As filed with the Securities and Exchange Commission on June 29, 2000
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
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FIBERCORE, INC.
(Exact name of registrant as specified in its charter)
NEVADA 87-0445729
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification Number)
253 WORCESTER ROAD, P.O. BOX 180
CHARLTON, MA 01507
(508) 247-3900
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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DR. MOHD A. ASLAMI
253 WORCESTER ROAD, P.O. BOX 180
CHARLTON, MA 01507
(508) 247-3900
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
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Copies to:
Malcolm Wattman, Esq.
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
(212) 504-6000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this registration statement.
If the only securities to be offered on this Form are being offered pursuant to
dividend or reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================== =========== ====================== ======================== ========================
AMOUNT TO
BE PROPOSED MAXIMUM
TITLE OF SHARES TO BE REGISTERED OFFERING PRICE PER PROPOSED MAXIMUM AMOUNT OF REGISTRATION
REGISTERED (1) (2) (3) SHARE(4) AGGREGATE OFFERING PRICE FEE
--------------------------- ----------- ---------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
Common Stock, par
value $0.001
Total 8,385,871 $5.00 $41,929,355 $11,069
=========================== =========== ====================== ======================== ========================
</TABLE>
(1) We are registering a total of 8,385,871 shares of our common stock
consisting of (i) 4,200,000 shares of common stock which we will sell from
time to time through underwriters and/or to an investor pursuant to an
agreement requiring the investor to purchase securities from time to time
upon our request; (ii) 1,886,145 shares of our common stock issued to the
selling shareholder; (iii) 699,726 shares of our common stock issuable upon
exercise of warrants issued to the selling shareholder and (iv) 1,600,000
shares of our common stock issuable upon the conversion of the outstanding
principal balance of $4 million on our $6 million convertible note issued
to the Selling Shareholder.
(2) Pursuant to Rule 416 of the General Rules and Regulations under the
Securities Act of 1933, the registration statement of which this prospectus
is a part also registers such currently indeterminate number of additional
shares of our common stock as may be issued upon conversion of the
outstanding principal balance of $4 million of our $6 million convertible
note as a result of certain adjustments to the conversion price, on the
exercise of our early put warrant and incentive warrant, (each issued to
Crescent International Ltd.) and upon the occurrence of certain dilutive
events.
(3) Pursuant to Rule 415(a)(4)(ii) under the Securities Act of 1933, the amount
of shares registered for sale directly by us cannot exceed 10% of the
aggregate market value of our outstanding voting stock held by
non-affiliates (calculated as of a date within 60 days prior to the date of
filing ). On June 12, 2000, non-affiliates held 36,726,272 shares of our
common stock valued at $211,176,000 (based on an average of the highest and
lowest price being 5.75 per share on that day).
(4) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act. The actual offering price per
share will be determined from time to time by the Company in connection
with the issuance of the shares of common stock registered hereunder.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THE SECURITIES WHICH ARE THE SUBJECT OF THIS REGISTRATION STATEMENT MAY
NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO
SELL NOR DOES IT SOLICIT AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED JUNE 29, 2000
8,385,871 SHARES OF
FIBERCORE, INC.
COMMON STOCK
This prospectus relates to the public offering of up to 8,385,871 shares of
the common stock of FiberCore, Inc. by FiberCore, Inc. and the selling
shareholder. The 4,185,871 shares of our common stock being offered on behalf of
the selling shareholder consist of (i) 1,886,145 shares of our common stock
issued to the selling shareholder on June 9, 2000 and June 26, 2000; (ii) up to
699,726 shares of our common stock issuable upon exercise of warrants issued to
the selling shareholder on June 9, 2000; and (iii) up to 1,600,000 shares of our
common stock issuable upon conversion of the outstanding principal balance of $4
million on our $6 million convertible note issued to the selling shareholder on
June 9, 2000, based on an estimated conversion price of $2.50 per share. The
remaining 4,200,000 shares of our common stock are being registered for sale by
FiberCore from time to time to or through underwriters and/or to an investor
pursuant to an agreement requiring the investor to purchase securities from time
to time upon our request. The names of any underwriters or agents will be set
forth in the accompanying prospectus supplement.
