UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 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.)
174 Charlton Road, P. O. Box 206
Sturbridge, MA 01566
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(Address and Zip Code of principal executive offices)
(508) 347-7744
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(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
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The number of shares of the Registrant's common stock outstanding as of April
30, 1997 was 35,790,397.
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FIBERCORE, INC. AND SUBSIDIARIES
INDEX
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PART I FINANCIAL INFORMATION...................................................... 3
ITEM 1. FINANCIAL STATEMENTS.................................................. 3
CONDENSED CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 1997 (UNAUDITED) AND DECEMBER 31, 1996................... 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
1996 (UNAUDITED)...................................................... 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE THREE MONTHS ENDED MARCH 31, 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
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share data) March 31, December 31,
1997 1996
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(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash ...........................................$ 828 $ 190
Accounts receivable - net........................... 1,187 1,093
Inventories......................................... 1,964 1,921
Prepaid and other current assets.................... 84 18
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Total current assets....................... 4,063 3,222
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Property and equipment - net ............................... 4,173 3,771
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Other assets:
Restricted cash..................................... 2,298 2,498
Patents - net....................................... 6,483 6,648
Investments in joint ventures....................... 1,800 1,375
Other............................................... 197 128
Total other assets......................... 10,778 10,649
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Total assets...............................$ 19,014 $ 17,642
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.......................................$ 200 $ 200
Accounts payable.................................... 1,495 1,652
Accrued expenses.................................... 1,318 1,220
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Total current liabilities.................. 3,013 3,072
Long-term debt............................................... 6,739 4,545
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Total liabilities.......................... 9,752 7,617
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Stockholders' equity:
Preferred stock, $.001 par value, authorized
10,000,000 shares; no shares issued andoutstanding.. --- ---
Common stock, $.001 par value, authorized
100,000,000 shares; shares issued and outstanding:
35,790,397 at March 31, 1997 and 35,223,250 at
December 31, 1996.................................... 36 35
Paid in capital...................................... 20,187 19,545
Accumulated deficit.................................. (10,724) (9,771)
Accumulated translation adjustment................... (237) 216
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Total stockholders'equity................... 9,262 10,025
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Total liabilities and stockholders' equity..$ 19,014 $ 17,642
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See accompanying notes to the condensed consolidated financial statements.
3
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FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands except share data)
Three Months Ended
March 31,
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1997 1996
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Net sales............................................... $ 2,000 $ 1,970
Cost of sales........................................... 1,715 1,902
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Gross profit .................................. 285 68
Operating expenses:.....................................
Selling, general and administrative expenses.......... 765 593
Research and development.............................. 160 106
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Loss from operations........................... (640) (631)
Interest income......................................... 6 --
Interest expense........................................ (199) ( 95)
Foreign exchange loss-net............................... (106)
Other income (expense).................................. (14) 8
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Net loss....................................... $ 953 $ 718
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Loss per share of common stock.......................... $ (0.03) $ (0.02)
============ ===========
Weighted average shares outstanding..................... 35,364,148 30,506,963
============ ===========
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See accompanying notes to the condensed consolidated financial statements.
4
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<CAPTION>
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands except share data)
Three Months Ended
March 31,
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1997 1996
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Cash flows from operating activities:
Net loss......................................................................... $ (953) $ (718)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization.................................................... 340 334
Other .......................................................................... 53 --
Foreign currency translation loss................................................ 149 --
Changes in assets and liabilities:
Accounts receivable.............................................................. (177) 67
Inventories...................................................................... (189) 420
Prepaid and other current assets................................................. ( 67) 11
Other assets.................................................................... 8 --
Accounts payable................................................................. ( 82) (804)
Accrued expenses................................................................. 147 ( 14)
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Net cash used in operating activities......................................... (771) (704)
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Cash flows from investing activities:
Purchase of property and equipment............................................... (949) ( 66)
Reimbursement from government grant.............................................. 115 --
Other .......................................................................... -- ( 21)
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Net cash used in investing activities......................................... (834) ( 87)
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Cash flows from financing activities:
Proceeds from sale of common stock............................................... 103 272
Proceeds from long-term debt..................................................... 2,170 --
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Net cash provided by financing activities..................................... 2,273 272
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Effect of foreign exchange rate change on cash..................................... (30) --
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(Decrease) increase in cash........................................................ 638 (519)
Cash, beginning of period.......................................................... 190 833
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Cash, end of period................................................................ $ 828 $ 314
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Supplemental Disclosure:
Shares issued in exchange for investment in joint venture $ 425
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See accompanying notes to the condensed consolidated financial statements.
5
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FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and Marks in thousands except share data)
1. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of March 31, 1997 and the
related condensed statements of operations and cash flows for the three months
ended March 31, 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:
March 31, December 31,
1997 1996
-------- ------------
Raw materials $ 892 $ 841
Work-in-progress 408 403
Finished goods 664 677
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Total $1,964 $1,921
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6
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FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. LONG-TERM DEBT
During the three months ended March 31, 1997, the Company drew down
3,384 German Marks (approximately $2,020) under the 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 $5,100) 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 $2,447.
