts receivable vs. accounts payable
between FiberCore and ALT.
F-35
<PAGE>
LETTERHEAD OF MOTTLE MCGRATH BRANEY & FLYNN, P.C.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
FiberCore Incorporated and Subsidiary
We have audited the consolidated balance sheets of FiberCore Incorporated and
Subsidiary as of December 31, 1994 and 1993, and the related consolidated
statements of operations, shareholders' equity and cash flows for the year ended
December 31, 1994 and the period ended November 5, 1993 (Date of Inception) to
December 31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion. In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of FiberCore Incorporated and
Subsidiary as of December 31, 1994 and 1993, and the results of their operations
and their cash flows for the year ended December 31, 1994 and the period
November 5, 1993 (Date of Inception) to December 31, 1993 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern As described in Note 1 to the financial
statements, the Company has experienced a loss from operations for the year
ended December 31, 1994 and has a net working capital deficiency at December 31,
1994. In the event that the Company is unable to obtain suitable alternative
financing, there is substantial doubt about the Company's ability to continue as
a going concern. Management's plans in response to this matter are described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ MOTTLE MCGRATE BRANEY & FLYNN, P . C.
-------------------------------------
MOTTLE MCGRATE BRANEY & FLYNN, P . C.
Worcester, Massachusetts
November 6, 1995
F-36
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
BALANCE SHEETS
December 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
-------------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 253,557 $397,850
Accounts receivable .............................................. 189,008 --
Other receivables ................................................ 120,119 --
Due from affiliate ............................................... 1,790 --
Inventories ...................................................... 168,344 --
Prepaid and other current assets ................................. 7,853 5,126
-------------- -----------
Total current assets ............................................ 740,671 402,976
-------------- -----------
Property and equipment ............................................ 3,557,181 2,833
Less accumulated depreciation .................................... 254,953 --
-------------- -----------
3,302,228 2,833
-------------- -----------
Other assets:
Patent, less accumulated amortization of $2,086 in 1994 .......... 81,591 68,035
Organizational costs, less accumulated amortization of $33,315 in
1994 ............................................................ 133,259 166,574
Security deposit ................................................. 7,500 --
-------------- -----------
222,350 234,609
-------------- -----------
$ 4,265,249 $640,418
============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable .................................................... $ 207,150 $ --
Current maturities of capitalized lease obligation ............... 81,052 --
Accounts payable ................................................. 854,671 3,751
Accrued expenses ................................................. 86,926 --
-------------- -----------
Total current liabilities ....................................... 1,229,799 3,751
-------------- -----------
Capitalized lease obligation, less current portion ............... 456,476 --
-------------- -----------
Stockholders' Equity:
Common stock, $.01 par value, authorized 20,000,000 shares; issued
6,594,264 and 5,600,001 shares; of which 125,000 shares are held
in treasury in 1994 ............................................. 65,943 56,000
Paid in capital .................................................. 4,627,774 660,667
Subscriptions receivable ......................................... (80,000)
Accumulated deficit .............................................. (1,624,913) --
Accumulated translation adjustment ............................... 10,170 --
-------------- -----------
3,078,974 636,667
Less treasury stock, at cost ..................................... 500,000 --
-------------- -----------
Total stockholders' equity ...................................... 2,578,974 636,667
-------------- -----------
$ 4,265,249 $640,418
============== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-37
<PAGE>
FIBERCORE INCORPORATED AND SUBSTDIARY
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994 AND THE PERIOD NOVEMBER 5, 1993
(DATE OF INCEPTION) TO DECEMBER 31, 1993
1994 1993
--------------- -------
Net sales ................................... $ 230,888 $ --
Cost of sales ............................... 1,063,560 --
--------------- -------
Gross profit (loss) ........................ (832,672) --
Operating expenses: .........................
Selling, general and administrative expenses 699,199 --
Research and development ................... 90,465 --
--------------- -------
(1,622,336) --
Operating loss .............................
Interest income ............................ 14,870 --
Interest expense ........................... (22,590) --
Other income ............................... 5,143 --
--------------- -------
Net loss ................................... $(1,624,913) $ --
=============== =======
See accompanying notes to consolidated financial statements.
F-38
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1994 AND THE PERIOD NOVEMBER 5, 1993
(DATE OF INCEPTION) TO DECEMBER 31, 1993
<TABLE>
<CAPTION>
COMMON STOCK
---------------------
ADDITIONAL ACCUMULATED
$0.1 PAR PAID-IN SUBSCRIPTION ACCUMULATED TRANSLATION
SHARES VALUE CAPITAL RECEIVABLE DEFICIT ADJUSTMENT
---------- --------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of stock for services provided ......... 2,617,581 $26,176 $ 136,961 $ -- $ -- $ --
Issuance of stock for patent .................... 1,000,000 10,000 50,000 -- -- --
Issuance of stock ............................... 1,535,753 15,357 398,173 -- -- --
Issuance of stock in exchange for subscription
receivable ...................................... 446,667 4,467 75,533 (80,000) -- --
---------- --------- ----------- ------------ ------------- -----------
Balance, December 31, 1993 ...................... 5,600,001 56,000 660,667 (80,000) -- --
Issuance of stock in exchange for equipment .... 605,000 6,050 2,413,950 -- -- --
Issuance of stock for cash ...................... 387,250 3,873 1,545,127 -- -- --
Proceeds received ............................... -- -- -- 80,000 -- --
Issuance of stock for services .................. 2,013 20 8,030 -- -- --
Purchase of treasury stock, (125,000 shares) ... -- -- -- -- -- --
Currency translation adjustment ................. -- -- -- -- -- 10,170
Net loss ........................................ -- -- -- -- (1,624,913) --
---------- --------- ----------- ------------ ------------- -----------
Balance, December 31, 1994 ...................... 6,594,264 $65,943 $4,627,774 $ -- $(1,624,913) $10,170
========== ========= =========== ============ ============= ===========
</TABLE>
FIBERCORE INCORPORATED AND SUBSIDIARY
STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1994 AND THE PERIOD NOVEMBER 5, 1993
(DATE OF INCEPTION) TO DECEMBER 31, 1993
(continued)
TREASURY
STOCK TOTAL
----------- --------------
Issuance of stock for services provided ......... $ -- $ 163,137
Issuance of stock for patent .................... -- 60,000
Issuance of stock ............................... -- 413,530
Issuance of stock in exchange for subscription
receivable ...................................... -- --
----------- -----------
Balance, December 31, 1993 ...................... -- 636,667
Issuance of stock in exchange for equipment .... -- 2,420,000
Issuance of stock for cash ...................... -- 1,549,000
Proceeds received ............................... -- 80,000
Issuance of stock for services .................. -- 8,050
Purchase of treasury stock, (125,000 shares) ... (500,000) (500,000)
Currency translation adjustment ................. -- 10,170
Net loss ........................................ -- (1,624,913)
----------- -----------
Balance, December 31, 1994 ...................... $(500,000) $ 2,578,974
========== ===========
See accompanying notes to consolidated financial statements.
F-39
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994 AND THE PERIOD NOVEMBER 5, 1993
(DATE OF INCEPTION) TO DECEMBER 3L, 1993
<TABLE>
<CAPTION>
1994 1993
--------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ........................................................................ $(1,624,913) $ --
--------------- -----------
Adjustments to reconcile net loss to net cash used in operating activities: .....
Depreciation and amortization .................................................. 289,237 --
Accounts receivable ............................................................ (189,008) --
Other receivables .............................................................. (120,119) --
Inventories .................................................................... (168,344) --
Prepaid and other current assets ............................................... (2,727) (5,126)
Accounts payable ............................................................... 866,120 3,751
Accrued expenses ............................................................... 86,926 --
--------------- -----------
Total adjustments ............................................................. 762,085 (1,375)
--------------- -----------
Net cash used in operating activities ......................................... (862,828) (1,375)
--------------- -----------
Cash flows from investing activities:
Purchase of property and equipment .............................................. (558,653) (2,833)
Increase in patent costs ........................................................ (15,642) (8,035)
Cost of organizational costs .................................................... (3,437)
Foreign currency translation adjustment ......................................... 11,287 --
Net amount due from affiliate ................................................... (1,790) --
--------------- -----------
Net cash used in investing activities .......................................... (564,798) (14,305)
--------------- -----------
Cash flows from financing activities:
Proceeds from subscriptions receivable .......................................... 80,000 --
Proceeds from sale of common stock .............................................. 1,549,000 413,530
Proceeds from note payable ...................................................... 200,000 --
Security deposit ................................................................ (7,500) --
Repayment of capitalized lease obligations ...................................... (38,167) --
Purchase of treasury stock ...................................................... (500,000) --
--------------- -----------
Net cash provided by financing activities ...................................... 1,283,333 413,530
--------------- -----------
Net change in cash ............................................................... (144,293) 397,850
Cash, beginning of year .......................................................... 397,850 --
--------------- -----------
Cash, end of year ................................................................ $ 253,557 $ 397,850
=============== ===========
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest ......................................................................... $ 22,590 $ --
Supplemental disclosure of noncash investing and financing activities:
Patents acquired in exchange for common stock ................................... -- 60,000
Common stock issued in exchange for services provided in the start-up phase of
the Company .................................................................... -- 163,137
Equipment acquired in exchange for common stock and capital lease ............... 2,995,695 --
Accounts payable reclassed to notes payable ..................................... 7,150 --
Stock issued in exchange for services ........................................... 8,050 --
</TABLE>
See accompanying notes to financial statements.
F-40
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994 AND THE PERIOD NOVEMBER 5, 1993
(DATE OF INCEPTION) TO DECEMBER 31, 1993
<TABLE>
<CAPTION>
1994 1993
----------- ---------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest........................................................... $ 22,590 $ --
Supplemental disclosure of noncash investing and financing activities:
Patents acquired in exchange for common stock....................... -- 60,000
Common stock issued in exchange for services provided in the
start-up phase of the Company...................................... -- 163,137
Equipment acquired in exchange of common stock and capital lease.... 2,995,695 --
Accounts payable reclassed to notes payable......................... 7,150 --
Stock issued in exchange for services............................... 8,050 --
</TABLE>
See accompanying notes to financial statements.
F-41
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
(1) INCORPORATION AND DESCRIPTION OF BUSINESS
FiberCore Incorporated (Company) was organized under the laws of the State of
Nevada on November 5, 1993. The Company is involved in the research, development
and commercialization of a patented, new and more efficient method of producing
single-mode optical fiber preforms.
At December 31, 1993 the Company was considered a development stage corporation.
For the year ended De cember 31, 1994, the Company is no longer considered to be
in the development stage. On July 14, 1994 the Company established a 100%
wholly-owned subsidiary, Fiber Core Glasfaser Jena GmbH (Jena) which is
organized and operates under the laws of Germany. Jena is involved in the
production and selling of optical fiber, preforms and fiber for the
telecommunications market.
The Company experienced a loss from operations of $1,624,913 for the year ended
December 31, 1994 and has a net working capital deficiency of $489,128 at
December 31, 1994. Additionally, the Company's newly acquired subsidiary, ALT
(see Note 14) is in default on loans totaling approximately $413,000 plus
accrued interest and is contingently liable for debt of its former subsidiary
approximating $l,000,000. The Company is attempting to obtain additional funding
through debt and/or equity financing. In the event that the Company is unable to
secure additional funding, there is substantial doubt about the Company's
ability to continue as a go ing concern.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of consolidation
For 1994, the consolidated financial statements include the accounts of
FiberCore Incorporated and its subsid iary, Fiber Core Glasfaser Jena GmbH. All
material intercompany balances and transactions have been elimi nated in
consolidation.
