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, 2000
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,
2000 was 52,254,918.
1
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I FINANCIAL INFORMATION.............................................. 3
ITEM 1. FINANCIAL STATEMENTS...................................... 3
CONDENSED CONSOLIDATED BALANCE SHEETS
AT JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999........ 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND
1999 (UNAUDITED).......................................... 4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS) FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2000 AND 1999.................................... 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)............................................... 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)............................................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK...............................................13
PART II OTHER INFORMATION..................................................14
ITEM 1. LEGAL PROCEEDINGS.........................................14
ITEM 2. CHANGES IN SECURITIES.....................................14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES...........................14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......14
ITEM 5. OTHER INFORMATION.........................................14
ITEM 6. EXHIBITS & REPORTS ON FORM 8-K............................14
SIGNATURES..................................................................15
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share data)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash .......................................................................... $ 2,950 $ 487
Accounts receivable - net ..................................................... 6,687 2,013
Inventories ................................................................... 6,507 3,047
Prepaid and other current assets .............................................. 621 16
-------- --------
Total current assets ................................................. 16,765 5,563
-------- --------
Property and equipment - net ........................................................... 14,241 4,062
-------- --------
Other assets:
Notes receivable from joint venture partners .................................. 4,949 4,949
Restricted cash ............................................................... 1,879 1,981
Patents - net ................................................................. 4,466 4,762
Investments in joint ventures ................................................. 1,425 1,425
Goodwill ...................................................................... 11,230 --
Other ......................................................................... 1,195 1,320
-------- --------
Total other assets ................................................... 25,144 14,437
-------- --------
Total assets ......................................................... $ 56,150 $ 24,062
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable ................................................................. $ 11,707 $ 2,006
Accounts payable .............................................................. 5,560 1,536
Accrued expenses .............................................................. 4,248 980
-------- --------
Total current liabilities ............................................ 21,515 4,522
Long-term interest payable ............................................................. -- 1,267
Long-term debt ......................................................................... 10,131 8,296
-------- --------
Total liabilities .................................................... 31,646 14,085
-------- --------
Minority interest ...................................................................... 4,453 3,263
-------- --------
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: 52,203,563 at June 30, 2000
and 41,404,602 at December 31, 1999 .......................................... 52 42
Paid in capital ............................................................... 44,076 24,874
Accumulated deficit ........................................................... (23,025) (17,196)
Accumulated other comprehensive
income (deficit):
Foreign currency translation adjustment ................................... (1,052) (1,006)
-------- --------
Total stockholders' equity ........................................... 20,051 6,714
-------- --------
Total liabilities and stockholders' equity ........................... $ 56,150 $ 24,062
======== ========
</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,
------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales .............................................. $ 6,413 $ 2,371 $ 9,866 $ 5,026
Cost of sales .......................................... 4,723 1,946 7,444 4,283
------------ ------------ ------------ ------------
Gross profit .................................. 1,690 425 2,422 743
Operating expenses:
Selling, general and administrative expenses ......... 976 637 1,673 1,181
Research and development ............................. 193 178 430 289
------------ ------------ ------------ ------------
Income (loss) from operations ................. 521 (390) 319 (727)
Interest income ........................................ 9 1 81 85
Interest expense ....................................... (5,598) (227) (5,824) (448)
Foreign exchange income (loss) - net ................... 52 (121) (34) (318)
Other income - net ..................................... 57 18 61 34
Minority interest in income of subsidiary .............. (37) -- (37) --
------------ ------------ ------------ ------------
Income (loss) before income taxes ............. (4,996) (719) (5,434) (1,374)
Provision for income taxes ............................. (337) -- (395) --
------------ ------------ ------------ ------------
Net loss ...................................... $ (5,333) $ (719) $ (5,829) $ (1,374)
============ ============ ============ ============
Basic and diluted loss per share of common stock ....... $ (0.11) $ (0.02) $ (0.13) $ (0.04)
============ ============ ============ ============
Weighted average shares outstanding .................... 46,458,419 36,262,861 44,176,241 36,127,912
============ ============ ============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -------------------------
2000 1999 2000 1999
------- ----- ------- -------
<S> <C> <C> <C> <C>
Net loss ..................................................... $(5,333) $ (719) $(5,829) $(1,374)
Other comprehensive income (loss):