Our OTC Bulletin Board symbol for our common stock is FBCE.
This prospectus may not be used to consummate sales of securities unless it
is accompanied by a prospectus supplement.
INVESTING IN THESE SECURITIES INVOLVES SUBSTANTIAL RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JUNE ___, 2000.
<PAGE>
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS........................................................5
FORWARD-LOOKING INFORMATION..................................................5
THE COMPANY..................................................................5
OUR BUSINESS.................................................................5
RISK FACTORS.................................................................6
WHERE YOU CAN FIND MORE INFORMATION.........................................13
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................13
RECENT EVENTS...............................................................14
RECENTLY ISSUED SECURITIES..................................................15
USE OF PROCEEDS.............................................................17
SELLING STOCKHOLDER.........................................................18
PLAN OF DISTRIBUTION........................................................19
DESCRIPTION OF CAPITAL STOCK................................................20
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION..............21
LEGAL MATTERS...............................................................21
EXPERTS.....................................................................21
PRO FORMA COMBINED FINANCIAL STATEMENTS.....................................23
FINANCIAL STATEMENTS FOR XTAL FIBRAS OPTICAS S.A............................24
INDEPENDENT AUDITORS' CONSENT...............................................33
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf registration
process, we and Crescent International Ltd. may sell the securities covered by
this prospectus in one or more offerings. This prospectus provides you with a
general description of the common stock that we may offer. Each time we sell
securities pursuant to the registration statement of which this prospectus is a
part, we will provide purchasers with a prospectus supplement that will contain
specific information about the terms of the offering. The prospectus supplement
may also add, update or change information contained in this prospectus. This
prospectus, together with applicable prospectus supplements, includes all
material information relating to this offering.
FORWARD-LOOKING INFORMATION
This prospectus contains or incorporates forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. You can identify these forward-looking statements by our use of the words
"believes," "anticipates," "plans," "expects," "may," "will," "would,"
"intends," "estimates" and similar expressions, whether in the negative or
affirmative. We cannot guarantee that we will actually achieve these plans,
intentions or expectations. Actual results or events could differ materially
from the plans, intentions and expectations disclosed in the forward-looking
statements we make. We have included important factors in the cautionary
statements in this prospectus, particularly under the heading "Risk Factors,"
that we believe could cause our actual results to differ materially from the
forward-looking statements that we make. The forward-looking statements do not
reflect the potential impact of any future acquisitions, mergers or
dispositions. We do not assume any obligation to update or revise any
forward-looking statement we make as a result of new information, future events
or otherwise.
THE COMPANY
We were incorporated as FiberCore Incorporated in Nevada in November 1993,
and commenced commercial operations at that time. In July 1995, we merged with
and into Venturecap, Inc., an inactive Nevada corporation traded on the OTC
Bulletin Board. Following the merger, Venturecap changed its name to FiberCore,
Inc. Our executive offices are located at 253 Worcester Road, Charlton,
Massachusetts, and our telephone number is (508) 248-3900. Our World Wide Web
site address is www.FiberCoreUSA.com. The information in our Web site is not a
part of this prospectus and is not incorporated by reference into this
prospectus. Unless the context otherwise requires, references in this prospectus
to "FiberCore," "we," "us," and "our" refer to FiberCore, Inc. and its
subsidiaries.
OUR BUSINESS
We are primarily 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. We
have developed a patented preform production process which management believes
to be competitive with other existing production methods in use. Our principal
operating units are FiberCore Jena GmbH, our wholly-owned subsidiary in Germany,
and Xtal Fibras Opticas, S.A., a Brazilian Company we recently acquired.
Our strategy in the fiber optic manufacturing and marketing business is to
become a low-cost supplier of fiber optic preforms and optical fiber to
independent manufacturers of fiber optic cable. In addition to the recent
acquisition of Xtal Fibras Opticas, S.A., as of June 1, 2000, FiberCore, through
FiberCore Jena GmbH, operates a manufacturing facility in Jena, Germany, which
was established in 1986 by Jena Glaswerk (a division of Schott Glass) and which
we acquired in July 1994. While our initial marketing efforts were focused in
Western Europe, we are now selling into North and South America, Africa, the
Middle East, and the Asia Pacific regions. By establishing strategic
distribution alliances in developing countries where demand for fiber optic
cable is growing
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more rapidly than in North America, we believe we can accelerate market
penetration, establish long-term customer relationships and reduce competitive
risk. We believe that customers producing fiber from preforms will enjoy the
benefit of our low-cost production methodology and avoid import duties on the
value added in the fiber optic cable manufacturing process.
