As filed with the Securities and Exchange Commission on August __, 1996
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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FIBERCORE, INC.
(Exact name of Registrant as specified in its charter)
Nevada 3229 87-0445729
(State or other (Primary standard (I.R.S. Employer
jurisdiction of incorporation industrial classification Identification
or organization) code number) Number)
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 the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
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]
<PAGE>
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. [ ]
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
-----------------------------------------------------------------
Proposed Proposed
maximum maximum
Title of Amount offering aggregate Amount of
securities to be to be price per offering registration
registered registered share (1) price (1) fee
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<S> <C> <C> <C> <C>
Common Stock,
$.001 par value 30,306,282 shs $5.25 $159,107,981 $54,865
Common Stock,
$.001 par value (2) 4,569,594 shs $5.25 $ 23,990,368 $8,272
Common Stock,
$.001 par value (3) 2,165,045 shs $5.25 $ 11,366,486 $3,919
Common Stock,
$.001 par value (4) 3,493,739 shs $5.25 $ 18,342,130 $6,325
Common Stock,
$.001 par value (5) 2,414,829 shs $5.25 $ 12,677,852 $4,372
TOTAL....................... 42,949,489 shs $5.25 $225,484,817 $77,753
===================================================================================================================
<FN>
(1) Estimated pursuant to Rules 457(c) and 457(h) solely for the purpose of
calculating the registration fee, based on the average of the bid and
ask prices reported on the OTC Bulletin Board of $5.25 on August 14,
1996.
(2) Issuable upon conversion of outstanding Convertible Notes issued to AMP
Incorporated (the "AMP Note"), Connecticut Innovation, Inc. ("CII
Note"), and H. Arsala ("Arsala Note") (collectively, the "Notes").
(3) Issuable upon exercise of outstanding Common Stock Purchase Warrants
("Warrants") having a weighted average exercise price of $1.41 per
share.
(4) Issuable upon exercise of outstanding Common Stock Purchase Options
("Options") having a weighted average exercise price of $ 0.98 per
share.
(5) Shares held in escrow ("Escrow Shares"), to be issued upon the
happening of certain events, on behalf of Techman International
("Techman") (1,497,002 shares) and Middle East Specialized Cable Co.
("MESC") (917,827 shares).
</FN>
</TABLE>
----------
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.
<PAGE>
----------
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.
FIBERCORE, INC.
Cross-Reference Sheet
Required by Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
Form S-1 Item Number Location in Prospectus
<S> <C> <C>
1. Forepart of the Registration Statement and Facing Page, Outside Front Cover Page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover Page
Prospectus
3. Summary Information, Risk Factors and Ratio The Company; Risk Factors
of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
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 Legal Matters; Expert
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; Shares Eligible for Future Sale;
Financial Statements
12. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities
</TABLE>
<PAGE>
Subject to Completion, dated August , 1996
42,949,489 Shares of Common Stock
FIBERCORE INC.
This Prospectus relates to 30,306,282 shares of common stock, $.001 par
value per share (the "Common Stock"), of FiberCore, Inc. (the "Company") which
are held by certain shareholders (the "Selling Shareholders") of the Company.
This Prospectus also relates to the issuance and sale by the Company of up to
12,643,207 shares of Common Stock (the "Underlying Shares") issuable to holders
upon: (i) conversion of a ten year convertible note issued to AMP Incorporated
(the "AMP Note"); (ii) conversion of the CII Note; (iii) conversion of the
Arsala Note; (iv) exercise of outstanding Common Stock Purchase Warrants (the
"Warrants"), (v) exercise of outstanding Common Stock Purchase Options (the
"Options"); and (vi) issuance of the Escrow Shares (the Notes, Warrants, Options
and Escrow Shares are sometimes referred to collectively as the "Convertible
Securities"). 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 Warrants and Options were issued by the Company and its
predecessors from 1987 through 1996 and are exercisable into Common Stock for
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" and "PLAN OF
DISTRIBUTION."
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, Options and issuance of Escrow
Shares. 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."
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<PAGE>
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 listing on the NASDAQ Small Cap
Market. On August 14, 1996, the closing bid price of the Common Stock on the
Bulletin Board was $5.25.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS."
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 August __, 1996.
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<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 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 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, and in accordance therewith will file reports, including
annual and quarterly reports, proxy statements and other information with the
Securities and Exchange Commission (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: Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60601, and 14th Floor, 7 World Trade
Center, Suite 1300 New York, New York 10048.
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;
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<PAGE>
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.
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<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, the information included in this Prospectus
does not give effect to the exercise of options granted or to be granted by the
Company or to the exercise or conversion of Convertible Securities.
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 3 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 Company's strategy in the fiber optic manufacturing and marketing
business is to become a supplier of fiber optic preforms and optical fiber to
independent manufacturers of fiber optic cable. The Company, through its
subsidiary FiberCore Jena, 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
manufacturing process.
In pursuit of its strategy, the Company has undertaken the
implementation of a multifaceted approach, the basic cornerstone of which is the
forming of strategic alliances so as to match supply with demand, on a local as
well as a world-wide basis. Strategic relationships will range from
joint-ventures, particularly in those countries requiring local control, to
direct investments by FiberCore. In effect, the Company intends to leverage its
international relationships. Product demand will be generated from these
strategic alliances, as well as from independent manufacturers of fiber optic
cable. The Company plans to capitalize on the strong growth in the fiber market
which is forecasted for the foreseeable future by building a number of
facilities. Such new facilities and/or expansion of existing facilities are
planned for the U.S., Europe, the Middle East and elsewhere in Asia. Facilities
will be established using a well- balanced, phased-in approach. The Company will
continually seek to improve the manufacturing processes by implementing its
patented technology and by developing new
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<PAGE>
techniques that lower production costs, thereby enhancing the Company's already
low cost producer strategy.
In April 1995, the Company entered into agreements with John Royle and
Sons, a manufacturer of cable manufacturing systems and equipment, and Middle
East Fiber Optic Manufacturing Co., Ltd. ("MEOFC") 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. As part of these arrangements, the Company entered into a Share
Purchase Agreement, dated April 13, 1995, with MESC, and affiliate of MEOFC,
pursuant to which, among other things, MESC subscribed for the purchase of
734,262 shares of the Company's Common Stock at the purchase price of
approximately $1.36 per share in two blocks of 367,131 shares. The Company and
Royle have each agreed to contribute $500,000 to the venture and each holds a
15% interest in the JV Company. MEOFC contributed $2.33 million and holds a 70%
interest. The JV Company intends to borrow approximately $10 million from the
Saudi Industries Development Fund for investment in equipment and working
capital and will purchase optical fiber preform and fiber from the Company. In
addition, the Company is holding in escrow, on behalf of MESC, 550,696 Warrants
to purchase Common Stock of the Company pursuant to the Share Purchase Agreement
and 238,635 shares of Common Stock to be issued to MESC immediately upon the
exercise of the MESC Warrants. Such Warrants are exercisable, in whole or in
part, at $1.63 per share and expire on April 13, 1997. See "Business-Sales and
Marketing-Joint Marketing Arrangements".
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.
On September 18, 1995, the Company acquired ALT. ALT manufactures a
patented Fiber Optic Cable Monitoring System ("FOCMS"), which continuously
monitors fiber optic cables for faults. ALT also manufactures long-range Fault
Locator Devices which are also patented, Cable Protection Devices, which are
applied at cable splice joints prior to fiber optic cable entering a building,
and Electro-Optical Talksets 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 FOCMS and related ALT products include telephone
companies worldwide.
On October 5, 1995, MESC purchased the first 367,131 shares of the
Company's Common Stock for $500,000 pursuant to the Share Purchase Agreement
dated April 13, 1995. Proceeds from the second purchase will be used to finance
the Company's $500,000 capital
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<PAGE>
contribution to the JV Company described above. The Company expects to close
this second purchase in the near future.
On November 1, 1995, the Company entered into a Distributor Agreement
with Techman, a company solely owned by Dr. M. Mahmud Awan, a director of the
Company. The International Distributor Agreement provides for commissions to be
paid in the form of Company stock based upon sales generated by Techman for the
Company. See "Certain Transactions" - Dealings with Techman.
In January 1996, the Company established a subsidiary, InfoGlass
Incorporated ("InfoGlass"), through which it intends to eventually conduct its
North American fiber optic business.
In January 1996, Techman agreed to purchase 734,260 shares of the
Company's Common Stock and Warrants exercisable into 550,696 shares of the
Company's Common Stock pursuant to a Share Purchase Agreement dated January 11,
1996. Additionally, under such Agreement, Techman will be issued 312,061 shares
of Common Stock upon (i) formation of the joint venture company Fiber Optic
Industries (Private) Ltd. ("FOI") to produce optical fiber and cable; (ii) the
completion of a supply agreement between FOI and the Company; and (iii)
completion of the purchase of the 734,260 shares under the Share Purchase
Agreement. Between February 1996 and August 1996, the Company, pursuant to the
Share Purchase Agreement, issued, at the request of Techman, 549,319 shares to
Dr. Awan, the sole shareholder of Techman.
In addition, 1,000,000 shares are being held in escrow (part of the
Escrow Shares) under an International Distributor Agreement. Such shares will be
issued ratably by the Company as commissions upon sales generated by Techman of
up to $200 million. Such shares will be issued upon receipt by the Company of
proceeds from such sales.
Unless otherwise specified, the term "Company", with respect to events
prior to July 18, 1995, refers to FiberCore Incorporated and 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 six months ended June 30, 1996,
the Company incurred net losses of $1,321,264 on revenues of $4,024,971.
The executive offices of the Company are located at 174 Charlton Road,
Sturbridge, Massachusetts 01566 and its telephone number is (508) 347-7744.
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<PAGE>
The Offering
Securities Offered: 42,949,489 shares of Common Stock. As of the date of
this Prospectus, the Selling Securityholders own
30,306,282 of such shares, while 12,643,207 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: 31,056,282 shares(1) (2) (3) (4)
Shares of Common
Stock outstanding
after the offering 41,184,184 shares5 assuming all Warrants and awarded
Options are exercised and $5,441,128 in principal and
accrued interest in 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, and the issuance of the
Escrow Shares, or approximately $4,989,658. 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
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1 Includes 750,000 shares of Common Stock of Venturecap that
were outstanding prior to the Venturecap Merger not being
registered hereunder.
2 Excludes 917,827 shares of Common Stock being held in escrow
for MESC, Warrants to purchase 550,696 shares of Common Stock
being held in escrow for MESC (collectively, the "MESC Escrow
Securities"), see "Business-Recent Developments"; or shares
issuable upon exercise of options (3,493,739) shares or
Warrants (1,063,653 shares).
3 Does not include 497,002 shares of Common Stock being held in
escrow and Warrants exercisable into 550,696 shares of common
stock pursuant to the Techman Purchase Agreement, and
1,000,000 shares held in escrow as payment for certain sales
commissions to be issued to Techman International, Inc. (the
"Techman Securities"). See "Certain Transactions - Dealings
with Techman".
4 Does not include 4,319,186 shares issuable to AMP,
Incorporated upon conversion of $5,000,000 of the AMP note;
147,059 shares to be issued to H. Arsala upon conversion of a
$200,000 note; and approximately 103,349 shares to be issued
to Connecticut Innovations, Inc. on conversion of a $241,128
note.
5 Excludes 2,515,305 shares being registered hereunder, to be
issued for future awards and grants of employee stock options.
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<PAGE>
Summary Financial Information
(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>
<CAPTION>
Six Months Ended June 30 Year Ended December 31
-------------------------------------- --------------------------------------
Pro Forma Historical Pro Forma Historical
--------- ---------- --------- ----------
1995 (1)(4) 1996 1995 (3)(5) 1995 (1)(4) 1995 (2) 1994 (3) (5)
----------- ---- ----------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Net sales $ 1,196 $ 4,025 $ 1,084 $ 3,255 $ 3,094 231
Costs and expenses:
Cost of sales 2,231 3,746 1,833 5,040 4,509 1,064
Research and development 82 200 82 188 75 90
Selling, general and administrative 953 1,264 762 2,224 2,099 699
Interest expense, net of interest income 167 191 159 383 369 8
Other expense (Income ), net (14) (55) (14) 45 51 (5)
---------- ---------- --------- ---------- ---------- ----------
Income (loss) before provision for income (2,223) (1,321) (1,738) (4,625) (4,009) (1,625)
Provision for income taxes - - - - - -
----------- ----------- ----------- ------------- ------------- ----------
Net income (loss): $ (2,223) $(1,321) $ (1,738) $ (4,625) $ (4,009) $ (1,625)
Net income (loss) per share $ (0.07) $ (0.04) $ (0.07) $ (0.15) $ (0.15) $ (0.07)
Weighted average common shares and common 29,980,468 30,580,264 24,840,638 30,245,879 26,584,630 22,873,322
share equivalents outstanding
Balance Sheet Data:
Working capital $2,332 $(404) $2,844 $(277) $(277) $(519)
Total assets $15,463 $14,257 $8,269 $14,167 $14,783 $4,270
Total liabilities $8,092 $8,856 $7,413 $8,415 $8,415 $1,687
Accumulated deficit $(3,851) $(6,959) $(3,366) $(6,253) $(5,638) $(1,628)
Stockholder's equity $7,371 $5,401 $856 $5,752 $6,368 $2,583
</TABLE>
(See notes on following page)
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<PAGE>
Summary Financial Information (cont.)
(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 through December
31, 1995.
(3) Does not include the results of ALT.
(4) The pro forma results reflect higher amortization costs than the
historical financial due to the allocation of the purchase price of the
ALT acquisition to ALT's assets. The pro forma financial also reflect
lower interest costs than the historical financial due to the
conversion of ALT debt at an earlier date than the actual conversion
date.
(5) Restated to reflect the Venturecap merger as of the beginning of the
period.
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<PAGE>
RISK FACTORS
The securities offered hereby are highly speculative and subject to
numerous and substantial risks. Therefore, prospective investors should
carefully consider the risk factors as well as the information contained
elsewhere in this Prospectus.
New Business
The Company is a relatively new business and is therefore subject to
the risks inherent in early-stage operations, including acceptance of products
and the establishment of distribution networks.
Need for Additional Financing and Capital Resources
The Company has had net losses in each year of operation. It is likely
that losses will occur from operations until at least the close of the third
quarter of 1996, causing the Company to have an operating loss for the fiscal
year 1996. The Company's ability to stay in operation 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 addition, the Company's Jena Facility has been operating at a loss since the
Company acquired control of the facility in July 1994 (even though it has been
operating with a positive cash flow since January 1996). These losses are
primarily due to lack of sufficient sales for the Company's multi-mode optical
fiber, manufacturing inefficiencies and less than optimum productivity. The
Company has transferred and, with additional capital, will continue to transfer
its more efficient and productive technology to its Jena Facility, which
management anticipates will result 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. There can be no assurance,
however, that additional capital will be available on terms acceptable to the
Company, if at all. 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.
Production Volume Increases Limited to Capacity of Current Facilities
In order for the Company to continue to increase its revenues, it will
have to expand its facilities. Although the Company will seek additional
financing through one or more sources that will be used, for the most part, to
increase manufacturing capacity by expanding facilities and purchasing
equipment, there can be no assurance that the planned increases will be achieved
so as to satisfy the Company's present and long-term supply contracts. A failure
to increase manufacturing capacity will have an adverse effect on the Company's
operating results. Moreover, there can be no assurance that if manufacturing
capacity were increased that it would be economically utilized.
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<PAGE>
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, although the
Company has established relationships with two other manufacturers. There can be
no assurance that these manufacturers will be able to meet the Company's raw
material needs in a satisfactory and timely manner. 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 will not occur in the future. In addition, one
supplier has recently required the Company to prepay for three months supply of
glass tubing. 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 at competitive prices to
their customers products similar to products produced by the Company. 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.
-12-
<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 as soon as possible. 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 certain of the executive officers with the
Company as the named beneficiary. The Company's future success also will depend
in large part upon its ability to attract and retain 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 U.S. 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 U.S. and abroad. The Company also owns three European
and United Kingdom patents covering ALT's products. One additional patent filing
in Europe, two in Japan and three in other countries related to ALT's 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 Sico
Quarzschmelze Jena GmbH ("Sico") patents and expertise developed or owned by
Sico relating to fiber optics. In the event the Company were to default on its
obligaions to Sico, the Company's rights to use these patents could terminate.
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. Without use of
Sico patents and technology, the
-13-
<PAGE>
Company's expense in manufacturing optical fiber and optical fiber preforms
could increase substantially.
The Company's wholly-owned subsidiary, ALT, 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 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 the risks of conducting business
internationally. These include unexpected changes in legislative or regulatory
requirements and fluctuations in the U.S. 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 foreign 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 is 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
Until 2001, the Company will not be able to move manufacturing
equipment out of the Jena Facility in Jena, Germany, pursuant to an agreement
with the seller of such equipment. This 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, under certain
conditions, principally maintaining employment levels and maintaining the Jena
Facility the manufacturing equipment could revert to a German governmental
entity. See "Certain Transactions - Dealings with Sico."
Use of Proceeds
Although the Company will receive all of the proceeds from the exercise
of the Warrants, Options and the issuance of certain Escrow Shares there can be
no assurance that any of such securities will be exercised by the holders
thereof. The Company currently intends to utilize a significant portion of any
such proceeds for working capital and general corporate purposes. Accordingly,
the Company will have broad discretion as to the application of a substantial
-14-
<PAGE>
portion of the net proceeds, if any, derived from the exercise of the Warrants,
Options and the issuance of certain Escrow Shares. None of the proceeds from the
sale of shares of Common Stock offered hereby (including the Underlying Shares)
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."
Strategic Alliances
The Company is contractually committed to providing at least 50% of
AMP's forecasted quantities of optical fiber. In the event AMP's needs change
and AMP does not purchase the forecasted quantity of the Company's product, 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.
Loan Defaults and Guarantees
On July 31, 1996, the Company entered into a Forbearance Agreement with
CII with respect to $245,000, owed by ALT to CII. Among the terms of that
agreement, contemporaneously with the filing of this Registration Statement and
in exchange for a general release from CII, the Company will (i) issue
approximately 103,000 shares to CII, (ii) pay $1,000 per month toward interest,
from March 1, 1996 until the filing date of this Registration Statement, and
(iii) issue up to 20,000 shares, to be held in escrow, as additional
compensation to CII if their shares are not freely tradeable by May 15, 1997
(10,000 shares) and August 15, 1997 (10,000 shares).
ALT also owes approximately $275,000 to Connecticut Development
Authority ("CDA"). As of the filing of this Registration Statement, CDA has
stated that it will be willing to accept basically the same terms as those given
to CII. However, no such agreement has been executed as of the date hereof. See
Description of Securities -- CDA Warrant." The CDA loan is personally guaranteed
by two of the Company's executive officers, Dr. Aslami and Mr.
DeLuca.
In addition, ALT is the primary guarantor of approximately $250,000 of
loan obligations to the Department of Economic Development for the State of
Connecticut ("DED") and a secondary guarantor on approximately $650,000 of bank
loan obligations of Allied Controls Inc., a former subsidiary (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 the bank under a forbearance
agreement and to DED as part of an oral standstill agreement.
