UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1999
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
253 Worcester Road, P.O. Box 180
Charlton, MA 01507
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(Address and Zip Code of principal executive offices)
(508) 248-3900
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
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(Title of Class)
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),
Yes X No
and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 1, 2000: $227,559,969.
Number of shares outstanding as of March 1, 2000: 41,932,472.
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DOCUMENTS INCORPORATED BY REFERENCE
None.
REASON FOR AMENDMENT:
The Company has amended Item 1 to disclose (i) the status of the
development of Fiber Laser, Laser Power Transmitting Fibers, and Bragg Grading
Fiber; (ii) information regarding its customers which represent 10% or more of
the Company's sales; (iii) more detailed information regarding the Company's
patents; and (iv) more detailed information regarding the Company's suppliers.
The Company has amended Item 10 to clarify Mr. Hassan's membership status on the
Company's Board of Directors. The Company has amended Item 13 to more fully
disclose its consulting agreement with One Financial Group.
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TABLE OF CONTENTS
Page
Item 1. Business.........................................................1
Item 10. Directors and Executive Officers of the Registrant..............13
Executive Officers and Directors................................13
Item 13. Certain Relationships and Related Transactions..................15
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ITEM 1. BUSINESS
GENERAL
FiberCore, Inc. ("FiberCore" or the "Company") is engaged in the business
of developing, manufacturing, and marketing single-mode and multi-mode optical
fiber and optical fiber preforms for the telecommunications and data
communications industry. Preforms are the basic component from which optical
fiber is drawn and subsequently cabled. The Company has developed a patented
preform production process which management believes to be competitive with
other existing production methods in use. The Company's principal operating unit
is FiberCore Jena GmbH ("FCJ"), the Company's wholly-owned subsidiary in
Germany.
On September 18, 1995, the Company acquired Automated Light Technologies,
Inc. ("ALT"). ALT, a Delaware corporation organized in 1986, manufactures
equipment that monitors and identifies faults in fiber optic cables, cable
protection devices, and electro-optical talk sets. The Company has focused its
resources on developing its optical fiber and preform business and, therefore,
has not been actively developing the ALT business. The Company, however, intends
to devote resources and efforts to the ALT products as resources become
available.
In November 1997, the Company entered into a joint-venture agreement with
PNB Equity Resource Corporation Sdn. Bhd. ("PERC") and Federal Power Sdn. Bhd.
("FDP"), both of which are Malaysian corporations, to form FiberCore Asia Sdn.
Bhd. ("FCA"). FCA, which is incorporated in Malaysia, was established to
construct and operate a manufacturing facility in Malaysia for the production of
optical fiber and optical fiber preforms. The Company owns 51% of FCA, and FDP
and PERC own 37% and 12%, respectively.
The Company granted FCA a license to use the Company's technology for its
51% ownership, while FDP and PERC contributed cash and notes for their
respective ownership interest. Due principally to the economic and currency
crisis experienced in the Asian/Pacific region, the debt financing necessary to
construct the manufacturing facility has not, as yet, been obtained. The Company
and the other partners in FCA are continuing to seek financing and additional
equity for FCA. The products of FCA will be marketed principally in the Pacific
Rim.
The following is an organizational chart depicting the Company's principal
subsidiaries and ownership percentage.
FIBERCORE, INC.
CORPORATE STRUCTURE
HEADQUARTERS
(USA)
<TABLE>
FIBERCORE, INC.
CORPORATE STRUCTURE
Headquarters
(USA)
===================================================================================================================
<CAPTION>
FiberCore MidEast Ltd.
(Asia)
FiberCore Asia FOI (Pvt.) Ltd. InfoGlass, Inc. 100% Owned ALT, Inc.
Sdn. Bhd. (Pakistan) FiberCore Jena GmbH (USA) Middle East Fiber Cables Co. (USA)
(Malaysia) 30% Owned (Germany) 100% Owned 15% Owned by 100%
51% Owned (inactive) 100% Owned (inactive) FiberCore MidEast Ltd. Owned
-------------- --------------- ------------------- --------------- ---------------------------- ---------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
Substantially all of the Company's sales are from optical fiber and
optical fiber preforms. ALT accounted for less than 5% of sales in each of the
last three years.
RECENT DEVELOPMENTS
In January 1998, Corning Incorporated filed suit against the Company
claiming the Company's phosphorus containing fiber violated a Corning patent.
During 1998 the suit was settled by the Company agreeing not to solicit, market
or sell phosphorus containing multimode fiber in the United States until the
Corning patent expired in July 1999. The Company also agreed to conduct an
arbitration to determine whether the Company's singlemode fiber violates the
Corning patent. In March 1999, the arbitrator issued an opinion concluding that
FiberCore's singlemode fiber does not violate the Corning patent. Prior to July
1999, the Company had not sold any material quantities of fiber in the United
States.
In July 1996, Tyco Electronics Corp. ("Tyco"), (formerly AMP,
Incorporated), entered into a supply contract which ends on December 31, 2000
(renewable at Tyco's option for an additional five year period) with the Company
whereby Tyco has undertaken to purchase from the Company at least 50% of Tyco's
future glass optical fiber needs.