In pursuit of our strategy, we have undertaken to form strategic alliances on
a worldwide basis. These strategic alliances include but are not limited to:
long-term supply agreements with our key customers, investment by our key
customers in FiberCore, joint-ventures such as FiberCore Asia Sdn. Bhd., and
direct investments in related businesses by us. We expect that product demand
will be generated from these strategic alliances, as well as from independent
manufacturers of fiber optic cable. Independent market analysts, such as Kessler
Marketing Intelligence of Newport, Rhode Island, have projected strong growth in
the fiber optic market. Our strategy also includes mergers with and acquisitions
of companies such as Xtal Fibras Opticas, S.A. We intend to capitalize on the
projected growth by constructing and/or acquiring facilities to produce optical
fiber preforms and optical fiber in Western Europe, South America, the United
States, Asia and elsewhere. We have already upgraded our Jena facility and have
begun planning the construction of a new facility in Jena. Our strategy also
includes constructing joint-venture owned facilities in selected areas. We will
attempt to continually improve the manufacturing processes at our facilities by
implementing our patented technology, by developing new techniques that lower
production costs, and offering new and more competitive products, thereby
enhancing our already low cost producer strategy.
On September 18, 1995, we acquired Automated Light Technologies, Inc.
Automated Light Technologies, Inc., a Delaware corporation organized in 1986,
manufactures equipment that monitors and identifies faults in fiber optic
cables, cable protection devices which are used in outdoor fiber optic cable
installations to provide lightning protection, and electro-optical talk sets
which are used during fiber optic cable installations and subsequent maintenance
work. We have focused our resources on developing our optical fiber and preform
business and, therefore, have not been actively developing Automated Light
Technologies, Inc.'s business. However, we intend to devote resources and
efforts to Automated Light Technologies, Inc. products as resources become
available.
RISK FACTORS
The securities offered under this prospectus are highly speculative and
subject to numerous and substantial risks. Therefore, prospective investors
should carefully consider the following risk factors as well as the information
contained elsewhere in this prospectus.
WE ARE A RELATIVELY NEW COMPANY AND HAVE A HISTORY OF OPERATING LOSSES
We were founded in November of 1993 and are a relatively new company; we are
subject to all the risks inherent in early-stage operations. Such risks include,
but are not limited to, the rejection or partial acceptance of our products by
our customers, the inability to establish networks for distribution of our
products, the dependence on limited suppliers, the risk of loss of market share
through competition, the inability to attract and/or retain qualified personnel,
the potential loss of significant customers, inefficient and unreliable
manufacturing processes, and the inability to obtain sufficient capital
necessary to sustain ourselves and expand our manufacturing capacity.
We have incurred operating losses since our inception, and losses are
expected to continue until at least [June 30,] 2000. We incurred a net loss of
$2,004,000 for the year ended December 31, 1999. To achieve profitable
operations, we must successfully overcome these and other risks associated with
a new business. There can be no assurance that any or all of our efforts will be
successful or that even if we become profitable, we will ever generate
sufficient profits to sustain the growth of the business. If our efforts are
unsuccessful, purchasers of our securities could lose their entire investment.
As of December 31, 1999, we had an accumulated deficit of approximately
$17,196,000.
WE NEED ADDITIONAL FINANCING AND CAPITAL RESOURCES
We have incurred net losses in each year of our operation. We believe our
history of losses is principally a result of our failure both to fully implement
our more efficient manufacturing technology and to sufficiently increase our
manufacturing capacity in order to achieve economies of scale leading to lower
unit production costs. Our continuing operations will depend upon the success of
our financing, marketing and manufacturing efforts. There
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can be no assurance that our efforts will be successful. A substantial portion
of the additional financing we are seeking is currently required in order to
finance our planned capacity expansion. This expansion is necessary for us to
satisfy customer demand, thereby increasing sales and achieving profitability.