-15-
<PAGE>
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."
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
six months of 1996, FiberCore had net sales to one customer in excess of 61% of
total sales. ALT has net sales to three customers aggregating 83% of net sales
(representing less than 2% of Company sales). The Company believes that the loss
of these customers could have a material adverse effect on the Company.
See "Business-Customers, Inventory, Backlog and Advertising."
Legal Proceedings
The Company is a defendant in a lawsuit seeking to enjoin the Company
from using the name "FiberCore," as well as unspecified monetary damages in
excess of $50,000. If the Company is not successful in defending the litigation,
good-will and advertising invested in the name FiberCore will be lost, and the
Company may be forced to spend additional capital in establishing a new name. In
addition, the Company may be required to pay an award of substantial monetary
damages. See "Business-Litigation."
FiberCore Jena is a defendant in a lawsuit brought against the
Company's subsidiary by a German firm, COIA GmbH, Hasenhdgweg 73, D-63 741
Aschaffenburg, F.R. Germany. COIA GmbH is suing the Company for approximately
$1.5 million, alleging that the Company failed to deliver under a sales
contract. The Company is aggressively defending this action and has established
a reserve for this action 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.
Insurance
The Company carries limited insurance on equipment located in its Jena
Facility. In the event of damage to or loss of such equipment, there can be no
assurance that the loss will not exceed policy limits.
-16-
<PAGE>
Limited Trading Market
Prior to the Offering, the Company's Common Stock was quoted on the OTC
Bulletin Board and has traded on a very limited basis. In connection with the
Offering, the Company intends to apply for listing on the NASDAQ Small Cap
Market, 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 the NASDAQ Small Cap Market and the
Company fails to meet certain other criteria, the Common Stock would be subject
to a Commission rule 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 Small
Cap Market, 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 the
Underlying Shares in the secondary market.
Shares Eligible for Future Sale
Upon completion of this Offering, 41,184,184 shares of Common Stock
will be issued and outstanding (assuming exercise of Warrants, Options,
conversion of the Notes and issuance of the Escrow Shares).
Market Overhang from Options, Warrants, Notes and Escrow Shares
Immediately after the Offering, the Company will have outstanding a
number of Options, Warrants, Notes and Escrow Shares, including the securities
described herein. To the extent that such Options, Warrants, Notes are exercised
or converted or the Escrow Shares are issued, as the case may be, dilution to
the interests of the Company's stockholders may occur. 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, and the beneficiaries of the
Escrow Shares may become entitled to such shares, as the case may be, 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, Notes and Escrow Shares. Further, the
sale of Common Stock or other securities held by or issuable to the holders of
such Options, Warrants, Notes or Escrow Shares, including the Underlying Shares
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 Company's 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
-17-
<PAGE>
performance). Prior to the Offering, only 750,000 shares of the Company's stock
were freely tradeable. After the Offering, 41,184,184 shares will be freely
tradeable, assuming all of the shares offered hereby are sold and all awarded
Options and Warrants are exercised, Notes are converted and Escrow Shares
issued. It is therefore possible that the price of the Company's Common Stock
will decline on the OTC Bulletin Board after the expectation of the imminent
Offering is priced into the market.
Control by Directors and Management and Others
Prior to the Offering, Mohd Aslami, Charles DeLuca, Gregory Perry,
Techman International, PEBCO, Inc. (including, where applicable, their
respective spouses and children) and AMP (assuming conversion of the AMP Note
and issuance of shares to Techman International) beneficially own approximately
20.0%, 12.2, 9.5%, 6.8%, 4.2% and 11.4% of the outstanding Common Stock,
respectively (collectively approximately 64.1%). If they retain similar
percentages in the Company following the Offering, some of such persons, acting
together, may effectively have the power to appoint a majority of the Company's
Board of Directors and to significantly influence corporate actions. See
"Principal Securityholders."
-18-
<PAGE>
USE OF PROCEEDS
The Company will receive all of the proceeds from the exercise of the
Warrants, the Options and the issuance of certain Escrow Shares. 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 and the Escrow
Shares are issued, the net proceeds to the Company will be $4,989,658. All
proceeds from the exercise of the Warrants and Options and the issuance of the
Escrow Shares will be added to working capital. There can be no assurance that
any of the Warrants and Options will be exercised or the Escrow Shares will be
issued.
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.
-19-
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company after
giving effect to (i) the Venturecap Merger; (ii) the ALT Acquisition; (iii) the
issuance of 367,131 shares to MESC; (iv) the 2,221,141 shares to Sico, and (v)
549,319 shares issued to Dr. M. Mahmud Awan. The column labeled "Actual" does
not give effect to this Offering. In other respects, the column labeled "As
Adjusted" gives effect to this Offering, including the issuance of 10,127,902
Underlying Shares upon the conversion, exercise and issuance of the Convertible
Securities 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>
June 30, 1996
-------------
(Dollars in Thousands)
Actual As Adjusted
------ -----------
<S> <C> <C>
Current portion of long term debt $613 $372
Long term debt, less current portion 5,413 213
Stockholders' equity (deficiency):
Preferred Stock, $.001 par value, 10,000,000 --- ---
authorized; none issued and outstanding
Common stock, $.001 par value, 100,000,000
shares authorized; 31,056,202 shares issued and
outstanding; 41,184,184 shares as adjusted 31 41
Additional paid in capital 12,184 22,605
Retained earnings (deficit) (6,959) (6,959)
Aggregate translation adjustment 144 144
------ ------
Total stockholders' equity 5,401 15,831
------- -------
Total capitalization $11,427 $16,416
======= =======
</TABLE>
-20-
<PAGE>
STOCK PRICE AND DIVIDEND POLICY
The Company intends to apply for the listing of its Common Stock on the
NASDAQ Small Cap Market, although there is no assurance that its application
will be approved. Currently there is a limited public market for the Company's
stock on the Bulletin Board, where the stock trades under the symbol FBCE. Set
forth below for the periods indicated are the high and low closing prices for
the Common Stock as reported on the OTC Bulletin Board. See "Capitalization."
The prices prior to July 18, 1995 reflect the price of Venturecap, Inc., a
predecessor to the Company, which traded under the symbol VTUR.
Period High Bid Low Bid
- ------ -------- -------
- -------------------------------------------------------------------------------
1995
----
1st Quarter No Reported Trades No Reported Trades
- -------------------------------------------------------------------------------
2nd quarter (first $4.94 $2.55
reported bid on
May 11, 1995)
- -------------------------------------------------------------------------------
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 to
August 9, 1996 $7.44 $4.75
- -------------------------------------------------------------------------------
To date, the Company has not paid any cash dividends on its Common
Stock. On August 31, 1995, ALT paid a dividend to stockholders 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 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.
-21-
<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 1994 and 1995 have been derived from the financial statements of the
Company 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 six month periods ended
June 30, 1995 and 1996 and for the Company on a consolidated pro forma basis for
the six months ended June 30, 1995 were derived from the unaudited financial
statements of the predecessors of the Company and the Company that, 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.
-22-
<PAGE>
Summary Financial Information
(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>
<CAPTION>
Six Months Ended June 30 Year Ended December 31
-------------------------------------- ----------------------------------------
Pro Forma Historical Pro Forma Historical
--------- ---------- --------- ----------
1995 (1)(4) 1996 1995 (3)(5) 1995 (1)(4) 1995 (2) 1994 (3) (5)
----------- ---- ----------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Net sales $ 1,196 $ 4,025 $ 1,084 $ 3,255 $ 3,094 231
Costs and expenses:
Cost of sales 2,231 3,746 1,833 5,040 4,509 1,064
Research and development 82 200 82 188 75 90
Selling, general and administrative 953 1,264 762 2,224 2,099 699
Interest expense, net of interest income 167 191 159 383 369 8
Other expense (Income ), net (14) (55) (14) 45 51 (5)
--------- ---------- --------- ---------- ---------- ----------
Income (loss) before provision for income (2,223) (1,321) (1,738) (4,625) (4,009) (1,625)
Provision for income taxes - - - - - -
--------- ---------- --------- ---------- ---------- ----------
Net income (loss): $ (2,223) $ (1,321) $ (1,738) $ (4,625) $ (4,009) $ (1,625)
Net income (loss) per share $ (0.07) $(0.04) $ (0.07) $ (0.15) $ (0.15) $ (0.07)
Weighted average common shares and common 9,980,468 30,580,264 24,840,638 30,245,879 26,584,630 22,873,322
share equivalents outstanding
Balance Sheet Data:
Working capital $2,332 $(404) $2,844 $(277) $(277) $(519)
Total assets $15,463 $14,257 $8,269 $14,167 $14,783 $4,270
Total liabilities $8,092 $8,856 $7,413 $8,415 $8,415 $1,687
Accumulated deficit $(3,851) $(6,959) $(3,366) $(6,253) $(5,638) $(1,628)
Stockholder's equity $7,371 $5,401 $856 $5,752 $6,368 $2,583
</TABLE>
(See notes on following page)
-23-
<PAGE>
Summary Financial Information (cont.)
(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 through December
31, 1995.
(3) Does not include the results of ALT.
(4) The pro forma results reflect higher amortization costs than the
historical financial due to the allocation of the purchase price of the
ALT acquisition to ALT's assets. The pro forma financial also reflect
lower interest costs than the historical financial due to the
conversion of ALT debt at an earlier date than the actual conversion
date.
(5) Restated to reflect the Venturecap merger as of the beginning of the
period.
-24-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
Background
Unless otherwise stated, reference to the Company in this section
includes FiberCore Incorporated and subsidiaries, including ALT from September
18, 1995.
The Company operates primarily through its FiberCore Jena subsidiary.
The Company maintains a headquarters in Sturbridge, Massachusetts which is
staffed by 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, 1993, 1994 and
1995, and the unaudited statements of the Company for the six month periods
ended June 30, 1995 and 1996.
Results of Operations
Six months ended June 30, 1996 and 1995
Total revenues for the six months ended June 30, 1996 were $4,025
compared with revenues of $1,084 for the six month period ended June 30, 1995.
This increase in revenues was attributable to the Company's increase of
production capacity stemming from an upgrade of the Company's facility in
Germany, and the Company's sales and marketing efforts.
Gross profit for the six months ended June 30, 1996 was $279 compared
to a loss of $749 for the six months ended June 30, 1995. This difference was
also attributable to the upgrade of the Jena Facility since its acquisition in
June 1994, improvement and upgrading of machinery and equipment, improved
preform and fiber yields, 24 hour per day production, and increased revenues.
Selling, general and administrative expenses were $1,264 for the six
months ended June 30, 1996 compared to $762 for the six months ended June 30,
1995. This increase was due primarily to the upgrade of the Jena Facility, the
commencement of increased production at such facility and the Company's
increased sales and marketing efforts.
Net interest expense for the six months ended June 30, 1996 was $191
compared to $159 for the year-earlier comparable period. This increase was due
to interest expense attributable to the AMP Note.
The net loss for the six months ended June 30, 1996 was $1,321, a
decrease of $417 from the loss of $1,738 in the corresponding period in 1995.
The primary cause of the decrease was the increase in sales and gross profit as
described above.
-25-
<PAGE>
Fiscal Year 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. This increase in revenues was due to the
acquisition of the Jena Facility by the Company in June 1994, with shipments
commencing primarily in the last quarter of the year and expansion and upgrade
of the Jena Facility since its acquisition.
The net loss for the year ended December 31, 1995 of $4,009 was $2,384
greater than the loss of $1,625 for the year ended December 31, 1994. The
increase in loss is principally related to the full year of operation of the
Jena Facility, an increase in cost of sales of $3,445 resulting from increased
sales, an increase in selling, general, and administrative costs of $1,399
resulting from the full year operation, the increase in net interest expense of
$361 which resulted from the AMP loan used to finance expansion and upgrade of
the Jena facility, and interest expense on loans included with the ALT
acquisition.
Fiscal Year Ended December 31, 1994 and Period November 5, 1993
to December 31, 1993.
FiberCore Incorporated was organized under Nevada Law on November 5,
1993. Venturecap, into which FiberCore merged in 1995, was inactive from 1990
until the time of the merger with FiberCore Incorporated.
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 June 1994, with shipments commencing primarily
in the last quarter of the year.
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 in
Jena.
Liquidity and Capital Resources
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).
At December 31, 1994, the Company had cash of $258 and non-cash current
assets of $453. Fixed assets increased by $3,554 due to the acquisition of the
Jena Facility. Current
-26-
<PAGE>
liabilities increased by $1,226 primarily due to an increase in accounts payable
at the Jena Facility. During the year 1994 the Company received $1,629 from the
issuance of Common Stock.
At December 31, 1995, the Company had cash of $833 and non-cash current
assets of $2,304. Fixed assets increased during the year by $1,453 due to
expansion and upgrade of the Jena Facility. Current liabilities increased by
$2,185 primarily due to an increase in accounts payable and accrued expenses at
the Jena Facility and an increase in short term debt acquired with the ALT
acquisition. During the year the Company issued a convertible debenture to AMP,
Inc. for $5,000. The proceeds of this loan were used primarily to fund the
expansion and operations of the Jena Facility. Also during the year, the Company
received $500 from the sale of its Common Stock.
For the six months ended June 30, 1996, the Company had operating
revenues of $4,025 and has accumulated a deficit of $6,959 at June 30, 1996. 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. However, there is no assurance that the Company will
succeed in its efforts to make the Jena Facility profitable. 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 will seek 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; (iv) issuance of certain Escrow
Shares; and (v) 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 any of the preceding sources will be available to the
Company on attractive terms or at all. 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.
The Company currently has a backlog of orders aggregating approximately
$18,600 which are scheduled to be shipped through the end of 1996 and 1997.
Additionally, the Company has entered into, or is negotiating, long-term supply
agreements that, in the opinion of the Company, will generate sales of
approximately $251,000 in the aggregate. These include supply agreements with
MEFC, AMP, FOI and others.
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<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 $1,660.
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<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.
FiberCore and ALT sales by product group for the last two years and for
the six months ended June 1996, were as follows:
($000)
Year Ended Six months ended
December 31 June 30,1996
1994 1995
Optical Fiber and Preform...... $ 231 $3,009 $3,800
ALT Products................... 476 246 109
--- ------ ------
Total.......................... $707 $3,255 $3,909
==== ====== ======
Recent Developments
FiberCore 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, FiberCore
leased the Jena Facility for a fixed monthly sum, and acquired certain equipment
located in that facility from Sico. Until the year 2001, FiberCore'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 FiberCore
ceases production. The agreement pursuant to which FiberCore 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, FiberCore issued a ten year $5 million convertible note
to AMP Incorporated ("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
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<PAGE>
cable. AMP's annual worldwide sales for the 1995 fiscal year were in excess of
$5 billion. Principal plus interest accumulating at a rate of LIBOR plus one
percent may be converted into Common Stock of the Company 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 Company immediately prior to
such conversion. The AMP Note is initially collateralized by FiberCore patents,
patent applications, licenses, rights and royalties arising from such patents.
Pursuant to the agreement, the Company and AMP intend in the future to
substitute equipment and other collateral for the current collateral. The AMP
Note is subject to prepayment on demand in the event the Company is the issuer
of securities to be sold by it under an effective registration statement.
On July 18, 1995, FiberCore merged into Venturecap, an inactive
corporation, organized under the laws of the state of Nevada in 1987. At the
time of the merger, the merged entity changed its name to FiberCore, Inc. On
September 18, 1995, FiberCore, Inc., through a subsidiary, acquired ALT, a
Delaware corporation organized in 1986, engaged in the business of manufacturing
equipment which monitors and identifies faults in fiber optic cables, cable
protection devices, and electro-optical talk sets.
On October 5, 1995, MESC purchased 367,131 shares of the Company's
Common Stock at a price of $500,000. At that time the Company deposited into
escrow (i) 312,061 shares of Common Stock; (ii) Warrants granting MESC the right
to purchase 550,696 shares at a price of $1.63 per share exercisable at any time
until April 13, 1997; and (iii) 238,635 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 escrowed securities (other than the
aforementioned shares of Common Stock) will be released upon the execution of
all documents required to complete the formation of the JV Company, the
execution of a 5 year product supply agreement between the JV Company and the
Company estimated at $33 million, and the purchase by MESC of an additional
367,131 shares of the Company's Common Stock at a price of $500,000. See "Sales
and Marketing-Joint Marketing."
The Company has completed an agreement for the establishment of the JV
Company with Royle and MEOFC. The JV Company will engage in the production of
optical fiber and optical fiber cable both inside and outside of Saudi Arabia.
See "Sales and Marketing--Joint Marketing Arrangements."
On November 1, 1995, the Company entered into a Distributor Agreement
with Techman, a company controlled by Dr. M. Mahmud Awan, a director of the
Company. The commissions due Techman resulting from sales of the Company's
products are to be paid in the form of Company stock. See "Certain Transactions"
- - Dealings with Techman.
In January 1996, the Company established a subsidiary, InfoGlass
Incorporated ("InfoGlass"), through which it intends to eventually conduct its
North American fiber optic business.
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<PAGE>
In January 1996, Techman agreed to purchase 734,260 shares of the
Company's Common Stock and Warrants, exercisable into 550,696 shares of the
Company's Common Stock, pursuant to a Share Purchase Agreement dated January 11,
1996. Additionally, under the Share Purchase Agreement, Techman will be issued
312,061 shares of Common Stock upon (i) formation of a joint venture company to
produce optical fiber and cable, (ii) the completion of a supply agreement
between FOI and the Company, and (iii) completion of the purchase of the 734,260
shares under the Share Purchase Agreement. Between February 1996 and August
1996, the Company pursuant to such Share Purchase Agreement issued, at the
request of Techman, 549,319 shares to Dr. Awan.
In addition, 1,000,000 shares are being held in escrow (part of the
Escrow Shares) under an International Distributor Agreement. Such shares will be
issued ratably by the Company as commissions upon sales generated by Techman of
up to $200 million. Such shares will be issued upon receipt by the Company of
proceeds from such sales.
In July 1996, AMP agreed to enter into a 5 year supply contract
(renewable at AMP's option for an additional 5 year period) with the Company
whereby the Company will supply AMP with at least 50% of AMP's future glass
optical fiber needs. Second, it agreed to loan the Company an additional $3
million to fund the expansion of the Jena Facility, in exchange for a 10 year
note and $2 million of common stock purchase Warrants exercisable at $1.45. The
new $3 million loan will be funded contemporaneously with the closing of a
German financing arrangement estimated at DM 11 million or $7.5 million. AMP has
also agreed to convert $3 million of the April 1995 Note into Common Stock of
the Company.
See "Patents" and "Certain Transactions" for a discussion of other
transactions relating to the Company and its predecessors.
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 tens of thousands 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
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<PAGE>
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 campus 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 require 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 the 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 (OVD) process.
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 (cable).
