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: June 30, 1998
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 July 31,
1998 was 35,811,535.
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I FINANCIAL INFORMATION .............................................. 3
ITEM 1. FINANCIAL STATEMENTS....................................... 3
CONDENSED CONSOLIDATED BALANCE SHEETS
AT JUNE 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997......... 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND
1997 (UNAUDITED)........................................... 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)................................................ 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)................................................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............. 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK................................................ 8
PART II OTHER INFORMATION .................................................. 9
ITEM 1. LEGAL PROCEEDINGS.......................................... 9
ITEM 2. CHANGES IN SECURITIES...................................... 9
ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................ 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........ 9
ITEM 5. OTHER INFORMATION.......................................... 9
ITEM 6. EXHIBITS & REPORTS ON FORM 8-K............................. 9
SIGNATURES................................................................... 10
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands except share data) June 30, December 31,
1998 1997
-------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash ................................................................................ $ 533 $ 2,128
Accounts receivable - net ........................................................... 1,185 1,501
Notes receivable from joint venture partners ........................................ 4,625 4,883
Inventories ......................................................................... 3,727 3,057
Prepaid and other current assets .................................................... 41 22
-------- --------
Total current assets ....................................................... 10,111 11,591
-------- --------
Property and equipment - net ................................................................. 5,067 4,808
-------- --------
Other assets:
Restricted cash ..................................................................... 2,135 2,140
Patents - net ....................................................................... 5,694 6,014
Investments in joint ventures ....................................................... 1,425 1,425
Other ............................................................................... 224 129
-------- --------
Total other assets ......................................................... 9,478 9,708
-------- --------
Total assets ............................................................... $ 24,656 $ 26,107
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable ....................................................................... $ 591 $ 594
Accounts payable .................................................................... 1,410 1,778
Accrued expenses .................................................................... 1,264 1,128
-------- --------
Total current liabilities .................................................. 3,265 3,500
Long-term liabilities ........................................................................ 10,098 9,851
-------- --------
Total liabilities .......................................................... 13,363 13,351
-------- --------
Minority interest ............................................................................ 3,008 3,217
-------- --------
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: 35,811,535 at June 30, 1998 and 35,774,822 at December 31, 1997 ......... 36 36
Paid in capital ..................................................................... 23,045 23,221
Accumulated deficit ................................................................. (13,915) (12,850)
Accumulated other comprehensive income (deficit):
Accumulated translation adjustment .............................................. (881) (868)
-------- --------
Total stockholders' equity ................................................. 8,285 9,539
-------- --------
Total liabilities and stockholders' equity ................................. $ 24,656 $ 26,107
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Dollars in thousands except share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales ...................................... $ 1,879 $ 1,550 $ 3,442 $ 3,550
Cost of sales .................................. 1,608 1,251 2,862 2,966
------------ ------------ ------------ ------------
Gross profit .......................... 271 299 580 584
Operating expenses:
Selling, general and administrative expenses . 683 687 1,236 1,452
Research and development ..................... 118 135 240 295
------------ ------------ ------------ ------------
Loss from operations .................. (530) (523) (896) (1,163)
Interest income ................................ 3 8 57 14
Interest expense ............................... (170) (193) (332) (392)
Foreign exchange income (loss) - net ........... 37 (63) (64) (169)
Other income - net ............................. 112 24 170 10
------------ ------------ ------------ ------------
Net loss .............................. (548) (747) (1,065) (1,700)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments ..... (73) (303) (13) (756)
------------ ------------ ------------ ------------
Comprehensive loss .................... $ (621) $ (1,050) $ (1,078) $ (2,456)
============ ============ ============ ============
Basic and diluted loss per share of common stock $ (0.02) $ (0.02) $ (0.03) $ (0.05)
============ ============ ============ ============
Weighted average shares outstanding ............ 35,803,458 35,583,493 35,789,223 35,580,985
============ ============ ============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands except share data)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss ..................................................................................... $(1,065) $(1,700)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ................................................................ 737 645
Other ........................................................................................ 39 48
Foreign currency gain ........................................................................ (5) --
Changes in assets and liabilities:
Accounts receivable .......................................................................... 313 (81)
Inventories .................................................................................. (677) (1,024)
Prepaid and other current assets ............................................................. (18) 42
Accounts payable ............................................................................. (326) 223
Accrued expenses ............................................................................. 137 260
------- -------
Net cash used in operating activities ..................................................... (865) (1,587)
------- -------
Cash flows from investing activities:
Purchase of property and equipment ........................................................... (740) (2,069)
Reimbursement from government grant .......................................................... 136 262
Other ........................................................................................ (131) (30)
------- -------
Net cash used in investing activities ..................................................... (735) (1,837)
------- -------
Cash flows from financing activities:
Proceeds from sale of common stock ........................................................... -- 103
Increase in long-term interest payable ....................................................... 208 --
Proceeds (repayment) of debt - net ........................................................... (2) 2,914
------- -------
Net cash provided by financing activities ................................................. 206 3,017
------- -------
Effect of foreign exchange rate change on cash ................................................. (201) 286
------- -------
Decrease in cash ............................................................................... (1,595) (121)
Cash, beginning of period ...................................................................... 2,128 190
------- -------
Cash, end of period ............................................................................ $ 533 $ 69
======= =======
Supplemental Disclosure:
Shares issued in exchange for investment in joint venture ................................... -- $ 425
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE>
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 June 30, 1998 and the
related condensed statements of operations for the three and six month periods
and statements of cash flows for the six month periods ended June 30, 1998 and
1997 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, 1997
included in the Company's Report on Form 10-K.