(b) Inventories
Inventories are stated at the lower of cost (average) or market. Cost for Jena
inventory, approximately 73% of total inventory, is based upon normal
utilization of production capacities. Cost for Company inventory, approximately
27% of total inventory, is determined by the first-in, first-out method.
(c) Property and equipment
All property and equipment acquisitions are stated at cost. The cost of
maintenance and repairs is charged to expense as incurred.
The Company's policy is to depreciate property and equipment using the
straight-line method over the useful lives of the assets.
(d) Other assets
Organizational costs will be amortized using the straight-line method over a
five year period.
The Company has made various filings for patents on new products and product
improvements. Total related costs amount to $15,642 and $668,035 at December 31,
1994 and 1993, respectively, and are amortized over seventeen years beginning
with the period in which the patent rights are granted.
It is the Company's policy to account for patents at the lower of amortized cost
or net realizable value. On an ongoing basis the Company reviews the valuation
and amortization of its patents. As a part of this review, the Company estimates
the net realizable value of its patents, taking into consideration any events
and circumstances which might have diminished the value.
F-42
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Translation of foreign currencies
The translation of foreign currencies into U.S. dollars is performed for balance
sheet accounts using current exchange rates in effect at the balance sheet date
and for revenue and expense accounts using an average exchange rate for the
period. The gains and losses resulting from translation are included in
stockholders' equity.
(f) Income taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". Deferred taxes are
recognized based on the temporary difference between the recognition of certain
costs and expenses for financial statement and tax purposes.
(3) OTHER RECEIVABLES
Other receivables consist of the following:
1994 1993
-------- -----
Value added
tax ..................................... $118,984 $--
Other ................................... 1,135 --
-------- -----
$120,119 $--
======== =====
The value added tax receivable comprises principally advance payments to the
German tax authorities.
(4) INVENTORIES
Inventories consist of the following:
1994 1993
-------- -----
Raw materials ........................... $ 11,929 $--
Finished goods .......................... 156,415 --
-------- -----
$168,344 $--
======== =====
(5) PROPERTY AND EQUIPMENT
Property and equipment, together with their estimated useful lives, consist of
the following:
ESTIMATED
USEFUL LIVES 1994 1993
----------- ---------- ----------
Office equipment ....................... 5 years $ 24,707 $ 2,833
Machinery and
equipment .............................. 3 - 7 years 3,522,346 --
Furniture and
fixtures ............................... 7 years 5,421 --
Leasehold improvements ................. 10 years 4,707 --
---------- ----------
$3,557,181 $ 2,833
========== ==========
Depreciation on property and equipment charged to expense was $253,836 in 1994.
Included in the above amounts is equipment acquired by an obligation under a
capital lease of $2,995,695. Accumulated amortization on property and equipment
acquired by an obligation under a capital lease totalled $250,986, which is
included in depreciation expense for the year ended December 31, 1994.
F-43
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(6) NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<CAPTION>
1994
----------
<S> <C>
Note payable to John Royle and Sons, with interest at prime plus 2%, due February
2, 1996............................................................................. $ 7,150
Note payable to Harkerside Trust, dated December 23, 1994, interest at 10.5%
payable on June 1st and December 1st of each year, due December 23, 1996 or on
demand after December 6, 1995, by thirty days prior written notice of such demand
to FiberCore Incorporated, issued with non-qualified warrants expiring January 1,
2000 to purchase 10,000 shares of common stock at $6.00 per share................... 200,000
----------
207,150
Less current portion................................................................ 207,150
----------
$ --
==========
</TABLE>
(7) OBLIGATION UNDER A CAPITAL LEASE
Obligation under a capital lease to SICO Jena Quarzschmelze
GmbH, with interest at approximately 8%, expiring June 2000 $537,528
Less current portion ........................................ 81,052
-----------
$456,476
===========
Minimum future lease payments for an obligation under a capital lease as of
December 31, 1994 for each of the next five years and in the aggregate are:
YEAR ENDED DECEMBER AMOUNT
- ------------------- --------
1995 ...................................................... $121,125
1996 ...................................................... 121,125
1997 ...................................................... 121,125
1998 ...................................................... 121,125
1999 and thereafter ....................................... 181,690
--------
Total minimum future lease payments ....................... 666,190
Less: amount representing interest ........................ 128,662
--------
Present value of net minimum lease
payments ................................................. $537,528
========
F-44
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(8) COMMITMENTS AND CONTINGENCIES
In January 1994, the Company signed a lease for its office and production space.
The lease term of the original lease expires on January 31, 1997 with an option
to extend for two successive three year periods after the original expiration of
the lease. The leased property may be acquired for amounts ranging from
$1,200,000 to $l,450,000 over the first three years of the lease term.
Future minimum lease payments under noncancellable operating leases (with
minimum or remaining lease terms in excess of one year) are as follows:
YEAR ENDING AMOUNT
- ----------- ------
1995 ................................................. $81,246
1996 ................................................. 89,583
1997 ................................................. 7,500
Jena conducts its operations from premises under an operating lease with SICO
Jena Quarzschmelze GmbH. The lease expires within the next six years, and
contains various renewal options. The rental payments for the facility is fixed
at $21,224 per month for the first six years.
Approximate future minimum payments under the operating lease, including all
option periods which Jena believes will be exercised, for the next five years
and in the aggregate are as follows:
FISCAL YEAR ENDING DECEMBER AMOUNT
--------------------------- ------
1995 ..................................................... $ 254,684
1996 ..................................................... 254,684
1997 ..................................................... 254,684
1998 ..................................................... 254,684
1999 ..................................................... 254,684
Thereafter ............................................... 127,344
----------
Total minimum payments .................................. $1,400,764
==========
Included in the statement of operations for the year ended December 31, 1994 is
rent expense of $165,846 under the above described operating leases.
The Company is subject to various claims and legal actions which arise in the
ordinary course of business. The Company believes such claims and legal actions,
individually or in the aggregate, will not have a material adverse effect on the
business of the Company.
Management of Jena has disclosed the fact that none of the property and
equipment at Jena are presently covered by adequate insurance coverage.
The Company at December 31, 1994 maintained a cash account in excess of the
federally insured limit of $100,000.
Jena has given a minimum investment guarantee in the amount of $1,290,600 to
upgrade the equipment acquired from SICO under the capital lease. The investment
can be made within the lease period at the discretion of Jena. Subsequently, the
Company entered into an agreement which provided the funds in May l995.
Jena has entered into a contract to utilize 25 employees from SICO until June
30, 1995 and 30 employees; thereafter at SICO's direct cost. This obligation
expires on June 30, 2000.
F-45
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(8) COMMITMENTS AND CONTINGENCIES (CONTINUED)
Based on 1994 payments under the contract the future financial commitments are
estimated as follows:
YEAR ENDED DECEMBER AMOUNT
- ------------------- ------
1995 .................................................... $1,220,750
1996 .................................................... 1,349,250
1997 .................................................... 1,349,250
1998 .................................................... 1,349,250
1999 and thereafter ..................................... 2,023,875
----------
Total estimated personnel lease
payments .............................................. $7,292,375
==========
(9) SHAREHOLDERS' EQUITY
The following stock options were granted during the year ended December 31,
1994:
SHARES PRICE
------ -----
Granted in 1994 .................................. 20,000 $.01
----
Balance at December 31,
1994 ............................................. 20,000
====
Options vest at rates stated in each employee's employment contract. The primary
vesting date is the anniversary of each employee's starting date of employment.
These stock options have no stated expiration dates.
The activity relating to stock warrants issued for the year ended December 31,
1994 is summarized below:
EXERCISABLE AT PRICE PER SHARE
$ 4.80 $ 6.00 TOTAL
------- ------- -------
December 31,
1993 ........................... -- -- --
Issued ......................... 213,625 10,000 223,625
Cancelled ...................... -- -- --
Reclassed ...................... -- -- --
------- ------- -------
December 31, 1994 .............. 213,625 10,000 223,625
======= ======= =======
As of December 31, 1994, no warrants had been exercised.
(10) INCOME TAXES
The Company has a net operating loss carryforward available of approximately
$500,000 at December 31, 1994 for financial and federal and state tax purposes.
The net operating loss carryforward expires in the year 2009. Jena has net
operating loss carryforwards at December 31, 1994 of approximately $760,000 for
corporation tax and for trade income tax purposes available to offset future
taxable income. Under German tax law the losses can be carried forward
indefinitely. Because future profitability is uncertain, such benefits have been
fully reserved.
F-46
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(11) CONCENTRATIONS OF CREDIT RISK
The approximate net product sales by the Company to its major customers and
related percentage are as follows:
1994
CUSTOMER AMOUNT %
- -------- -------- --------
A ................................... $141,167 61%
B ................................... 77,755 34%
At December 31, 1994, one customer accounted for 95% of the total receivables.
(12) RELATED PARTY TRANSACTIONS
The common stock of FiberCore Incorporated at fair market value of $2,420,000
has been given as consideration to SICO Jena Quarzschmelze GmbH in exchange for
equipment under the capital lease.
The chief executive officer of Fiber Core Glasfaser Jena GmbH is the controlling
shareholder of SICO Jena Quarzschmelze GmbH.
SICO is Jena's main supplier of materials and its main customer; substantially
all transactions between SICO and Jena did not result in cash payments in 1994.
SICO so far informally extended payment terms. In conducting its operations Jena
is dependent on SICO.
Transactions with SICO Jena Quarzschmelze GmbH during the year ended December
31, 1994 consist of the following:
AMOUNT
----------
Plant and equipment under capital lease ....................... $2,995,695
Rent of premises .............................................. 127,342
Purchase of services .......................................... 407,252
Purchase of materials ......................................... 69,076
Sales of fibers ............................................... 166,079
At December 31, 1994 the Company has a receivable from SICO amounting to
$178,676 and a liability to SICO of $1,133,877 including the remaining capital
lease obligations, utilization of SICO personnel, rent and purchases of raw
material.
F-47
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(13) FOREIGN OPERATIONS
FiberCore Incorporated and Subsidiary operates principally in 2 geographic
areas: the United States (Company) and Germany (Jena). Following is a summary
of information by area for the years ended December 31, 1994 and 1993:
1994 1993
-------------- -----------
Net sales to customers:
United States ..................................... $ -- $ --
Germany............................................ 230,888 --
-------------- -----------
Net sales as reported in the accompanying
statements of operations......................... $ 230,888 $ --
============== ===========
Inter-area sales:
United States...................................... $ 488,838 $ --
Germany............................................ -- --
-------------- -----------
Total intersegment sales.......................... $ 488,838 $ --
============== ===========
Loss from operations:
United States ..................................... $(1,023,413) $ --
Germany ........................................... (598,923) --
-------------- -----------
(1,622,336) --
Interest income..................................... 14,870 --
Interest expense ................................... (22,590) --
Other income........................................ 5,143 --
Net loss as reported in the accompanying
statements of operations ........................ $(1,624,913) $ --
============== ===========
Identifiable assets:
United States...................................... $ 491,700 $640,418
Germany............................................ 3,773,549 --
-------------- -----------
Total assets as reported in the accompanying
balance sheets..................................... $ 4,265,249 $640,418
============== ===========
Inter-area sales are eliminated in consolidation and are excluded from net sales
reported in the accompanying statements of operations. Identifiable assets are
those that are identifiable with operations in each geographic area.