Foreign currency translation adjustment .................. 144 55 (46) (296)
------- ----- ------- -------
Comprehensive loss ........................................... $(5,189) $ (664) $(5,875) $(1,670)
======= ===== ======= =======
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
<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,
--------------------------
2000 1999
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................................................... $ (5,829) $ (1,374)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ............................................................... 1,186 958
Non-Cash interest expense ................................................................... 5,317 190
Deferred income tax provision ............................................................... 227 --
Other ....................................................................................... 26 527
Changes in assets and liabilities, excluding acquisition:
Accounts receivable ......................................................................... (608) (267)
Inventories ................................................................................. 346 130
Prepaid and other current assets ............................................................ 99 (18)
Accounts payable ............................................................................ 166 (104)
Accrued expenses ............................................................................ 666 95
-------- -------
Net cash provided from operating activities .............................................. 1,596 137
-------- -------
Cash flows from investing activities:
Purchase of property and equipment .......................................................... (931) (758)
Reimbursement from government grant ......................................................... 168 248
Cash used for acquisition ................................................................... (10,067) --
Cash acquired from acquisition .............................................................. 196 --
Other ....................................................................................... (36) (193)
-------- -------
Net cash used in investing activities .................................................... (10,670) (703)
-------- -------
Cash flows from financing activities:
Proceeds from sale of common stock .......................................................... 5,773 124
Proceeds (repayment) of debt - net .......................................................... 5,681 380
-------- -------
Net cash provided by financing activities ................................................ 11,454 504
-------- -------
Effect of foreign exchange rate change on cash ................................................ 83 (3)
-------- -------
Increase (decrease) in cash ................................................................... 2,463 (65)
Cash, beginning of period ..................................................................... 487 150
-------- -------
Cash, end of period ........................................................................... $ 2,950 $ 85
======== =======
Supplemental disclosure:
Common stock issued for conversion of debt ................................................. $ 8,079
Cash paid for interest ..................................................................... $ 117 $ 132
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
6
<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, 2000 and the
related condensed consolidated statements of operations and comprehensive income
(loss) for the three and six month periods and statements of cash flows for the
six month periods ended June 30, 2000 and 1999 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, 1999
included in the Company's Report on Form 10-K.
Certain amounts in the prior year have been reclassified to conform to
the current period presentation.
2. ACQUISITION OF XTAL FIBRAS OPTICAS S. A.
On June 20, 2000, the Company, through a wholly owned subsidiary,
acquired as of June 1, 2000, 90% of the capital stock of Xtal Fibras Opticas, S.
A., ("Xtal"), from Algar S. A., ("Algar"), and entered into an agreement to
acquire the remaining 10% of the capital stock (collectively, the
"Acquisition"). Xtal's manufacturing facility is located in Campinas, Brazil and
manufactures primarily singlemode optical fiber for sale mainly in Brazil. The
acquisition was accounted for as a purchase.
Prior to the Acquisition, no material relationship existed between
Algar and the Company, the Company's affiliates, directors and officers, and
associates of such directors and officers.
The cost for the 90% interest in Xtal was $20,000 plus costs
(commissions, legal and accounting fees) of approximately $1,657, and is subject
to certain adjustments described below. At the closing of the Acquisition, the
Company paid Algar $10 million in cash and issued to Algar a $10 million, 6%
note, payable on December 31, 2000. The Company will receive a $1 million
discount if the Company redeems the $10 million note by August 31, 2000. At the
closing of the Acquisition, the Company also issued to Algar a $2.5 million, 6%
note, payable in two installments of $1.25 million each, on September 20, 2001,
and on December 20, 2002, respectively. The Company's obligation to repay the
$2.5 million note is contingent on Xtal's achieving certain profitability
targets in 2000 and 2001. The Company will acquire the remaining 10% of Xtal's
common stock upon payment of an additional $2.5 million on or before June 20,
2003. The cost of the acquisition of $21,657 exceeded the preliminary estimate
of the fair value of the net assets acquired by $11,277. A final allocation of
the purchase price will be made upon the completion of studies and valuations
that are now in progress. This excess has been accounted for as goodwill and is
being amortized over twenty (20) years.
7
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FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The funds the Company used to pay the $10 million in cash paid to Algar
were obtained from (i) Crescent International Ltd. pursuant to an agreement
under which the Company may require Crescent to purchase securities from time to
time for an aggregate of up to $30 million and (ii) proceeds received by the
Company upon Tyco Electronics Corporation's exercise of warrants to purchase the
Company's common stock. The Company plans to pay the balance of the Purchase
Price by requiring Crescent to buy additional securities pursuant to such
agreement and/or raising funds which may become available from other sources
from time to time.