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 IVD (MCVD), OVD or the AVD
processes. The Company's process,
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<PAGE>
however, takes advantage of available high quality doped1 and undoped fused
silica rods and tubes during the manufacturing process to more efficiently
produce 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, a "clad", which has a lower refractive
index than the core, and collapses the tube over the rod to form an intermediate
preform such intermediate preform can also be manufactured by any of the
existing processes, such as IVD (MCVD), OVD or AVD. A larger- diameter quartz
tubing is then collapsed over the intermediate preform to form the 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(degree)C, 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.
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 extensive knowledge and experience in
fiber production and machine design.
ALT Products and Other Products
The Company's ALT subsidiary has four principal products (the "ALT
Products"). These products are manufactured in the Company's Sturbridge,
Massachusetts facility and are marketed by independent sales representatives.
ALT's FOCMS facilitates the continuous monitoring of fiber optic and
copper cables. The FOCMS consists of sensors housed in a protective cover placed
at cable splice points and connected to a central monitoring system. The Company
holds two United States patents covering this technology. ALT purchased one of
these patents in 1986 from 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. ALT entered into a Purchase and Sale Agreement, dated
as of September 7, 1986, with Norscan, for the acquisition of certain patents
and know-how relating to fiber optic cable monitoring systems. A dispute exists
between ALT and Norscan with respect to
- ----------------
1 Doping means adding other glassy materials, such as germanium
dioxide to the silica glass.
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<PAGE>
Norscan selling FOCMS products, in competition with 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. See "-Patents."
The Company, through its ALT subsidiary, 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, the Company, through its ALT subsidiary, manufactures
cable protection devices. These and similar devices, manufactured by numerous
companies, are applied at cable splice joints prior to cables entering the
building. These devices protect against hazardous electrical currents which
could otherwise be carried by metal sheaths encasing optical fibers.
The Company, through its ALT subsidiary, also manufactures
electro-optical Talksets. These devices 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.
The Company also has developed flood and leak detection devices for the
home. The Company is not actively marketing these products because of lack of
resources. The Company, however, may attempt to market such products in the
future. See "Trademarks."
Sales and Marketing
Preform and Fiber Strategy
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. FiberCore 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>
FiberCore'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
(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 current
shareholder and a former Director, is Director of Fiber Technology at Royle.
See "Certain Transactions," 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. 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 "-Fiber Optic Cable and
Preform Manufacturing Technologies."
The Company is attempting to enter into joint ventures with potential
foreign and domestic partners including cable manufacturers over the next few
years 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 have agreed to contribute $500,000 to the venture and
each holds a 15% interest in the JV Company. MEOFC contributed $2.33 million and
holds a 70% interest. The JV Company has placed a $5.5 million purchase order
with Royle for fiber optic cable manufacturing equipment, and intends to
purchase fiber and preforms from the Company, totaling approximately $33 million
over the next 5 years. 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
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<PAGE>
367,131 shares of the Company's Common Stock at an aggregate price of $500,000.
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 MEFC
venture. 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 other
countries, although there can be no assurances that such discussions will lead
to the consummation of any transactions. See "Certain Transactions - Pakistan
Joint Venture."
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<PAGE>
Customers, Inventory, Backlog and Advertising
A key element of the Company's marketing strategy is to maintain
sufficient raw material and finished good 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 ALT and the
Company for all periods presented.
<TABLE>
<CAPTION>
Optical Fiber and
ALT Preform Business Combined
<S> <C> <C> <C>
1996 (6 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%
</TABLE>
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<PAGE>
The Company believes that the loss of any of these customers could have
a material adverse effect on the Company.
The Company currently has orders and/or supply agreements, that, in the
Company's opinion, is sufficient to consume the Company's current production
capacity and the currently planned expansion of the Jena Facility. Accordingly,
sales of optical fiber and preforms is 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 in 1997. 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 a number of independent sales agents.
The Company does not currently engage in extensive advertising.
Commencing in 1997, 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
The Company's 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 U.S. manufacturers,
SpecTran Specialty Optics ("SSO"), formerly Ensign Bickford Optics/Lightwave
Technologies, Inc. and Alcatel U.S.A. It should be noted that SSO'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. (They do not sell preform to other
fiber-optic manufacturers). FiberCore management believes these large companies
will not enter the preform market since demand for fiber currently exceeds
supply and because fiber manufacturers have an inherent disincentive in selling
preforms; they have already invested heavily in plant, equipment and technology
to
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<PAGE>
convert preforms into fiber and/or cable, and by selling preforms they would be
giving up value-added margins.
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 U.S. and Plasma Optical Fiber and Alcatel in Europe.
Corning, AT&T, and Alcatel generally supply the bulk of their production to
their own cablers or joint venture partners. Management believes the Company can
compete effectively in the multi-mode fiber market both in the U.S., Europe and
the rest of the world.
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 will come from Corning and AT&T. Corning's major market
concentration is and is anticipated to continue to be the U.S., while AT&T's
major market is itself, due to the vertical integration of the company and its
relationships with the regional Bell operating companies. Both AT&T and Corning
have several joint ventures throughout the world, but 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 larger producers.
ALT Products
ALT's management believes there is limited or no direct competition for
its FOCMS product line which can directly monitor and locate long range faults
on fiber optic cable except Norscan (see "Risk Factors-Patents and Proprietary
Rights)." Most other competing technologies and products in this regard are much
more complementary to the Company's products, rather 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.
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.
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<PAGE>
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 was acquired in
1993, from Gregory Perry, a co-founder, now a consultant to the Company and
expires in 2003. The existing patent provides a more efficient method of
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
Quarzschmelze Jena GmbH ("Sico") patents and expertise developed or owned by
Sico relating to fiber optics. In the event the Company were to default on its
obligaions to Sico, the Company's rights to use these patents could terminate.
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. 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 which 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 U.S. 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
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<PAGE>
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.
Research and Development
The Company conducts research and development activities at its Jena
and Sturbridge facilities. 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 fault
locating products. The Company is currently conducting research in Germany under
two grants totaling approximately $107,000 from the German government. For
fiscal years 1995, 1994, and 1993, total combined research and development
expenditures were $188,495, $161,803 (ALT and the Company) and $72,413 (ALT)
respectively. Research and development expenditures were $199,858 (ALT and the
Company)in the first six months of 1996.
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.
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, which
are not currently being marketed.
Litigation
The Company is a defendant in a lawsuit filed in the United States
District Court for the District of Massachusetts captioned FiberCore Limited v.
FiberCore Incorporated (now the Company), Docket No. 94-40155. The plaintiff, a
specialty fiber optic manufacturer, and a subsidiary of the Amoco Corporation,
alleges that the use by FiberCore, Inc. of the word "FiberCore" in its name
infringes a trademark of the plaintiff. The plaintiff seeks damages in excess of
$50,000 and also seeks to force FiberCore to change its name. Although a
negative result in the litigation could have a material adverse effect on the
Company, the Company has been vigorously defending the action and believes it
will prevail. The Company could be forced to change its name. The Company
believes that expenses in changing its name will not be
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material and that even if it loses the litigation, damages will not exceed
$50,000, although there can be no assurance the Company is correct in this
regard.
FiberCore Jena, at the present time has only one case pending. This
litigation is being brought against the Company's subsidiary by a German firm,
COIA GmbH, Hasenhdgweg 73, D- 63 741 Aschaffenburg, F.R. Germany. COIA GmbH is
suing the Company for approximately $1.5 million, alleging that the Company
failed to comply with a sales contract. The Company is aggressively defending
this action and has established a reserve for this action 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.
In addition to the above, 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.
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. During 1994, 1995 and the first six
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 method.
The Company's ALT subsidiary uses raw materials widely available from
numerous suppliers.
Employees
At June 30, 1996, the Company employed 59 persons, of whom five were
engaged in research and development the majority of the time, twelve of whom
were engaged in sales and
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administrative tasks, and 42 of whom were engaged in manufacturing. The Company
considers relations with employees to be satisfactory and believes that its
employee turnover does not exceed the industry average.
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 as they terminate
their employment with the Company.
Properties
FiberCore's headquarters are located in a 20,000 sq. ft. leased
building, including 5,000 sq. ft. of office space, located in Sturbridge,
Massachusetts. The initial term of the lease is three years expiring in January
31, 1997 and is renewable for two additional terms of three years each.
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-Dealing 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 plant, machinery and
equipment is approximately $8.4 million. The Company maintains limited 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.
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MANAGEMENT
Executive Officers and Directors
The following tables set forth certain information with respect to each
person who is an executive officer or director of the Company as of July 31,
1996.
Name Age Position
- ---- --- --------
Mohd A. Aslami 49 Chairman of the Board of Directors, Chief
Executive Officer and Director
Charles DeLuca 59 Vice President Sales, Secretary and Director of
the Company and General Manager of the
Company's ALT subsidiary
Michael J. Beecher 51 Chief Financial Officer
Hans F.W. Moeller 66 Managing Director of the Company's
subsidiary FiberCore Glasfaser Jena GmbH
Zaid Siddig 59 Director
Steven Phillips 50 Director
M. Mahmud Awan 45 Director
Dr. Aslami is a co-founder of FiberCore and became Chief Executive
Officer and Chairman of the Board of Directors of FiberCore in November 1993 and
holds identical positions with the Company. Dr. Aslami has served as Chairman
and Chief Executive Officer 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.
Mr. DeLuca is a co-founder of FiberCore. He became Secretary and a
Director of FiberCore in November 1993 and holds identical positions with 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 in April 1996. Mr. Beecher
was the Vice President/Treasurer and Chief Financial Officer at the University
of Bridgeport from 1989 through 1995. Prior to that, Mr. Beecher held the
positions of Vice President Finance for Consolidated Imaging Corporation
(1987-1989) and Vice President Finance and Treasurer for Perstorp, Inc,
(1977-1987), a manufacturer of chemicals, plastics and building products. Mr.
Beecher is a Certified Public Accountant and is a member of the American
Institute of Certified Public Accountants.
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<PAGE>
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 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"), whose parent company he joined in 1956. From
1989 to 1993, he served as President of Schott Corporation. Mr. Moeller was a
member of the Board of Directors of Schott from 1989 to 1994. During his career
with Schott, Mr. Moeller also served as President of Schott America, Inc., a
subsidiary of Schott Corporation, Executive Vice President of Schott Glass
Technologies, Inc., a subsidiary of Schott and Vice President/General Manager of
Schott America, Inc. The parent company of Schott is in Mainz, Germany and
manufactures optical, industrial specialty and ceramics types of glasses.
Mr. Siddig became a Director of FiberCore Incorporated in 1994 and
holds the same position in the Company. He also serves as a consultant to the
Board of Directors of FiberCore Jena. Mr. Siddig was a co-founder and Director
of SpecTran from 1981 to 1991. Mr. Siddig is a private investor and since 1986
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, founder and director, of Winstar
Incorporated, the sole general partner of The Winstar Government Securities
Company L.P., a registered broker-dealer specializing in odd-lot U.S. Government
securities transactions. 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 a majority stockholder.
Dr. Awan is the founder and President of Techman International, Inc., a
Massachusetts company, engaged in providing technical, sales and management
consulting services to various industrial companies in the U.S. and abroad. Dr.
Awan has been responsible for the launching 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 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 Government of Pakistan to operate a national and
international satellite data communication network throughout Pakistan. In
cooperation with STS, he was responsible for building the first multi-trunk
SATCOM network for Government of Pakistan linking fifty five Pakistani cities to
ASIASAT.
Executive Compensation
The following table sets forth, for the Company's last three fiscal
years, the cash salary, bonus and non-cash salary or bonuses earned or paid by
the Company (including both FiberCore, ALT, and their subsidiaries), as well as
certain other compensation paid or accrued for those
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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 $100,000:
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
Name and Other Annual All other
Principal Position Year Salary ($) Bonus (S) Compensation($)1 Stock Options Compensation
- ------------------ ---- ---------- --------- ---------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mohd A. Aslami(2) 1995 146,500 - - - -
Chairman, President
and Chief Executive 1994 178,729 - 10,529 - -
Officer of FiberCore
and ALT 1993 9,333 - 188,687 - -
Charles DeLuca3 1995 37,699 - - - -
Director and Secretary of
FiberCore and Executive 1994 18,000 - 99,485 - -
Vice President of ALT
1993 5,925 - 117,269 - -
- -----------------------
<FN>
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 awarded to Dr. Aslami and Mr. DeLuca in 1995
for serving on ALT's Board of Directors. All Warrants and
shares of ALT stock were valued at $0.35, for purposes of the
compensation table.
2 Dr. Aslami became Director, President, and Chief Executive
Officer of the Company, as currently constituted, in July 1995
after the Venturecap Merger.
3 Mr. DeLuca became Director and Secretary of the Company, as
currently constituted in July 1995, after the Venturecap
Merger.
</FN>
</TABLE>
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Employment Agreements
The Company maintains no written employment or severance agreements
with its executive officers. As soon as possible, the Company intends to enter
into non-compete agreements with Dr. Aslami, Mr. DeLuca, Mr. Moeller, and Mr.
Beecher. The loss of the aforementioned individuals or any other executive
officer would have a material adverse effect on the Company. The Company intends
to apply for key-man life insurance policies on certain executives with the
Company as the named beneficiary.
Committees of the Board
The Company intends to establish an audit committee, an executive
committee, and a compensation committee as of the effectiveness of the
Prospectus. 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. In addition, ALT maintained a stock option plan prior to the
ALT acquisition. The Company intends to adopt a formal Employee Stock Option
Plan.
There were no exercises of FiberCore stock options for the year ended
December 31, 1994 and 1995 for the Chief Executive Officer and each of the four
most highly compensated executive officers of the Company.
Directors' Compensation
During 1995 and 1994, FiberCore'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 per year
of ALT common stock for serving as directors. The Company intends to adopt a
compensation plan for its directors.
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CERTAIN TRANSACTIONS1
Formation of FiberCore
FiberCore was organized under the laws of the state of Nevada in
November, 1993 by Mohd Aslami, Gregory Perry, Charles DeLuca, 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.
ALT contributed $60,000 worth of services in exchange for 3,671,307 shares. Mr.
Perry assigned a patent to the Company, valued at $60,000 and received 3,671,307
shares. See "Business-Patents."
In November 1993, Jack Ramsey purchased 1,529,710 shares from FiberCore
for $50,000. In July 1994 Royle subscribed for 458,913 shares of FiberCore
Common Stock and Warrants to purchase 229,457 shares at an exercise price of
$1.31. The aggregate price paid by Royle was $500,000. FiberCore deposited
$500,000 with Royle toward the purchase of up to $1.4 million of equipment used
in the manufacture and testing of optical fiber. FiberCore, due to the
acquisition of the Jena Facility, and delays in raising capital for the U.S.
Facility, had to cancel the purchase order with Royle. Royle returned the
subscribed shares and Warrants, and agreed to cancel its subscription for such
securities.
Sturbridge Lease
In January 1994, FiberCore entered into a lease for its current
facility in Sturbridge, Massachusetts with Cobra Realty Trust, as lessor. The
initial term of the lease expires on January 31, 1997, with an option to renew
for an additional six years.
Dealings With Sico
In June 1994, FiberCore Jena, a wholly-owned subsidiary of FiberCore,
entered into a six year capital lease for equipment in Germany with Sico, in
exchange for 2,221,141 shares of FiberCore, issuable to Sico or a designee
thereof. Walter Nadrag, managing director and owner of a majority stock interest
became managing director of FiberCore Jena and was designated by Sico to hold
the 2,221,141 shares. In August 1995, Sico and FiberCore amended the agreement,
and FiberCore 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)
and in turn Sico and Mr. Nadrag agreed to the cancellation of all shares of the
Company 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 and the
Company 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
required basis at an equivalent half-time
- ------------------------
1 Share numbers of FiberCore have been adjusted to reflect the
Venturecap merger.
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<PAGE>
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 was amended in August 1995. See
"Business-Properties." Sico was also a reseller customer of the Company in 1994
and 1995. In 1995 and the first six months of 1996, Sico accounted for
approximately 10% and less than 1% of FiberCore total sales, respectively.
Dealings With Royle
In June 1994, FiberCore entered into the Royle Cooperation Agreement
with Royle, which was amended in November, 1995, to eliminate commissions paid
to each other and to establish guidelines for both companies entering into joint
venture agreements, with each other and third parties. 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.
See "Business-Sales and Marketing-Joint Marketing Agreements" for a description
of the Royle Cooperation Agreement and the Mideast JV Agreement. Royle is
controlled by Jack Ramsey, who prior to the Offering beneficially owned 5.3% of
the outstanding shares of Common Stock of the Company. Gregory Perry, the
Director of Fiber Technology at Royle, who prior to the Offering beneficially
owned 11.3% of the outstanding shares of Common Stock of the Company is a former
director of the Company see "Principal Securityholders."
Dealings with Techman
Since 1995, the Company has maintained a working relationship with
Techman International Corporation, a technology management company headquartered
in Massachusetts since 1982. Techman specializes in sales of fiberoptic 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 USA based
multinationals. Techman developed the first wireless Local Area Network ("LAN")
in 1984 based on its proprietary modem design and gained an excellent customer
base with major customers such as Pitney Bowes before selling the technology to
a local manufacturer.
Techman has forty nine employees with operational offices in Charlton
and East Brookfield, Massachusetts, Karachi, Lahore, and Islamabad, Pakistan as
well as in Muscat, Oman. Its worldwide organization is headed by Dr. M. Mahmud
Awan who has been a consultant to major telecommunications companies such as
Telecom Australia, NFT Ericsson, Sanders (Lockheed), and Southern New England
Telephone (SNET). He served as Presidential Adviser to the Government of
Pakistan in 1978. Prior to the formation of Techman, he was a Group Manager at
American Optical Corporation, and upon the sale of American Optical Corporation,
served as a Senior Consultant to its parent, Warner Lambert Company.
The Company signed an International Distributor Agreement with Techman
in November 1995 to market its products worldwide. Techman agreed to receive
customary sales commissions in the form of stock. The Company has placed one
million (1,000,000) shares of its Common Stock in escrow, to be
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issued to Techman in payment of commissions as earned on sales of up to $200
million of the Company's products. Based on Techman's efforts, the Company won a
major contract through an International Tender from Pakistan Telecom for its
cable monitoring system (FOCMS) in June 1996. Under this agreement, ALT is
responsible for installing a fiber optic cable monitoring system in the Northern
region of Pakistan. Upon the successful completion of this installation, the
Company is expected to install a nationwide system valued in excess of one
million ($1,000,000) dollars.
In collaboration with Techman, the Company has also formed FOI, a
company Incorporated in Islamabad under the laws of Pakistan. The Company has an
assigned Founders Equity position in FOI that requires funding. The assigned
equity position for the founders of FOI are as follows:
Techman 40 %
FiberCore 30 %
Royle 15 %
Telecom Foundation 15 %
FOI has been funded since its inception in June 1995, primarily by
Techman which retains the largest interest. FOI has contracted with First
Capital Securities Corporation Limited to arrange for listing of FOI on the
Karachi Stock Exchange in accordance with the rules of Corporate Law Authority,
Government of Pakistan.