F-48
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(14) SUBSEQUENT EVENTS
In April 1995, FiberCore Incorporated issued to AMP Incorporated (AMP), a
floating rate collateralized debenture in the amount of $5,000,000 due ten years
after the date of issuance, with interest, at an annualized rate adjusted
quarterly, equal to the sum of 1% and the 3-month London Interbank offered rate.
AMP has the option to convert the outstanding loan plus accrued interest into
common stock of FiberCore at $4.25 per share in years 1-5 or the per share price
provided for in the last third party private equity financing in years 6-10.
In April 1995, the Board of Directors ratified actions by FiberCore Incorporated
to enter into a joint venture with John Royle & Sons Co. and Middle East
Specialized Cables Company (MESC) for a period of 15 years to be known as Middle
East Fiber Cables Co. (MEFC). The Company shall issue and sell to MESC 200,000
shares of common stock at $5.00 per share. The agreement also states MESC will
receive 85,000 shares of additional common stock and 150,000 warrants upon the
completion and execution of a product supply contract between the Company and
the joint venture entity, MEFC. MESC must exercise the 150,000 warrants, to
purchase 150,000 shares of the Company's common stock at $6.00 per share, within
a two year period to receive an additional 65,000 shares. The Company will
invest $500,000 of the $1,000,000 purchase price in MEFC as a capital
contribution to the joint venture and in the process acquire a 20% interest in
MEFC.
On May 19, 1995, the Board of Directors of FiberCore Incorporated authorized the
establishment of a wholly-owned subsidiary, FiberCore Mid East Ltd., to be
located in the Cayman Islands for the purpose of holding the Company's eventual
15% ownership of Middle East Fiber Cables Co. (MEFC).
On May 19, 1995, the Board of Directors approved a merger agreement with
Venturecap, Inc. On July 18, 1995, Venturecap acquired 100% of the outstanding
shares of FiberCore Incorporated in exchange for shares of restricted common
stock of Venturecap. Effective at the closing all officers and directors of
Venturecap resigned and were replaced with designees of FiberCore Incorporated.
Venturecap changed its name to FiberCore, Inc.
On June 23, 1995 the Board of Directors authorized 200,000 shares of FiberCore
Incorporated common stock to be exchanged for shares owned by a consultant,
Techman International, of F.O.I. (Pvt.) Ltd., a joint venture located in
Pakistan. The transaction would give the Company a 51% ownership in the joint
venture. This transaction is contingent upon the closing of financing
arrangements of F.O.I. Ltd.
On May 19, 1995, a merger under the purchase method of accounting between
Automated Light Technologies, Inc. (ALT), an affiliate, and a wholly-owned
subsidiary of FiberCore, Inc. (ALT Merger Co.) was approved by the Boards of
Directors of both Companies. The merger took place on September 18, 1995.
Accordingly, effective immediately prior to the merger, loans and warrants of
consenting ALT holders were converted, resulting in the issuance of
approximately 4.5 million additional shares of common stock. FiberCore, Inc.
will acquire 100% of all the outstanding shares of ALT in exchange for shares of
restricted common stock of FiberCore Incorporated. Following the acquisition,
ALT will operate as a subsidiary of FiberCore Incorporated.
F-49
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(14) SUBSEQUENT EVENTS (CONTINUED)
On August 19, 1995, Jena entered into a purchase agreement regarding assets
previously leased under the capital lease agreement from SICO. Subject to the
purchase agreement, the 605,000 shares of FiberCore Incorporated will be
returned to Jena in exchange for 24 equal quarterly installments of $100,833
beginning October 31, 1995 subject to Jena or the Company closing on its current
financing. The Company is authorized to cancel these shares after the first two
installment payments have been made. After such payments the installment obli
gation will be collateralized by the underlying assets. In the same agreement,
Jena has assumed the obligation to take over the existing employment contracts
between SICO and all personnel leased from SICO. The trans fer of employment
contracts is subject to the employees' consent. Employer's obligations related
to the 30 employment contracts covered under the agreement will transfer to
Jena.
On August 19, 1995, the lease agreement for the premises with SICO has been
amended effective September 1, 1995. The new lease expires on June 30, 2000 and
has various renewal options. The agreement states that the monthly payments of
$28,703 not including utilities are for the premises only. The intention of the
agree ment is however, for the monthly payments to include installment payments
for the purchase of plant and equipment in the same amount as the lease payments
under the original capital lease agreement. An amend ment to the new lease
agreement is in the process of being prepared.
The Company in 1995, received from Harkerside Trust, a demand notice for the
note payable dated December 23, 1994. As stated in the terms of the note
Harkerside Trust gave the Company thirty days prior written notice. The note is
now due on demand after December 6, 1995. Also the Company in April 1995, repaid
the note payable to John Royle and Sons, in full. These obligations are recorded
in the balance sheet at December 31, 1994 as current due to the items of note
above, (see note 6).
F-50
<PAGE>
LETTERHEAD OF MOTTLE MCGRATH BRANEY & FLYNN, P.C.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Automated Light Technologies, Inc.
We have audited the accompanying balance sheets of Automated Light Technologies,
Inc. as of December 31, 1994, 1993 and 1992 and the related statements of
operations, shareholders' deficiency, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Automated Light Technologies,
Inc. as of December 31, 1994, 1993 and 1992 and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As described in Note 1 to the financial
statements, the Company has experienced recurring losses from operations and has
a net capital deficiency and is in arrears on certain liabilities. In the event
that the Company is unable to obtain suitable alternative financing, there is
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in response to this matter are described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ MOTTLE McGRATH BRANEY & FLYNN, P.C.
-----------------------------------
MOTTLE McGRATH BRANEY & FLYNN, P.C.
Worcester, Massachusetts
November 6, 1995
F-51
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
BALANCE SHEETS
December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS .......................................................
Current assets:
Cash ........................................................ $ 7,957 $ 11,472 $ 1,978
Accounts receivable, net of allowance for doubtful accounts
of $17,000, $21,374 and $21,154 in 1994, 1993 and 1992,
respectively ............................................... 51,284 34,961 141,893
Due from subsidiary ......................................... -- -- 133,485
Note receivable - subsidiary ................................ -- -- 75,000
Inventories ................................................. 157,111 163,848 225,003
Other current assets ........................................ 851 1,166 1,166
-------------- -------------- --------------
Total current assets ...................................... 217,203 211,447 578,525
Property and equipment, net of depreciation ............... 6,646 3,288 5,754
Patents, net of amortization of $7,663, $5,192 and $3,867
in 1994, 1993 and 1992, respectively ..................... 69,376 59,314 41,759
Investment in affiliate ................................... 60,000 60,000 --
Finance commitment fees and deposits ...................... -- 3,958 36,960
-------------- -------------- --------------
$ 353,225 $ 338,007 $ 662,998
============== ============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt ........................ $ 2,942,303 $ 2,827,254 $ 2,584,932
Accounts payable ............................................ 125,250 125,075 119,642
Accrued liabilities ......................................... 88,705 93,110 67,907
Accrued interest payable .................................... 1,533,333 1,100,658 636,480
Deferred revenue - affiliate ................................ 48,000 60,000 --
Due to affiliate ............................................ 1,790 -- --
Total current liabilities .................................. 4,739,381 4,206,097 3,408,961
Long-term debt, less current maturities .................... 690,000 690,000 690,000
-------------- -------------- --------------
Total liabilities ......................................... 5,429,381 4,896,097 4,098,961
-------------- -------------- --------------
Shareholders' deficiency:
Common stock, $0.01 par value, authorized 10,000,000 shares;
issued 3,848,423 in 1994 and 3,839,236 in 1993 and 1992 ..... 38,484 38,392 38,392
Additional paid-in capital ................................... 1,670,246 1,695,872 1,695,872
Accumulated deficit .......................................... (6,784,886) (6,264,369) (5,142,242)
-------------- -------------- --------------
(5,076,156) (4,530,105) (3,407,978)
Less treasury stock, cost of 15,323 shares in 1993 and 1992,
respectively ................................................ -- 27,985 27,985
Total shareholders deficiency ............................... (5,076,156) (4,558,090) (3,435,963)
$ 353,225 $ 338,007 $ 662,998
============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
F-52
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1994, 1993 and 1992
1994 1993 1992
------------- --------------- ---------------
Net sales ....................... $ 476,381 $ 328,063 $ 697,010
Cost of sales ................... 218,940 152,727 300,711
------------- --------------- ---------------
Gross profit .................. 257,441 175,336 396,299
Operating expenses:
Selling ........................ 144,153 200,352 282,184
General and administrative ..... 121,901 241,434 266,564
Research and development ....... 71,338 72,413 134,144
------------- --------------- ---------------
Operating loss ................ (79,951) (338,863) (286,593)
------------- --------------- ---------------
Other income (expense):
Interest expense ............... (472,721) (488,322) (438,351)
Interest income ................ 363 102,631 94,910
Other income ................... 41,238 -- --
Loss on investment in subsidiary (9,446) (397,573) (710,852)
------------- --------------- ---------------
Net loss ...................... $(520,517) $(1,122,127) $(1,340,886)
============= =============== ===============
See accompanying notes to financial statements.
F-53
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIENCY
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
COMMON STOCK
----------------------- ADDITIONAL
NUMBER OF PAR PAID-IN ACCUMULATED TREASURY
SHARES VALUE CAPITAL DEFICIT STOCK
------------ ---------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 ......... 3,831,766 $38,317 $1,684,142 $(3,801,356) $(27,985)
Common stock issued for services .... 7,470 75 11,730 -- --
Net loss ............................ -- -- -- (1,340,886) --
------------ ---------- ------------- --------------- ------------
Balance at December 31, 1992 ......... 3,839,236 38,392 1,695,872 (5,142,242) (27,985)
Net loss ............................ -- -- -- (1,122,127) --
------------ ---------- ------------- --------------- ------------
Balance at December 2l, 1993 ......... 3,839,236 38,392 1,695,872 (6,264,369) (27,985)
Common stock issued for services .... 24,510 245 2,206 -- --
Cancellation of treasury stock shares
(15,323 shares) .................... (15,323) (153) (27,832) -- 27,985
Net loss ........................... -- -- -- (520,517) --
------------ ---------- ------------- --------------- ------------
Balance at December 31, 1994 ......... 3,848,423 $38,484 $1,670,246 $(6,784,886) $ --
============ ========== ============= =============== ============
</TABLE>
See accompanying notes to financial statements.
F-54
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ............................................... $(520,517) $(1,122,127) $(1,340,886)
------------- --------------- ---------------
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Loss on investment in subsidiary ....................... 9,446 397,573 710,852
Depreciation and amortization .......................... 18,817 33,393 49,177
Product warranty reserve ............................... (6,800) (7,500) 1,680
Inventory obsolescence reserve ......................... (1,200) (3,400) 7,900
Write-down of financing commitment fee ................. -- 30,000 --
Bad debt expense ....................................... 7,266 -- --
Write-down of deposits and note receivable ............. 3,600 -- --
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable ................................... (23,589) 106,932 5,226
Inventories ........................................... 7,937 64,555 (143,700)
Other current assets .................................. (685) -- (1,000)
Increase (decrease) in liabilities:
Accounts payable ..................................... 175 5,433 87,642
Accrued liabilities .................................. 106,126 268,050 172,744
Deferred revenue - affiliate ......................... (12,000) -- --
Accrued interest ..................................... 432,675 464,178 273,083
------------- --------------- ---------------
Total adjustments ................................... 541,768 1,359,214 1,163,604
------------- --------------- ---------------
Net cash provided by (used in) operating activities .. 21,251 237,087 (177,282)
------------- --------------- ---------------
Cash flows from investing activities:
Issuance of a note receivable to subsidiary ............ -- -- (335,000)
Net (increase) decrease in subsidiary receivable ....... (9,446) (189,088) (66,425)
Net increase in amount due to affiliate ................ 1,790 -- --
Purchase of fixed assets ............................... (4,577) (916) (4,165)
Increase in patent costs ............................... (12,533) (18,880) (l,660)
------------- --------------- ---------------
Net cash used in investing activities ................ (24,766) (208,884) (407,250)
------------- --------------- ---------------
</TABLE>
See accompanying notes to financial statements.