Assuming the acquisition of Xtal had occurred at the beginning of each
period presented, the pro forma net sales, gross profit, net income and basic
and diluted loss per share of common stock are provided below.
The unaudited pro forma combined information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the transactions had
been consummated at the date indicated, nor is it necessarily indicative of
future operating results or financial position of the combined company.
<TABLE>
<CAPTION>
Pro Forma
Six Months Ended
June 30,
--------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
Net sales............................................................................... $ 21,355 $ 10,287
Gross Profit ........................................................................... $ 4,082 $ 1,106
Net Loss ............................................................................... $ (5,957) $ (4,677)
Basic and diluted loss per share of common stock........................................ $ (0.12) $ (0.11)
Weighted average shares outstanding..................................................... 48,010,558 40,779,544
</TABLE>
3. AGREEMENT WITH TYCO ELECTRONICS CORPORATION
On May 19, 2000, the Company entered into an Agreement with Tyco
Electronics Corporation (formerly "AMP Incorporated"), whereby Tyco agreed to
convert the two notes due Tyco into common stock of the Company and to exercise
warrants previously issued to Tyco in connection with the one of the notes. In
accordance with the note agreement dated April 17, 1995 Tyco converted the
remaining $2,000 in principal plus accrued interest of approximately $460 into
3,419,977 common shares of the Company. Also Tyco converted $3,000 plus accrued
interest of approximately $972 for the note dated November 27, 1996 into
1,031,532 common shares. Additionally Tyco exercised warrants to purchase
2,765,487 common shares for cash of $2,000. In connection with the conversion of
debt and the Agreement Tyco released its liens on the Company's assets.
8
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. AGREEMENT WITH CRESCENT INTERNATIONAL LTD.
On June 9, 2000 the Company concluded an agreement with Crescent
International Ltd., an investment fund based in Geneva, Switzerland, whereby
Crescent agreed to purchase up to $30,000 worth of securities which will include
common stock of the Company and convertible notes up to $7,500. At the closing
on June 9, 2000 the Company issued 1,200,274 common shares for $3,500 and
issued a $6,000 convertible note. The Company, in accordance with the agreement,
has filed a registration statement to register shares underlying the
transaction.
The agreement is for two years until June 9, 2002 and provides that the
Company, after the registration statement is effective, may require Crescent,
pursuant to the agreement, to purchase common shares of the Company on a monthly
basis over the two-year period. The price per share will be 93% of the average
of the lowest three consecutive weighted-average trading prices during the 22
trading days prior to the notice to Crescent to purchase shares. The Company
is limited to a maximum of $3,500 for each sale of common stock during any 22
day trading period. Further the Company is subject to penalties in the event
that a registration statement does not become, or ceases to be, effective.
The convertible notes are convertible into common shares of the Company
at the lower of i) the volume-weighted average trading prices during the 10
trading days preceding the closing, or ii) 93% of the average of the lowest
three consecutive days weighted average trading price during the 22 trading days
preceding conversion. In connection with the deemed beneficial conversion
feature of the $6,000 note and in accordance with accounting pronouncements, the
Company recorded a $5,317 non-cash interest expense and an increase in paid in
capital. The adjustment had no effect on the net equity of the Company. On June
26, 2000, $2,000 of the note was converted into 685,871 shares of common stock.
At the closing the Company received proceeds of $9,500 which was used
to pay approximately $1,369 for fees related to the transaction with the balance
used to finance the Xtal acquisition discussed in note 2 above.
5. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Raw material $ 4,287 $ 1,745
Work-in-progress 988 361
Finished goods 1,232 941
--------- ---------
Total $ 6,507 $ 3,047
========= =========
</TABLE>
9
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which requires that an entity recognize all
derivatives as either assets or liabilities in the consolidated balance sheets
and measure those instruments at fair value. The accounting for changes in fair
value of a derivative depends on the intended use of the derivative and its
resulting designation. The Company is completing its evaluation of the effect
this new standard will have on the Company's financial statements. The Company
believes that adopting this statement will not have a material adverse effect on
the financial position or results of operations of the Company. The Company is
required to adopt this standard, as amended, by January 1, 2001.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial Statements",
which provides guidance related to revenue recognition based on interpretations
and practices followed by the SEC. SAB 101, as amended by SAB 101A and SAB 101B,
is effective for the Company's fourth quarter of 2000. It requires companies to
report any changes in revenue recognition as a cumulative change in accounting
principle at the time of implementation in accordance with Accounting Principles
Board Opinion 20, "Accounting Changes." The Company does not expect that SAB 101
will have a material effect on its financial position or results of operations.