FOI has been active in the regional market for setting up new fiber
manufacturing plants. It has been instrumental in getting new orders for its own
factory in Pakistan. Techman and FOI have a twenty five percent ownership of
Oman Fiber Optic Company ("OFOC"), a company being listed on Muskat Stock
Exchange. The other founders of OFOC include, General Telephone Organization
("GTO"), the Omani Government Telephone Company, and Oman/Emirates Investment
Holding Company, a Joint Venture funded by the Royal Governments of Oman and
United Arab Emirates.
Pursuant to a 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 exercisable at $1.63 per share for $100,000 in
cash and a promissory note in the principal amount of $900,000, bearing interest
at LIBOR and payable in 9 monthly installments, with the first payment due on
the last business day of the calendar month following the month in which the
closing occurs. In addition, as part of the Share Purchase Agreement, Techman
will be issued an additional 312,061 shares on formation of FOI and the
completion of a supply agreement between FOI and the Company. Between February
and August, 1996, at the request of Techman, the Company issued 549,319 shares
of the Company's Common Stock to Dr. M. Mahmud Awan, a director of the Company
(the sole shareholder of Techman) under the Share Purchase Agreement.
In addition, 1,000,000 shares are being held in escrow (part
of the Escrow Shares) under an International Distributor Agreement. Such shares
will be issued ratably by the Company as commissions upon sales generated by
Techman of up to $200 million. Such shares will be issued upon receipt by the
Company of proceeds from such sales.
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Pakistan Joint Venture
The Company has contributed $50,000 and owns 30% of FOI, a corporation
incorporated under the laws of Pakistan. The remainder of FOI is owned by
Techman International, Inc. (40%), Telecom Foundation (15%) and Royle (15%).
Techman is controlled by Mahmud Awan, a director of the Company.
FOI was formed for the manufacturing of optical fiber products in
Pakistan, and is in the process of raising capital to fund the construction of a
manufacturing facility.
Aslami and DeLuca Guarantees
In 1991, Allied, a former subsidiary of ALT, acquired the assets and
assumed certain liabilities of a corporation which had filed for protection
under Title 11 of the United States Code (the Bankruptcy Code). One of the
assumed liabilities was a loan held by Lafayette American National Bank
("Lafayette") in the original amount of $750,000. As a condition of the loan
assumption, in March 1991, Lafayette obtained the guarantees of ALT and Messrs.
DeLuca and Aslami, which guarantees were in addition to the initial loan
guarantees Lafayette already had obtained from other persons. Each of Dr. Aslami
and Mr. DeLuca guaranteed $150,000. Before commencing proceedings to enforce the
guarantee first against ALT and second against 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 each of
Messrs. Aslami and DeLuca received Warrants to purchase 25,000 shares of ALT
common stock at $1.75 per share, expiring in 1998. These Warrants were converted
into ALT common stock immediately prior to the ALT Acquisition.
In 1992, Messrs. Aslami and DeLuca guaranteed a $250,000 loan to Allied
from a Connecticut governmental agency. As consideration for their guarantees,
Messrs. Aslami and DeLuca received Warrants to purchase 62,500 shares of Common
Stock of ALT at $1.75 per share expiring in 1998. These Warrants were converted
into ALT stock immediately prior to the ALT Acquisition.
In 1990, Messrs. Aslami and DeLuca guaranteed a $300,000 loan from
Connecticut Development Authority ("CDA") to ALT. As consideration for their
guarantees, Messrs. Aslami and DeLuca received Warrants to purchase 50,000
shares of Common Stock of ALT at $1.50 per share expiring in 2000. These
Warrants were converted into ALT stock immediately prior to the ALT Acquisition.
Deferred Compensation
Since 1987, Aslami and DeLuca 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 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 stock immediately prior to the ALT Acquisition.
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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
$60,532 for services. Payment of such bills was deferred. Interest accrued
thereon 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
payment and interest accrued thereon, OFG was granted Warrants to purchase 0.767
shares of ALT 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 before 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.
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 an agreement upon mutually acceptable terms and conditions.
Since June, 1995, Techman has been providing technology consulting
services to the Company at a rate of $3,000 per month. Mr. Awan, a Director of
the Company, is chairman, chief executive officer and sole shareholder of
Techman.
Loans
In May 1991 and August 1991, Hedayat Amin-Arsala, a director of ALT,
loaned $150,000 and $120,000 to ALT, respectively, each convertible at $1.50 per
share of ALT common stock, at interest rates of 12% per annum. Through June 30,
1995, for every dollar of principal and accrued interest on such loans he was
granted Warrants to purchase one share of 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 ALT stock immediately prior to the ALT
Acquisition. See "-Conversion of ALT Warrants and ALT Acquisition"
In September 1991, Mohd Aslami, Charles DeLuca and OFG each lent 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 its subsidiaries' 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
before 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
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into ALT common stock at $2.00 per share through July 1993 and the loans and
Warrants were converted into ALT stock immediately prior to the ALT Acquisition.
See "-Conversion of ALT Warrants and ALT Acquisition"
In February 1992, Zaid Siddig, a director of the Company, 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 ALT common stock at $2.00 per share through July 31, 1993 and
the loans and Warrants were converted into ALT stock immediately prior to the
ALT Acquisition. See "-Conversion of ALT Warrants and ALT Acquisition."
In, February 1995, each of Messrs. Aslami and Siddig and John Royle and
Sons loaned $110,000 to FiberCore, at an interest rate of 2% over prime. In
connection with such loans each lender received 41,667 shares of FiberCore.
These loans were repaid in April 1995.
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 compensation. Through
June 30, 1994, for every dollar of principal and accrued interest on such loans
such persons were generally granted Warrants to purchase a certain number of
shares of common stock. These loans and Warrants were converted into ALT stock
immediately prior to the ALT Acquisition. See "Deferred Compensation."
Conversion of ALT Warrants and ALT Acquisition
In 1994, ALT entered into a restructuring plan with certain warrant
holders and debt 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 (the ALT Acquisition). Each shareholder of ALT received
approximately 1.0498 shares of the Company's Common Stock in exchange for each
outstanding share of ALT stock. Approximately 3.7 million shares of the
Company's common stock held by ALT were canceled. Approximately 8.4 million
shares of ALT common stock were converted into an aggregate of 8.8 million
shares of the Company's Common Stock.
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.
-53-
<PAGE>
<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 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 766,374 9.1 -0- 0 804,553 2.6
Hedayat Amin Arsala 559,519 6.7 183,565 0.7 770,957 2.5
</TABLE>
Immediately prior to the ALT Acquisition, pursuant to a restructuring
plan agreed to in 1994, 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 (which were converted
at $1.25), pursuant to each lender's loan agreement, as modified and if
applicable, otherwise 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 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% ("Bonus
Warrants").
The table below depicts the conversion of debt and Warrants
beneficially owned by various officers and directors of the Company and ALT in
connection with the ALT Acquisition, including the number of Bonus Warrants
awarded.
<TABLE>
<CAPTION>
Number of Number of Number of
ALT shares ALT Warrants Shares into
Amount of into which converted Number of which ALT
ALT debt ALT debt (not including Bonus Warrants were
converted was converted bonus shares) Warrants Converted
--------- ------------- ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Mohd Aslami $626,333 477,926 590,638 98,890 100,506
Charles DeLuca 673,266 515,472 558,760 101,143 96,037
Zaid Siddig 323,021 209,669 196,356 49,089 61,273
Steven Phillips 747,017 570,720 665,585 172,951 148,154
Hedayat Amin
Arsala 495,099 341,448 375,000 92,500 133,572
</TABLE>
-54-
<PAGE>
The Allied Distribution
In 1995, ALT transferred its shares in its wholly owned subsidiary
Allied 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, as dividends, pursuant to the terms of their
respective instruments, payable upon exercise of such instruments. As a result
of the distribution, Messrs. Aslami, DeLuca, Perry, Siddig, Ramsey, Phillips and
Arsala beneficially own 17.7%, 19.1%, 0%, 5%, 0%, 9.1% and 6.7% of the LLC,
respectively.
Unrealized Gain on Options
As of July 31, 1996, the executive officers and directors of the
Company, including its wholly-owned subsidiaries, owned 301,192 shares of Common
Stock issuable upon exercise of currently outstanding Options which shares are
included in the securities offered hereby. Before deduction of any selling
expenses they might incur in connection with the sale or other disposition of
the Underlying Shares with respect to such Options, the aggregate unrealized
gain for such executive officers and directors as a result of the offering
described in this Prospectus, based on the closing bid price of the Common Stock
on the OTC Bulletin Board on August 9, 1996, of $5.25 is as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate
Name Shares Exercise Price Unrealized Gain
- ---- ------ -------------- ---------------
<S> <C> <C> <C>
Mohd Aslami 60,913 $88,324 $231,469
Charles DeLuca 46,050 66,773 174,990
One Financial Group, Inc. 41,746 60,532 158,635
Michael J. Beecher 64,248 43,750 293,552
Hans F.W. Moeller 88,235 111,442 352,171
------ ------- -------
Total 301,192 $370,442 $1,210,817
======= ======== ==========
</TABLE>
-55-
<PAGE>
PRINCIPAL SECURITYHOLDERS
The following table sets forth certain information regarding the
ownership of the Common Stock as of the date of this Prospectus and as adjusted
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 stockholders has sole voting and
investment power with respect to the shares beneficially owned.
SHARES % SHARES %
NAME OWNED OWNED OWNED OWNED
AND BEFORE BEFORE AFTER AFTER
ADDRESSES1 OFFERING OFFERING OFFERING OFFERING
Mohd Aslami 7,594,2502 24.5 7,655,1633 18.6
Charles DeLuca 4,640,1584 14.9 4,686,2085 11.4
Gregory A. Perry 3,597,8816 11.6 3,597,881 8.7
- -------------------
1 The addresses of the persons named in this table are: Messrs.
Aslami, DeLuca, Perry, Siddig, Beecher, Moeller, Ramsey,
Massarani, 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;
Patrick Brake, New York, NY 10023. Sico Quarzchemelze Jena
Gmbh, address is 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 shares held by
the Ariana Trust, 618,914 shares held by the Kabul Foundation,
trusts of which Dr. Aslami's wife is trustee and of which Dr.
Aslami's children are beneficiaries. Dr. Aslami disclaims
beneficial ownership of all such shares. Includes 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.
3 Includes 60,913 currently exercisable options.
4 Includes 1,395,097 shares held by Elizabeth DeLuca, Mr.
DeLuca's wife, 347,715 shares held by Mr. DeLuca's children
and 618,914 shares held by the Dawn Foundation, a trust of
which Mrs. DeLuca is trustee and of which Mr. DeLuca's
children are beneficiaries. Mr. DeLuca disclaims beneficial
ownership of all such shares. Includes 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.
5 Includes 46,050 currently exercisable options.
6 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.
-56-
<PAGE>
SHARES % SHARES %
NAME OWNED OWNED OWNED OWNED
AND BEFORE BEFORE AFTER AFTER
ADDRESSES OFFERING OFFERING OFFERING OFFERING
Jack Ramsey 1,682,6857 5.4 1,682,685 4.1
Steven Phillips 804,553 2.6 846,2998 2.1
Zaid Siddig 591,7359 1.9 591,735 1.4
PEBCO, Inc. 1,592,70110 5.1 1,636,29811 4.0
M. Mahmud 549,319 1.8 2,597,01712 6.3
Awan
Hans Moeller 0 0 88,23513 0.2
AMP 0 0 4,319,18614 10.5
Incorporated
Sico Jena GmbH 2,221,141 7.2 2,221,141 5.3
Michael J. 0 0 64,24815 0.2
Beecher
All directors
and executive
officers as a
group (7 persons) 14,180,015 45.7% 16,528,905 40.2%
- ------------------
7 Includes 152,972 shares held by Royle, a company controlled by
Jack Ramsey.
8 Include 41,746 currently exercisable options issued to One
Financial Group Incorporated.
9 Mr. Siddig is the uncle of Dr. Aslami's wife.
10 Shares are held of record by nominee.
11 Includes 43,597 currently exercisable Warrants.
12 Includes the Techman shares, including shares to be issued on
the completion of the purchase agreement (497,002), exercise
of Warrants (550,696), and escrowed sales commission shares
(1,000,000).
13 Includes 88,235 currently exercisable options.
14 Includes shares into which AMP Note is convertible at $1.16
per share, assuming conversion of
the AMP $5,000,000 principal amount of the note. 15 Includes
64,248 currently exercisable options.
-57-
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of August 13, 1996 by each Selling
Securityholder, as adjusted to reflect the sale by each Selling Securityholder
of the Common Stock, including the 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, 7,594,250(1) 24.5% 7,655,163(11) 18.4%
Chief Executive
Officer and Director
Charles DeLuca, 4,640,158(2) 14.9% 4,686,208(12) 11.3%
Secretary and EVP
Vice President of
ALT and Director
Gregory A. Perry 3,597,881(3) 11.0% 3,597,881 8.7%
Jack Ramsey 1,682,685(4) 5.4% 1,682,685 4.1%
Steven Phillips, 804,553 2.6% 846,299(13) 2.0%
Consultant and
Director
Zaid Siddig, 591,735(5) 1.9% 591,735 1.4%
Director
Michael Beecher, 0 0.0% 64,248(10) 0.2%
CFO
Techman Int. 1,412,352 4.4% 2,468,951(6) 6.0%
Hans Moeller, 0 0 88,2357 0.2%
General Manager of
FiberCore Jena
GmbH, and Director
AMP Incorporated 0 0 4,319,1868 10.4
PEBCO, Inc. 1,592,701(9) 14.9% 1,636,29814 3.9%
H Amin-Arsala 760,458 2.4% 1,107,90815 2.7%
</TABLE>
-58-
<PAGE>
- ---------------------------
1 Includes 157,473 shares held by Dr. Aslami's wife, 425,085 shares held
by Dr.Aslami's children, 1,998,589 shares held by the Ariana Trust,
618,914 shares held by the Kabul Foundation, trusts of which Dr.
Aslami's wife is trustee and of which Dr. Aslami's children are
beneficiaries. Dr. Aslami disclaims beneficial ownership of all such
shares. Includes 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.
2 Includes 1,395,097 shares held by Elizabeth DeLuca, Mr. DeLuca's wife,
357,715 shares held by Mr. DeLuca's children and 618,914 shares held by
the Dawn Foundation, a trust of which Mrs. DeLuca is trustee and of
which Mr. DeLuca's children are beneficiaries. Mr. DeLuca disclaims
beneficial ownership of all such shares. Includes 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.
3 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.
4 Includes 152,972 shares held by Royle, a company controlled by Jack
Ramsey.
5 Mr. Siddig is the uncle of Dr. Aslami's wife.
6 Includes the Techman shares, including shares to be issued on the
completion of the purchase agreement (497,002), exercise of warrants
(550,696), and escrow shares commission shares (1,000,000).
7 Includes 88,235 currently exercisable options.
8 Includes shares into which AMP Note is convertible at $1.16 per share,
assuming conversion of the AMP $5,000,000 principal amount of the note.
9 Shares are held of record by nominee.
10 Includes 64,248 currently exercisable options.
11 Includes 60,913 currently exercisable options
12 Includes 46,050 currently exercisable options
13 Includes 41,746 currently exercisable options to be issued to One
Financial Group, Inc.
14 Includes 43,597 currently exercisable warrants.
15 Includes 347,450 shares issuable on conversion of debt and exercise of
warrants.