2. INVENTORIES
Inventories consist of the following:
June 30, 1998 December 31, 1997
------------- -----------------
Raw material $ 832 $ 997
Work-in-progress 436 315
Finished goods 2,459 1,745
----- -----
Total $ 3,727 $ 3,057
======= =======
3. ACCOUNTING PRONOUNCEMENTS
Effective for 1998, the Company implemented Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income". Other
comprehensive income (loss) for the Company consists of foreign currency
translation adjustments. The reports for prior periods included in the financial
statements have been restated to reflect this change.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Sales for the three and six months ended June 30, 1998 were $1,879,000 and
$3,442,000, respectively, compared to sales of $1,550,000 and $3,550,000 for the
same periods in 1997. The 21.2% increase in sales during the second quarter of
1998 compared to the same quarter in 1997 was primarily the result of an
increase in shipments and the addition of new customers. The 3.0% decrease in
sales for the six months ended June 30, 1998 compared to the same period in 1997
was effected by the decline in the value of the German Mark versus the U.S.
dollar of 6.4% offset by the increase in shipments noted above. 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 3,321,556
and DM 6,132,944 for the quarter and six months ended June 30, 1998 compared to
DM 2,632,957 and DM 5,874,036 for the same periods in 1997.
Gross profit was $271,000 (14.4% of sales) and $580,000 (16.9% of sales)
for the quarter and six months ended June 30, 1998, respectively, compared to
$299,000 (19.3% of sales) and $584,000 (16.5% of sales) for the corresponding
periods in 1997. The decrease in the profit margin in the second quarter of 1998
was principally due to slightly higher production costs and lower average sales
prices compared to the same period in 1997. The profit margins are expected to
improve as further production efficiencies are implemented.
Selling, general and administrative costs decreased by $216,000 (14.9%) for
the six months ended June 30, 1998 compared to the same period in 1997. This
decrease was principally due to a decrease in legal, consulting and other
administrative costs of the parent company.
Research and development costs decreased $17,000 (12.6%) and $55,000
(18.6%) during the quarter and six month periods ended June 30, 1998,
respectively, compared to the corresponding periods in 1997. This decrease was
due to higher costs incurred for a specific product development project in
Germany during the first half of 1997.
Interest expense was $23,000 and $60,000 lower in the quarter and six
months ended June 30, 1998 compared to the corresponding periods in 1997
principally due to the capitalization of interest in 1998 related to the
expansion project in Germany.
As a result of the changes as described above, the Company had a net loss
for the three months ended June 30, 1998 that was 26.6% lower than the loss in
the same period of 1997. The loss for the six months ended June 30, 1998 was
37.4% lower than the loss in the corresponding period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operations was $865,000 in the first half 1998 compared to
$1,587,000 in the same period in the prior year. This resulted from the loss in
the first half 1998 of $1,065,000 offset by depreciation and amortization of
$737,000 and other non-cash charges of $34,000 and changes in other working
capital items. The Company's German subsidiary is generating a positive cash
flow from operations and management anticipates that this will continue.
7
<PAGE>
Accounts receivable decreased $313,000, principally as a result of the
collection of grants due from the German government. Inventories increased
$677,000 resulting from the increased capacity and to provide stock for
shipments during the planned vacation shut-down. Accounts payable decreased by
$326,000, principally resulting from the repayment of amounts advanced to the
Malaysian subsidiary by the Malaysian partners, while accrued liabilities
increased $137,000 due to the increase in accrued interest on notes.
During the first six months of 1998, the Company invested $740,000 in new
equipment and the expansion of the production facility in Germany. This was
funded, in part, by $136,000 in grants from the German government. Other assets
increased $131,000 principally due to an increase in deferred costs related to
the Malaysian subsidiary.
Long-term interest payable increased $208,000 during the first half of
1998, principally on the AMP loans wherein interest is payable at maturity.
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 two German banks for 2,000,000
German Marks, approximately $1,109,000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
8
<PAGE>
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
None
9
<PAGE>
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: August 12, 1998 /s/ Mohd Aslami
-----------------------------------------------
Dr. Mohd A. Aslami
Chairman, President and Chief Executive Officer
(Duly Authorized Officer)
Date: August 12, 1998 /s/ Michael J. Beecher
-----------------------------------------------
Michael J. Beecher
Chief Financial Officer and Treasurer
(Principal Financial Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000917770
<NAME> FIBERCORE, INC.
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 533
<SECURITIES> 0
<RECEIVABLES> 1,219
<ALLOWANCES> (34)
<INVENTORY> 3,727
<CURRENT-ASSETS> 10,111
<PP&E> 7,148
<DEPRECIATION> (2,081)
<TOTAL-ASSETS> 24,656
<CURRENT-LIABILITIES> 3,265
<BONDS> 10,098
0
0
<COMMON> 36
<OTHER-SE> 8,249
<TOTAL-LIABILITY-AND-EQUITY> 24,656
<SALES> 3,442
<TOTAL-REVENUES> 3,669
<CGS> 2,862
<TOTAL-COSTS> 4,338
<OTHER-EXPENSES> 64
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 332
<INCOME-PRETAX> (1,065)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,065)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,065)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0
</TABLE>