10
<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, 2000 AND 1999
The results for the three and six month periods include the operations
of Xtal Fibras Opticas S.A., the Company's recently acquired facility in Brazil,
from June 1, 2000.
Sales for the three and six month periods ended June 30, 2000 were
$6,413,000 and $9,866,000, respectively, compared to sales of $2,371,000 and
$5,026,000 for the same periods in 1999. This represents an increase of
$4,042,000 or 170% for the three months and $4,840,000 or 96% for the six months
ended June 30, 2000 compared to the same periods in 1999. The increase includes
the sales of Xtal for the month of June 2000 of $2,594,000. Additionally, sales
from the Company's German subsidiary increased by $2,246,000 or 45% for the six
months ended June 30, 2000 compared to the same period in 1999, primarily due to
increases in volume shipped to continuing customers and increases in the prices
of the Company's products. Market prices continued to strengthen during the six
months of 2000, and this trend is expected to continue.
Gross profit improved to $1,690,000 (26.4% of sales) and $2,422,000
(24.5% of sales) for the three and six month periods ended June 30, 2000,
respectively, compared to $425,000 (17.9% of sales) and $743,000 (14.8% of
sales) for the same periods of 1999. This improvement in the profit margin
results from the Brazilian acquisition and price increases. The Company
anticipates that the gross margins will continue to improve as production levels
are increased and cost reductions and process improvements are implemented at
both the German and Brazilian facilities.
Selling, general and administrative costs increased $339,000 or 53%,
and $492,000 or 42% for the three and six month periods ended June 30, 2000,
respectively, compared to the same periods in 1999. Xtal accounted for $169,000
of the increase, including amortization of goodwill of $47,000. In addition, the
Company had increases in printing and mailing costs related to the Company's
annual report, legal fees and increases in personnel at the Company and the
Company's Germany subsidiary. Research and development costs increased $15,000
or 8% and $141,000 or 49% for the three and six month periods ended June 30,
2000. The increase in research and development costs was due to increased
spending on a new technology development project and other process improvements.
The Company intends to continue current spending levels on research and
development through the remainder of 2000.
Interest expense increased by $5,371,000 and $5,376,000 for the three
and six month periods ended June 30, 2000, respectively, compared to the same
periods in 1999. The increase is primarily due to the $5,317,000 non-cash
interest charge recorded in connection with the deemed beneficial conversion
feature of the $6,000,000 note issued to Crescent International Ltd. in June,
2000, with the offset recorded as an increase in paid in capital. The charge had
no effect on the net equity of the Company. The Company expects to record a
similar non-cash interest expense of approximately $88,000 in the third quarter
of 2000 in connection with a $1,500,000 note issued to Crescent in July 2000.
The Company had foreign exchange gains (losses) of $52,000 and
($34,000) for the three and six month periods ended June 30, 2000, respectively,
compared to a loss of $121,000 in the second quarter 1999 and a loss of $318,000
for the first six months of 1999. The gains and losses are principally due to
the impact of the fluctuations in the value of the German mark and Euro versus
the U.S. dollar.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company recorded expense of $37,000 attributable to the 10%
minority interest in the earnings of Xtal.
The Company recorded a tax provision related to the foreign
subsidiaries of $337,000 and $395,000 for the three and six month periods ended
June 30, 2000, respectively. The Company had no tax provision in the same
periods in 1999 because the net deferred tax benefit of net operating loss
carryovers was fully reserved at June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company achieved a positive cash flow from operations of $1,596,000
in the first six months of 2000, an increase of more than $1,459,000 compared to
the cash flow from operations of $137,000 in the first six months of 1999. This
resulted from the loss for the period of $5,829,000 offset by depreciation and
amortization of $1,186,000, non-cash interest expense of $5,317,000 and other
non-cash charges of $253,000 and changes in other working capital items. The
improvement in cash from operations is the result of the higher sales and gross
profit.