In 1995, the Company, through its subsidiary, FiberCore MidEast Ltd.
("FME"), entered into a joint venture agreement (the "MidEast JV Agreement")
with Middle East Fiber Optic Manufacturing Company Limited ("MEOFC"), a Saudi
Arabian company, and John Royle and Sons, Inc. ("Royle"), a manufacturer of
cable manufacturing systems. Pursuant to the agreement, the parties jointly own
Middle East Fiber Cables Co., ("MEFC"), a Saudi Arabian joint venture company.
MEFC manufactures and sells optical fiber and optical fiber cable both inside
and outside of Saudi Arabia. The Company has a 15% interest in MEFC. MEFC began
operations in 1998 and had sales of approximately U.S.$6,587,000 and
U.S.$489,000 for the years ended December 31, 1999 and 1998, respectively. MEFC
reported income from operations of approximately U.S.$433,000 for the year ended
December 31, 1999.
On July 31, 1996, the Company borrowed $500,000 under two loan agreements
with the spouses of the Chairman and Chief Executive Officer and the Executive
Vice President of the Company. The loans are in the amount of $250,000 each, and
bear interest at the prime rate plus one percent (currently 9.25%). The loans
were renewed in 1999 and in conjunction with the renewal the new loans were
convertible into common shares of the Company at $0.26 per share which was the
closing trading price on the renewal date. Also, each lender received warrants
to purchase 323,082 common shares at a price of $0.26 per share. The Warrants
expire on October 1, 2004. In December 1999, the loans were converted into
common shares of the Company.
In 1998, the expansion of the Jena facility was completed, more than
doubling the production capacity of that plant. The expansion was funded by
German government grants and loans. The Company anticipates that it will outgrow
the current leased facility and therefore is planning to construct a new
manufacturing facility in the Jena area. The Company expects to finance this new
facility under similar financing arrangements to the earlier expansion,
utilizing German Government grants and guaranteed loans and equity. In addition,
due to the increased demand for the Company's products and the rapid growth in
the industry in general, the Company is planning to add capacity through joint
ventures such as FCA, and through acquisitions.
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FIBER OPTIC PREFORM MANUFACTURING TECHNOLOGIES
Optical fibers are solid strands of hair-thin, high quality glass which
are usually combined to form cables for transmitting information via light
pulses from one point to another. The fibers consist of a core of high-purity
glass that transmits light encased within a covering layer designed to reduce
signal loss through the side walls of the fibers. Information transmitted
through optical fibers is converted from electrical impulses into light waves by
a laser or light emitting diode. At point of reception, the light waves are
converted back into electrical impulses by a photo-detector.
Communication by means of light waves guided through glass fibers offers a
number of advantages over conventional means of transmitting information. Glass
fibers carry significantly more information than metallic conductors and, unlike
metallic conductors, are not subject to electromagnetic or radio frequency
interference. Signals of equal strength can be transmitted over much longer
distances through optical fibers than through metallic conductors and require
the use of fewer repeaters (devices which strengthen a signal). Further,
fiber-optic cables, which typically consists of numerous optical fibers encased
in one or more plastic sheaths, are substantially smaller and lighter than
metallic conductor cables of the same capacity, so they can be less expensive
and more easily installed, particularly in limited conduit or duct spaces.
There are two basic types of communication optical fibers: multimode fiber
and singlemode fiber. Multi-mode fiber has a larger core (the area where the
light travels) than singlemode fiber, carries less bandwidth and is more
expensive. It is generally used over relatively short distances in wiring
buildings and groups of buildings. The electronics and the connectors required
to work with multi-mode fiber are less costly than the electronics required for
single-mode fiber. For example, the light source for multi-mode fiber can be
light emitting diodes, while single-mode fiber requires laser light sources.
Single-mode fiber is used in long-distance trunk lines (cables between cities)
and fiber-to-the-curb (cable from a central office to the curb in front of an
office building or home).
The three basic technologies widely used to manufacture multi-mode and
single-mode optical fiber are:
1. Outside Vapor Deposition ("OVD"), otherwise known as the "Corning process."
2. Inside Vapor Deposition ("IVD"), which is also known as Modified Chemical
Vapor Deposition ("MCVD") or the "AT&T process". Due to its flexibility and
relative ease of operation, this process is the most widely used around the
world by independent manufacturers.
3. Axial Vapor Deposition ("AVD"), also known as the "Japanese process". This
process is similar to the Corning process.
The basic production unit from which fiber "is drawn" is a preform. A
preform is a cylindrical high purity glass rod with a high refractive index
glass material in the central part of the rod (the "core") and a low refractive
index glass material in the outer part of the rod (the "clad"). The rod can be
less than one inch to several inches in diameter and one to several meters in
length. From one such preform many thousands of meters of optical fiber can be
drawn. The OVD and AVD processes both manufacture 100% of the glass composing
the final preform and are comparable in terms of machine speeds that manufacture
glass per unit of time. These speeds are significantly higher than those of the
IVD process. In contrast, the IVD process manufactures only about one-third of
the total glass required in the manufacture of a preform, with the balance of
the glass being purchased in the form of a tube at costs significantly lower
than that of either OVD or AVD, thus balancing the overall expense.
