UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to________________
Commission file number: 0-21823
FIBERCORE, INC.
(Exact name of registrant as specified in its charter)
Nevada 87-0445729
------------------------------------ ----------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
253 Worcester Road, P.O. Box 180
Charlton, MA 01507
------------------
(Address and Zip Code of principal executive offices)
(508) 248-3900
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------------- ---------
The number of shares of the Registrant's common stock outstanding as of October
31, 1997 was 35,918,893.
1
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FIBERCORE, INC. AND SUBSIDIARIES
INDEX
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PAGE
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PART I FINANCIAL INFORMATION............................................................................. 3
ITEM 1. FINANCIAL STATEMENTS................................................................... 3
CONDENSED CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996................................ 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
1996 (UNAUDITED)....................................................................... 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)............................................................................ 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)............................................................................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................................... 8
PART II OTHER INFORMATION................................................................................. 10
ITEM 1. LEGAL PROCEEDINGS...................................................................... 10
ITEM 2. CHANGES IN SECURITIES.................................................................. 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES........................................................ 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................................... 10
ITEM 5. OTHER INFORMATION...................................................................... 10
ITEM 6. EXHIBITS & REPORTS ON FORM 8-K......................................................... 10
SIGNATURES................................................................................................. 11
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2
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share data) September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash ........................................................................ $ 278 $ 190
Accounts receivable - net ................................................... 1,190 1,093
Inventories ................................................................. 2,994 1,921
Prepaid and other current assets ............................................ 60 18
-------- --------
Total current assets ............................................... 4,522 3,222
-------- --------
Property and equipment - net ......................................................... 4,805 3,771
-------- --------
Other assets:
Restricted cash ............................................................. 2,128 2,498
Patents - net ............................................................... 6,167 6,648
Investments in joint ventures ............................................... 1,850 1,375
Other ....................................................................... 148 128
-------- --------
Total other assets ................................................. 10,293 10,649
-------- --------
Total assets ....................................................... $ 19,620 $ 17,642
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable ............................................................... $ 400 $ 200
Accounts payable ............................................................ 1,519 1,652
Accrued expenses ............................................................ 1,479 1,220
-------- --------
Total current liabilities .......................................... 3,398 3,072
Long-term debt ....................................................................... 8,961 4,545
-------- --------
Total liabilities .................................................. 12,359 7,617
-------- --------
Stockholders' equity:
Preferred stock, $.001 par value, authorized 10,000,000 shares; no shares
issued and outstanding ...................................................... -- --
Common stock, $.001 par value, authorized 100,000,000 shares; issued and out-
standing: 35,918,893 at September 30, 1997 and 35,233,250 at December 31,
1996 ...................................................................... 36 35
Paid in capital ............................................................. 20,188 19,545
Accumulated deficit ......................................................... (12,171) (9,771)
Accumulated translation adjustment .......................................... (792) 216
-------- --------
Total stockholders' equity ......................................... 7,261 10,025
-------- --------
Total liabilities and stockholders' equity ......................... $ 19,620 $ 17,642
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
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<TABLE>
<CAPTION>
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Dollars in thousands except share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales...................................................... $ 1,869 $ 2,220 $ 5,419 $ 6,245
Cost of sales ................................................. 1,486 2,362 4,452 6,108
------------ ------------ ------------ ------------
Gross profit (loss) .................................. 383 (142) 967 137
Operating expenses:
Selling, general and administrative expenses ................ 716 656 2,168 1,920
Research and development .................................... 130 81 425 281
------------ ------------ ------------ ------------
Loss from operations ................................. (463) (879) (1,626) (2,064)
Interest income ............................................... 8 -- 22 1
Interest expense .............................................. (213) (89) (605) (280)
Foreign exchange loss - net ................................... (31) -- (200) --
Other income (expense) - net .................................. (1) (43) 9 11