F-55
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
---------- ----------- ------------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from debt ............................... -- -- 345,000
Payments of debt ................................. -- (17,709) (100,704)
Rental/services deposit .......................... -- (1,000) (1,400)
Payment of finance commitment fees ............... -- -- (30,000)
---------- ----------- ------------
Net cash provided by (used in) financing
activities ...................................... -- (18,709) 212,896
---------- ----------- ------------
Net increase (decrease) in cash ................... (3,515) 9,494 (371,636)
----------- ------------
Cash, beginning of year ........................... 11,472 1,978 373,614
---------- ----------- ------------
Cash, end of year ................................. $ 7,957 $ 11,472 $ 1,978
========== =========== ============
Supplemental disclosures of cash flow information:
Cash paid during the year for: Interest .......... $ 36,338 $ 23,873 $ 166,631
Non-cash transactions:
Received stock in exchange for services to be
provided to affiliate $ -- $ 60,000 $ --
Stock issued in exchange for debt and services 2,451 -- 11,805
Other receivables reclassed against debt -- -- 10,046
Notes payable issued in exchange for services 101,280 235,347 509,389
Cancellation of treasury stock shares 27,985 -- --
</TABLE>
See accompanying notes to financial statement.
F-56
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and operations
Automated Light Technologies (ALT or the Company) is a manufacturer and
distributor of fiber optic cable monitoring and fault locating systems to the
telecommunications industry. Its wholly-owned subsidiary, Allied Controls, Inc.
(Allied), which was acquired in May 1991, is engaged in the designing,
manufacturing and marketing of electromechanical and solid state relays and push
button switches and controls. Allied has a wholly-owned subsidiary, Thermosen,
Incorporated, which is also engaged in the relay business.
In August 1995, the Company distributed the stock of its subsidiary to its
shareholders thereby making Allied a separate independent entity. Therefore, the
financial statements for the years ended December 31, 1994, 1993 and 1992
reflect the financial position and results of operations of Automated Light
Technologles, Inc. on a nonconsolidated basis. (See Note 10)
The Company has experienced recurring losses from operations and has a net
capital deficiency of $5,076,156 at December 31, 1994. Additionally, the Company
is in default on loans totaling approximately $413,000 plus accrued interest of
approximately $58,000 and is contingently liable for debt of its former
subsidiary approximating $1,000,000. In September 1995 the Company was merged by
the purchase accounting method with a wholly-owned subsidiary of FiberCore, Inc.
(FiberCore) (See Note 11). FiberCore is attempting to obtain additional funding
through debt and/or equity funding. In the event that the Company is unable to
secure additional funding, there is substantial doubt about the Company's
ability to continue as a going concern.
(b) Inventories
Inventories are stated at the lower of cost or market. Cost is determined based
upon standard costs which approximate actual cost using the first-in, first-out
method.
(c) Property and equipment
All property and equipment acquisitions are stated at cost. The cost of
maintenance and repairs is charged to income as incurred.
The Company's policy is to depreciate property and equipment using the
straight-line method over the useful lives of the assets. Generally these lives
are as follows:
Machinery and equipment ............................. 12 years
Furniture and fixtures .............................. - 5 years
Computer equipment .................................. - 3 to 5 years
(d) Patents
In 1987, the Company exchanged 150,000 shares of common stock to acquire patents
technology, know-how and the worldwide rights (except Canada) to manufacture and
market a patented cable monitoring system for the detection of moisture and/or
sheath penetration. No value was assigned to these intangible assets.
The Company has made various filings for patents on new products and product
improvements. Total related costs amount to $22,156, $23,676 and $25,381 at
December 31, 1994, 1993 and 1992, respectively, and are amortized over seventeen
years beginning with the period in which the patent rights are granted.
F-57
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Income taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". Deferred taxes are
recognized based on the temporary difference between the recognition of certain
costs and expenses for financial statement and tax purposes.
(2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Raw material ........................... $ 58,147 $ 57,735 $ 80,747
Work-in-process ........................ 15,964 24,873 17,289
Finished goods ......................... 90,800 90,240 139,367
----------- ----------- -----------
164,911 172,848 237,403
----------- ----------- -----------
Allowance for obsolete and excess stock (7,800) (9,000) (12,400)
----------- ----------- -----------
$157,111 $163,848 $225,003
=========== =========== ===========
</TABLE>
(3) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Office equipment ........ $ 63,292 $ 58,715 $ 57,799
Machinery and equipment 65,099 65,099 65,099
Furniture and fixtures . 7,494 7,494 7,494
------------ ------------ ------------
135,885 131,308 130,392
Accumulated depreciation (129,239) (128,020) (124,638)
------------ ------------ ------------
$ 6,646 $ 3,288 $ 5,754
============ ============ ============
</TABLE>
Depreciation on property and equipment charged to income was $1,219 in 1994,
$3,382 in 1993 and $8,717 in 1992.
F-58
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)
(4) LONG-TERM DEBT
As of December 31, 1994, the Company owes $5,165,636 of notes payable and
accrued interest, all of which are in arrears. Of this amount, $239,360 bearing
interest at 10% and due on January 1, t996, is owed to Connecticut Development
Authority, and $231,747 bearing interest at 8.5% and due September 1, 1996, is
owed to Connecticut Innovation Inc. Holders of the balance $4,694,529, have
consented to the conversion of their loans to common stock, including interest
upon the happening of certain events. Prior to June 30, 1994, these loans were
bearing interest ranging from between 11% - 138. Thereafter, these loans bear
interest at 8.75%. (See Note 6)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Line of credit ....................................................... $ 200,000 $ 200,000 $ 200,000
Notes payable to One Venture Group, net of unamortized discount of
$2,331 and $9,427 for 1993 and 1992, respectively .................... 882,275 879,944 872,848
Notes payable to One Financial Group Inc. net of unamortized discount
of $8,898 and $17,796 for 1993 and 1992, respectively ................ 393,113 359,865 337,342
Notes payable to Albany Venture Group ................................ 305,000 305,000 305,000
Notes payable to individual officers and directors, net of
unamortized discount of $5,000 for 1992 .............................. 1,049,229 970,781 741,032
Note payable to Connecticut Innovation, net of unamortized discount
of $1,945, $3,056 and $4,167 for 1994, 1993 and 1992, respectively .. 208,939 207,828 215,053
Note payable to Connecticut Development Authority, net of unamortized
discount of $4,165 $5,594 and $7,023 for 1994, 1993 and 1992,
respectively ......................................................... 198,111 196,682 204,626
Notes payable, others, net of unamortized discount of $1,150 for 1992 395,636 397,154 399,031
------------ ------------ ------------
3,632,303 3,517,254 3,274,932
------------ ------------ ------------
Less current portion ................................................. 2,942,303 2,827,254 2,584,932
------------ ------------ ------------
$ 690,000 $ 690,000 $ 690,000
============ ============ ============
</TABLE>
The general terms of the Company's debt are outlined below. The debt discounts
are attributable to an allocation of the debt issue price between the debt and
warrants when they are considered together (See Note 6 for information regarding
detachable stock warrants). Generally, when unpaid interest payments are carried
over as a new loan, the Company agrees to issue additional stock warrants for
additional interest deferred.
Line of credit, under note agreements with two officers, dated December 22,
1987, interest at prime plus 2% payable monthly. For making this line available,
these officers each received detachable stock warrants to purchase common stock
at $2.00 per share. This line of credit will remain in effect until the Company
has raised $2,500,000 in any combination of earnings and equity in connection
with a public offering, except that it will not be withdrawn prior to January 1,
1993.
Notes payable to One Venture Group, with interest ranging from 8 3/4% to 13%
payable monthly, issued with detachable stock warrants to purchase shares of
common stock at $1.50 to $2.00 per share. The notes are generally due May 26,
1993 or by 30 days written notice subsequent to May 26, 1991, extended to
January 1, 1993. Unpaid monthly interest payments are deferred as a new loan and
bear interest at the above stated rate.
F-59
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)
(4) LONG-TERM DEBT (CONTINUED)
Note payable to One Financial Group Incorporated, with interest rates ranging
from 8 3/4 % to 13% payable monthly, issued with detachable stock warrants to
purchase shares of common stock at $1.75 per share. The note is due May 26, 1993
or by 30 days written notice subsequent to May 26, 1991 extended to January 1,
1993. Unpaid monthly interest payments are deferred as a new loan and bear
interest at the above stated rates (See Note 9).
Note payable to Albany Venture Group, with interest ranging from 8 3/4% to 11%
payable monthly, principal due December 6, 1996. The note is convertible into
common stock at $2.00 per share until December 6, 1993 and convertible into
common stock at $1.75 a share after December 6, 1993. The note is also
redeemable after one year subject to ALT's ability to repay and after three
years without stipulation.
Individual notes payable to certain officers and directors of the Company have
interest rates ranging from 8 3/4% to 13%. Interest is payable monthly and the
notes mature beginning in May 1993. Certain of the notes are due on demand or
upon 30 days notice, extended to January 1, 1993. All the notes were either
issued with detachable stock warrants to purchase common stock at $1.50 or are
convertible to common stock at $1.75 to $2.00.
The Company has not paid a portion of the salary of two key officers over the
past three years. Obligations to these officers, including interest at 13%, were
reclassified as debt by the Company during 1992. As consideration for deferring
payment of salary these officers were also awarded warrants to purchase 220,000
shares of common stock at $1.75 per share, expiring ten years after issuance.
Note payable to Connecticut Innovation with interest at 8.5% payable monthly,
issued with detachable stock warrants to purchase shares of common stock at
$l.50 per share. The note is due September 1, 1996 but is in arrears as the
contractual principal and interest payments were not made by the Company.
Note payable to Connecticut Development Authority with interest at 10% payable
monthly, issued with detachable stock warrants to purchase common stock at $1.50
per share. The note is due January 1, 1996, but is in arrears as no monthly
interest payments were made by the Company. The note is collateralized by the
personal guarantee of two officers.
Scheduled maturities on long-term debt are as follows:
1995 ............................ $ --
1996 ............................ 635,000
1997 ............................ 55,000
--------
$690,000
========
F-60
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)
(5) COMMITMENTS AND CONTINGENCIES
The Company and two of its key officers have issued the following guarantees
and/or security interests with respect to certain loans of its spun off former
subsidiary (Allied). In a $250,000 financing of Allied from the State of
Connecticut acting through the Department of Economic Development ("DED"), dated
as of October 9, 1992, DED received a guarantee and security interest in certain
assets from the Company. In a $250,000 financing of Allied from the State of
Connecticut, acting through the Connecticut Development Authority ("CDA"), dated
as of June 9, 1992, CDA received a guarantee from two key officers of the
Company. As consideration for their guarantees, each officer received warrants
to purchase 62,500 shares of common stock of the Company at $1.75 per share,
expiring in 1998.