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Optical fiber cable is produced from optical fiber by first coloring the
coated fiber and then encasing the fiber in a protective jacket.
PROPRIETARY MANUFACTURING PROCESS AND PRODUCTS
The Company manufactures both multi-mode and single-mode preforms and
fiber, but does not manufacture optical fiber cable, although MEFC, in which the
Company has an interest, draws fiber from preforms and manufactures fiber optic
cable.
The Company's patented technology can be best described as a
"rod-and-tube" process, or as a hybrid of the OVD, IVD and the AVD processes.
The Company's process takes advantage of available high quality doped1 and
undoped fused silica rods and tubes during the manufacturing process to produce
more efficiently single-mode optical fiber preform and single-mode fiber at a
substantially reduced cost than the alternative processes.
Specifically, the Company's process places a high-purity "core" glass rod
inside a high-purity glass tube or "clad", which has a lower refractive index
than the core, and collapses the tube over the rod to form an intermediate
preform. The Company purchases the glass tubes and manufactures the "core" glass
inside of the purchased glass tube. The composite material is subsequently
converted to a glass rod referred to as an intermediate preform or core rod.
Such intermediate preform can also be manufactured by any of the other existing
processes. This intermediate preform is placed inside another purchased tube and
collapsed together to form a final preform, which has the proper ratio of
core-to-outside-diameter-glass. The preform is then drawn into finished fiber by
placing it inside a "draw furnace", heated to approximately 2000 degrees
Celsius, and "stretched" into tens of thousands of meters of hair-thin, flexible
glass fiber. The Company believes that its patented process offers
manufacturing-cost and capital-investment advantages over the processes
currently in use by competitors for the manufacture of optical fiber, because
(i) the machine time necessary to produce a given size preform is significantly
less, thereby allowing the Company to produce more preforms in the same time
period; and (ii) the Company purchases the tube while manufacturing a much
smaller portion of the clad and all of the core which accounts for approximately
5% of the preform, while the OVD process, for example, manufactures 100% of the
preform, requiring substantially more capital investment.
Prior to its acquisition by the Company, the Jena Facility was
manufacturing multi-mode fiber and preform for the Eastern European market.
Management believes the time and cost required to achieve manufacturing
efficiencies at the Jena Facility were minimized as a result of management's
knowledge and experience in fiber production and machine design.
---------------------------
1 Doping means adding other glass materials, such as germanium dioxide to the
silica glass.
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ALT PRODUCTS
The Company's ALT subsidiary has four principal products, all of which are
manufactured through subcontractors, with final assembly and testing done at the
Company's Charlton, Massachusetts facility.
ALT's Fiber Optic Cable Monitoring Systems ("FOCMS") facilitate the
continuous monitoring of fiber optic and copper cables. The FOCMS consist of
sensors housed in a protective cover placed at cable splice points and connected
to a central monitoring system. ALT holds two United States patents covering
this technology. ALT purchased one of these patents and know-how relating to
fiber optic cable monitoring systems on September 7, 1986, from Norscan, a
Canadian company. Norscan retained the right to use the technology in Canada and
the rights to a Canadian reissuance of the purchased patent and has had the
technology in operation on the Trans Canada fiber optic network since 1988. ALT
intends to make the technology widespread in other regions worldwide.
ALT also manufactures patented long-range fault locators, which are
generally used in pairs. Typically, each device is applied at a point on a fiber
optic cable, less than 100 miles from the other unit. These devices can detect
and locate cable faults between the units.
In addition, ALT manufactures cable protection devices, which are applied
at cable splice joints prior to cables entering a building to protect against
hazardous electrical currents that could otherwise be carried by metal sheaths
encasing optical fibers, and electro-optical talksets. Talksets are used by
field personnel to communicate over optical fiber, twisted pair-cable (regular
telephone cable), and metal sheaths encasing optical fibers and copper cables.
Customers for the FOCMS and other ALT Products have included telephone
companies worldwide, including MCI Telecommunications Corp., AT&T Corp. and
Pacific Telesis.
The Company has focused its resources on developing its optical fiber and
preform business and, therefore, has not been actively developing the ALT
business. Accordingly, the activities of ALT have been limited. The Company,
however, intends to devote resources and efforts to the ALT products as
resources become available.
RESEARCH AND DEVELOPMENT
In 1998, the Company filed two patents for a production process that the
Company believes when implemented will substantially reduce the Company's
manufacturing cost of optical fiber and preforms. In mid-1999, the Company
installed a pilot machine using this new process in Jena. The preliminary
results of this process are very positive and the Company is planning to expand
its production capacity using this process in 2000.