The $9.5 million financing that we received from Crescent International, Ltd. on
June 9, 2000 was used primarily to fund the acquisition of Xtal Fibras Opticas,
S.A. as of June 1, 2000. While our net cash flow used in operations has been
steadily decreasing, we cannot internally fund our possible operating losses and
the planned amount of capital expenditures solely from our current cash and cash
equivalents. Although the current equity commitment from Crescent International
of $20.5 million will provide part of the capital funding we require, we will
need additional funds to complete our expansion plans. For 1999, net cash used
in operations was approximately $739,000, down from $1,697,000 for 1998, and
$3,068,000 for 1997.
WE HAVE LIMITED CAPACITY IN OUR JENA FACILITY AND NEED TO EXPAND
We lack the production capacity needed to meet our demand. Our Jena facility
(which until our recent acquisition of Xtal Fibras Optics, S.A. was our only
facility for the manufacture of optical fiber and optical fiber preform) is
currently operating at full capacity. At our current capacity, and given current
prices for our products, the Jena facility cannot produce sufficient quantities
to satisfy our present and long-term requirements for that facility or to
achieve profitable operations. Although we expect to receive additional
financing for the purchase of more equipment and the expansion of our Jena
facility, there can be no assurance that we will obtain the financing necessary
to expand or that the expansion will result in the level of manufacturing
capacity necessary to meet our requirements to attain profitability.
In addition, while we have initiated plans to build a new manufacturing
facility in Jena, there can be no assurance that our expansion efforts will be
completed on time and/or within our budget, or that we will avoid manufacturing
delays or problems or a decrease in production yields. We are exposed to risk
associated with operating inefficiencies that can accompany the start-up of a
new manufacturing facility and are subject to the risk that adequate equipment
and personnel will not be available to operate the new facility. If adequate
funds are not available to complete the expansion, we may be required to
scale-down the expansion. Delays or problems in implementing our capacity
expansion plans could have a material adverse effect on our business, results of
operations or financial condition.
WE ARE DEPENDENT ON CERTAIN CUSTOMERS
Our dependence on a limited number of customers subjects us to additional
risk. Historically, we have been dependent on relatively few customers for the
majority of our sales. Although our customer concentration level has improved,
with our top two customers accounting for approximately 45% of sales in 1999 as
compared to the same top two customers accounting for 59% of sales in 1997, we
must continue to expand our customer base. There can be no assurance that we
will be successful in doing so. In addition, the loss of either of our two
largest customers could have a material adverse effect on us.
We are contractually committed to provide at least 50% of Tyco Electronics
Corporation's (formerly AMP Incorporated) forecasted requirements of optical
fiber for an initial term of five years, which expires on December 31, 2000, and
an additional five year term at Tyco Electronic Corporation's option. In the
event that the agreement expires because Tyco Electronics Corporation outsources
its cable manufacturing to third parties, rather than manufacture its own cable,
Tyco Electronics Corporation has agreed to ensure that such third party cable
suppliers initiate discussions to purchase optical fibers from us. Tyco
Electronics Corporation is currently outsourcing much of its cable manufacturing
requirements, and we have been selling to certain of Tyco Electronics
Corporation's cable suppliers in lieu of selling directly to Tyco Electronics
Corporation. In the event that Tyco Electronic Corporation's requirements change
for any reason or Tyco Electronics Corporation does not continue to encourage
its suppliers to purchase optical fiber from us, we may be in the position of
having committed significant resources to accommodate their needs, by way of
capacity expansion, without having them purchase or encourage others to purchase
our products. Additionally, we cannot be assured that we will reach agreement
with a third party supplier or that the terms and conditions of any agreement
with their suppliers will be favorable to us.
WE ARE DEPENDENT ON THIRD-PARTY SUPPLIERS
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Our dependence on third party suppliers subjects us to the risk that we may
not be able to timely and efficiently obtain material essential to our business.