Under a plan of reorganization, on May 14, 1995, the present Allied acquired the
assets and assumed certain liabilities of a corporation that had filed for
voluntary protection under Chapter 11 of the U. S. Bankruptcy Code. One of the
assumed liabilities was a $750,000 SBA loan dated May 29, 1989 (originally in
the amount of $1,000,000) from American National Bank, now Lafayette American
National Bank ("Lafayette"). As a condition of the loan assumption on March 21,
1991, Lafayette obtained the guarantees of ALT and two key officers of ALT which
guarantees were in addition to the initial loan guarantees Lafayette already had
from other persons. Before commencing proceedings to enforce the guarantees
first against ALT and second against the two key officers, Lafayette must first
take all reasonable steps to realize upon the assets of Allied and the security
provided by the initial guarantors. In the event of a deficiency, Lafayette may
enforce its guarantee against ALT, provided that at all times it simultaneously
and diligently pursues actions to enforce its guarantees from the initial
individual loan guarantors. Each of the key officers guaranteed $150,000 and
received in consideration warrants to purchase 25,000 shares of common stock of
the Company at $1.75, expiring in 1998. Allied is in arrears in its payments on
each of these loans, and management has been working with the lenders to, among
other things, negotiate new loan terms. In addition, management has been in
discussions with several potential buyers of Allied which, if successful, would
eliminate the aforementioned security interests and guarantees that have been
provided by ALT and the two key officers.
The Company extends performance warranties on its telecommunications products
for extended periods. Liability under such warranties is contingent upon future
product performance and durability and the ultimate liability is not reasonable
estimable at this time. Management does not believe that such warranties will
result in material expense to the Company.
The amount of rent expense charged to income during the period is $17,497,
$17,080 and $31,440 for December 31, 1994, 1993 and 1992, respectively. The
Company subleased space from its former subsidiary (Allied). In December 1994,
the Company moved its operations to an affiliate's location, (see note 11).
F-61
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)
(6) SHAREHOLDERS' EQUITY
In July 1994, the Company proposed a restructuring plan (the "Plan") designed to
convert the existing debt and outstanding warrants into equity. In general, the
Plan provided that a lender and/or warrant holder would consent to the
conversion, but that the actual conversion would only occur upon the closing of
any one of a number of certain events, including the closing of a merger, joint
venture, or other similar transaction with a strategic partner. In addition, the
agreement provided that (1) loans held by consenting lenders would accrue
interest from July 1, 1994 at 8.75% until the date of conversion and would be
converted at the then outstanding loan amount, including accrued interest, (2)
no additional warrants would be issued after June 30, 1994, (3) agreement of at
least 75% of the June 30, 1994 lenders was needed by August 31, 1994 to declare
the Plan effective, and (4) the Plan would terminate by July 31, 1996, if the
closing of one of the certain events did not occur (See Note 11).
By August 31, 1995, holders of all $5,165,636 in outstanding loans and accrued
interest, as of December 31, 1994 consented to the Plan with the exception of
the Connecticut Development Authority and Connecticut Innovations, Inc., whose
loans and accrued interest, were outstanding, in the amounts of $239,360 and
$231,747, respectively. In addition, of the 4,960,701 in outstanding warrants as
of December 31, 1994, holders of all but 251,917 consented to the Plan. Of the
251,917 in non-consenting warrant holders, Connecticut Development Authority and
Connecticut Innovations, Inc. represent 100,000 and 66,667, respectively.
Activity in the Incentive Stock Option Plan is summarized below:
SHARES PRICE
-------- -----
Granted in 1986 .................................... 15,000 $ .01
Granted in 1987 .................................... 121,000 1.50
Granted in 1988 .................................... 31,300 1.50
Canceled in 1988 ................................... (39,000) 1.50
Granted in 1991 .................................... 106,900 1.50
Exercised in 1991 .................................. (15,000) .01
Balance at December 31, 1991 ....................... 220,200
Canceled 1992 - 1994 ............................... (66,000)
--------
Balance at December 31, 1994 ....................... 154,200
========
Options vest at a rate of one-third per year from the date of grant. Options
expire after ten years or at such date the holders' employment with the Company
is terminated.
F-62
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC. -
NOTES TO FINANCIAL STATEMENTS (Continued)
(6) SHAREHOLDERS' EQUITY (CONTINUED)
The activity relating to stock warrants issued for the years ended December 31,
1994, 1993 and 1992 is summarized below:
EXERCISABLE AT PRICE PER SHARE
- --------------------------------------------------------------------------------
$1.00 $1.50 $1.75 $2.00 TOTAL
--------- ------------ ------------ ------------ -----------
December 31, 1991 -- 1,226,349 857,632 298,532 2,382,513
Issued ........... -- 133,666 577,048 64,884 775,598
--------- ------------ ------------ ------------ -----------
December 31, 1992 -- 1,360,015 1,434,680 363,416 3,158,111
Issued ........... 80,000 37,837 435,831 70,238 623,906
--------- ------------ ------------ ------------ -----------
December 31, 1993 80,000 1,397,852 1,870,511 433,654 3,782,017
Issued ........... -- 264,806 932,877 97,451 1,295,134
--------- ------------ ------------ ------------ -----------
Cancelled ........ -- (116,450) -- -- (116,450)
Reclassed ........ -- -- 159,730 (159,730) --
--------- ------------ ------------ ------------ -----------
December 31, 1994 80,000 1,546,208 2,963,118 371,375 4,960,701
========= ============ ============ ============ ===========
As of December 31, 1994, 1993 and 1992, no warrants had been exercised.
(7) INCOME TAXES
The Company has net operating loss carryforwards available of approximately
$3,800,000 at December 31, 1994 for federal and state tax purposes. The loss
carryforwards expire between the years 2001 through 2009. Because future
profitability is uncertain, such benefits have been fully reserved.
(8) CONCENTRATIONS OF CREDIT RISK
The approximate net product sales by the Company to its major customers and
related percentage are as follows:
1994 1993 1992
CUSTOMER . AMOUNT % AMOUNT % AMOUNT %
- ----------- -------- -------- -------- -------- -------- --------
A .... $ 28,428 6% $ 3,342 1% $387,038 56%
B .... 179,540 38% 134,790 41% 193,863 29%
C .... -- -- 56,810 17% -- --
D .... 65,669 14% 25,133 8% -- --
E .... 63,064 13% -- -- -- --
At December 31, 1994, three customers accounted for 96% of the total
receivables
(9) RESEARCH AND DEVELOPMENT COSTS
The Company incurred $71,338, $72,413 and $134,144 of research and development
costs for the years ended December 31, 1994, 1993 and 1992.
(10) RELATED PARTS TRANSACTIONS
As described in Note 4, the Company has substantial debt payable to related
parties. One Financial Group, Incorporated, a financial consulting firm,
provides consulting services to ALT. One of the principals of One Financial
Group, Incorporated is also a Director of the Company. Consulting fees of
$16,520, $13,625 and $33,237 were incurred in 1994, 1993 and 1992, respectively.
Such fees were settled through the issuance of notes to One Financial Group,
Incorporated with detachable stock warrants for the purchase of common stock
(see Note 4). This same Director is also one of the principals of One Venture
Group, a significant investor in the Company.
F-63
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)
(11) SUBSEQUENT EVENTS
On May 10, 1995, the Company transferred all of its shares in Allied, together
with notes and advances of Allied to the Company to Allied Controls Holding LLC
in exchange for a membership interest. Thereafter, on August 31, 1995, the
Company transferred the membership interest to its shareholders
On May 19, 1995, a merger between ALT and a wholly-owned subsidiary of FiberCore
was approved by the Boards of Directors of both Companies. The merger took place
on September 18, 1995. The merger with FiberCore represents a merger with a
strategic partner as provided in the terms of the Plan, described in Note 6.
Accordingly, effective immediately prior to the merger, loans and warrants of
consenting holders were converted, resulting in the issuance of approximately
4.5 million additional shares of common stock.
The Company entered into a sublease with FiberCore commencing January 1, 1995,
to use and occupy floor space within the same premises leased by FiberCore. The
terms of the lease state that payments shall be $1,041 a month, plus all
applicable maintenance, utilities and taxes. Either party may terminate the
sublease by giving sixty days written notice.
F-64
<PAGE>
LETTERHEAD OF DUANE V. MIDGLEY
INDEPENDENT AUDITORS' REPORT
July 1, 1996
Board of Directors
Venturecap, Inc.
Salt Lake City, Utah
We have audited the balance sheets of Venturecap, Inc. (a development stage
company), as of April 30, 1995, December 31, 1994, December 31, 1993 and
December 31, 1992, and the related statements of operations, stockholders'
equity and cash flows for the years ended Decem ber 31, 1994, December 31, 1993,
December 31, 1992, and for the period January 1, 1995 to April 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material re spects, the financial positron of Venturecap, Inc., at April 30,
1995, December 31, 1994, December 31, 1993 and December 31, 1992, and the
results of its operations and cash flows for the years ended December 31, 1994,
December 31, 1993, December 31, 1992, and for the period January 1, 1995 to
April 30, 1995, in conformity with generally accepted accounting principles.
/s/ DUANE V. MIDGLEY
- --------------------
DUANE V. MIDGLEY
Certified Public Accountant
F-65
<PAGE>
VENTURECAP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
APRIL 30, DECEMBER 31,
--------------------- ---------------------
1995 1994 1993 1992
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash .............................................. $ 15 $ 4,300 $ 4,085 $ 4,750
---------- ---------- ---------- ----------
Total Current Assets............................. 15 4,300 4,085 4,750
---------- ---------- ---------- ----------
Total Assets........................................ $ 15 $ 4,300 $ 4,085 $ 4,750
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities: ............................... $ 0 $ 0 $ 0 $ 0
Stockholders' Equity:
Common stock, S.001 par value, authorized
20,000,000 shares; issued and outstanding 955,450
shares ........................................... 955 955 955 955
Additional paid-in capital ........................ 6,819 6,819 6,149 6,149
Loss accumulated during development stage ......... (7,759) (3,474) (3,019) (2,354)
---------- ---------- ---------- ----------
Total Stockholders' Equity....................... 15 4,300 4,085 4,750
---------- ---------- ---------- ----------
Total Liabilities and Stockholders' Equity ........ $ 15 $ 4,300 $ 4,085 $ 4,750
========== ========== ========== ==========
</TABLE>
F-66
<PAGE>
VENTURECAP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
JANUARY 1,
1995 MAY 14, 1987
TO YEAR ENDED (INCEPTION) TO
APRIL 30, DECEMBER 31, APRIL 30,
1995 1994 1993 1992 1995
--------------- ---------- -------------- ------- ---------------
<S> <C> <C> <C> <C> <C>
INCOME: ........... $ 0 $ 0 $ 0 $0 $ 0
EXPENSE:
Accounting ....... 100 200 450
Legal ............ 1,500 255 665 4,620
Directors fees ... 4
Finders fee ...... 2,650 2,650
Bank charges ..... 15 35
--------------- ---------- -------------- ------- ---------------
TOTAL EXPENSES . 4,285 455 665 0 7,759
NET LOSS .......... $(4,285) $ (455) $ (665) $0 $(7,759)
=============== ========== ============== ======= ===============
NET LOSS PER SHARE $ (.004) $(.001) $(.001) $NIL $ (.008)
=============== ========== ============== ======= ===============
</TABLE>
See accompanying notes to financial statements.
F-67
<PAGE>
VENTURECAP, INC .