The Company conducts research and development ("R&D") activities at its
Jena Facility and Charlton, Massachusetts offices. The Company's research and
development activities consist primarily of optical fiber manufacturing process
improvements and optical fiber product development. In addition, the Company is
conducting R&D activities in developing the following new products:
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a. Fiber Lasers. Fiber Lasers are used in laser projection applications,
including laser television ("TV"), which are expected to be more cost
effective than flat panel TV's. Fiber lasers can also be used in
heavy-duty commercial laser printers. The Company is funding 55% of
this project through government grants, and the project requires an
additional investment of approximately $72,000. The Company expects to
complete the development of Fiber Lasers by the middle of 2003, and
then begin marketing the products. The Company does not anticipate
significant sales of this product in the near future.
b. Laser Power Transmitting Fibers ("LPTF"). LPTF's for high power
transmission to be used in conjunction with various type of lasers.
Fiber Laser and LPTF are expected to replace gas lasers in certain
applications such as laser welding, laser cutting, and laser surgery.
The Company is funding the entire cost of this project. The Company
expects to complete development of technology to manufacture laser
transmitting fibers with an improved lifespan to be used in Laser TV
applications by the end of October, 2000, and to begin marketing the
product by the end of 2000. The Company does not anticipate significant
sales of this product in the near future.
c. Bragg Grading Fiber ("BGF"). BGFS's can also create band-path that,
like filters, will work in the dense wavelength division multiplexing
("DWDM") applications. The Company is funding 55% of this project
through government grants and outside sources, and the project requires
an additional investment of approximately $351,000. The Company has
completed the development of highly photosensitive fibers. However, at
present, the imprinting of BGF's is being done in cooperation with
IPHT/Jena, a German research institute. The Company may begin marketing
the highly photosensitive fibers this year, and anticipates that it
will begin marketing BGF's by the middle of 2001. The Company does not
anticipate significant sales of this product in the near future.
The Company's R&D expenditures have increased by approximately 52% during
1999 from the prior year. Such expenditures amounted to $722,000, $475,000 and
$434,000 for the fiscal years ended December 31, 1999, 1998, and 1997,
respectively. The principal purpose of the research activity is to implement new
technology, improve the production process for the manufacturing of fiber
preforms with concentration on reducing production time, and reducing raw
material consumption per unit of product.
Eight of the Company's employees devote substantially all of their time to
research and development. In addition, the Company has contracts with several
individuals who are involved in process development projects.
SALES AND MARKETING
To capitalize on the growth in fiber demand, the Company's sales and
marketing objective is to increase market penetration by developing long-term,
strategic relationship supply contracts for both preform and fiber products as
rapidly as practical; expanding the Company's global sales and marketing
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programs; and emphasizing the performance and cost advantages of the Company's
patented technology for its key customers. The Company plans to sell products in
areas where it can reasonably expect to avoid direct competition from major
suppliers of fiber, such as Lucent Technologies and Corning, and secure its
customer base through strategic alliances. Consistent with this strategy,
initial marketing efforts for singlemode fiber and preform have been focused on
establishing strategic alliances in developing countries where management
believes the demand is growing more rapidly than in Europe and the Americas.
Multimode fiber is marketed in Europe and the Americas where management believes
market opportunities are the greatest for this product. In July 1999, the
Company began selling into the North American market and anticipates that sales
growth in this region will be more rapid than in Europe.
Management believes the telecommunications infrastructure of developing
countries is in the early stages of evolution and competition is not well
established. In the past, developing countries would typically purchase older,
previously deployed communications technology and equipment. However, the lack
of a copper cable infrastructure and a desire to become more technologically
advanced has driven some developing countries to choose fiber optic cable
networks to develop a sophisticated communications network. These countries must
first install a fiber optic infrastructure of trunk and feeder lines followed by
fiber, copper or wireless to the subscriber loop. The Company is initially
targeting the large fiber optic cable manufacturing companies in Asia, the
Middle East, the Pacific Rim, and certain European markets. Four employees
devote substantially all of their time to sales and marketing and are assisted
in this effort by independent sales representatives.
JOINT MANUFACTURING AND MARKETING ARRANGEMENTS
The Company is seeking to increase market penetration in optical fiber
markets through strategic alliances and/or joint ventures similar to the MEFC
and FCA joint ventures. These relationships are being structured so that the
Company provides the preforms and the related technology requirements and the
partner provides the financing, operating and local marketing expertise. In this
way, it may be possible for the Company to rapidly obtain market penetration
with little, if any, capital investment. Discussions regarding similar joint
ventures and/or strategic alliances are underway, although there can be no
assurances that such discussions will lead to the consummation of any
transactions.
CUSTOMERS, INVENTORY, BACKLOG AND ADVERTISING
A key element of the Company's marketing strategy is to maintain
sufficient raw material and finished goods inventories to enable the Company to
fill customer orders promptly. This strategy requires a substantial amount of
working capital to maintain inventories at a level sufficient to meet
anticipated demand.
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BUSINESS (continued)
CUSTOMERS REPRESENTING OVER 10% OF SALES
The following table is based on the total sales of the Company for all
periods presented.