------------ ------------ ------------ ------------
Net loss............................................. $ (700) $ (1,011) $ (2,400) $ (2,332)
============ ============ ============ ============
Loss per share of common stock................................ $ (0.02) $ (0.03) $ (0.07) $ (0.08)
============ ============ ============ ============
Weighted average shares outstanding ........................... 35,882,978 31,181,309 35,682,756 30,815,900
============ ============ ============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
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<TABLE>
<CAPTION>
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands except share data)
Nine Months Ended
September 30,
-----------------
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................................ $(2,400) $(2,332)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ........................................... 1,009 1,033
Other ................................................................... 72 --
Foreign currency translation loss ....................................... 281 (87)
Changes in assets and liabilities:
Accounts receivable ..................................................... (230) (84)
Inventories ............................................................. (1,307) 59
Prepaid and other current assets ........................................ 72 56
Other assets ........................................................... (13) --
Accounts payable ........................................................ (13) (715)
Accrued expenses ........................................................ 336 388
------- -------
Net cash used in operating activities ................................ (2,193) (1,682)
------- -------
Cash flows from investing activities:
Purchase of property and equipment ...................................... (2,963) (353)
Reimbursement from government grant ..................................... 662 699
Other ................................................................... (50) (23)
------- -------
Net cash from (used) in investing activities ......................... (2,351) 323
------- -------
Cash flows from financing activities:
Proceeds from sale of common stock ...................................... 103 550
Proceeds from long-term debt ............................................ 4,544 500
------- -------
Net cash provided by financing activities ............................ 4,647 $1,050
------- -------
Effect of foreign exchange rate change on cash ............................ (15) --
------- -------
Increase (decrease) in cash ............................................... 88 (309)
Cash, beginning of period ................................................. 190 833
------- -------
Cash, end of period ....................................................... $278 $524
======= =======
Supplemental Disclosure:
Shares issued in exchange for investment in joint venture .............. $425 $233
Shares issued for retirement of debt .................................. 514
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
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FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and Marks in thousands except share data)
1. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of September 30, 1997 and
the related condensed statements of operations for the three and nine month
periods and statements of cash flows for the nine month periods ended September
30, 1997 and 1996 included herein have been prepared by the Company in
accordance with the rules and regulations of the Securities and Exchange
Commission for reports on Form 10-Q. These statements are unaudited. In the
opinion of management, all adjustments necessary for a fair presentation of such
financial statements have been included and such adjustments consist of normal
recurring items.
The condensed consolidated financial statements do not contain certain
information included in the Company's annual audited financial statements. These
financial statements should be read in conjunction with the annual audited
financial statements and notes thereto for the year-ended December 31, 1996
included in the Company's Report on Form 10-K.
2. INVENTORIES
Inventories consist of the following:
September 30, 1997 December 31, 1996
------------------ -----------------
Raw materials $1,269 $ 841
Work-in-progress 343 403
Finished goods 1,382 677
----- ---
Total $2,994 $1,921
===== =====
3. LONG-TERM DEBT
During the nine months ended September 30, 1997, the Company drew down
6,850 German Marks (approximately $3,874) under a loan agreement with the
Berliner Bank. The proceeds were used to fund the expansion of the Company's
plant in Germany. The total loan commitment by the bank is 7,700 German Marks
(approximately $4,355) and bears interest at 6.25% annually. The loan is due on
September 30, 2006. The loan is collateralized by a deposit with the bank of
approximately $2,128.
Also during the nine months ended September 30, 1997, the Company
borrowed $220 from a shareholder under a note maturing in 2000. The annual
interest rate on the note is the prime rate plus 1% adjustable quarterly and
payable quarterly. In conjunction with the note, the lender was granted warrants
to purchase 69,132 shares of common stock of the Company at an exercise price of
$1.53 per share. The warrants expire on March 7, 2002. The proceeds of the note
were used for working capital.
In April and September 1997, the Company borrowed $250 and $150 from
Techman International Corp. ("Techman") under two notes maturing in 2000 and
1998, respectively. The annual interest rate on the notes is the prime rate plus
1%, adjustable quarterly and payable quarterly. In conjunction with the notes,
Techman was granted warrants to purchase 184,352 common shares of the Company at
an exercise price
6
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FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
from $0.625 to $0.78 per share. The warrants expire in 2002. Dr. M. Mahmud Awan,
a director and shareholder of the Company, is the President and sole shareholder
of Techman.
Also, in September, 1997, the Company borrowed $50 under various notes
with interest at the rate of prime plus 1%. The notes mature in 1998. The
lenders were granted warrants to purchase up to 70,000 common shares of the
Company at an exercise price of $0.6875 per share. One of the lenders, Mr.
Steven Phillips, is a director of the Company.