-59-
<PAGE>
<TABLE>
<CAPTION>
Before Offering After Offering
--------------- --------------
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Achin, Ron 6,582 * 6,582 *
Albany Venture Group 272,103 * 272,103 *
Alpert, Jay 72,404 * 72,404 *
Anderson, Ron 5,249 * 5,249 *
Andre, Maurick & Brenda 5,218 * 5,218 *
Arayesh, Mohammad 20,996 * 20,996 *
Arsala, Betsy 10,499 * 10,499 *
Aslami, Fraidoon 31,495 * 49,852 *
Aslami, Qasim 241,156 * 241,156 *
Aubi, Mohammad 2,205 * 2,205 *
Ayoubi, Amanollah 45,891 * 45,891 *
Benjamin, G. 12,850 * 12,850 *
Benoit, Ronald 22,008 * 79,748 *
Bichum, Anthony 3,671 * 3,671 *
Bonanno, Salvatoro 25,237 * 25,237 *
Cagatay, Hafiz 29,336 * 29,336 *
Cagatay, Hafizula 11,014 * 11,014 *
Camelot Investments 45,891 * 68,837 *
Cannistraci, Anthony 5,249 * 5,249 *
Caprera, John 12,073 * 12,073 *
Carlin, Jeffrey 20,188 * 20,188 *
Chamberlain, John 10,498 * 10,498 *
Chapman, John 31,495 * 31,495 *
Chisson, J. 3,671 * 3,671 *
Ciesla Associates 36,713 * 36,713 *
Ciesla Construction Corp. 18,357 * 18,357 *
Coleman & Rhine LLP 0 * 73,426 *
Connecticut Development Authority 0 * 228,884 *
Connecticut Innovations, Inc. 0 * 103,349 *
Damen, William 2,096 * 2,096 *
Davenport, D. 1,836 * 1,836 *
Dean, R. 36,713 * 36,713 *
DeLoreto, Mario 73,426 * 73,426 *
DeLuca, M & C 2,205 * 2,205 *
Dill, Sheldon 3,149 * 3,149 *
Doucette, R. 7,342 * 7,342 *
Dow, Cynthia 7,390 * 7,390 *
Drew, Robert 21,025 * 21,025 *
Duchaine, Raymond 2,100 * 2,100 *
Duda, Pat 15,747 * 15,747 *
-60-
<PAGE>
Before Offering After Offering
--------------- --------------
Amount Percent Amount Percent
------ ------- ------ -------
Dyck, Victor & Lydia 10,498 * 10,498 *
Earnest, Alice 19,169 * 61,162 *
Eggert, Abida 2,310 * 2,310 *
Eoll, Christopher 3,149 * 3,149 *
Flood, John 45,891 * 68,837 *
Frenzel, James 70,430 * 70,430 *
Fugitive Holding 1,700 * 1,700 *
Gianaris, Paul 3,671 * 3,671 *
Gianaris, Zachary 3,671 * 3,671 *
Giardano, Richard 25,237 * 25,237 *
Glickman, Eleanor 36,713 * 36,713 *
Glickman, J. 7,343 * 7,343 *
Global Money Management Corp. 229,457 * 344,185 *
Handy, Roland 1,260 * 1,260 *
Harris, Bernard 44,427 * 44,427 *
Hillis, Paul 3,149 * 3,149 *
Hunt, Peter & Ann 9,102 * 9,102 *
Ingraham, Ronwyn 3,499 * 3,499 *
Jackle, Jack 3,149 * 3,149 *
Jaeger, Frank 10,498 * 10,498 *
Jalil, Abdul 68,628 * 68,628 *
James Money Management, Inc. 677,764 2.18 677,764 1.65
Jensen, M.L. 7,863 * 7,863 *
Kampf, Andrew 31,495 * 31,495 *
Kanter, Arlene 31,190 * 31,190 *
Khatua, H. 0 * 10,498 *
Keedwell, Rodney 5,249 * 5,249 *
Khaki, Mansour 44,056 * 220,279 *
Khatau, Bharatt 76,007 * 76,007 *
Khodadad, F. 10,498 * 10,498 *
Khybery, Kassem 55,070 * 55,070 *
Krebs, William 45,891 * 68,837 *
Kusunoki, Alan 36,713 * 36,713 *
Lai, Richard 91,783 * 137,674 *
Lambert, Alfred 10,498 * 10,498 *
Laurion, Arthur 31,495 * 71,357 *
Lavellee, Ronald 18,065 * 139,004 *
Lees, B. 3,175 * 3,175 *
Lees, T. 9,178 * 9,178 *
Leyden, Lloyd 3,932 * 3,932 *
-61-
<PAGE>
Before Offering After Offering
--------------- --------------
Amount Percent Amount Percent
------ ------- ------ -------
Looney, R. 7,342 * 7,342 *
Lowenstern, Carl 48,012 * 48,012 *
Mahoney, J. 0 * 5,511 *
Mainsfield, E. Blaine 73,426 * 73,426 *
Malikyar, Jamila 24,077 * 24,077 *
Mangual, C. 18,357 * 18,357 *
Markowicz, Victor 229,457 * 344,185 *
Mastellone, Edward 91,783 * 137,674 *
Mattison, John 31,495 * 215,060 *
Mayernick, F.C. 2,100 * 2,100 *
McDermid, Embrer 5,626 * 5,626 *
McDermid, Rodney 5,626 * 5,626 *
MacKirdy, J. 7,342 * 7,342 *
Magida, N. 0 * 26,542 *
Marinilli, A. 36,713 * 36,713 *
Maziello, W. 36,713 * 36,713 *
McNaughton, Paul 23,923 * 23,923 *
McNulty, Dale 45,891 * 68,837 *
Miller, Bruce 3,149 * 3,149 *
Miller, Gary 10,498 * 10,498 *
Moisan, Bernard 15,675 * 15,675 *
Morales, Ruth 3,499 * 3,499 *
Morgan and Evans 0 * 83,985 *
Morrison, M. 11,013 * 11,014 *
Muenchmeyer, G. 3,671 * 3,671 *
Muir, Ted 2,625 * 2,625 *
Munab Investments Limited 323,075 1.04 1,615,375 3.92
Nasir, Sayed 246,422 * 246,422 *
Nava, K. 3,671 * 3,671 *
Norscan Instruments, Ltd. 123,360 * 123,360 *
O'Connor, Lawrence 15,747 * 15,747 *
Osman, Ghulam 24,966 * 24,966 *
Pilch, Denis 5,249 * 5,249 *
Pinney, Selby J. 5,249 * 5,249 *
Pitcher, Charles 3,149 * 3,149 *
Porosoff, Melvin 30,282 * 30,282 *
Prouty, Daniel 15,288 * 15,288 *
Quinn, Lorne 6,998 * 6,998 *
Rastgooy, Homa 32,394 * 32,394 *
-62-
<PAGE>
Before Offering After Offering
--------------- --------------
Amount Percent Amount Percent
------ ------- ------ -------
Rastgooy, Mahmood 10,498 * 10,498 *
Rauf, A. 52,491 * 52,491 *
Richards, Donald 1,050 * 1,050 *
Riley, Christopher 1,060 * 1,060 *
Rossmanith, Jutta 10,498 * 10,498 *
Russo, Thomas 73,249 * 73,249 *
Samee, Akbar 10,498 * 10,498 *
Samee, Dastigar 2,205 * 2,205 *
Samee, Tamin 2,205 * 2,205 *
Santoro, Enrico and Ellen Beck 735 * 735 *
Sarnecky, Arthur 3,149 * 3,149 *
Scanlon, Donald 45,891 * 68,837 *
Schulz, Werner 10,498 * 10,498 *
Seal Partners 25,927 * 25,927 *
Sello, Kenneth 1,050 * 1,050 *
Seraj, Ibrahim 10,498 * 10,498 *
Shairzay, Abraham & Soforina 10,498 * 55,930 *
Shairzay, Sabrina 73,426 * 73,426 *
Shairzay, Tahera 154,323 * 154,323 *
Sheppard, Douglas 2,625 * 2,625 *
Sherzai, Abdul Bari 22,946 * 22,946 *
Sico Jena GmbH 2,221,141 7.15 2,221,141 5.39
Siddig, Khaled 222,622 * 222,622 *
Siddig, N. 0 * 87,492 *
Smith, Dave 95,905 * 95,905 *
Smylie, Donn 10,498 * 10,498 *
Sontag, Ken 110,231 * 110,231 *
Steg, Brian 16,797 * 16,797 *
Sudol, David 20,554 * 20,554 *
Sutherland, William 8,399 * 8,399 *
Tarakai, Ashraf 15,747 * 15,747 *
Tessier, Gerald 2,100 * 2,100 *
Thames Group 23,863 * 23,863 *
Valgardson, Norman 10,498 * 10,498 *
Vazpaziani, J. 18,357 * 18,357 *
Vazpaziani, P 18,357 * 18,357 *
VentureCap 750,000 2.5 750,000 1.8
Vokey, David 139,146 * 139,146 *
Vokey, Robert 10,498 * 10,498 *
-63-
<PAGE>
Before Offering After Offering
--------------- --------------
Amount Percent Amount Percent
------ ------- ------ -------
Vokey, Wayne 15,850 * 15,850 *
Von Summer, Alexander 36,744 * 36,744 *
Votaw, Gregory 3,499 * 3,499 *
Warasta, A. Ghafar 11,188 * 11,188
Warasta, Carol 110,139 * 110,139 *
Wattman, Malcom 73,249 * 73,249 *
Welles, Edward 3,499 * 3,499 *
Wu, Dau 48,064 * 84,777 *
Yankoski, Murray 10,492 * 10,492 *
Yasin, M 16,136 * 16,136 *
Young, D. 11,014 * 11,014 *
Young, John 7,373 * 7,373 *
Yusof, Quyoom 2,310 * 2,310 *
Zheng, Carl 110,139 * 110,139 *
Zulfacar, Diane Mavee 20,996 * 20,996 *
-64-
</TABLE>
<PAGE>
PLAN OF DISTRIBUTION
The Underlying Shares offered hereby initially are being offered by the
Company for issuance to the Selling Securityholders upon exercise, conversion or
issuance, as the case may be, of the Convertible Securities. The Company will
receive all of the proceeds derived from such exercise, conversion or issuance.
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 Security-holders. 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.
-65-
<PAGE>
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.
-66-
<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,
31,056,282 shares of Common Stock were issued and outstanding (not including the
Escrow Shares), and no shares of Preferred Stock were issued and outstanding.
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. 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
Company's 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.
-67-
<PAGE>
AMP Note
See "Business-Recent Developments" for a description of the AMP Note.
FiberCore Warrants
From time to time since its formation, and prior to the Venturecap
Merger, FiberCore issued Warrants (the "FiberCore Warrants") to purchase varying
number of shares of Common Stock, exercisable, in whole or in part, at prices
ranging from $1.31 to $1.63 per share. The Warrants expire in periods ranging
from April 13, 1997 through July 7, 1999. The consideration issuable on exercise
of the 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. As a result of the Venturecap Merger, the FiberCore Warrants were
automatically converted into Warrants to purchase 3.671307 times more shares of
Common Stock of the Company as appears on the face of each such Warrant at an
exercise price reduced by a factor of 3.671307 in effect previously. The
FiberCore Warrants do not entitle the holders thereof to registration rights.
MESC Warrants
In connection with the MESC Share Purchase Agreement, the Company
placed into escrow Warrants (the "MESC Warrants") to purchase Common Stock of
the Company, issued to MESC's designees. The Warrants are exercisable, in whole
or in part, at $1.63 per share and expire on April 13, 1997. The consideration
issuable on exercise of the 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. The MESC Warrants do not entitle the
holders thereof to registration rights.
Techman Warrants
In connection with the Techman Share Purchase Agreement between Techman
and the Company, the Company has placed the Techman Warrants in escrow pending
the exercise of the Warrants by Techman. Such Warrants are convertible at $1.63
per share and expire on January 11, 1998.
Escrow Shares
The Company has place in escrow 917,827 shares on behalf of MESC and
1,497,002 shares on behalf of Techman. The MESC Escrow Shares will be released
from escrow upon (i) completion of the Share Purchase Agreement between MESC and
the Company, (ii) upon exercise of the MESC Warrants, and (iii) completion of a
supply agreement between MEFC and the Company. The Techman Escrow shares will be
released from escrow upon (i) completion of the Share Purchase Agreement between
Techman and the Company, (ii) completion of a supply agreement between
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<PAGE>
Techman and the Company, and (iii) the earning of commissions under the
International Distributor Agreement between Techman and the Company.
CDA Warrant
General
- -------
On December 5, 1990, ALT issued a warrant to purchase 100,000 shares of
ALT Common Stock to the Connecticut Development Authority (the "CDA"), a public
instrumentality and political subdivision of the State of Connecticut, in
connection with a $300,000 loan made by CDA to ALT. When issued, the CDA Warrant
was exercisable in whole or in part at any time before January 1, 1998 at a
price of $1.50 per share of ALT.
As a result of the increase in ALT common stock outstanding after the
issuance of the CDA warrant, the ALT Acquisition, the Warrants are now
exercisable into 106,400 shares of Company Common Stock, at an exercise price of
$1.48 per share.
The number of shares issuable on exercise of the CDA Warrant and the
exercise price of the CDA Warrant is subject to adjustment in certain
circumstances, including in the event of a stock dividend, stock split
recapitalization, reorganization, merger or consolidation of the Company.
The number of shares into which the ALT Warrant is exercisable
increases to 200,000 if ALT does not maintain certain contacts with the State of
Connecticut. See "Redemption Rights" below.
Adjustments
- -----------
If the Company issues new shares at an exercise price less than the
exercise price of the CDA Warrants, the exercise price of the CDA Warrant is
adjusted downward pursuant to a formula set forth therein and the number of
shares issuable upon exercise of the CDA Warrant is adjusted upward.
If the Company issues new shares at an exercise price greater than the
exercise price per share under the CDA Warrant, then the number of shares
issuable pursuant to the CDA Warrant is increased so that proportionately it is
exercisable into the same percentage of shares of the Company, as before the
issuance of such new shares.
If the issuance of such shares relates to a public offering, where the
applications of the adjustments described in this subsection would materially
affect the offering, the parties agree to negotiate alternatives to the
adjustment provisions contained in the CDA Warrant.
If the issuance of new shares is at a price not less than $3 per share,
then the exercise price for the additional shares is at the issuance price of
the new shares. If the issuance price for the new shares is greater than the
exercise price of the CDA Warrant but less than $3 per share the exercise price
for the additional shares is equal to the current exercise price.
-69-
<PAGE>
Registration Rights
- -------------------
The holder of the CDA Warrant is entitled to include as part of the
registration by the Company of any of its shares of stock, the shares underlying
the CDA Warrant and any shares into which the CDA Warrant have been exercised,
subject to certain limitations in an underwritten offering.
Redemption Rights
- -----------------
Between December 1, 1995 and December 1, 1997 (subject to extension
under certain circumstances), the holder of the CDA Warrant may require ALT to
repurchase the CDA Warrant at a price of $150,000 or to buy back all of the
shares underlying the warrant at a price of $300,000, subject to the ability of
ALT to legally purchase such instruments. Upon the occurrence of certain
defaults the redemption prices stated above double to $300,000 and $600,000,
respectively.
ALT Warrants
General
- -------
Prior to the ALT Acquisition, ALT issued a number of Warrants. Most of
these Warrants were exchanged for common stock of ALT immediately prior to the
ALT Acquisition, and all of such exchanging warrant holders waived registration
rights. Other than Warrants issued to CDA and CII, the only outstanding Warrants
issued by ALT are two Warrants (the "ALT Warrants"), to purchase 80,000 and
5,250 shares of ALT common stock, respectively. The Warrants were issued in 1993
and 1988, respectively and expire in 1998. When issued, the Warrants were
exercisable, in whole or in part into shares of ALT initially at a price $1.00
and $1.50 per share, respectively. As a result of the ALT Acquisition such
Warrants are now exercisable into an aggregate of 89,496 Underlying Shares of
Company common stock at a weighted average exercise price of $0.98 per share.
The consideration issuable on exercise of the ALT 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.
ALT is required to furnish quarterly financial statements and audited
annual financial statements to holders of ALT Warrants until the expiration date
of such Warrants or the effectiveness of a registration statement under the
Securities Act.
Pursuant to the terms of the ALT Warrants, in the event ALT or the
Company effects a merger or consolidation, a condition of such merger must be
that the Company agree to register all shares or other securities under the
Securities Act.
Holders of ALT Warrants or shares underlying such Warrants ("ALT
Warrant Underlying Shares") have no other demand registration rights. Under
certain circumstances, they may participate in the Company's registration of
shares. The Company, however, is not required to register the ALT
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<PAGE>
Warrant Underlying Shares in a Company registration, if, in the opinion of
Company counsel, registration is not necessary to allow a public sale or
transfer of such securities. The following description of registration rights is
relevant only if the aforementioned exception does not apply.
In the event the Company proposes within the ten year period commencing
one year from the issue date of an ALT Warrant to register any securities under
the Securities Act, the Company must give holders of the ALT Warrants or holders
of ALT Warrant Underlying Shares notice of the proposed registration. Within 30
days of such notice, such holders must give the Company notice of their demand
to include all or some of the ALT Warrant Underlying Shares in the proposed
registration. In the event of such registration, the Company must include the
ALT Warrantholder Shares in the registration, subject to reduction, under
certain circumstances.
Among other things, the Company must qualify the ALT Warrant Underlying
Shares for sale under the security or blue sky laws of not more than eight
states designated by the holders of the ALT Warrants, and Company must also keep
the registration statement and prospectus effective for a period of nine months
after such shares of Common Stock first become free to be sold under such
registration statement.
Holders of ALT Warrants or ALT Warrant Underlying Shares must pay all
underwriting discounts, commissions, transfer taxes, registration fees, and
their own counsel fees with respect to the securities owned by them being
registered and such holders and the Company must enter into cross-indemnity
agreements, indemnifying one another against omissions or other material
inaccuracies provided by the other for use in the registration statement.
Anti-Dilution Rights
- --------------------
In the event the Company sells common stock or issues options, or
convertible securities after the issue date of the ALT Warrants, at a price per
share, as determined by formulae set forth in the ALT Warrants, less than the
exercise price of the ALT Warrants, the exercise price of such ALT Warrant must
be adjusted downward, according to a formula set forth in such warrant.
ALT Employee Options
Prior to the ALT Acquisition, ALT issued several options to employees
(the "ALT Employee Options") pursuant to the 1987 ALT Stock Option Plan, to
purchase an aggregate of 274,200 underlying shares of ALT common stock at a
weighted average exercise price of $1.57 per share, subject to adjustment in
certain circumstances, and expire at various dates through 2005. The ALT
Employee Options vested according to the schedule set forth in each such option.
The exercise price of each ALT Employee Option was not less than the fair market
value of the Common Stock on the date such Option was granted. There are no
registration rights in connection with ALT Employee Options.
In connection with the ALT Acquisition, all ALT Employee Options
immediately vested, and were converted into options to purchase a different
number of shares of the Company's common
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<PAGE>
stock, at an adjusted exercise price. Such options are presently convertible
into an aggregate of 287,860 Underlying Shares of Company Common Stock at a
weighted average exercise price of $1.49 per share.
FiberCore Employee Options
Prior to the Venturecap Merger, FiberCore Incorporated issued several
options to employees and consultants (the "FiberCore Employee Options") to
purchase approximately 84,000 shares of FiberCore Incorporated common stock at a
weighted average exercise price of $0.44 per share, subject to adjustment in
certain circumstances. The exercise price of each Option was not less than the
fair market value of the common stock of FiberCore Incorporated on the date such
option was granted. There are no registration rights in connection with
FiberCore Employee Options. 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.
-72-
<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, hold Warrants to purchase 73,426 shares of
Common Stock of the Company.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, with respect to the securities
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain items of which are contained in the exhibits and schedules
thereto as permitted by the rules and regulations of the Commission. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete; with respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Registration Statement, including the exhibits
and schedules thereto, may be inspected without charge at the principal office
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, or at the
Regional Offices of the Commission: Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60601, and 14th Floor, 7 World Trade
Center, Suite 1300 New York, New York 10048. Copies of such material may be
obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
-73-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
FIBERCORE, INC . AND PREDECESSORS
HISTORICAL (audited)
Consolidated Balance Sheets at December 31, 1995 and
1994.
Consolidated Statements of Operations for the Years
Ended December 31, 1995 and 1994.
Consolidated Statements of Cash Flows for the years
Ended December 31, 1995 and 1994.
HISTORICAL AND PRO FORMA (unaudited)
Consolidated Balance Sheets at June 30, 1996 and
1995. Consolidated Statements of Operations for 6
Months Ended June 30, 1996 and 1995. Pro Forma
Consolidated Balance Sheet at December 31, 1995 Pro
Forma Consolidated Statement of Operations for the
Year Ended December 31, 1995.
FIBERCORE INCORPORATED
HISTORICAL ( audited)
Report of Independent Auditors
Balance Sheet as of December 31, 1994 and December
31, 1993 Statements of Operations for the years ended
December 31, 1994 and 1993 Statements of
Stockholder's Equity for the years ended December 31,
1994 and 1993 Statements of Cash Flows for the years
ended December 31, 1994 and 1993 Notes to Financial
Statements for the years ended December 31, 1994 and
1993.
AUTOMATED LIGHT TECHNOLOGIES, INC.
HISTORICAL (audited)
Report of Independent Auditors
Balance Sheets as of December 31, 1994, December 31,
1993 and December 31, 1992 Statements of Operations
for the years ended December 31, 1994, 1993 and 1992
Statements of Stockholder's Equity for the years
ended December 31, 1994, 1993 and 1992 Statements of
Cash Flows for the years ended December 31, 1994,
1993 and 1992 Notes to Financial Statements for the
years ended December 31, 1994, 1993 and 1992
-75-
<PAGE>
VENTURECAP, INC .
HISTORICAL (audited)
Report of Independent Auditors
Balance Sheets as of December 31, 1994, 1993 and
1992. Statements of Operations for the years ended
December 31, 1994, 1993, and 1992 Statements of
Shareholders' Equity for the years ended December 31,
1994, 1993, and 1992 Statements of Cash Flows for the
years ended December 31, 1994, 1993, and 1992 Notes
to Financial Statements for the years ended December
31, 1994, 1993, and 1992 Report of Independent
Auditors. Balance Sheet as of April 30, 1995
Statement of Operations for the four months ended
April 30, 1995 Statement of Shareholders' Equity for
the four months ended April 30, 1995 Statement of
Cash Flows for the four months ended April 30, 1995
Notes to Financial Statements for the four months
ended April 30, 1995
-76-
<PAGE>
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-1
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
Assets 1995 1994
---- ----
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
=========== ===========
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
December 31, 1995 and 1994
Liabilities and Stockholders' Equity 1995 1994
------------------------------------ ---- ----
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
============ ============
See accompanying notes to consolidated financial statements.