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLOERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL LOSS
---------- --------- ------------ -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1990 ............ 954,450 $954 $6,149 $(2,353)
May 24 1993 issued for directors fees 1,000 1
Net loss, year ended December 31, 1991 (1)
---------- --------- ------------ -------------
Balance, December 31, 1991 and 1992 .. 955,450 955 6,149 (2,354)
Net loss, year ended December 31, 1993 (665)
---------- --------- ------------ -------------
Balance December 31, 1993 ............. 955,450 955 6,149 (3,019)
Contribution to capital ............... 670
Loss, year ended December 31, 1994 ... (455)
---------- --------- ------------ -------------
Balance, December 31, 1994 ............ 955,450 955 6,819 (3,474)
Loss to April 30, 1995 ................ (4,285)
---------- --------- ------------ -------------
Balance, April 30, 1995 ............... 955,450 $955 $6,819 $(7,759)
========== ========= ============ =============
</TABLE>
See accompanying notes to financial statements.
F-68
<PAGE>
VENTURECAP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
JANUARY 1,
1995 MAY 14, 1987
TO YEAR ENDED (INCEPTION) TO
APRIL 30, DECEMBER 31, APRIL 30,
1995 1994 1993 1992 1995
--------------- --------- -------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss ............................. $(4,285) $ (455) $ (665) $ 0 $(7,759)
Cash Flows from Investing Activities: 0 0 0 0 0
Cash Flows from financing Activities:
Issuance of common stock ............ 7,104
Contribution to capital .............. 670 670
--------------- --------- -------------- --------- ---------------
Net increase (decrease) in cash ..... (4,285) 215 (665) 0 15
Cash, beginning of period ............ 4,300 4,085 4,750 4,750 0
--------------- --------- -------------- --------- ---------------
Cash, end of period .................. $ 15 $4,300 $4,750 $4,750 $ 15
=============== ========= ============== ========= ===============
</TABLE>
See accompanying notes to financial statements.
F-69
<PAGE>
VENTURECAP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, DECEMBER 31, 1993,
DECEMBER 31, 1992 AND APRIL 30, 1995
NOTE 1 - ACCOUNTING POLICIES AND PROCEDURES
Venturecap, Inc., was Organized May 14, 1987 under the laws of the State of
Nevada. The Company has never started any operations and has no income. In
accordance with SFAS #7, the Company is considered a development stage company.
No accounting policies have been de termined by the Company.
NOTE 2 - WARRANTS AND OPTIONS
There are no warrants or options to acquire any additional shares of common
stock of the Company.
NOTE 3 - PROPOSED MERGER
In April, 1995, the Company signed a Letter of Intent to acquire FiberCore,
Incorporated. In connection with the proposed merger, the Company would amend
its Articles of Incorporation to authorize 100,000,000 shares of common stock
and 10,000,000 shares of preferred stock. The Company would also effect a
reverse stock split on the basis of one (1) share for each 1.27393466 shares
outstanding. F-66
F-70
<PAGE>
LETTERHEAD OF DUANE V. MIDGLEY
INDEPENDENT AUDITORS' REPORT
July 12, 1995
Board of Directors
Venturecap, Inc.
Salt Lake City, Utah
We have audited the balance sheets of Venturecap, Inc. (a development stage
company), as of June 30, 1995, and the related statements of operations,
stockholders' equity and cash flows for the period January 1, 1995 to June 30,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Venturecap, Inc., at June 30,
1995, and the results of its operations and cash flows for the period January 1,
1995 to June 30, 1995, in conformity with generally accepted accounting
principles.
/s/ DUANE V. MIDGLEY
- --------------------
DUANE V. MIDGLEY
Certified Public Accountant
F-71
<PAGE>
VENTURECAP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30,
1995
----------
<S> <C>
ASSETS
Current Assets:........................................................ $ 0
----------
Total Current Assets................................................. 0
----------
Total Assets.......................................................... $ 0
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:................................................... $ 0
Stockholders' Equity:
Common stock, $.001 par value, authorized 20,000,000 shares; issued
and outstanding 955,450 shares....................................... 955
Additional paid-in capital............................................ 6,819
Loss accumulated during development stage............................. (7,774)
Total Stockholders' Equity........................................... 0
----------
Total Liabilities and Stockholders' Equity............................ $ 0
==========
</TABLE>
See accompanying notes to financial statements.
F-72
<PAGE>
VENTURECAP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
JANUARY 1, MAY 24, 1987
1995 (INCEPTION)
TO TO
JUNE 30, JUNE 30,
1995 1995
------- -------
INCOME ................................... $ 0 $ 0
EXPENSES:
Accounting .............................. 100 450
Legal ................................... 1,500 4,620
Directors Fee ........................... -- 4
Finders fee ............................. 2,650 2,650
Bank charges ............................ 50 50
------- -------
TOTAL EXPENSES ........................ 4,300 7,774
------- -------
NET LOSS ............................... $(4,300) $(7,774)
======= =======
NET LOSS PER
SHARE ................................. $ (.004) $ (.008)
======= =======
See accompanying notes to financial statements.
F-73
<PAGE>
VENTURECAP, INC .
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL LOSS
--------- --------- ------------ -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993........ 955,450 $955 $6,149 $(3,019)
Contribution to capital........... 670
Loss, year ended December 31,
1994.............................. (455)
--------- --------- ------------ -------------
Balance, December 31, 1994........ 955,450 955 6,819 (3,474)
--------- --------- ------------ -------------
Loss to June 30, 1995............. (4,300)
--------- --------- ------------ -------------
Balance, June 30, 1995............ 955,450 $955 $6,819 $(7,774)
========= ========= ============ =============
</TABLE>
See accompanying notes to financial statements.
F-74
<PAGE>
VENTURECAP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
JANUARY 1, MAY 14, 1987
1995 (INCEPTION)
TO TO
JUNE 30, JUNE 30,
1996 1995
------------- --------------
Cash Flow from Operating Activities:
Net loss ........................................ $(4,300) $(7,774)
Cash Flows from Investing
Activities: ..................................... 0 0
Cash Flows from Financing
Activities:
Issuance of common stock ........................ 7,104
Contribution to capital ......................... 670
------- -------
Net increase (decrease) in cash .................. (4,300) 0
Cash, beginning of period ........................ 4,300 0
------- -------
Cash, end of period .............................. $ 0 $ 0
======= =======
See accompanying notes to financial statements.
F-75
<PAGE>
VENTURECAP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
(1) ACCOUNTING POLICIES AND PROCEDURES
VentureCap, Inc., was organized May 14, 1987 under the laws of the State of
Nevada. The Company has never started any operations and has no income. In
accordance with SFAS #7, the Company is considered a development stage company.
No accounting policies have been determined by the Company.
(2) WARRANTS AND OPTIONS
There are no warrants or options to acquire any additional shares of common
stock of the Company.
(3) PROPOSED MERGER
In April, 1995, the Company signed a Letter of Intent to acquire FiberCore,
Incorporated. In connection with the proposed merger, the Company would amend
its Articles of Incorporation to authorize 100,000,000 shares of common stock
and 10,000,000 shares of preferred stock. The Company would also effect a
reverse stock split on the basis of one (1) share for each 1.27393466 shares
outstanding.
F-76
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
============================================ ==========================================
No dealer, sales representative or any
other person has been authorized to give
any information or to make any
representation in connection with this
offering other than those contained in this
Prospectus, and, if given or made, such 43,306,464 SHARES
information or representations must not be
relied upon as having been authorized by
the Company or the Underwriters. This
Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy
any securities other than the registered
securities to which it relates or an offer [LOGO]
to, or a solicitation of, any person in any
jurisdiction where such offer or
solicitation would be unlawful. Neither the
delivery of this Prospectus nor any sale
made hereunder shall, under any
circumstances, create any implication that
there has been no change in the affairs of
the Company since the date hereof or that
the information contained herein is correct
as of any time subsequent to the date
hereof.
--------------------
TABLE OF CONTENTS FIBERCORE, INC.
PAGE
---- COMMON STOCK
Available Information................... 2
Prospectus Summary...................... 3
Risk Factors............................ 9
Use of Proceeds......................... 15
Capitalization.......................... 15
Dividend Policy......................... 16
Stock Price............................. 16
Dilution ............................... 16 --------------------
Selected Consolidated and Consolidated
Pro Forma Financial Data Management's PROSPECTUS
Discussion and Analysis of Financial
Condition and Results of Operations ... 19 --------------------
Business................................ 23
Management.............................. 34
Certain Transactions.................... 37
Principal Securityholders............... 44
Selling Securityholders................. 45
Plan of Distribution.................... 49
Description of Securities............... 50
Experts................................. 53
Legal................................... 53
Index to Financial Statements .......... 54 , 1996
============================================ ==========================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the shares of Common Stock being registered. All items are estimated except
the registration and filing fees.
SEC registration fee ............................. $78,200
NASD filing fee .................................. 15,000
Blue Sky fees and expense ........................ 15,000
Printing and engraving expenses .................. *
Legal fees and expenses .......................... *
Accounting fees and expenses ..................... *
Transfer agent fees .............................. *
Miscellaneous .................................... *
-------
Total ......................................... $ *
- ----------
* To Be Supplied By Amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.751 of the Nevada General Corporation Law ("Nevada Law") provides
generally and in pertinent part that a Nevada corporation may indemnify its
directors and officers against expenses, judgments, fines and settlements
actually and reasonably incurred by them in connection with any civil suit or
action, except actions by or in the right of the corporation, or any
administrative or investigative proceeding if, in connection with the matters in
issue, they acted in good faith and in a manner reasonably believed to be in, or
not opposed to, the best interests of the corporation, and in connection with
any criminal suit or proceeding, if in connection with the matters in issue,
they had no reasonable cause to believe their conduct was unlawful. Section
78.751 further provides that, in connection with the defense or settlement of
any action by or in the right of the corporation, a Nevada corporation may
indemnify its officers and directors against expenses actually and reasonably
incurred by them if, in connection with the matters in issue, they acted in good
faith, in a manner they reasonably believed to be in, or not opposed to, the
best interests of the corporation. Section 78 .751 further permits a Nevada
corporation to grant its directors and officers additional rights of
indemnification through by-law provisions and otherwise.
Article VIII of the By-Laws of the Registrant provides in relevant part that
each person who was or is made a party or is threatened to be made a party to
any action, by reason of the fact that he or she is or was a director or
officer, employee or agent of the Registrant or is serving at the request of the
Registrant as an officer, director, employee or agent of another enterprise
shall be indemnified to the full extent provided by Nevada Law; provided,
however, that the Registrant will indemnify any such indemnitee in connection
with a proceeding commenced by such indemnitee only if such proceeding was
authorized by the board of directors of the Registrant. The right of
indemnification includes the right to be advanced expenses; provided, however,
that if Nevada law requires an advancement of expenses incurred by an indemnitee
in his or her capacity as an officer or director then advances shall be paid
only upon delivery to the Registrant of an undertaking to repay such amounts if
it is judicially determined that the indemnitee was not entitled to
indemnification. In the event an indemnitee is forced to sue the corporation to
recover unpaid indemnification expenses, the indemnitee is generally entitled to
recover the costs expended in such proceedings from the Registrant.
II-1
<PAGE>
Article XIII of the Registrant's Articles of Incorporation, as amended,
provides that the directors and officers of the Registrant are not liable to the
corporation or its stockholders for breaches of fiduciary duty other than (1)
acts or omissions which involve intentional misconduct, fraud or a knowing
violation of law or (2) payment of distributions in violation of section 78.3 of
the Nevada Revised Statutes
The Registrant maintains officers and directors insurance to further insure
its officers and directors.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
As used herein FiberCore refers to FiberCore Incorporated, which merged into
the Registrant in July 1995. ALT refers to Automated Light Technologies, Inc.,
which was acquired by the Registrant in September 1995. All numbers listed in
association with shares issued by FiberCore have been restated to reflect the
exchange of 3.671307 shares of the Registrant for each share of FiberCore.