4. SHAREHOLDERS' EQUITY
During the nine months ended September 30, 1997, in connection with the
Middle East Fiber Cables Co., ("MEFC") joint venture agreement and the share
purchase agreement with Middle East Specialized Cables Company (a partner in the
joint venture), the Company issued 312,061 shares of common stock on the
execution of a long-term supply agreement with MEFC.
Also, during the period, the Company issued 373,582 shares on exercise
of warrants and employee stock options.
5. ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128") "Earnings Per
Share" which is effective for financial statements issued after December 15,
1997. The statement established new standards for computing and disclosure of
earnings per share ("EPS") and requires restatement of prior years EPS
information. The statement requires dual presentation of "basic" EPS and
"diluted" EPS. Basic EPS is based on the weighted average number of common
shares outstanding, excluding common stock equivalents. Diluted EPS reflects the
potential dilution of EPS that could occur if securities or other contracts to
issue common shares were exercised or converted. Had SFAS 128 been effective for
the periods ended September 30, 1996 and 1997, there would have been no change
in the loss per share as reported since common stock equivalents and other
contracts to issue shares, if exercised or converted, would be anti-dilutive.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which requires that changes in comprehensive income be shown in a
financial statement that is displayed with the same prominence as other
financial statements. This statement is effective for periods beginning after
December 15, 1997. Management is currently evaluating the effects of this change
on the Company's financial statements.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information", which changes the way public
companies report information about segments. This statement is effective for
periods beginning after December 15, 1997. Management is currently evaluating
the effects of this change on the Company's financial statements.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
1996
Sales for the three and nine months ended September 30, 1997 were
$1,869,000 and $5,419,000, respectively, compared to sales of $2,220,000 and
$6,245,000 for the same periods in 1996. This decrease was effected by the
decline in value of the German Mark versus the U. S. dollar from the first nine
months of 1996 to the first nine months of 1997 of approximately 12%.
Substantially all of the Company's sales are in the Company's German subsidiary,
FiberCore Glasfaser Jena GmbH. Sales of the subsidiary in German Marks were DM
3,132,492 and DM 9,006,528 for the quarter and nine months ended September 30,
1997, respectively, compared to DM 3,085,266 and DM 9,027,239 for the same
periods in 1996.
Gross profit increased to $383,000 (20.5% of sales) and $967,000 (17.8%
of sales) for the quarter and nine months ended September 30, 1997,
respectively, compared to a loss of $142,000 and profit of $137,000 (2.2% of
sales) for the corresponding periods in 1996. The improved profit margin
resulted from increased production efficiency at the German facility resulting
in improvement of production yields, offset by the decline in the value of the
German Mark as discussed above.
Selling, general and administrative costs increased by $60,000 (9.1%)
for the quarter ended September 30, 1997 compared to the same period in 1996.
This increase was primarily due to an increase in personnel costs in Germany
offset by a decrease in legal and accounting fees. For the nine months ended
September 30, 1997, these costs increased by $248,000 (12.9%). This increase was
principally attributable to an increase in travel and consulting fees of
approximately $106,000 related to the development of overseas projects, costs of
approximately $35,000 incurred in connection with a registration covering
resales of the Company's common stock and an increase in other administrative
costs of approximately $107,000 due to the growth of the German subsidiary.
Research and development costs increased $49,000 (60.5%) and $144,000
(51.2%) during the quarter and nine month periods ended September 30, 1997,
respectively, compared to the corresponding periods in 1996. This increase was
due to costs incurred for a specific product development project in Germany.
Interest expense increased by $124,000 (139%) and $325,000 (116%) for
the quarter and nine months ended September 30, 1997 compared to the same
periods in 1996. The increase was due principally to interest and fees on the
Berliner Bank loan consummated in the last quarter of 1996 and drawn down in the
first nine months of 1997, and interest on the $3.0 million loan from AMP
Incorporated which was received in November 1996.
During the three and nine month periods ended September 30, 1997, the
Company incurred a $31,000 and $200,000 foreign currency translation loss,
respectively, principally due to a loss on the German Mark collateral deposit
with the Berliner Bank.
As a result of the changes as described above, the Company had a net
loss for the three months ended September 30, 1997 that was 30.8% lower than the
loss in the same period of 1996. The loss for the nine months ended September
30, 1997 was 2.9% greater than the loss in the corresponding period in 1996.