1999 % OF SALES
Leone AG 24%
Pinacl Ltd. 21%
Siemens AG 10%
Optical Cable Corp. 10%
1998
Leone AG 23%
Pinacl Ltd. 22%
Siemens AG 13%
Belden Wire & Cable 10%
1997
Leone AG 42%
Pinacl Ltd. 17%
The Company believes that the loss of the top two customers (in percentage
of sales) would have a material adverse effect on the Company.
The customers representing more than 10% of the Company's accounts
receivable at the end of the last three years are the same customers
representing 10% or more of the Company's total sales.
BACKLOG, SALES AND ADVERTISING
At December 31, 1999, the Company had a backlog of orders approximating
$12.8 million ($3.9 million at December 31, 1998). This represents a 228%
increase over the backlog in the previous year. During 1999, four of the
Company's employees were engaged in sales activities, and the Company utilized
manufacturers' sales representatives in certain geographic markets. In 1999, the
Company employed two additional full time sales people for the European market.
Also in 1999, the Company expanded its independent sales representative
organization to provide broader representation primarily in the Pacific Rim.
Assisted by local representatives, management intends to establish potential
relationships with key managers of local cable and telephone companies. In
addition, other management executives are engaged in negotiating long-term
supply agreements with current and potential customers.
Due to the nature of the industry, the Company does not currently engage
in extensive advertising. The Company promotes its products principally through
direct mailings and visits to potential customers, distribution of product
brochures through sales representatives and exhibiting at industry trade shows.
The Company also maintains product information on its web-site, and plans to
expand such activities in the future.
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BUSINESS (continued)
COMPETITION
Due to the high demand for the Company's fiber, the Company has initially
concentrated on manufacturing and selling fiber and has increased its fiber
manufacturing capability in Jena, Germany, and plans to further increase
capacity through building a new facility in Jena and a planned facility in
Malaysia. However, because competition in the production of preforms is somewhat
limited, the Company plans to increase its emphasis on marketing preforms to
that segment of the market outside the U.S. and Europe.
Fiber Preform
Management believes that there is limited competition in the sale of
preforms to cable manufacturers who draw their own fiber. Such competition,
however, is expected to grow. At present, the competition for singlemode
preforms on a worldwide basis is limited to two United States manufacturers,
SpecTran and Alcatel. SpecTran's product sales are for unique fiber
applications, and Alcatel is directly marketing singlemode preforms.
Additionally, Lycom, Alcatel and Nokia, in Europe, Shin-Etsu from Japan and
DaeWoo from Korea have begun marketing singlemode preforms.
The predominant practice of most fiber manufacturers is to make fiber
optic preform only for their internal use and not to sell preform to other
fiber-optic manufacturers. Management believes these large companies will not
enter the preform market since fiber manufacturers have an inherent disincentive
in selling preforms; they have already invested heavily in plant, equipment and
technology to convert preforms into fiber and/or cable, and by selling preforms
they would be giving up value-added margins. The Company's customers are not
vertically integrated, and require preforms that are in limited supply.
Fiber
The competition in multimode fiber products is limited to a few
manufacturers in North America and Europe. They include Corning Incorporated,
Lucent Technologies, Alcatel, SpecTran and Plasma Optical Fiber. Management
believes that Corning, Lucent Technologies, and Alcatel generally supply the
bulk of their production to their own cablers or joint venture partners.
Therefore, in the U.S., multimode fiber will be the primary product due to the
Company's unique technological and cost advantage, coupled with the fact that
the other three large U.S. producers do not focus on the multimode fiber as
their primary business. Furthermore, FiberCore plans to offer several types of
multimode fibers for specific applications and performance advantages such as
different glass composition for radiation resistant fiber for Government
applications, and special coatings for high performance cable designs.
Additionally, because of the Company's manufacturing flexibility, the Company is
positioned to respond quickly to special customer requirements and applications.
The competition in the singlemode fiber market is much more extensive than
in the preform market or the multimode fiber market. Most of the competition for
fiber comes from Corning and Lucent Technologies. Competition in the fiber
market is primarily based on availability and quality. In the past, with some
exceptions, the Company's fiber has been generally priced at comparable levels
to fiber manufactured by the larger producers. In the future, FiberCore will
concentrate on marketing its new line of high performance products to support
emerging protocols, such as Gigabit Ethernet, as well our ValuGrade and
EconoGrade line of products, which have excellent price/performance
characteristics.
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BUSINESS (continued)
ALT Products
The Company's management believes there is limited or no direct
competition for its FOCMS product line except for Norscan. Most other competing
technologies and products are more complementary to the Company's products than
true competitors because these products and the Company's products are both
needed to perform short range and long range fault locating.
Numerous companies manufacture cable protection devices. The Company
believes, however, that it has the only product approved by Underwriters
Laboratories, an internationally recognized certifying organization.
Numerous companies manufacture field talksets that enable personnel to
communicate over either twisted pair, metal sheath or optical fiber. The Company
knows of no other company that manufactures a product that enables personnel to
communicate over all three media, although many companies have or can acquire
the technology to create such a device.