We rely on outside parties for the manufacture of our raw materials, including
our principal raw material, glass tubing. Accordingly, we are dependent on the
capabilities of these outside parties for the successful manufacture of their
products. Currently, we purchase over 95% of our required glass tubing from one
supplier. At the beginning of each year, we negotiate a firm commitment with
this supplier for our annual glass tubing requirements. While this supplier has
committed to supply our tube requirements for calendar year 2000, the supplier
has not yet committed to meet our projected long-term glass requirements. To
reduce the possibility of future glass shortages, we have identified other
suppliers. There can be no assurance that these manufacturers will be able to
meet our needs in a satisfactory and timely manner in the event our current
supplier is unable or unwilling to do so. The Jena facility has the capability
to manufacture very small quantities of the high-purity synthetic glass as
additional cladding material using our new proprietary and patented (and patents
pending) production process, but cannot supply all of our requirements. Xtal
Fibras Opticas, S.A., a company we recently acquired, also has similar
dependency on raw materials. Furthermore, Xtal Fibras Opticas, S.A. is highly
dependent on a single preform manufacturer for over 50% of its preform
requirements. Xtal Fibras Opticas, S.A. is in the process of entering into a
long term multi-year supply agreement with this preform manufacturer. However,
there is no assurance that this supplier will be able to satisfy our future
requirements.
Although we believe that the possibility of securing alternative suppliers as
well as our ability for glass manufacturing capability at our facilities in
Germany and Brazil should limit the risk, there can be no assurance that
problems in obtaining glass tubing or other raw materials will not occur in the
future.
WE HAVE SUBSTANTIAL COMPETITION
We are subject to intense competition, which could have a negative effect on
our performance. The optical fiber business is highly competitive, and there are
several competitors that have substantially greater resources than we do. These
competitors are providing, or are capable of providing, competitively priced
products that are similar to the products we produce. They may also introduce
new products that could directly compete with our products in all markets. If
these competitors were to aggressively target our market segment, we could be
materially adversely affected.
The competition for our multi-mode fiber products is primarily composed of
Corning, Inc., Lucent Technologies, Inc., Alcatel, SpecTran Corporation
(recently acquired by Lucent Technologies, Inc.) and Plasma Optical Fiber. While
we believe that there is limited competition in the sale of preforms to cable
manufacturers who draw their own fiber, we anticipate that competition will
grow. The largest preform competitor is Shin Etsu, a Japanese manufacturer. In
addition, SpecTran Corporation supplies some specialty preforms, and Alcatel
supplies limited quantities of single mode preform to consumers in the United
States. Competition in the single-mode fiber optic market is significantly more
extensive than either the preform or the multi-mode fiber markets. In that
market, our primary competitors are Corning, Inc. and Lucent Technologies, Inc.
Our fiber optic products also compete with other existing products,
including, products associated with copper wire and wireless communications.
Over the past two decades, optical fiber has successfully competed with copper
wire. Wireless communications depends heavily on a fiber optic backbone. Any
improvements in these competing products or the introduction of new competing
technologies may have a material adverse effect on our marketability and
profitability.
THE CONDITIONS OF OUR INDUSTRY COULD CHANGE
We are exposed to industrywide risk. Based on published market studies and
industry sources, we believe that the current demand for optical fiber products
exceeds the supply. However, to the extent that future market supply begins to
exceed market demand, or to the extent that our products are no longer in
demand, prices for our products may decline from current levels, and we may be
burdened by the costs associated with excess capacity. These factors could
prevent us from achieving profitability or could result in substantially lower
profitability than we have anticipated.
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THE INDUSTRY IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE
Optical fiber products are characterized by rapid technological advances and
evolving industry standards. Any failure by us to anticipate or respond
adequately to technological developments or end user requirements could damage
our competitive position in the marketplace and reduce our revenues and/or
profits. Our ability to achieve and maintain profitably depends, in large part,
upon our timely access to, or development of, technological advances and the
ability to use those advances to improve existing products, develop new products
and manufacture those products efficiently. There is no assurance that we will
be successful in these endeavors. The failure to introduce new or enhanced
products on a timely and cost competitive basis could have a material adverse
effect on our business, results of operations and financial condition.