F-3
<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
============ ============
See accompanying notes to consolidated financial statements.
F-4
<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 Treasury
Shares Value Capital Receivable Deficit Adjustment Stock Total
------ ----- ------- ---------- ------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1993 21,309,323 $21,309 $ 702,462 $(80,000) $ (3,019) $ - $ - $ 640,752
Issuance of stock in
exchange for equipment 2,221,141 2,221 2,417,779 - - - - 2,420,000
Issuance of stock
for cash 1,421,714 1,422 1,547,578 - - - - 1,549,000
Proceeds received - - - 80,000 - - - 80,000
Issuance of stock
for services 7,390 8 8,042 - - - - 8,050
Proceeds from
capital contribution - - 670 - - - - 670
Purchase of treasury
stock, (458,916 shares) - - - - - - (500,000) (500,000)
Currency translation
adjustment - - - - - 10,170 - 10,170
Net loss - - - - (1,625,368) - - (1,625,368)
--------- ------- ---------- -------- ----------- ------- --------- -----------
Balance,
December 31, 1994 24,959,568 24,960 4,676,531 - (1,628,387) 10,170 (500,000) 2,583,274
</TABLE>
F-5
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (continued)
Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Common Stock
------------------ Additional Accumulated
$.001 Par Paid-In Subscription Accumulated Translation Treasury
Shares Value Capital Receivable Deficit Adjustment Stock Total
------ ----- ------- ---------- ------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of stock
for services provided 40,434 40 44,010 - - - - 44,050
Reissuance of treasury
stock as loan incentive - - (455,000) - - - 500,000 45,000
Issuance of stock for
acquisition of ALT 8,811,137 8,811 6,991,189 - - - - 7,000,000
Issuance of stock for
investment in MEFC
joint venture 367,131 367 499,633 - - - - 500,000
Retirement of shares
held by ALT (3,671,307) (3,671) 3,671 - - - - -
Currency translation
adjustment - - - - - 204,827 - 204,827
Net loss - - - - (4,009,163) - - (4,009,163)
----------- ------- ----------- ------- ----------- -------- -------- -----------
Balance,
December 31, 1995 30,506,963 $30,507 $11,760,034 $ - $(5,637,550) $214,997 $ - $ 6,367,988
=========== ======= =========== ======= =========== ======== ======== ===========
</TABLE>
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
1995 1994
---- ----
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
=========== ===========
F-7
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
Years Ended December 31, 1995 and 1994
1995 1994
---- ----
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
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.
F-9
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(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.
(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.
F-10
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(f) Other assets (continued)
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.
(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
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 earnings per share since the effect would be anti-dilutive.
F-11
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(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)
=========== ===========
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. ALT now operates as a wholly-owned
subsidiary of the Company.
F-12
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Mergers, Acquisitions and Strategic Investments (continued)
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.
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.
F-13
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Mergers, Acquisitions and Strategic Investments (continued)
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 for shares 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. (Pvt.) Ltd. The Company expects this transaction to
be completed in 1996.
(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-14
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(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-15
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Long-Term Debt
Long-term debt consist of the following:
1995 1994
---- ----
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 $ -
========== ==========
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.
F-16
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Long-term Debt (continued)
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.
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.
F-17
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Commitments and Contingencies (continued)
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).
The Company and its subsidiaries are subject to certain claims and legal
actions which arose in the ordinary course of business. The plaintiffs are
alleging total damages of $1.55 million. 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.
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.
F-18
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Commitments and Contingencies (continued)
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.
(10) Stockholders' Equity
The following employee stock options were granted during the years ended
December 31, 1995 and 1994:
Exercisable at Price per Share
$ 0.003 $ 1.09 $ 1.43 $ 1.50 $ 1.51
------- ------ ------ ----- ------
Granted in 1994 73,426 -- -- -- --
------- ------ ------ ------ ------
Balance,
December 31, 1994 73,426 -- -- -- --
Granted in 1995 550,696 33,042 -- -- --
Granted in 1995 in
connection with the
ALT acquisition -- -- 67,188 41,993 178,679
------- ------- ------- ------- -------
Balance,
December 31, 1995 624,122 33,042 67,188 41,993 178,679
======= ======= ======= ======= =======
F-19
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Stockholders' Equity (continued)
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:
Exercise at Price per share
$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
======= ======= ======= =======
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.
(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 $ - $ -
=========== ===========
F-20
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Income Taxes (continued)
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 - -
F-21
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(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 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.
F-22
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(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:
1995 1994
---- ----
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:
Unites 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:
Unites 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
=========== ===========
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-23
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(15) Subsequent Events
In January 1996, the Company reached an agreement with Techman
International Corporation (Techman) whereby Techman will purchase 734,260
shares for $1 million. 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 Fiber Optic
Industries Limited (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. 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
within the second anniversary of the closing between the Company and AMP.
If the guarantee is not achieved, additional stock and, if applicable, an
adjustment to the conversion rate for the remaining outstanding balance of
the debenture, shall be issued to AMP.
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 a major financing project 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 also guaranteed the
market value of their stock within the second anniversary of the closing
date between the Company and AMP. If the guarantee is not achieved, an
adjustment in the exercise price of the warrants will be issued to AMP.
F-24
<PAGE>
FiberCore, Inc.
Consolidated Balance Sheets
June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Dollars in thousands except per share data.
PROFORMA
ASSETS 1996 1995 (1) 1995 (1)(2)
-------- -------- -----------
<S> <C> <C> <C>
Current Assets:
Cash $ 208 $ 4,095 $ 4,101
Accounts receivable, net of allowance for doubtful accounts
of $39; $0;and $19 in 1996, 1995 and Proforma 1995, respectively 907 224 234
Inventory 1,310 139 287
Other current assets 614 31 34
-------- -------- --------
Total Current Assets 3,039 4,489 4,656
Property and equipment, net of depreciation 4,008 3,595 3,601
Patents, net of amortization 7,071 68 7,089
Other assets 139 117 117
-------- -------- --------
Total Assets $ 14,257 $ 8,269 $ 15,463
======== ======== ========
LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 527 $ 1,070 $ 1,483
Accounts payable 1,514 575 704
Accrued liabilities 1,198 -- 137
-------- -------- --------
Total Current Liabilities 3,239 1,645 2,324
Long-term debt, less current maturities 5,617 5,768 5,768
-------- -------- --------
Total Liabilities 8,856 7,413 8,092
-------- -------- --------
Stockholders' Equity:
Common stock, $0.001 par value, authorized 100,000,000
shares; 30,951,657; 25,367,133 and 30,506,963 issued
and outstanding in 1996, 1995 and Proforma 1995, respectively 32 25 31
Additional paid-in capital 12,184 4,266 11,260
Accumulated deficit (6,959) (3,366) (3,851)
Accumulated translation adjustment 144 (69) (69)
-------- -------- --------
5,401 856 7,371
Less treasury stock, at cost -- -- --
-------- -------- --------
Total Stockholders' Equity 5,401 856 7,371
-------- -------- --------
Total Liabilities and Stockholders' Equity $ 14,257 $ 8,269 $ 15,463
======== ======== ========
</TABLE>
(1) Restated to reflect the Venturecap, Inc. merger as of the beginning of the
period.
(2) 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 occured immediatly prior thereto.
F-25
<PAGE>
FiberCore, Inc.
Consolidated Statements of Operations
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Dollars in thousands except per share data.
PROFORMA
1996 1995(1) 1995(1)(2)
------------ ------------ ------------
<S> <C> <C> <C>
Net Sales $ 4,025 $ 1,084 $ 1,196
Cost of Sales 3,746 1,833 2,231
------------ ------------ ------------
Gross Profit (Loss) 279 (749) (1,035)
Research and Development 200 82 82
Selling, General and Administrative Expenses 1,264 762 953
------------ ------------ ------------
Loss from Operations (1,185) (1,593) (2,070)
Interest Income 3 3
Interest Expense 191 162 170
Other Income 61 14 14
Other Expense 6 0 0
------------ ------------ ------------
Net Loss $ (1,321) $ (1,738) $ (2,223)
============ ============ ============
Pimary Earnings (Loss) Per Share $ (0.04 $ (0.07 $ (0.07)
============ ============ ============
Weighted Average Shares Outstanding 30,580,264 24,840,638 29,980,468
============ ============ ============
</TABLE>
(1) Restated to reflect the Venturecap, Inc. merger as of the beginning of the
period.
(2) 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 occured immediatly prior thereto.
F-26
<PAGE>
FiberCore, Inc.
Proforma Consolidated Balance Sheet (1) (2)
December 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
Dollars in thousands except per share data.
PROFORMA
ASSETS 1995
--------
Current Assets:
Cash $ 833
Accounts receivable, net of allowance
for doubtful accounts of $39 880
Inventory 1,407
Other current assets 53
--------
Total Current Assets 3,173
Property and equipment, net of depreciation 4,119
Patents, net of amortization 6,784
Other assets 126
--------
Total Assets $ 14,202
========
LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 506
Accounts payable 1,846
Accrued liabilities 650
--------
Total Current Liabilities 3,002
Long-term debt, less current maturities 5,448
--------
Total Liabilities 8,450
--------
Stockholders' Equity:
Common stock, $0.001 par value, authorized 100,000,000
shares; 30,506,963 issued and outstanding 31
Additional paid-in capital 11,760
Accumulated deficit (6,253)
Accumulated translation adjustment 214
--------
5,752
Less treasury stock, at cost --
--------
Total Stockholders' Equity 5,752
--------
Total Liabilities and Stockholders' Equity $ 14,202
========
(1) Restated to reflect the Venturecap, Inc. merger as of the beginning of the
period.
(2) 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 occured immediatly prior thereto.
F-27
<PAGE>
FiberCore, Inc.
Proforma Consolidated Statement of Operations (1) (2)
For the Year Ended December 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
Dollars in thousands except per share data.
PROFORMA
1995
------------
Net Sales $ 3,255
Cost of Sales 5,040
------------
Gross Profit (Loss) (1,785)
Research and Development 188
Selling, General and Administrative Expenses 2,224
------------
Loss from Operations (4,197)
Interest Income 148
Interest Expense 531
Other Income 88
Other Expense 133
------------
Net Loss $ (4,625)
============
Pimary Earnings (Loss) Per Share $ (0.15)
============
Weighted Average Shares Outstanding 30,245,879
============
(1) Restated to reflect the Venturecap, Inc. merger as of the beginning of the
period.
(2) 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 occured immediatly prior thereto.
F-28
<PAGE>
LETTERHEAD OF MOTTLE McGRATH BRANEY & FLYNN, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
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 finan cial 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 fi nancial 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 finan cial position of FiberCore
Incorporated and Subsidiary as of December 31, 1994 and 1993, and the results of
their oper ations 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-29
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
Balance Sheets
December 31, 1994 and 1993
Assets 1994 1993
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
========== =========
See accompanying notes to consolidated financial statements.
F-30
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
Balance Sheets (continued)
December 31, 1994 and 1993
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity 1994 1993
----------- -----------
<S> <C> <C>
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-31
<PAGE>
FIBERCORE INCORPORATED AND SUBSTDIARY
Statements of Operations
Year Ended December 31, 1994 and the Period November S, 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-32
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDTARY
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
$.01 Par Paid-In Subscription Accumulated Translation Treasury
Shares Value Capital Receivable Deficit Adjustment Stock Total
------ -------- ---------- ------------ ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of stock
for services provided 2,617,581 $ 26,176 $ 136,961 $ - $ - $ - $ - $163,137
Issuance of stock
for patent 1,000,000 10,000 50,000 - - - - 60,000
Issuance of stock 1,535,753 15,357 398,173 - - - - 413,530
Issuance of stock in
exchange for sub-
scription receivable 446,667 4,467 75,533 (80,000) - - - -
--------- ------- ---------- -------- ----------- --------- --------- ----------
Balance,
December 31, 1993 5,600,001 56,000 660,667 (80,000) - - - 636,667
Issuance of stock in
exchange for equipment 605,000 6,050 2,413,950 - - - - 2,420,000
Issuance of stock for cash 387,250 3,873 1,545,127 - - - - 1,549,000
Proceeds received - - - 80,000 - - - 80,000
Issuance of stock
for services 2,013 20 8,030 - - - - 8,050
Purchase of treasury
stock, (125,000 shares) - - - - - - (500,000) (500,000)
Currency translation
adjustment - - - - - 10,170 - 10,170
Net loss - - - - (1,624,913) - - (1,624,913)
--------- ------- ---------- -------- ----------- --------- --------- ----------
Balance,
December 31, 1994 6,594,264 $65,943 $4,627,774 $ - $(1,624,913) $ 10,170 $(500,000) $2,578,974
========= ======= ========== ======== =========== ========= ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-33
<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
=========== ========
</TABLE>
F-34
<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
1994 1993
---- ----
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 -
See accompanying notes to financial statements.
F-35
<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, 199 4 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.
F-36
<PAGE>
FIBERCORE INCORPORPATED AND SUBSIDIARY
Notes to Financial Statements
(2) Summary of Significant Accounting Policies (continued)
(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.
(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 ex change 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.
F-37
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
Notes to Financial Statements
(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 $2,99S,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.
(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>
F-38
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
Notes to Financial Statements;
(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
========
(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
origi nal expiration of the lease. The leased property may be acquired for
amounts ranging from $1,200,00t 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.
F-39
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
Notes to Financial Statements
(8) Commitments and Contingencies (continued)
Approximate future minimum payments under the operating lease, including
all option periods which Jena be lieves 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 un der the above described operating
1eases.
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 ad
verse 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 cov ered 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 discre tion 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.
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
==========
F-40
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
Notes to Financial Statements
(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 anniver sary 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 corpo ration 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-41
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
Notes to Financial Statements
(11) Concentrations of Credit Risk
The approximate net product sales by the Company to its major customers and
related percentage are as fol lows:
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 consider ation 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 conduct
ing 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-42
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
Notes to Financial Statements
(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-43
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
Notes to Financial Statements
(14) Subsequent Events
In April 1995, FiberCore Incorporated issued to AMP Incorporated (AMP), a
floating rate collateralized de benture 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 op tion 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 con tract between the Company and the joint venture entity, MEFC.
MESC must exercise the 150,000 warrants, to purchase l50,000 shares of the
Company's common stock at $6.00 per share, within a two year period to re
ceive 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, l995, 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 re signed 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.
F-44
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
Notes to Financial statements
(14) Subsequent Events (continued)
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, ef fective immediately prior to the merger, loans and
warrants of consenting ALT holders were converted, result ing in the
issuance of approximately 4.5 million additional shares of common stock.
FiberCore, Inc. will ac quire 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.
0n August 19, 1995, Jena entered into a purchase agreement regarding assets
previously leased under the capi tal lease agreement from SICO. Subject to
the purchase agreement, the 605,000 shares of FiberCore Incorpo rated 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
em ployment 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 no tice.
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-45
<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 princi ples used and significant - estimates made by
management, as well as evaluating the overall financial state ment 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 3S, 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-46
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
Balance Sheets
December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Assets 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
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-47
<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-48
<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-49
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
Statements of Cash Flows
For the Years Ended December 31, 1994, 1993 and t992
<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>
F-50
<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-51
<PAGE>
AUTONATED 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 mar keting 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 approxi
mating $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 addi tional 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 ap proximate 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
F-52
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(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.
(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:
1994 1993 1992
---- ---- ----
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
========= ========= =========
F-53
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
Notes to Financial Statements
(3) Property and Equipment
Property and equipment consist of the following:
1994 1993 1992
---- ---- ----
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
========= ========= =========
Depreciation on property and equipment charged to income was $1,219 in
1994, $3,382 in 1993 and $8.717 in 1992.
(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 Con necticut
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:
1994 1993 1992
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
F-54
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
Notes to Financial Statements
(4) Long-Term Debt (continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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 alloca tion 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 pur
chase 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 gen
erally 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.
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).
F-55
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
Notes to Financial Statements
(4) Long-Debt (continued)
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 detach able 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 follows:
1995 $ -
1996 635,000
1997 55,000
----------
$690,000
==========
F-56
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
Notes to Financial Statements
(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 con
sideration 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, 199S, 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 con sideration 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 sev eral
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. Lia bility under such warranties is
contingent upon future product performance and durability and the ultimate
lia bility 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 Decem ber 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-57
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
Notes to Financial Statements
(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 con
sent 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) agree ment 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 In
novations, 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-58
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
Notes to Financial Statements
(6) Shareholders's Equity (continued)
The activity relating to stock warrants issued for the years ended December
31, 1994, 1993 and 1992 is sum marized 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 fol lows:
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
F-59
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
Notes to Financial Statements
(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.
(11) Subsequent Events
On May 10, 1995, the Company transferred all of its shares in Allied,
together with notes and advances of Al lied 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 con verted,
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-60
<PAGE>
DUANE V. MIDGLEY
CERTIFIED PUDLIC ACCOUNT
4351 Lynne Lane
SALT LAKE CITY, UTAH 84124
--------
(801) 277 3608
July 1. 1995
INDEPENDENT AUDITORS' REPORT
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, Decem ber 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 Jan uary 1, 1995 to
April 30, 1995, in conformity with generally accepted accounting principles.
/s/ DUANE V. MIDGLEY
Duane V. Midgley
Certified Public Accountant
F-61
<PAGE>
VENTURECAP, INC.
(A Development Stage Company)
BALANCE SHEET
April 30, December 31,
1995 1994 1993 1992
------- ------- ------- -------
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
======= ======= ======= =======
See accompanying notes to financial statements.
F-62
<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-63
<PAGE>
VENTURECAP, INC .
(A Development Stage Company)
STATEMENT OF STOCKHOLOERS' EQUITY
Additional
Common Stock paid-in Accumulated
Shares Amount capital loss
------- ------- ----------- -----------
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 31, 1995 (4,285)
------- ------- ------- -------
Balance, April 30, 1995 955,450 $ 955 $ 6,819 $(7,759)
======= ======= ======= =======
See accompanying notes to financial statements.
F-64
<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-65
<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
<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.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee . . . . . . . . . $77,753
NASD filing fee . . . . . . . . . . *
Blue Sky fees and expense . . . . . . . . *
Printing and engraving expenses . . . . . . . *
Legal fees and expenses . . . . . . . . *
Accounting fees and expenses . . . . . . . *
Transfer agent fees . . . . . . . . . *
Miscellaneous . . . . . . . . . . *
- ------------------------------------------------------------------------------
Total . . . . . . . . . . $*
</TABLE>
*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
II-1
<PAGE>
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.
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 give effect to the merger with
the Registrant. Each FiberCore share is equivalent to one share of the
Registrant.
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 Incorporated issued 3,671,307 shares to
Gregory Perry in exchange for the assignment of a patent.
In November 1993, FiberCore Incorporated 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 Incorporated 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 Incorporated issued 3,671,307 shares to ALT
in exchange for $60,000 ($0.016 per share) worth of services.