8
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LIQUIDITY AND CAPITAL RESOURCES
The Company's cash increased by $88,000 during the nine months ended
September 30, 1997. Cash used in operations was $2,193,000 in the first nine
months of 1997 compared to $1,682,000 in the same period in the prior year. This
resulted from the loss in the first nine months of 1997 of $2,400,000 offset by
depreciation and amortization of $1,009,000 and other non-cash charges of
$353,000 and changes in other working capital items of $(1,155,000). The
Company's current ratio improved from 1.0 at December 31, 1996 to 1.3 at
September 30, 1997. The Company's German subsidiary is now generating a positive
cash flow from operations and management anticipates that this will continue.
Inventory increased $1,073,000 at September 30, 1997 compared to
December 31, 1996, principally due to an increase in finished goods due to a
delay in shipments to one customer caused by a delay in the completion of the
customer's production facility and an increase in raw materials to ensure
sufficient supply of glass tubing.
During the first nine months of 1997, the Company invested $2,963,000
in new equipment and the expansion of the production facility in Germany. This
was funded, in part, by $662,000 in grants from the German government.
Additionally, the Company drew down approximately $3,874,000 under the Berliner
Bank loan to finance this expansion.
Also during the nine months ended September 30, 1997, the Company
received $103,000 from the issuance of common stock for the exercise of options
and warrants. The Company also borrowed $670,000 for short-term working capital
needs.
Management anticipates that its German subsidiary will continue to
generate a positive cash flow from operations and the Company will be able to
sustain its operations through short-term borrowing. The Company's German
subsidiary has a committed working capital line of credit from a German bank for
1,000,000 German Marks, approximately $566,000.
9
<PAGE>
PART II - OTHER INFORMATION
ITEMS 1.-3.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders ("Annual Meeting"),
held on September 25, 1997, 20,633,057 shares of Common Stock were
represented, in person or by proxy, constituting a quorum, of the total
of 35,808,754 shares of Common Stock outstanding and entitled to vote
at the Annual Meeting.
At the Annual Meeting, the directors nominated were elected by the
following votes:
Number of Shares Number of Shares
Voted For Withheld
---------------- ----------------
Dr. M. Mahmud Awan 20,554,657 78,400
Zaid Siddig 20,553,157 79,900
Steven Phillips 20,554,557 78,500
Dr. Mohd A. Aslami 20,554,657 78,400
Charles De Luca 20,554,657 78,400
No director received fewer than 20,553,157 votes or 57.4% of the
outstanding Common Stock. There were no broker non-votes on this
proposal.
At the Annual Meeting, the selection of Deloitte & Touche LLP,
independent certified public accountants, as auditors for the company
for the fiscal year ending December 31, 1997, was ratified by a vote of
20,552,757 shares (57.4% of the outstanding Common Stock). Holders of
76,000 shares voted against the proposal and holders of 4,300 shares
abstained. There were no broker non-votes on this proposal.
ITEM 5.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
None
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FiberCore, Inc.
---------------
(Registrant)
Date: November 3, 1997 /s/ Mohd Aslami
---------------
Dr. Mohd A. Aslami
Chairman, President and Chief Executive Officer
(Duly Authorized Officer)
Date: November 3, 1997 /s/ Michael J. Beecher
----------------------
Michael J. Beecher
Chief Financial Officer and Treasurer
(Principal Financial Officer)
11
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<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000917770
<NAME> FIBERCORE, INC.
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 278
<SECURITIES> 0
<RECEIVABLES> 1,224
<ALLOWANCES> (34)
<INVENTORY> 2,994
<CURRENT-ASSETS> 4,522
<PP&E> 6,503
<DEPRECIATION> (1,698)
<TOTAL-ASSETS> 19,620
<CURRENT-LIABILITIES> 3,398
<BONDS> 8,961
0
0
<COMMON> 36
<OTHER-SE> 7,225
<TOTAL-LIABILITY-AND-EQUITY> 19,620
<SALES> 5,419
<TOTAL-REVENUES> 5,450
<CGS> 4,452
<TOTAL-COSTS> 7,045
<OTHER-EXPENSES> 200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 605
<INCOME-PRETAX> (2,400)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,400)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,400)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> 0
</TABLE>