Product Warranties
Customers may obtain refunds for any defective fiber and fiber preforms
shipped by the Company within 90 days of delivery. The Company extends one year
warranties on ALT Products.
PATENTS
The Company is highly dependent on its patents. The Company's long-term
strategy includes becoming a low-cost producer of fiber optic performs and
optical fiber to independent manufacturers of fiber optic cable. To do this, the
Company must continually improve its manufacturing processes at its facilities
by implementing the Company's patented technologies, by developing new
techniques that lower production costs, and by offering new and competitive
products. With these patents, manufacturing efficiencies are increased, thereby
reducing manufacturing cost and improving overall profitability. The Company is
also able to expand its business and reduce the need for cash financing by
leveraging the Company's intellectual property. For example, in the Malaysian
joint venture, the Company contributed the value of its technology in return for
a 51% interest in the joint venture. Similarly, because of increases in
manufacturing efficiency provided by the Company's patented technology, the
Company can increase capacity with less equipment than otherwise needed. The
Company's capitalizing on its technology reduces cash requirements, thereby
reducing the likelihood of additional shareholder dilution. The Company's
patents also help protect the Company from competition by preventing others from
using the technology covered by the patent.
The Company is the registered owner in the United States of U.S. Patent
No. 4,596,589 relating to optical fiber fabrication. The patent, which expires
in 2003, was acquired in 1993 from Gregory Perry, a co-founder of the Company.
The existing patent provides a more efficient method for fabricating a
single-mode optical fiber preform by substantially reducing the time and cost
required to produce the preform. The patent also provides an efficient method of
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BUSINESS (continued)
attaching cladding material around a single-mode fiber core. The Company has
filed an application in the United States and European Common Market improving
upon the process covered by the above patent, and intends to file in other
foreign jurisdictions, as well as filing further improvement patents for its
process.
In 1997 and 1998, the Company filed two patent applications in the U.S.
for a process which the Company believes will improve the cost and efficiency of
producing optical fiber preforms. The Company is currently in the process of
preparing additional patent applications for the production of optical fiber and
preforms that are expected to be filed in 2000.
The Company is the registered owner in the United States of three patents
covering its cable monitoring systems and fault locating methods. The Company
acquired the first such U.S. patent, Patent No. 4,480,251, which covers cable
monitoring systems and expires in 2001, from Norscan. A patent issued by the
United Kingdom for the same technology was also acquired by the Company from
Norscan. The Company has filed international patent applications covering this
technology in various other countries around the world, although none have yet
been granted. Pursuant to the Company's agreement with Norscan, Norscan has the
right to a Canadian patent reissuance and may otherwise use the technology in
Canada. The Company has improved upon Norscan's technology and obtained a
European patent and United States patent, Patent No. 5,077,526, which expires in
2008 covering the improvements. The Company also owns a United States patent,
Patent No. 4,947,469 expiring in 2007, and a European patent covering a cable
fault location method. In addition, the Company owns a United States patent
covering the provision of backup power to optical communications systems.
The Company's ability to compete effectively will depend, in part, on its
ability to protect its patents. There can be no assurance that the steps taken
by the Company to protect its intellectual property will be adequate to prevent
misappropriation or that others will not develop competitive technologies or
products. Furthermore, there can be no assurance that others will not
independently develop products that are similar or superior to the Company's
products or technologies, duplicate any of the Company's technologies, or design
around the patents issued to the Company. In addition, the validity and
enforceability of a patent can be challenged after its issuance. While the
Company does not believe that its patents infringe upon the patents or other
proprietary rights of any other party, other parties may claim that the
Company's patents do infringe upon such patents or other proprietary rights.
There can be no assurance that the Company would be successful in defending
against such a claim of infringement. Moreover, the expense of defending against
such a claim could be substantial. (See Item 3. Legal Proceedings).
INTERNATIONAL OPERATIONS
The Company is subject to all the risks of conducting business
internationally. These risks include unexpected changes in legislative or
regulatory requirements and fluctuations in the United States dollar, the Euro,
and the German mark, and other currencies in which the Company is doing business
from time to time. The business and operations of the Company's Germany
subsidiary, FCJ, are subject to the changing economic and political conditions
prevailing from time to time in Germany. Labor costs, corporate taxes and
employee benefit expenses are high compared to the rest of the European Union,
the United States and Japan. FCA, the Company's joint venture in Malaysia, is
subject to similar international risks, including the currency fluctuations
recently experienced in the Pacific Rim region. The Company's participation in
MEFC and its investment in FOI are subject to the risks of doing business in
Saudi Arabia, the Middle East and Asia in general. These risks include, but are
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BUSINESS (continued)
not limited to, the threat of regional conflict. To date, essentially all of the
Company's revenues have come from its wholly-owned subsidiary, FCJ.
TRADEMARKS
FCJ is the owner of the registered trademark InfoGlass(R) under which it
markets its optical fiber products. In 1997, the Company filed for registration
of the trademarks "EconoGrade" and "ValuGrade" for products it introduced in the
market in 1998.