II-2
<PAGE>
In December 1993, FiberCore Incorporated 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 Incorporated 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.
In April 1994 and April 1995, FiberCore Incorporated 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 Incorporated issued 2,221,141 shares to a
designee of Sico Jena Quarzschmelze 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.
In July 1994, FiberCore Incorporated 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. This figure does not include 10 Units purchased by Royle in July 1994,
an entity controlled by a director of FiberCore Incorporated, and returned by
Royle later in 1994.
In July 1994, FiberCore Incorporated 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 Incorporated 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 Incorporated issued 7,390 shares to an
employee in exchange for services valued at $8,050.
On April 17, 1995, FiberCore Incorporated issued a ten year $5,000,000
convertible note to AMP, Incorporated, a manufacturer of electrical connectors
and other equipment. Principal plus interest accumulating 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
II-3
<PAGE>
have agreed, to replace such collateral with various pieces of equipment owned
or to be owned- by the Registrant.
In May 1995, FiberCore Incorporated 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 Incorporated merged into the Registrant.
Each of the 6,605,277 outstanding shares of FiberCore, Incorporated was
converted into 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 into
escrow (i) 312,061 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 escrowed securities (other than the aforementioned 238,634 shares of Common
Stock) will be released 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. The Registrant relied on
the exemption provided under Regulation D.
In January 1996, Techman, a company controlled by M. Mahmud Awan a
director of the Registrant, agreed to purchase 734,260 shares of Common Stock
and Warrants pursuant to a Share Purchse Agreement date January 11, 1996,
exercisable into 550,696 shares of Common Stock exercisable at $1.63 per share
for $100,000 in cash and a promissory note in the principal amount of $900,000,
bearing interest at LIBOR and payable in 9 monthly installments, with the first
payment due on the last business day of the calendar month following the month
in which the closing occurs. Additionally, the Company, as part of the Share
Purchase Agreement, agreed to issue 312,061 shares to Techman for the formation
of FOI and completion of a supply agreement with FOI. Between February 1996 and
August 1996, the Company, pursuant to the Share Purchase Agreement, issued, at
the request of Techman, 549,319 shares to Dr. Awan, the sole shareholder of
Techman.
In addition, 1,000,000 shares are being held in escrow (part
of the Escrow Shares) under an International Distributor Agreement. Such shares
will be issued ratably by the Company as commissions upon sales generated by
Techman of up to $200 million. Such shares will be issued upon receipt by the
Company of proceeds from such sales.
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 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.
II-4
<PAGE>
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.
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, 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
II-5
<PAGE>
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-6
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit
-------
Number
------
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
10.1 Loan Agreement dated August 2, 1990 between ALT and
Connecticut Innovations Incorporated ("CII").
10.2 Promissory Note issued by ALT to CII.
10.3 Security Agreement dated as of August 1990 between ALT and CII.
10.4 Subordination executed August 2, 1990 between CII, Mohd Aslami,
and Charles DeLuca
10.5 Collateral Assignment and Security Agreement dated August 2,
1990 between ALT and Connecticut Innovations Incorporated
10.6 Loan Agreement dated December 5, 1990 between ALT and the
Connecticut Development Authority ("CDA").
10.7 Promissory Note dated December 5, 1990 issued by ALT to CDA.
10.8 Guaranty dated December 5, 1990 issued to CDA by Mohd Aslami
and Charles DeLuca.
10.9 Collateral Assignment and Security Agreement dated December 5,
1990 between ALT and CDA.
10.10 Security Agreement dated as of December 5, 1990 between ALT and
CDA.
10.11 Subordination dated November 5, 1990 between CDA, Mohd Aslami
and Charles DeLuca.
10.12 Form of Warrant issued by ALT to CDA
10.13 Form of Warrant issued byAgreement between ALT to Connecticut
Innovations Incorporated.
10.14 Form of Warrant issued by ALT.
10.15 Form of FiberCore Incorporated Warrant.
10.16 Assignment dated November 8, 1993 by Gregory Perry to FiberCore
Incorporated of U.S. Patent No. 4,596,589.
10.17 Lease executed January 31, 1994 between Cobra Realty Trust,
FiberCore, Incorporated, Mohd Aslami and Charles DeLuca.
II-7
<PAGE>
10.18 Agreement dated June 7, 1994 between Sico GmbH and FiberCore,
Inc.
10.19 Agreement dated August 19, 1995 between Sico GmbH and FiberCore
Jena GmbH, with supplemental agreement by Walter Nadrag.
10.20 Cooperation Agreement dated December 19,. 1995 between Sico
Jena GmbH and FiberCore, Inc.
10.21 Lease dated August 19, 1995 between Sico Jena GmbH and
FiberCore Jena GmbH.
10.22 Agreement dated January 25, 1996 between the Company, FiberCore
Jena and Sico.
10.23 Share Purchase Agreement dated January 11, 1996 between the
Company and Techman International, Inc.
10.24 Escrow Agreement dated as of April 13, 1995 between FiberCore
Incorporated, Middle East Specialized Cables Co. ("MESC") and
Shawmut Bank, N.A.
10.25 Escrow Amending Agreement dated September 15, 1995 between the
Registrant, MESC and Shawmut Bank, N.A.
10.26 Share Purchase Agreement dated as of April 13, 1995 between
FiberCore Incorporated and MESC.
10.27 Share Purchase Amending Agreement dated September 15, 1995
between the Registrant and MESC.
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.
10.29 Cooperation Agreement dated June 17, 1994 between John Royle &
Sons and FiberCore Incorporated, with Amendment No. 1 executed
on the same date.
+10.30 Escrow Agreement between Techman and the Registrant.
10.31 Agreement dated July 1, 1994 between FiberCore Incorporated and
FiberCore Jena GmbH.
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.
+10.33 Product Supply Agreement between MEOFC and the Registrant.
10.34 Joint Venture Agreement dated May 21, 1995 between the Company,
Techman International, Inc. and the other parties named
therein.
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.
- -------
+ To be filed by amendment.
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
II-8
<PAGE>
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
II-9
<PAGE>
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-10
<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,
thereuno duly authorized, in the City of New York, State of New York, on August
16, 1996.
FIBERCORE, INC.
By: /s/ Mohd Aslami
Mohd Aslami,
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the 16th day of August, 1996.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Mohd A. Aslami
- ---------------------------- Chairman, Chief Executive August 16, 1996
Mohd A. Aslami Officer and Director
/s / Charles DeLuca
- ---------------------------- Director, Vice President, Secretary August 16, 1996
Charles DeLuca and Executive Vice President of
Automated Light Technologies, Inc.
/s / Michael J. Beecher
- ---------------------------- Chief Financial Officer and August 16, 1996
Michael J. Beecher Principal Accounting Officer
/s / Zaid Siddig Director August 16, 1996
- ----------------------------
Zaid Siddig
/s / Steven Phillips Director August 16, 1996
- ----------------------------
Steven Phillips
/s / M. Mahmud Awan Director August 16, 1996
- ----------------------------
M. Mahmud Awan
</TABLE>
II-11
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
-------
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
10.1 Loan Agreement dated August 2, 1990 between ALT and
Connecticut Innovations Incorporated ("CII").
10.2 Promissory Note issued by ALT to CII.
10.3 Security Agreement dated as of August 1990 between ALT and CII.
10.4 Subordination executed August 2, 1990 between CII, Mohd Aslami, and
Charles DeLuca
10.5 Collateral Assignment and Security Agreement dated August 2, 1990
between ALT and Connecticut Innovations Incorporated
10.6 Loan Agreement dated December 5, 1990 between ALT and the
Connecticut Development Authority ("CDA").
10.7 Promissory Note dated December 5, 1990 issued by ALT to CDA.
10.8 Guaranty dated December 5, 1990 issued to CDA by Mohd Aslami and
Charles DeLuca.
10.9 Collateral Assignment and Security Agreement dated December 5, 1990
between ALT and CDA.
10.10 Security Agreement dated as of December 5, 1990 between ALT and
CDA.
10.11 Subordination dated November 5, 1990 between CDA, Mohd Aslami and
Charles DeLuca.
10.12 Form of Warrant issued by ALT to CDA
10.13 Form of Warrant issued byAgreement between ALT to Connecticut
Innovations Incorporated.
10.14 Form of Warrant issued by ALT.
10.15 Form of FiberCore Incorporated Warrant.
10.16 Assignment dated November 8, 1993 by Gregory Perry to FiberCore
Incorporated of U.S. Patent No. 4,596,589.
10.17 Lease executed January 31, 1994 between Cobra Realty Trust,
FiberCore, Incorporated, Mohd Aslami and Charles DeLuca.
10.18 Agreement dated June 7, 1994 between Sico GmbH and FiberCore, Inc.
10.19 Agreement dated August 19, 1995 between Sico GmbH and FiberCore
Jena GmbH, with supplemental agreement by Walter Nadrag.
<PAGE>
10.20 Cooperation Agreement dated December 19,. 1995 between Sico Jena
GmbH and FiberCore, Inc.
10.21 Lease dated August 19, 1995 between Sico Jena GmbH and FiberCore
Jena GmbH.
10.22 Agreement dated January 25, 1996 between the Company, FiberCore
Jena and Sico.
10.23 Share Purchase Agreement dated January 11, 1996 between the Company
and Techman International, Inc.
10.24 Escrow Agreement dated as of April 13, 1995 between FiberCore
Incorporated, Middle East Specialized Cables Co. ("MESC") and
Shawmut Bank, N.A.
10.25 Escrow Amending Agreement dated September 15, 1995 between
the Registrant, MESC and Shawmut Bank, N.A.
10.26 Share Purchase Agreement dated as of April 13, 1995 between
FiberCore Incorporated and MESC.
10.27 Share Purchase Amending Agreement dated September 15, 1995 between
the Registrant and MESC.
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.
10.29 Cooperation Agreement dated June 17, 1994 between John Royle & Sons
and FiberCore Incorporated, with Amendment No. 1 executed on the
same date.
+10.30 Escrow Agreement between Techman and the Registrant.
10.31 Agreement dated July 1, 1994 between FiberCore Incorporated and
FiberCore Jena GmbH.
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.
+10.33 Product Supply Agreement between MEOFC and the Registrant.
10.34 Joint Venture Agreement dated May 21, 1995 between the Company,
Techman International, Inc. and the other parties named therein.
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
- -------------
+ To be filed by amendment.
================================================================================
State Of Nevada [Seal] Department Of State
I, FRANKIE SUE DEL PAPA, Secretary of State of the State of Nevada, do
hereby certify that VENTURECAP, INC. did on the FOURTEENTH day of MAY, 1987,
file in this office the original Articles of Incorporation; that said Articles
are now on file and of record in the office of the Secretarey of State of the
State of Nevada, and further, that said Articles contain all the statements of
facts required by the law of said State of Nevada.
IN WITNESS WHEREOF, I have set my hand and affixed the Great Seal of State,
at my office in Carson City, Nevada, this FOURTEENTH day of MAY, A.D. 1987.
[SEAL]
/S/ Frankie Sue Del Papa
------------------------
Secretary of State
By /S/ Nancy [Illegible]
------------------------
Deputy
================================================================================
<PAGE>
- ----------------------------------------
SECRETARY OF STATE
STATE OF NEVADA
MAY 14, 1987
FRANKIE SUE DEL PAPA SECRETARY OF STATE
/S/Frankie Sue Del Papa
No. 3690 - 87
- ----------------------------------------
ARTICLES OF INCORPORATION
OF
VENTURECAP, INC.
I. NAME The name of the corporation is:
VENTURECAP, INC.
II. PRINCIPAL OFFICE: The location of the principal office of this corporation
within the State of Nevada is located at: c/o Lloyd G. Hollis, 3751 So. Nellis
Blvd. Space 310, Las Vegas, Nevada 89121.
III. PURPOSE: The purpose for which this corporation is formed is to engage in
any lawful activity.
IV. AUTHORIZATION OF CAPITAL STOCK : The amount of the total authorization of
capital stock of the corporation shall be TWENTY THOUSAND DOLLARS ($20,000.00),
consisting of twenty Million (20,000,000) shares of common stock with a par
value of ONE TENTH OF ONE CENT ($0.001) per share.
V. INCORPORATORS: The names and addresses of each of the incorporators signing
these Articles of Incorporation are as follows:
1. James E. Glavas, 6640 So. 2475 East Salt Lake City, Utah 84121.
2. Bonnie Hollis, 3633 So. 3325 West, West Valley City, Utah 84119.
3. Lloyd G. Hollis, 3751 So. Nellis Blvd. Space 310, Las Vegas, Nevada
89121
VI. DIRECTORS: The governing board of this corporation shall be known as
directors and the number of directors may from time to time be increased or
decreased in such manner as shall be specified by the bylaws of the corporation;
provided, however, the number of directors shall not be reduced to less than
three (3).
The names and addresses of the Directors comprising the first Board of
Directors are as follows:
1. James E. Glavas, 6640 So. 2475 East Salt Lake City, Utah 84121.
2. Bonnie Hollis, 3633 So. 3325 West, West Valley City, Utah 84119.
3. Lloyd G. Hollis, 3751 So. Nellis Blvd. Space 310, Las Vegas, Nevada
89121.
The name and residence address within the State of Nevada of this
corporation's initial resident agent shall be: Lloyd G. Hollis, 3751 So. Nellis
Blvd. Space 310, Las Vegas, Nevada 89121.
VII. STOCK NON-ASSESSABLE: The capital stock or the holders thereof, after the
amount of the subscription price has been paid in, shall not be subject to any
assessment whatsoever to pay the debts of the corporation.
<PAGE>
VIII. TERM OF EXISTENCE: This corporation shall have perpetual existence.
IX. CUMULATIVE VOTING: No cumulative voting shall be permitted in the election
of Directors.
X. PREEMPTIVE RIGHTS: Stockholders shall not be entitled to preemptive rights.
XI. The directors of the corporation above named, and their duly elected and
qualified successors shall have the unqualified right of adoption of and
subsequent revision or amendment to the by-laws of this corporation, without
resort to approval thereof by shareholders of this corporation.
XII. The directors of the corporation above named, and their duly elected and
qualified successors shall have the unqualified right to authorize and issue
other and additional classes of stock of this corporation in addition to those
herein provided, without resort approval thereof by the shareholders of this
corporation.
IN WITNESS WHEREOF, we have hereunto set our hands and seals this 30th day
of Dec. 1986.
/S/ James E. Glavas
-----------------------------
JAMES E. GLAVAS
/S/ Bonnie Hollis
-----------------------------
BONNIE HOLLIS
/S/ Lloyd G. Hollis
-----------------------------
LLOYD G. HOLLIS
STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE )
On this 30th day of Dec. 1986 , before me, a Notary Public, personally
appeared James E. Glavas and Bonnie Hollis who acknowledge they executed the
above instrument.
/S/ JOAN M. NORTH
-----------------------------
Notary Public
[SEAL] NOTARY PUBLIC
STATE OF NEVADA
County of Clark
JOAN M. NORTH
My Appointment Expires Jan. 22, 1989
<PAGE>
STATE OF NEVADA )
) ss
COUNTY OF CLARK )
On this 30 day of December, 1986, before me, a Notary Public, personally
appeared Lloyd G. Hollis who acknowledged he executed the above instrument.
/S/ JOAN M. NORTH
-----------------------------
Notary Public
[SEAL] NOTARY PUBLIC
STATE OF NEVADA
County of Clark
JOAN M. NORTH
My Appointment Expires Jan. 22, 1989
<PAGE>
- --------------------------------
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE
STATE OF NEVADA
JUL 11, 1995
No. 3690 - 87
/S/ [ILLEGIBLE]
[ILLEGIBLE] SECRETARY OF STATE
- --------------------------------
CERTIFICATE OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
VENTURECAP, INC.
THE UNDERSIGNED President and Secretary of Venturecap, Inc., of the
corporation, pursuant to the provisions of Sections 78.385 and 78.390 of the
Nevada Revised Statutes, for the purpose of amending the Articles of
Incorporation of said Corporation, do hereby certify as follows:
That the shareholders of said Corporation at its Special Meeting in Lieu of
Annual Meeting of Shareholders duly convened and held on the 5th day of July,
1995, adopted a resolution to amend the Articles of Incorporation of the
Corporation as follows:
FIRST: Article IV shall be amended to read as follows:
"IV. Authorization of Capital Stock: The aggregate number of shares which the
Corporation will have authority to issue is One Hundred Million (100,000,000)
shares of common stock, par value $.001 per share, each share of common stock
having equal rights and preferences; and Ten Million (10,000,000) shares of
preferred stock, par value $.001 per share, which shares of preferred stock may
be issued in various series and with terms, rights, voting privileges and
preferences to be determined by the Board of Directors at the time of issuance."
The foregoing amendment to the Articles of Incorporation was duly adopted
by the shareholders of the Corporation on the 5th day of July, 1995.
At the date of the Meeting of Shareholders, the number of shares of the
Corporation's common stock outstanding and entitled to vote on the foregoing
amendment to the Articles of Incorporation was 955,450. A total of 765,550
shares voted FOR the aforesaid amendment (representing approximately 80% of the
issued and outstanding shares of the Corporation) and -0- shares voted AGAINST
such amendment.
DATED this 5th day of July, 1995.
The undersigned President and Secretary of the Corporation hereby declare
that the foregoing Certificate of Amendment To The Articles of Incorporation is
true and correct to the best of their knowledge and belief.
<PAGE>
STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE )
- ------------------------------------ /S/ Linda Fredrickson
[SEAL] Notary Public -----------------------------
LINDA FREDRICKSON Notary Public
751 West 300 South
Salt Lake City, Utah 84104 Residing at Salt Lake City, Utah
My Commission Expires
August 26, 1996
State Of Utah
- ------------------------------------
My Commission Expires:
AUG. 25, 1998
- ----------------------
On this 6th day of July, 1995, before me, the undersigned, a Notary Public,
in and for said State, personally appeared James R. Glavas and Don Danielsen ,
who first being duly sworn, did each hereby affirm that they are the President
and Secretary, respectively of Venturecap, Inc., a Nevada corporation, and that
they did execute the foregoing Amendment to the Articles of Incorporation on
behalf of said Corporation and that such instrument was executed pursuant to a
resolution of the Board of Directors and ratified by more that a 50% majority of
the issued and outstanding shares of the Corporation's common stock.