Unless otherwise stated below the Registrant, FiberCore or ALT relied on the
exemption to the registration requirements of the Securities Act set forth in
section 4(2) of the Securities Act
In November 1993, FiberCore issued 3,671,307 shares to Gregory Perry in
exchange for the assignment of a patent.
In November 1993, FiberCore issued 5,914,883 shares to Mohd Aslami and his
designees in exchange for cash and services aggregating to $96,667 ( $0.016 per
share). In November 1993, FiberCore issued 2,957,443 shares to Charles DeLuca
and his designees in exchange for cash and services valued at $50,000 ( $0.016
per share).
In December 1993, FiberCore issued 3,671,307 shares to ALT in exchange for
$60,000 ($0.016 per share) worth of services.
In December 1993, FiberCore issued 1,529,712 shares to each of Patrick Brake
and Jack Ramsey at a price of $0.033 per share.
In December 1993, FiberCore sold 1,284,957 shares of common stock at a price
of $0.27 per share to 11 investors for a total of $350,000.
The following table lists the 11 investors and the number of shares
purchased.
NAME # SHARES
---- --------
H. Amin-Arsala ................................... 183,565
Sayed I. Nasir ................................... 183,565
Carol A. Warasta ................................. 110,139
Alan A. Kusunoki ................................. 36,713
Sabrina Shairzay ................................. 73,426
M. Kassem Khybury ................................ 55,070
Eleanor Glickman ................................. 36,713
Mario and Rose
DeLoreto ......................................... 73,426
Daniel Prouty .................................... 325,021
Qasim Aslami ..................................... 97,180
Carl Zheng ....................................... 110,139
---------
Total ........................................... 1,284,957
=========
In April 1994 and April 1995, FiberCore issued 124,824 options to various
employees. Such options are exercisable at $0.0027 per share and expire no
earlier than ten (10) years from the date of grant.
The Registrant is contractually committed to issue options to purchase
132,167 shares to various employees at various times in 1996, 1997 and 1998,
each exercisable at $0.0027 per share.
In June 1994, FiberCore issued 2,221,141 shares to a designee of Sico
Quarzschmelze Jena GmbH ("Sico") in consideration for equipment purchased from
Sico located in Jena, Germany. The parties agreed to several modifications to
the initial sale, including one contemplating a retention of the shares by Sico,
which were superseded by a January 1996 amendment pursuant to which Sico
retained the shares.
II-2
<PAGE>
In July 1994, FiberCore sold a total of 29 units ("Units") to 10 investors.
Each Unit consisted of 45,891 shares of Common Stock and 22,946 Warrants to
purchase Common Stock at a price of $1.31 per share. Each Unit cost $50,000. A
total of 1,330,848 shares and 665,424 Warrants were sold in the offering.
The following table lists the 10 investors and the number of shares and
warrants purchased.
NAME # SHARES # WARRANTS
---- -------- ----------
Victor Markowicz ....................... 229,457 114,730
Donald Scanlon ......................... 45,890 22,946
John Flood ............................. 45,890 22,946
Camelot Investments .................... 45,890 22,946
Richard Lai ............................ 91,782 45,892
Global Money Management ................ 229,457 114,730
Dale Archer McNulty .................... 45,890 22,946
John Royle and Sons,
Inc. ................................... 458,920 229,450
William C. & Rita Krebs ................ 45,890 22,946
Victor Mastellone ...................... 91,782 45,892
--------- ---------
Total .................................. 1,330,848 665,424
========= =========
In July 1994, FiberCore issued Warrants to purchase 73,426 shares at an
exercise price of $1.31 per share to Coleman & Rhine LLP, a law firm, in
exchange for services valued at $7,500.
In December 1994, FiberCore issued 90,864 shares and Warrants to purchase an
additional 45,432 shares exercisable at $1.31 per share in exchange for $99,000
to an investor.
In December 1994, FiberCore issued 7,390 shares to an employee in exchange
for services valued at $8,050.
On April 17, 1995, FiberCore issued a ten year $5,000,000 convertible note
(the "AMP Note") to AMP Incorporated ("AMP"), a manufacturer of electrical
connectors and other equipment. Principal plus interest accrue at a rate of
LIBOR plus one percent, may be converted into Common Stock of the Registrant
through April 17, 2005. Until April 17, 2000, the conversion price is $1.16 per
share; thereafter the conversion price is equal to the price per share paid by a
third party investor in the private sale of Common Stock by the Registrant
immediately prior to such conversion. The AMP Note is initially collateralized
by certain patents, patent applications, licenses, rights and royalties arising
from such patents and, claims for damages arising from infringement of such
patents. The parties have agreed, to replace such collateral with various pieces
of equipment owned or to be owned by the Registrant.
In May 1995, FiberCore issued 23,863 shares to a consultant for services
valued at $26,000 and 16,569 shares to an employee in lieu of compensation.
On July 18, 1995, FiberCore merged into the Registrant. Each of the
outstanding shares of FiberCore Incorporated was exchanged for 3.671307 shares
of the Registrant.
On October 5, 1995, MESC purchased 367,131 shares of the Registrant's Common
Stock at a price of $500,000. At that time the Registrant deposited with Shawmut
Bank, N.A. (i) 679,192 shares of Common Stock; (ii) Warrants granting MESC the
right to purchase 550,696 shares of the Registrant's Common Stock at a price of
$1.63 per share exercisable at any time until October 5, 1997; and (iii) 238,634
shares of Common Stock to be issued to MESC immediately upon MESC exercising its
rights to purchase shares pursuant to the Warrants referred to in clause (ii).
The securities (other than the aforementioned 238,634 shares of Common Stock)
are issuable upon the execution of all documents required to complete the
formation of a joint venture, the execution of a product supply agreement with
the Registrant, and the purchase by MESC of an additional 367,131 shares of the
Registrant's Common Stock at a price of $500,000. In November 1996, MESC
purchased and was issued the second block of 367,131 shares of the Registrant's
Common Stock.
In January 1996, Techman, a company controlled by M. Mahmud Awan, a director
of the Registrant, agreed to purchase, pursuant to a Share Purchase Agreement
dated January 11, 1996, 734,260 shares of Common Stock and Warrants exercisable
into 550,696 shares of Common Stock exercisable at
II-3
<PAGE>
$1.63 per share for $1,000,000. Additionally, the Company, as part of the Share
Purchase Agreement, agreed to issue 312,061 shares to Techman upon (i) the
formation of FOI and (ii) completion of a supply agreement between the Company
and FOI. Between February 1996 and September 1996, the Company, pursuant to the
Share Purchase Agreement, issued at the request of Techman, 575,477 shares to
Dr. Awan, the sole shareholder of Techman. Subsequent to September 1996, an
additional 470,844 shares of Common Stock (representing the balance of shares to
be issued under the Techman Share Purchase Agreement) were issued to Dr. Awan in
exchange for a payment of $450,000 and the delivery by Techman of a twenty year
supply agreement between the Company and FOI. The $450,000 payment was invested
by the Registrant in FOI as an additional capital contribution to FOI (along
with ratable additional capital contributions by FOI's other shareholders). The
Registrant maintains a 30% ownership interest in FOI.
In addition, warrants entitling Dr. Awan to 1,000,000 shares are being held
in escrow under an International Distributor Agreement. The warrants will be
exercised and the shares will be issued ratably by the Registrant as commissions
on sales generated by Techman of up to $200,000,000. Such shares will be issued
upon receipt by the Registrant of proceeds from such sales.
On July 1, 1996 the Company borrowed $500,000 under two loan agreements from
spouses of the President and the Executive Vice President of the Company. The
loans are in the amount of $250,000 each and bear interest at the prime rate
plus one percent (currently 9.25%), and are due on June 30, 1999. In conjunction
with the loans each lender received warrants to purchase 115,220 shares of
Common Stock at the rate of $1.81 per share. The warrants expire on July 31,
2001.
In August 1996, the Registrant issued 111,462 shares of Common Stock to CII
in full settlement of the outstanding debt to CII in amount of $241,869.
In August 1996, the Registrant issued 142,450 shares of Common Stock to CDA
in full settlement of the outstanding debt to CDA in the amount of $272,489.
On November 27, 1996, the Registrant issued a $3,000,000 note and warrants
to purchase up to $2,000,000 of shares of Common Stock to AMP. Additionally, the
Registrant issued 3,058,833 shares of Common Stock in exchange for the
conversion by AMP of $3,000,000 of principal plus accrued interest on the AMP
Note.
In 1995, ALT granted to various employees, options exercisable into 120,000
shares of ALT common stock at a price of $1.50 per share pursuant to the ALT
1987 Stock Option Plan.
In 1995, each of the four ALT directors received 17,500 shares of ALT common
stock as compensation for serving as director during the years 1989 through
1995. As a result, a total of 70,000 shares of ALT common stock were issued.
In November 1994, ALT issued 4,931 shares to Bernard Moison in exchange for
services to Allied, a former subsidiary, valued at $493.
In November 1994, ALT issued 19,579 shares to David Sudol in exchange for
services to Allied a former subsidiary valued at $1,957.
In December 1993, ALT issued a warrant for 80,000 shares exercisable at $1.00
per share expiring in 1998 for services to a financial services company.
In addition, ALT issued warrants to purchase 0.767 shares of ALT common
stock, as shown in the table below, for each dollar in salary deferred and
interest accruing thereon by Charles DeLuca and Mohd Aslami during 1992, 1993
and 1994. ALT also issued warrants to purchase shares of ALT Common Stock to One
Financial Group, Inc., a company controlled by Steven Phillips, a director of
the Registrant, for amounts earned, but not paid, through June 30, 1994.
Warrants were also earned on interest accruing on such deferred salary and
earnings as stated below. Only issuances of warrants for principal are depicted
below.
Number of shares of ALT common stock issuable pursuant to ALT warrants
exercisable originally at $1.75 per share issued for deferred salary or
compensation, not including interest accrued.
II-4
<PAGE>
1992 1993 1994
------- ------- -------
Mohd Aslami ....................... 22,064 106,800 --
Charles DeLuca .................... 16,338 65,516 60,146
One Financial Group ............... 51,139 10,446 18,669
From November 1992 to June 1994, ALT issued warrants to purchase 121,058
shares to ten lenders exercisable at prices ranging from $1.00 to $2.00 per
share, in connection with making of the loans and interest accruing thereon.
Such lenders included Mohd Aslami, Charles DeLuca, Hedayat Amin-Arsala, Zaid
Siddig; One Financial Group, Inc. and One Venture Group. Messrs. Aslami, DeLuca,
Arsala and Phillips were directors of ALT at such time. Mr. Phillips is a
Director, President and major stockholder of One Financial Group, Inc. and was a
managing partner of One Venture Group at such time. Zaid Siddig is Mr. Aslami's
wife's uncle.