SEASONALITY
The Company's business does not have strong seasonal fluctuations, and the
Company does not expect material seasonal variations to revenue.
RAW MATERIALS
The Company presently can purchase all its raw material requirements for
its optical fiber and preform business. The major component of a preform is
silica glass tubing which is available in various sizes. Various high purity
gases such as oxygen, nitrogen, argon, helium, chlorine and chemicals such as
silicon tetrachloride, silicon tetra fluoride and germanium tetrachloride are
used in the process of manufacturing preform. During 1999, the Company's optical
fiber and preform business purchased approximately 95% of its key glass tubing
raw material from one supplier, Heraeus Quarz Glas GmbH & Co.K.G., located in
Hanau, Germany. Heraeus Quarz Glas GmbH & Co.K.G. accounted for over 90% and 50%
of the Company's glass tube requirements in 1998 and 1997, respectively. Heraeus
Quarz has committed to supply the Company's tube requirements for 2000. If the
Company becomes unable to continue to purchase raw materials from Heraeus Quarz,
there can be no assurance that the Company will not face difficulties in
obtaining raw materials on commercially acceptable terms, which could have a
material adverse effect on the Company. To limit the possibility of future
shortages of key materials, the Company has successfully identified other
suppliers of this material. The Jena Facility has the capability to manufacture
the high-purity synthetic core glass using a first purchased cladding tube, as
well as adding additional purchased cladding tubes using the Company's patented
production process.
EMPLOYEES
At December 31, 1999, the Company employed 96 persons, of whom 3 are
executives, 13 are engaged in sales and administration, 72 are engaged in
manufacturing and 8 are engaged principally in research and development. Ninety
(90) of the Company's employees are located in Jena, Germany. The Company is not
party to any collective bargaining agreements and the Company does not maintain
a pension plan. The Company considers its relations with employees to be
satisfactory and believes that its employee turnover does not exceed the
industry average.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS AND DIRECTORS
The following tables set forth certain information with respect to each
person who was an executive officer or director of the Company as of December
31, 1999.
NAME AGE POSITION
Dr. Mohd A. Aslami 53 Chairman of the Board of Directors, Chief
Executive Officer, and President
Charles De Luca 62 Managing Director of FiberCore Jena GmbH
And Director of the Company
Michael J. Beecher 55 Chief Financial Officer and Treasurer
Steven Phillips 54 Director
Hedayat Amin-Arsala 58 Director
Javad K. Hassan 59 Director
Dr. Aslami is a co-founder, Chairman of the Board of Directors and Chief
Executive Officer of the Company. Dr. Aslami has served as Chairman and Chief
Executive Officer of FiberCore Jena, the Company's wholly-owned subsidiary in
Germany, since 1994. Dr. Aslami also co-founded ALT in 1986, and served as its
President, Chief Executive Officer and director from 1986 to 1994. Dr. Aslami
received a Ph.D. in chemical engineering from the University of Cincinnati in
1974.
Mr. De Luca is Managing Director of FiberCore Jena GmbH and is a
co-founder and director of the Company. Mr. De Luca also co-founded and became
an Executive Vice President and director of ALT in 1986. Mr. De Luca received
his MBA in marketing and business management from St. Johns University in 1974.
Mr. Beecher became Chief Financial Officer of the Company in April 1996.
Mr. Beecher was the Vice President/Treasurer and Chief Financial Officer at the
University of Bridgeport from 1989 through 1995. Mr. Beecher is a Certified
Public Accountant and is a member of the American Institute of Certified Public
Accountants.
Mr. Phillips became a director of the Company in May 1995 and became a
director of ALT in 1989. In addition to his consulting activities for the
Company, Mr. Phillips also serves as a director and financial advisor for
several companies through his company, One Financial Group Incorporated. Until
recently, he served as interim Chief Financial Officer for a start-up internet
company, and, for five years as Chief Financial Officer of The Winstar
Government Securities Company L. P., a registered U.S. Government securities
dealer which he co-founded. Since August 1987, Mr. Phillips has served as a
director, Secretary and Chief Financial Officer of James Money Management, Inc.,
a private investment company.
Mr. Amin-Arsala held various senior positions with the World Bank for 18
years. He was in charge of World Bank operations in countries of East and South
Asia, retiring in 1987. He served as the Minister of Finance for the Afghan
Interim Government from 1989 to 1992, and Minister of Foreign Affairs for
Afghanistan from 1993 to 1996. Since 1996, Mr. Amin-Arsala has acted in an
advisory capacity to the United Nations and the United States Agency for
International Development and has served a number of governmental and
non-governmental humanitarian organizations.