- ------------------ /S/ James R. Glavas
RECEIVED -----------------------------
JUL 11 1995 JAMES R. GLAVAS, President
[ILLEGIBLE]
SECRETARY OF STATE /S/ Don Danielsen
- ------------------ -----------------------------
DON DANIELSEN, Secretary
<PAGE>
- ------------------
RECEIVED
JUL 11 1995
[ILLEGIBLE]
SECRETARY OF STATE
- ------------------
<PAGE>
- --------------------------------
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE
STATE OF NEVADA
JUL 18, 1995
/S/ [ILLEGIBLE]
[ILLEGIBLE] SECRETARY OF STATE
No. 3690 - 87
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ARTICLES OF MERGER
OF
FiberCore Incorporated,
a Nevada Corporation
Into
Venturecap, Inc.,
A Nevada Corporation
THE UNDERSIGNED, as the President and the Secretary of Venturecap, Inc., a
Nevada corporation (the "Surviving Corporation"), as and for the purpose of
complying with the provisions of Nevada Revised Statutes ("NRS") Sections 78.451
et seq., and in order to effectuate the merger of FiberCore Incorporated, a
Nevada Corporation into Venturecap, Inc., a Nevada Corporation, hereby certifies
as follows:
1. The name of the Constituent Corporation is FiberCore Incorporated and
its place of incorporation was the State of Nevada. The name of the Surviving
Corporation is Venturecap, Inc. and its place of incorporation was also the
State of Nevada.
2. A plan of merger has been adopted by the Board of Directors of each
corporation that is a party to this merger.
3. The plan of merger was submitted by the Board of Directors of the
Surviving Corporation to is stockholders pursuant to the Nevada Revised
Statutes. Of the 955,451 outstanding shares of Venturecap common stock, par
value, $.001 per share at the time of the vote, all were entitled to vote on the
plan of the merger, 765,550 were represented at the shareholders meeting,
765,550 shares were voted in favor of the plan of merger and 0 shares were voted
against the plan and the number of votes cast in favor of the plan was
sufficient for approval of the plan of merger.
4. The plan of merger was submitted by the Board of Directors of the
Constituent Corporation to its stockholders pursuant to the Nevada Revised
Statutes. Of the 6,605,277 outstanding shares of FiberCore common stock, par
value, $.01 per share, holders representing 5,333,334 shares agreed to the plan
of merger by written consent, and the consent of such stockholders was
sufficient for approval.
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4. The Articles of Incorporation of the Surviving Corporation are hereby
amended as follows:
Article 1 of the Articles of Incorporation is deleted in its entirety and
replaced by the following:
The Name of the Corporation is FiberCore, Inc.
5. A complete executed plan of merger is on file at the office of the
registered agent of the Surviving Corporation which is hereby changed to be:
Corporation Trust Company
One East 1st Street, Suite 1600
Reno, Nevada 89501
Formerly the registered agent was:
Broadmoor Associates, Inc.
3916 Orville Circle
Las Vegas, Nevada 89108
6. A copy of the plan of merger will be furnished by the Surviving
Corporation on request and without any cost to any stockholder of any
corporation which is a party to this merger.
7. The effective date of the merger is the date upon which these Articles
of Merger are filed in the Office of the Secretary of State of the State of
Nevada.
<PAGE>
IN WITNESS WHEREOF, we have set forth our hands as of the 18th day of July,
1995.
VENTURECAP, INC
By__________________
Name:
Title: President
By__________________
Name:
Title: Secretary
FIBERCORE, INCORPORATED
By /S/ Mond Aslami
-----------------------
Name: MOND ASLAMI
Title: President
By /S/ Charles De Luca
-----------------------
Name: CHARLES DE LUCA
Title: Secretary
- ------------------
[ILLEGIBLE]
JUL 18 1995
[ILLEGIBLE]
- ------------------
<PAGE>
IN WITNESS WHEREOF, we have set forth our hands as of the 18 day of July,
1995.
VENTURECAP, INC
By /S/ James R. Glavas
----------------------
Name:
Title: President
By /S/ Don Danielsen
----------------------
Name:
Title: Secretary
FIBERCORE INCORPORATED
By__________________
Name:
Title: President
By__________________
Name:
Title: Secretary
<PAGE>
THE CORPORATION TRUST COMPANY OF NEVADA hereby accepts the appointment as
Resident Agent of FIBERCORE, INC.
Date: July 12, 1995
THE CORPORATION TRUST COMPANY OF NEVADA
Resident Agent
By /S/ Timothy E. Carlson
-------------------------------------
TIMOTHY E. CARLSON
ASSISTANT SECRETARY
- ------------------
RECEIVED
JUL 18 1995
[ILLEGIBLE]
- ------------------
<PAGE>
STATE OF UTAH )
) ss
COUNTY OF SALT LAKE )
On this 18 day of July, 1995, before me, the undersigned, a Notary
Public, in and for said State, personally appeared James R. Glavas and Don
Danielsen, who first being duly sworn, did each hereby affirm that they are the
President and Secretary, respectively of Venturecap, Inc., a Nevada corporation,
and that they did execute the forgoing Article of Merger on behalf of said
Corporation and that such instrument was executed pursuant to a resolution on
the Board of Directors and ratified by more than 50% majority of the issued and
outstanding shares of the Corporation's common stock.
/S/ Kelly A. Henderson
-----------------------------
Notary Public
Residing at Salt Lake City, Utah
My Commission Expires:
JAN-25-1999
- ----------------------
- ------------------------------------
[SEAL] Notary Public
/S/ KELLY A. HENDERSON
455 South 300 East ____
Salt Lake City, Utah 84111
My Commission Expires
January 5, 1999
State Of Utah
- ------------------------------------
<PAGE>
- ------------------
RECEIVED
JUL 18 1995
[ILLEGIBLE]
- ------------------
THE BYLAWS OF
FIBERCORE, INC
Section 1. Annual Meeting.
An annual meeting of the stockholders for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held on such date and at such
time and at such place within or without the State of Nevada, as the Board of
Directors shall each year fix.
Section 2. Special Meetings
Special meetings of the stockholders, for any purpose or purposes
prescribed in the notice of the meeting, may be called by the Board of Directors
or the chief executive officer and shall be held at such place, on such date,
and at such time as they or he or she shall fix.
Section 3. Notice of Meetings
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than five nor more than sixty days before
the date on which the meeting as to be held, to each stockholder entitled to
vote at such meeting, except as otherwise provided herein or required by law
(meaning, here and hereinafter, as required from time to time by the Nevada
Corporation Act or the Certificate of Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty day s
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting,. written notice of the place, date, and
time of the adjourned meeting, shall be given in conformity herewith. At any
adjourned meeting, any business
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may be transacted which might have been transacted at the original meeting.
Section 4. Quorum
At any meeting of the stockholders, the holders of a majority of all of
shares of the stock entitled to vote at the meetings present in person or by
proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law.
If a quorum shall fail to attend meeting, the chairman of meeting or the
holder of a majority of the shares of stock entitled to vote who are present, in
person or by proxy, may adjourn the meeting to another place. date. or time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present constituting, a quorum, then except as otherwise required by law, those
present at such adjourned meeting shall constitute a quorum, and all matters
shall be determined by a majority of the votes cast at such meeting.
Section 5 Organization
Such person as the Board of Directors may have designated or, in the
absence of such a person, the chief executive officer of the Corporation or, in
his or her absence, such person as may be chosen by the holders of a majority of
the shares entitled to vote who are present, in person or by proxy, shall call
to order any meeting of the stockholders and act as chairman of the meeting. In
the absence of the Secretary of the Corporation, the secretary of the meeting
shall be such person as the chairman appoints.
Section 6. Conduct of Business
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including, such regulation of the
manner of voting and the conduct of discussion as seem to him or her in order.
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Section 7. Proxy and Voting
At any meeting of the stockholders every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing, filed in
accordance with the procedure established for the meeting.
Each stockholder shall have one vote for every share of stock; entitled to
vote which is registered in his or her name on the record date for the meeting,
except as otherwise provided herein or required by law.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefor by a stockholder entitled to vote or his or her proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballots, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or inspectors
appointed by the chairman of the meeting
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law, all other matters shall be determined by a
majority of the votes cast.
Section 8. Stock List
A complete list of stockholder entitle to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) day, prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified a the notice of
the meeting, or if not so specified. at the place where the meeting is to be
held
The stock list shall also be kept at the place of meeting during the whole
time thereof and shall be open to the examination of any such stockholder who is
present. This list shall presumptively determine the identity of the stockholder
entitled to vote at the meeting and the
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number of shares held by each of them.
Section 9. Consent of Stockholder in Lieu of Meeting
Any action required to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be taken at any annual
or special meeting of the stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all share entitled to vote thereon were
present and voted.
ARTICLE II- BOARD OF DIRECTORS
Section 1. Number and Term of Office.
The number of directors who shall constitute the whole board shall be such
number as the Board of Directors shall at the time have designated, except that
in the absence of any such designation, such numbers shall be not less than
three (3) and not more than nine (9). Each director shall be elected for a term
of one year and until his or her successor is elected and qualified. except
otherwise provided herein or required by law.
Whenever the authorized number of directors is increased between annual
meetings of the stockholders, a majority of the directors then in office shall
have the power to elect such new directors for the balance of a term and until
their successors are elected and qualified. Any decrease in the authorized
number of directors shall not become effective until the expiration of the term
of the directors then in office unless, at the time or such decrease, there
shall be vacancies on the board which are being eliminated by the decrease.
The Board of Dictators shall have a Chairman of the Board of Dictators,.
who shall preside at all meetings of the Board of Dictators and the Stockholders
at which such person is present. The Chairman of the Board shall make all final
rulings of procedure at meetings of the Board or Stockholders. The Chairman of
the Board shall be the Chief Executive Officer of the Corporation, an ex-office
member of all committees, and shall have the general and active
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<PAGE>
management of the business of the Corporation, and shall have executory
authority over all resolutions of the Board of Directors.
Section 2. Vacancies
If the office of any director becomes vacant by reason of death,
resignation, disqualification, removal or other cause, a majority of the
directors remaining in office, although less than a quorum, may elect a
successor for the unexpired term and until his or her successor is elected and
qualified.
Section 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings
Special meetings of the Board of Director may be called by one-third of the
directors then in office (rounded up to the nearest whole number) or by the
chief executive officer and shall he held at such place. on such date and at
such time as they or he or she shall fix. Notice of the place, date, and time of
each such special meeting shall be given each director by whom it is not waived
by mailing written notice not less than five days before the meeting or by
telegraphing the same not less than a twenty-four hours before the meeting.
Unless otherwise indicated in the notice thereof, any and all business may be
transacted at a special meeting.
Section 5. Quorum
At any meeting of the Board of Directors, a majority of the total number of
the whole Board then holding office shall constitute a quorum for all purposes.
If a quorum shall fail to attend any meeting, a majority of those present may
adjourn the meeting to another place, date,
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<PAGE>
or time, without further notice or waiver thereof.
Section 6. Participation in Meeting By Conference Telephone
Member of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 8. Power
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges on
such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it may
determine of written obligations of every kind negotiable or non-negotiable,
secured or unsecured, and to do all things necessary in connection therewith;
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<PAGE>
(4) To remove any officer of the Corporation with or without cause, and
from time to time to devolve the powers and duties of any officer upon any other
person for the time being;
(5) To confer upon any officer of the Corporation with or without cause,
and from time to time to devolve. the powers and duties of any officer upon any
other person for the time being;
(6) To adopt from time to time such stock option, stock purchase, bonus or
other compensation plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance retirement, and other benefit
plans for directors, officers, employees and agents of the Corporation and its
subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with these
bylaws, for the management of the Corporation's business and affairs.
Section 9. Compensation of Directors
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors
The Board of Directors, by a vote of a majority of the whole Board, may
from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for those committees and any others provided for herein,
elect a director or directors to serve as the member or members, designating, if
it desires, other directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. Any committee so designated
may exercise
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the power and authority of the Board of Directors to declare a dividend or to
authorize the issuance of stock if the resolution which designates the committee
or a supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his place, the member or members of the committee present at the
meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may be unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
Section 2. Conduct of Business
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third of the members shall constitute
a quorum unless the committee shall consist of one or two members, in which
event one member shall constitute a quorum; and all makers shall be determined
by a majority vote of the members present. Action may be taken by any committee,
without a meeting if all members thereof consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings of such
committee.
ARTICLE IV - OFFICERS
Section 1. General
The officers of the Corporation shall consist of a President, a Secretary
and such other officers as may from time to time be appointed by The Board of
Directors. Officers shall be elected by the Board of Directors, which shall
consider that subject at its first meeting after every, annual meeting of
stockholders. Each officer shall hold office until his or her successor is
elected and qualified or until his or her earlier resignation or removal. The
President shall be a member of the Board of Directors. Any number of offices may
be hold by the same person.
Section 2. President
The President shall be the principal operating and administrative office or the
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Corporation. Subject to the provision of those bylaws and to the direction of
the Board of Directors, he or she shall have the responsibility for the general
management and control of the business and affairs of the Corporation and shall
perform all duties and have all powers which are commonly incident to the office
of chief executive or which are delegated to him or her by the Board of
Directors. He or she shall have power to sign all stock certificates, contracts
and other instruments of the Corporation which are authorized and shall have
general supervision and direction of all of the other officers, employees and
agents of the Corporation. In the absence of the Chairman of the Board, or in
the event of a vacancy in such position, the President shall exercise all of the
powers of the Chairman of the Board.
Section 3. Vice Presidents
Each Vice President shall have such powers and duties as may be delegated
to him or her by the Board of Directors. One Vice President shall be designated
by the Board to perform the duties and exercise the power of the President in
the even of the President's absence or disability.
Section 4. Treasurer
The Treasurer shall have the responsibility for maintaining the financial
records of the Corporation and shall have custody of all monies and securities
of the Corporation. He or she shall make such disbursement of the funds of the
Corporation as are authorized and shall render from time to time an account of
all such transactions and of the financial condition of the Corporation. The
Treasurer shall also perform such other duties as the Board of Directors may
from time to time prescribe.
Section 5. Secretary
The Secretary shall issue all authorized notices for, and shall keep
minutes of, all meetings of the stockholders and the Board of Directors. He or
she shall have charge of the corporate book and shall perform such other duties
as the Board of Directors may from time to time prescribe.
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Section 6. Delegation of Authority
The Board of Directors may from time to time delegate the power or duties
of any officer to any other officer or agents, notwithstanding any provision
hereof
Section 7. Removal
Any officer of the Corporation may be removed at any time, with or without
cause, by the Board of Directors.
Section 8. Action with Respect to Securities of Other Corporations
Unless otherwise directed by the Board of Directors, the President or any
officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting, of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V - STOCK
Section 1. Certificates of Stock
Each stockholder shall be entitled to a certificates signed by, or in the
name of the Corporation by, the President, and by the Secretary, or the
Treasurer, certifying the number of shares owned by him or her. Any of or all
the signatures on the certificate may be facsimile.
Section 2. Transfer of Stock
Transfer of stock shall be made only upon the transfer books of the
Corporation kept at
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an office of the Corporation or by transfer agents designated to transfer shares
of the stock of the Corporation. Except where a certificate is issued in
accordance with Section 4 of Article V of these bylaws, an outstanding
certificate for the number of shares involved shall be surrendered for
cancellation before a new certificate is issued therefor.
Section 3. Record Date
The Board of Directors may fix a record date, which shall not be more than
sixty nor less than ten days before the date of any meeting of stockholders, nor
more than sixty days prior to the time for the other action hereinafter
described, as of which there shall be determined the stockholders who are
entitled; to notice of or to vote at any meeting of stockholders or any
adjournment thereof; to express consent to corporate action in writing without a
meeting; to receive payment of any dividend or other distribution or allotment
of any rights; or to exercise any rights with respect to any change, conversion
or exchange of stock or with respect to any other lawful action.
Section 4. Loss, Stolen or Destroyed Certificates
In the event of the loss, theft or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
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ARTICLE VI - NOTICES
Section 1. Notices
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, director, officer, employee or
agent shall be in writing and may in every instance be effectively given by hand
delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, or by sending such notice by prepaid telegram or mailgram. Any
such notice shall be addressed to such stockholder, director, officer, employee
or agent at his or her last known address as the same appears on the books of
the Corporation. The time when such notice is received, if hand delivered or
dispatched, if delivered through the mails or by telegraph or mailgram, shall be
the time of the giving of the notice.
Section 2. Waivers
A written waiver of any notice, signed by a stockholder, director, officer.
employee or agent, whether before or after the time of the event for which
notice is to be given, shall be deemed equivalent to the notice required to be
given to such stockholder, director officer, employee or agent. Neither the
business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VII - MISCELLANEOUS
Section 1. Facsimile Signatures
In addition to the provisions for use of facsimile signature elsewhere
specifically authorized in these bylaws, facsimile signature of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
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Section 2. Corporate Seal
The Board of Directors may provide a suitable seal. containing, the name of
the Corporation, which seal shall be in the charge of the Secretary. If and when
so directed by the Board of Directors or a committee thereof, duplicates of the
seal may be kept and used by the Treasurer or the Secretary, or by the Assistant
Secretary.
Section 3. Reliance upon Books, Reports and Records
Each director, each member of any committee designated by the Board of
Directors and each officer of the Corporation shall, in the performance of his
duties, be fully protected in relying in good faith upon the books of account or
other records of the Corporation, including reports made to the Corporation by
any of its officers, by an independent certified public accountant, or by an
appraiser selected with reasonable care.
Section 4. Fiscal Year
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods
In applying any provision of these bylaws which require that an act be done
or not done a specified number of days prior to an event or that an act be done
during a period of a specified number of days prior to an event, calendar days
shall be used, the day of the doing of the act shall be excluded, and the day of
the event shall be included.
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ARTICLE VIII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification
Each person who was or is made a party or is threatened to be made a party
to or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director, officer, [employee or
agent] of the Corporation or it or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including services with
respect to an employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Nevada Corporation Act,
as the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than such law permitted the Corporation
to provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith and such indemnification shall continue as to
an indemnitee who has ceased to be a director, officer, employee or agent and
shall insure to the benefit of the indemnitee's heirs, executor and
administrators, provided, however, that, except as provided in Section 2 hereof
with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the board of directors of the Corporation. The right
to indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending, any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the Nevada
Corporation Act requires, an advancement of expanses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
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further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section otherwise.
Section 2. Right of Indemnitee to Bring Suit
If a claim under Section I of this Article is not paid in full by the
Corporation within sixty days after a written claim has been received by the
Corporation except in the case of a claim for an advancement or expenses in
which case the applicable period shall be twenty days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that and (ii) in any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the Corporation
shall be entitled to recover such expenses upon a final adjudication that the
indemnitee has not met the applicable standard of conduct set forth in the
Nevada Corporation Act. Neither the failure of the Corporation (including its
board of directors independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Nevada Corporation Act nor
actual deter.
15
CONSENT AND REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANT
The Boards of Directors and Stockholders
FiberCore, Inc. and Subsidiaries
We hereby consent to the use in this Registration Statement of our report dated
July 29, 1996, relating to the consolidated financial statements of FiberCore
Inc. and Subsidiaries, and to the reference to our Firm under the caption
"Experts", in the Prospectus.
MOTTLE McGRATH BRANEY & FLYNN, P.C.
Worcester, Massachusetts
August 9, 1996
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion in this Form S-1 of our reports dated July 1,
1995 and July 12, 1995 of our examination of the financial statements of
Venturecap, Inc.
We also consent to the reference to our firm under the caption "Experts".
/s/ Duane V. Midgley
Duane V. Midgley
Certified Public Accountant
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