Accounts receivable increased by $608,000 due to the increase in sales
at Xtal and an increase in other receivables for the escrow of $250,000 of the
proceeds from the Crescent investment. Inventories decreased by $346,000 as a
result of the increase in shipments of product. Accrued expenses increased by
$666,000 principally due to increases in accrued legal and accounting fees
related to the Xtal acquisition and the Crescent investment and increases in
accrued salaries and interest payable.
The Company invested $931,000 in new equipment during the first six
months of 2000 and received $168,000 in German government grants for
investments. Cash paid in connection with the Xtal acquisition was $10,067,000.
In addition cash acquired with the Xtal acquisition was $196,000.
The Company received net proceeds of $7,773,000 from the sale of common
stock, principally from the Crescent investment and the exercise of warrants to
purchase common stock by Tyco. The Company received net proceeds from the
issuance of debt of $3,681,000 primarily from the notes issued to Crescent of
$4,000,000, $300,000 in short-term borrowings for working capital at the
Company, and repayment of short-term working capital loans at the German
subsidiary. The proceeds from the sale of common stock and the notes issued to
Crescent were used primarily for the Xtal acquisition.
12
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks from changes in foreign currency
exchange rates and interest rates. The Company has two principal operating
subsidiaries, FiberCore Jena, which is located in Germany and its functional
currency is the EURO, and Xtal, which is located in Campinas Brazil, and its
functional currency is the Real.
FOREIGN CURRENCY RISK. FiberCore Jena and Xtal may, from time to time, purchase
short-term forward exchange contracts to hedge payments and/or receipts due in
currencies other than the EURO and Real. At June 30, 2000, FiberCore Jena had
outstanding forward exchange contracts for the sale of U.S. Dollars totaling
$250,000 which mature at various dates in 2000. The weighted-average exchange
rate in these contracts is $0.9761 per Euro. A 10% change in the exchange rate
could result in a gain or loss on these contracts of approximately $25,000. At
June 30, 2000, Xtal had no outstanding forward exchange contracts.
At June 30, 2000, the Company had a long-term loan denominated in
Deutsche Marks (DM) totaling DM7,700,000. The principal of the loan is due at
maturity, September 2006. Interest on the loan is payable quarterly at the fixed
rate of 6.25% per annum. A 10% change in the DM exchange rate to the U.S. dollar
could increase or decrease the cash flow requirements of the Company
approximately $12,000 for the year 2000, $24,000 for each of the years 2001
through 2005, and $18,000 in 2006.
Substantially all of the Company's sales are through it German and
Brazilian subsidiaries. Additionally, at June 30, 2000, 37%, 19% and 10% of the
Company's assets are at its Brazilian, German, and Malaysian subsidiaries,
respectively. The Company, therefore, is subject to foreign currency translation
gains or losses in reporting its consolidated financial position and results of
operations.
INTEREST RATE RISK. At June 30, 2000, the Company had short and long-term loans
with interest rates based on the prime rate and LIBOR, which are adjusted
quarterly based on the prevailing market rates. A 10% change in the interest
rates on these loans would have increased or decreased the first six months of
2000 interest expense by approximately $22,000.
13
<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
On June 9, 2000 the Company filed a report on Form 8-K,
reporting the agreement between the Company and Tyco
Electronics Corporation wherein Tyco agreed to convert certain
debt into common shares of the Company and exercise warrants.
On June 15, 2000 the Company filed a report on Form 8-K,
reporting the agreement between the Company and Crescent
International Limited wherein Crescent agreed to subscribe to
purchase common shares of the Company and to loan the Company
up to seven million five hundred thousand dollars
($7,500,000.00) under a convertible note agreement.
On July 3, 2000 the Company filed a report on Form 8-K,
reporting the acquisition of Xtal Fibras Opticas S. A.
On July 10, 2000 the Company filed an amended Form 8-K to
include the financial statements of Xtal Fibras Opticas S. A.
omitted from the Form 8-k filed on July 3, 2000.
14
<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 15, 2000 /s/ Mohd Aslami
-----------------------------------------------
Dr. Mohd A. Aslami
Chairman, President and Chief Executive Officer
(Duly Authorized Officer)
Date: August 15, 2000 /s/ Steven Phillips
-----------------------------------------------
Steven Phillips
Interim Chief Financial Officer and Treasurer
(Principal Financial Officer)
15