Also during the quarter ended March 31, 1997, the Company borrowed $150
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.
4. SHAREHOLDERS' EQUITY
During the three months ended March 31, 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.
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 March 31, 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.
7
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6. SUBSEQUENT EVENTS
In April 1997, the Company borrowed $250 from Techman International
Corp. ("Techman") 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, Techman was granted warrants to purchase 115,220
common shares of the Company at an exercise price of $0.78 per share. The
warrants expire on April 17, 2002. Dr. M. Mahmud Awan, a director and
shareholder of the Company, is the President and sole shareholder of Techman.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Sales for the three months ended March 31, 1997 were $2,000,000
compared to sales of $1,970,000 for the same period in 1996. This relatively
small increase was effected by the decline in value of the German Mark versus
the U. S. dollar from the first quarter of 1996 to the first quarter 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 3,241,079 for the quarter ended March 31, 1997 compared to
DM 2,774,719 for the quarter ended March 31, 1996, an increase of 16.8%. This
increase resulted from an increase in volume shipped due to the addition of new
customers.
Gross profit improved to $285,000 or 14.3% of sales for the quarter
ended March 31, 1997 from $68,000 or 3.5% of sales for the same period in the
prior year. 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 were $765,000 for the three
months ended March 31, 1997, an increase of $172,000 or 29% over the same period
in 1996. This increase is principally attributable to an increase in travel and
consulting fees of approximately $70,000 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 $65,000 due to the growth of the
German subsidiary.
Research and developments costs increased 50.9% from $106,000 in the
first quarter of 1996 to $160,000 for the first quarter of 1997. This increase
is due to costs incurred for a specific product development project in Germany.
Interest expense was $199,000 for the first quarter of 1997 compared to
$95,000 for the same period in 1996. The increase of $104,000 is due principally
to interest and fees on the Berliner Bank loan consummated in the last quarter
of 1996 and drawn down in the first quarter of 1997, and interest on the $3.0
million loan from AMP Incorporated which was received in November, 1996.
During the three months ended March 31, 1997 the Company incurred a
$106,000 foreign currency translation loss principally due to a loss in the
German Mark collateral deposit with the Berlin Bank.
As a result of the changes described above, the Company had a loss for
the first quarter of 1997 of $953,000 or 33% greater than the loss of $718,000
in the same period in 1996. The Company's German subsidiary, however, had a
profit in the first quarter of 1997 of approximately $24,000 compared to a loss
for the first quarter of 1996 of approximately $50,000.
8
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LIQUIDITY AND CAPITAL RESOURCES
The Company's cash increased by $638,000 during the three months ended
March 31, 1997. Cash used in operations was $771,000 in the first quarter 1997
compared to $704,000 in the same period in the prior year. This resulted from
the loss in the first quarter 1997 of $953,000 offset by depreciation and
amortization of $340,000 and other non-cash charges of $202,000 and changes in
other working capital items of $360,000. The Company's current ratio improved
from 1.0 at December 31, 1996 to 1.3 at March 31, 1997. The Company's German
subsidiary is now generating a positive cash flow from operations and management
anticipates that this will continue.
During the first quarter of 1997, the Company invested $949,000 in new
equipment and the expansion of the production facility in Germany. This was
funded, in part, by $115,000 in grants from the German government. Additionally,
the Company drew down approximately $2,020,000 under the Berliner Bank loan to
finance this expansion.
Also during the three months ended March 31, 1997, the Company received
$103,000 from the issuance of common stock for the exercise of options and
warrants. The Company also borrowed $150,000 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 $597,000.
9
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PART II - OTHER INFORMATION
ITEMS 1 - 5
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
On January 17, 1997, the Company filed a report on
Form 8-K, reporting the change to Deloitte & Touche
LLP as the Company's independent accountants pursuant
to item 4 thereof.
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: May 14, 1997 /s/ Mohd A. Aslami
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Dr. Mohd A. Aslami
Chairman, President and Chief Executive
Officer
(Duly Authorzed Officer)
Date: May 14, 1997 /s/ Michael J. Beecher
-----------------------
Michael J. Beecher
Chief Financial Officer and Treasurer
(Principal Financial Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000917770
<NAME> FIBRECORE, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 828
<SECURITIES> 0
<RECEIVABLES> 1,222
<ALLOWANCES> (35)
<INVENTORY> 1,964
<CURRENT-ASSETS> 4,063
<PP&E> 5,656
<DEPRECIATION> (1,483)
<TOTAL-ASSETS> 19,014
<CURRENT-LIABILITIES> 3,013
<BONDS> 6,739
0
0
<COMMON> 36
<OTHER-SE> 9,226
<TOTAL-LIABILITY-AND-EQUITY> 19,014
<SALES> 2,000
<TOTAL-REVENUES> 2,006
<CGS> 1,715
<TOTAL-COSTS> 2,640
<OTHER-EXPENSES> 120
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 199
<INCOME-PRETAX> (953)
<INCOME-TAX> 0
<INCOME-CONTINUING> (953)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (953)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0
</TABLE>