On September 18, 1995, ALT Merger Co., a wholly-owned subsidiary of the
Registrant merged into ALT (the "ALT Acquisition"). Each shareholder of ALT
received approximately 1.0498 shares of the Registrant's Common Stock in
exchange for each outstanding share of ALT stock. 3,671,307 shares of the
Registrant's Common Stock held by ALT were canceled. Approximately 8.4 million
shares of ALT common stock were converted into approximately 8.8 million shares
of the Registrant's Common Stock. Immediately prior to the acquisition, several
ALT warrantholders and debtholders converted their debts and warrants into
shares of ALT common stock. Loans, other than loans arising from deferred.
compensation (which were converted at $1.25), were converted pursuant to each
lender's loan agreement, if applicable, otherwise at the exercise price of the
warrants issued less $0.05. Loans arising from deferred compensation were
converted at $1.25 per share. The exercise price of all warrants exercisable at
$2.00 per share was reduced to $1.75 per share, except for warrants held by
Messrs. Aslami and DeLuca and OFG. Warrants were valued at the deemed value of
ALT shares ($2.10) less the exercise price of each such warrant. For example a
warrant to purchase one share of ALT common stock with an exercise price of
$1.75 was valued at $0.35. Shares of common stock of ALT were purchased to the
extent of such warrant value. In consideration for the fact that all loans were
past due, the percentage of warrants that each lender had been entitled to
receive pursuant to such loans was increased by 25%. A total of warrants
4,013,960 and $5,092,449 in debt were converted into approximately 4.53 million
shares of ALT common stock in conjunction with the ALT Acquisition.
All other outstanding warrants and options to purchase shares of ALT common
stock were automatically converted into instruments to purchase shares of the
Registrant's Common Stock, pursuant to the terms of such instruments.
II-5
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------------
<S> <C>
+2.1 Agreement and Plan of Reorganization dated as of July 18, 1995 between Venturecap, Inc. and
FiberCore Incorporated.
+2.2 Agreement of Merger dated as of July 18, 1995 between Venturecap and FiberCore Incorporated.
+2.3 Agreement and Plan of Reorganization dated as of September 18, 1995 between the Company Alt
Merger Co., and Automated Light Technologies, Inc. ("ALT").
+2.4 Agreement dated February 13, 1987 between Norscan Instruments Ltd. and ALT.
+3.1 Certificate of Incorporation of FiberCore, Inc.
+3.2 By-Laws of FiberCore, Inc.
+++5.1 Opinion of Coleman & Rhine LLP
P +10.1 Loan Agreement dated August 2, 1990 between ALT and Connecticut Innovations Incorporated
("CII").
P +10.2 Promissory Note issued by ALT to CII.
P +10.3 Security Agreement dated as of August 1990 between ALT and CII.
P +10.4 Subordination executed August 2, 1990 between CII, Mohd Aslami,
and Charles DeLuca
P +10.5 Collateral Assignment and Security Agreement dated August 2, 1990 between ALT and Connecticut
Innovations Incorporated
P +10.6 Loan Agreement dated December 5, 1990 between ALT and the Connecticut Development Authority
("CDA").
P +10.7 Promissory Note dated December 5, 1990 issued by ALT to CDA.
P +10.8 Guaranty dated December 5, 1990 issued to CDA by Mohd Aslami and Charles DeLuca.
P +10.9 Collateral Assignment and Security Agreement dated December 5, 1990 between ALT and CDA.
P +10.10 Security Agreement dated as of December 5, 1990 between ALT and CDA.
P +10.11 Subordination dated November 5, 1990 between CDA, Mohd Aslami and Charles DeLuca.
P +10.12 Form of Warrant issued by ALT to CDA
P +10.13 Form of Warrant issued by Agreement between ALT to Connecticut Innovations Incorporated.
P +10.14 Form of Warrant issued by ALT.
P +10.15 Form of FiberCore Incorporated Warrant.
P +10.16 Assignment dated November 8, 1993 by Gregory Perry to FiberCore, Incorporated of U.S. Patent
No. 4,596,589.
P +10.17 Lease executed January 31, 1994 between Cobra Realty Trust, FiberCore, Incorporated, Mohd
Aslami and Charles DeLuca.
P +10.18 Agreement dated June 7, 1994 between Sico GmbH and FiberCore, Inc., to lease building and
equipment and to manufacture optical fiber and optical fiber preform.
P +10.19 Agreement dated August 19, 1995 between Sico GmbH and FiberCore Jena GmbH, with supplemental
agreement by Walter Nadrag.
P +10.20 Cooperation Agreement dated December 19,. 1995 between Sico Jena GmbH and FiberCore, Inc.
P +10.21 Lease dated August 19, 1995 between Sico Jena GmbH and FiberCore Jena GmbH.
P +10.22 Agreement dated January 25, 1996 between the Company, FiberCore Jena and Sico.
P +10.23 Share Purchase Agreement dated January 11, 1996 between the Company and Techman International,
Inc.
P +10.24 Escrow Agreement dated as of April 13, 1995 between FiberCore Incorporated, Middle East
Specialized Cables Co. ("MESC") and Shawmut Bank, N.A.
II-6
<PAGE>
EXHIBIT
NUMBER
- ---------------
P +10.25 Escrow Amending Agreement dated September 15, 1995 between the Registrant, MESC and Shawmut
Bank, N.A.
P +10.26 Share Purchase Agreement dated as of April 13, 1995 between FiberCore Incorporated and
MESC.
P +10.27 Share Purchase Amending Agreement dated September 15, 1995 between the Registrant and MESC.
P +10.28 Convertible Debenture Purchase Agreement effective as of April 17, 1995 between AMP
Incorporated and FiberCore Incorporated, with form of Convertible Debenture Attached, as
Exhibit A.
P +10.29 Cooperation Agreement dated June 17, 1994 between John Royle & Sons and FiberCore
Incorporated, with Amendment No. 1 executed on the same date.
P +++10.30 Warrant issued by the Registrant to Techman to purchase up to 550,696 shares of Common Stock.
P +10.31 Agreement dated July 1, 1994 between FiberCore Incorporated and FiberCore Jena GmbH.
P +10.32 Joint Venture Agreement dated January 31, 1996 between Middle East Optic Fiber Company
("MEOFC"), Royle Mid East Ltd. and FiberCore Mid East Ltd.
P +10.34 Joint Venture Agreement dated May 21, 1995 between the Company, Techman International, Inc.
and the other parties named therein.
P ++10.35 International Distributor Agreement between Techman and the Company.
P ++10.36 Term Loan Agreement by and between FiberCore, Inc. as borrower and AMP Incorporated a lender
dated November 27, 1996.
P ++10.37 Term Promissory Note in the original principal amount of $3 million dated November 27, 1996.
P ++10.38 Amendment No. 1 to Convertible Debenture Purchase Agreement between FiberCore, Inc., as borrower
and AMP Incorporated as Lender dated November 27, 1996.
P ++10.39 The Subsidiary Guarantee between FiberCore Clasfaser Jena GmbH and AMP Incorporated dated November
27, 1996.
P ++10.40 Security Interest Agreement between FiberCore Clasfaser Jena GmbH and AMP Incorporated dated
November 27, 1996.
P ++10.41 Patent Security Agreement between FiberCore, Inc. and AMP Incorporated dated November 27, 1996.
P ++10.42 Warrant issued to AMP Incorporated to purchase shares of Common Stock of FiberCore, Inc. dated
November 27, 1996.
P ++10.43 Amended and Restated Convertible Debenture dated November 27, 1996.
P ++10.44 Voting Agreement between FiberCore, Inc., AMP Incorporated, Mohd Aslami, Charles DeLuca and Dr. M.
Mahmud Awan dated November 27, 1996.
P ++10.45 Copy of patents purchased from Sico Jena GmbH.
+22 List of subsidiaries of FiberCore, Inc.
++23.1 Consent of Mottle McGrath Braney & Flynn, P.C. independent auditors.
++23.2 Consent of Dwayne Midgley, independent accountants.
+++23.3 Consent of Coleman & Rhine LLP (contained in the opinion to be filed as Exhibit 5.1)
++25 Power of Attorney (contained on the signature page)
++27 Financial Data Schedule
</TABLE>
- ----------
+ Filed on August 16, 1996.
++ Filed herewith.
+++ To be filed by Amendment
II-7
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that:
(1) For the purpose of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act, shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; and
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes: Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the provisions
described in Item 14, or otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-8
<PAGE>
SIGNATURES
Pursuant to the Securities Act of 1933, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on December 4,
1996.
FIBERCORE, INC.
By: /s/ Mohd A. Aslami
------------------------
Mohd A. Aslami,
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes, Mohd A. Aslami
and Michael J. Beecher, and each of them, with full power of substitution and
full power to act without the other, to file one or more amendments (including
post-effective amendments) to this Registration Statement which amendments may
make such changes as any of such persons deems appropriate, and each such
person, individually and in each capacity stated below, hereby appoints each of
such persons as attorney-in-fact to execute in his name and on his behalf any of
such amendments to the Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registration Statement has been signed by the following persons in the
capacities indicated below on the 4th day of December, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Mohd A. Aslami Chairman, Chief Executive
- --------------------------- Officer and Director December 4, 1996
Mohd A. Aslami
/s / Charles DeLuca Executive Vice President, Secretary and
- --------------------------- Director and General Manager of Automated
Charles DeLuca Light Technologies, Inc. December 4, 1996
/s / Michael J. Beecher Chief Financial Officer and
- --------------------------- Principal Accounting Officer December 4, 1996
Michael J. Beecher
- --------------------------- Director December 4, 1996
Zaid Siddig
/s / Steven Phillips
- --------------------------- Director December 4, 1996
Steven Phillips
- --------------------------- Director December 4, 1996
M. Mahmud Awan
</TABLE>
II-9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1994 JAN-01-1996 JAN-01-1995
<PERIOD-END> DEC-31-1995 DEC-31-1994 SEP-30-1996 SEP-30-1995
<CASH> 833,407 257,857 524,000 4,268,000
<SECURITIES> 0 0 0 0
<RECEIVABLES> 869,473 310,917 898,000 570,000
<ALLOWANCES> (39,150) 0 (39,150) (11,000)
<INVENTORY> 1,406,449 168,344 1,347,000 889,000
<CURRENT-ASSETS> 3,137,753 710,951 2,796,000 5,791,000
<PP&E> 5,044,373 3,591,201 5,398,000 4,451,000
<DEPRECIATION> (825,351) (254,953) (1,448,000) (833,000)
<TOTAL-ASSETS> 14,782,896 4,269,549 13,785,000 17,064,000
<CURRENT-LIABILITIES> 3,414,908 1,229,799 2,573,000 5,057,000
<BONDS> 5,000,000 456,476 5,500,000 7,194,000
0 0 0 0
0 0 0 0
<COMMON> 30,507 24,960 31,000 28,000
<OTHER-SE> 6,337,481 2,558,314 5,681,000 4,785,000
<TOTAL-LIABILITY-AND-EQUITY> 14,782,896 4,269,549 13,785,000 17,084,000
<SALES> 3,093,499 230,888 6,245,000 1,628,000
<TOTAL-REVENUES> 3,323,079 250,901 7,053,000 1,757,000
<CGS> 4,508,860 1,063,560 6,108,000 2,509,000
<TOTAL-COSTS> 6,683,030 1,853,679 8,309,000 3,593,000
<OTHER-EXPENSES> 132,894 0 117,000 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 516,318 22,590 280,000 315,000
<INCOME-PRETAX> (4,009,163) (1,625,368) (1,653,000) (2,151,000)
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> (4,009,163) (1,625,368) (1,653,000) (2,151,000)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (4,009,163) (1,625,368) (1,653,000) (2,151,000)
<EPS-PRIMARY> (0.15) (0.07) (0.05) (0.09)
<EPS-DILUTED> (0.15) (0.17) (0.05) (0.09)
</TABLE>