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<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Mr. Hassan joined AMP Incorporated (now Tyco) in 1988 as Vice President
Technology and in 1993 was appointed Corporate Vice President, Strategic
Businesses, later renamed Global Interconnect Systems Business ("GISB") where he
pioneered and deployed a new strategy to take Tyco from a connector company to a
global interconnection systems and solutions organization. He was named
President of GISB in 1993. After retiring from Tyco in 1998, Mr. Hassan founded
and is Chairman and CEO of NeST (Network Systems and Technologies) a provider of
software, systems and electronics design and manufacturing with over 2000
employees. He is Chairman of AM Communications, a public company providing
broadband network monitoring and management systems to cable TV operators, and
General Partner to MESA (Middle East and Southeast Asia) Venture Capital Fund
for targeted investments in US based technology companies. He is a member of the
board of several companies and currently serves as Chairman of the Electronic
Development Commission for the Government of Kerala in India. Mr. Hassan's
membership on the Board of Directors of FiberCore, Inc. is not pursuant to any
agreement with Tyco. Mr. Hassan received a B.S.M.E. degree from Kerala
University in 1962, a Masters of Materials Science degree from the University of
Bridgeport, Connecticut in 1968 and was elected IEEE Fellow, Institute of
Electrical and Electronics Engineers in 1986.
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act") and the rules thereunder, the Company's executive officers and
directors are required to file with the Securities and Exchange Commission and
the National Association of Securities Dealers, Inc. reports of ownership and
changes in ownership of Common Stock. Copies of such reports are required to be
furnished the Company. Based solely on review of the copies of such reports
furnished to the Company, or written representations that no other reports were
required, the Company believes that during the year ended December 31, 1999 all
of its executive officers and directors complied with the requirements of
Section 16(a), except that: Mohd Aslami, an officer and director of the Company,
did not timely file the reports on Form 4 in April, July, and October and the
annual Form 5 with respect to his acquisition of 1,114,644 options to purchase
shares of the Company and did not timely report his spouse's acquisition of
1,271,676 common shares issued on the conversion of debt; Mr. Charles De Luca,
an officer and director of the Company, did not timely file the reports on Form
4 in April, July, and October and the annual Form 5 with respect to his
acquisition of 515,296 options to purchase shares of the Company and did not
timely report his spouse's acquisition of 1,271,676 common shares issued on the
conversion of debt; and, Michael Beecher, an officer of the Company, did not
timely file the reports on Form 4 in April, July, and October and the annual
Form 5 with respect to his acquisition of 408,972 options to purchase shares of
the Company. Mr. Hedayat Amin-Arsala, a director of the Company, did not timely
file the annual Form 5 with respect to his acquisition of 54,666 options to
purchase shares of the Company and did not timely report his acquisition of
1,488,243 shares on conversion of a loan in December 1999. Also, Mr. Javad K.
Hassan, a director of the Company did not timely file the annual Form 5 with
respect to his acquisition of 53,333 options to purchase shares of the Company.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LOANS
During the year 1999, the Company issued notes to Dr. Aslami, Mr. De Luca
and One Financial Group Incorporated ("OFG"), in the amounts of $192,000,
$119,000 and $181,000, respectively, for previously unpaid salaries, fees and
expense. Mr. Phillips, a director of the Company, controls OFG. The notes bear
interest at 8.0% per year and are due on December 31, 2000. In conjunction with
the notes, Dr. Aslami, Mr. De Luca and OFG were granted warrants to purchase
shares of the Company of 161,441, 84,525, and 150,735, respectively. The
warrants have an exercise price of $0.25 per share which was the closing trading
price of the shares at the date of issue and expire on July 1, 2004.
Additionally, the unpaid balance of the notes plus accrued and unpaid interest
are also convertible into shares of the Company at $0.25 per share, which was
the closing trading price of the shares at the date the notes were issued.
During the year, two notes each in the principal amount of $250,000, due
the spouses of Dr. Aslami and Mr. De Luca, matured and were renewed. In
conjunction with the renewal, each lender was granted warrants to purchase
323,082 shares of the Company at $0.26 per share and the renewed notes included
conversion rights at the same $0.26 per share which was the closing trading
price at the date of issue. In December 1999, these notes were converted into
2,543,352 common shares of the Company.
Also during 1999, Mr. Amin-Arsala converted a note due him from the
Company in the principal amount of $249,000 into 1,488,243 common shares of the
Company.
CONSULTING
The Company has a consulting agreement with One Financial Group,
Incorporated, that provides services as a financial advisor. Mr. Steven
Phillips, a director of the Company, controls One Financial Group. The Company
incurred costs of $46,000 in each of the years 1998 and 1997 under this
agreement. In 1999, One Financial Group was granted options to purchase common
stock of the Company in lieu of receiving cash payment for services valued at
$94,000. This amount is included in selling, general and administrative
expenses.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ Mohd A. Aslami August 16, 2000
Dr. Mohd A. Aslami
Chairman, Chief Executive Officer
and President (Principal Executive Officer)
By: /s/ Steven Phillips August 16, 2000
Steven Phillips
Interim Chief Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/Mohd A. Aslami Chairman of the Board, August 16, 2000
Dr. Mohd A. Aslami President
Chief Executive Officer,
Director
/s/ Charles De Luca Secretary and Director August 16, 2000
Charles De Luca
/s/ Steven Phillips Director August 16, 2000
Steven Phillips