WE ARE DEPENDENT ON KEY PERSONNEL
We are subject to the risks associated with being reliant on a few
individuals. We do not have employment agreements with any of our executive
officers. The loss of any of the key executives could have a material adverse
effect on us. While we intend to apply for a key-man life insurance policy on
Dr. Aslami, our Chairman, President and Chief Executive Officer, with the
Company as the sole beneficiary, as resources become available, we currently
have no policy of this type.
Our success depends, to a significant extent, upon the performance of our key
executive officers and key technical employees. Our future success will also
depend in large part upon our ability to attract and retain additional highly
skilled managerial, technical and marketing personnel. There can be no assurance
that we will be successful in attracting and retaining such personnel.
OUR PATENTS AND PROPRIETARY RIGHTS COULD BE CHALLENGED
Our ability to compete effectively will depend, in part, on our ability to
protect our patents. We own five United States patents relating to the
manufacture of optical fiber preform, fiber optic cable monitoring systems, long
range fault locating systems, optical communications systems and methods and
related products. In addition, we have applied for another patent on an
improvement to our basic fiber optic manufacturing process, two new next
generation process patents, and we intend to file several more process and
product patents in the coming years. We also own three European and United
Kingdom patents covering our fiber optic cable monitoring and fault locating
products. We own six German patents for processes used in the manufacture of
optical fiber. Xtal Fibras Opticas, S.A., a company we recently acquired, has
one patent application pending in Brazil for process improvement for the
manufacture of optical fiber.
There can be no assurance that the steps taken by us to protect our
intellectual property will be adequate to prevent misappropriation of our
intellectual property or that others will not develop competitive technologies
or products. Furthermore, there can be no assurance that other companies will
not independently develop products that are similar or superior to our products
or technologies, duplicate any of our technologies, or design around the patents
issued us. In addition, the validity and enforceability of a patent can be
challenged after its issuance. While we do not believe that our patents infringe
upon the patents or other proprietary rights of any other party and we are
unaware of any claim of such infringement, other parties may claim that our
patents and manufacturing processes infringe upon such patents or other
proprietary rights. There can be no assurance that we would be successful in
defending against any claims of infringement. Moreover, the expense of defending
against those claims could be substantial.
Our Automated Light Technologies, Inc. subsidiary entered into a Purchase and
Sale Agreement, dated September 7, 1986, with Norscan Instruments, Ltd., for the
acquisition of certain patents and know-how relating to fiber optic cable
monitoring systems. There is a dispute between Automated Light Technologies,
Inc. and Norscan Instruments, Ltd. with respect to Norscan Instruments, Ltd.'s
selling fiber optic cable monitoring systems products that compare with the
Automated Light Technologies, Inc.'s products that utilize technology other than
the technology assigned to Automated Light Technologies, Inc. pursuant to the
terms and conditions of the Purchase and Sale Agreement. Automated Light
Technologies, Inc. contends that, in so doing, Norscan Instruments, Ltd. is
violating a non-competition provision of the Purchase and Sale Agreement.
Failure by the parties to resolve this dispute could materially adversely affect
the future sales of Automated Light Technologies, Inc. products.
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WE ARE SUBJECT TO RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
We are 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 Brazilian real, the Euro and other
currencies in which we do business. While we engage in foreign currency hedging
transactions, we do not attempt to eliminate all foreign currency risk from
our business. The business and operations of FiberCore Jena GmbH and Xtal Fibras
Opticas S.A., are subject to the changing economic and political conditions
prevailing from time to time in Germany and Brazil, respectively. Labor costs,
corporate taxes and employee benefit expenses are high and working hours are
shorter than in the rest of the European Union, the United States and Japan.
Further, our Malaysian joint-venture has been delayed because of a recent
financial crisis in Asia. There is also the threat of regional conflict. For
example, our Middle East joint venture, Middle East Fiber Cable Company, is
headquartered in Saudi Arabia and could be affected by local instability.
WE ARE RESTRICTED FROM RELOCATING OUR MANUFACTURING OPERATION AND CERTAIN
EQUIPMENT HAS REVERSION RIGHTS
We are contractually restricted from moving our manufacturing equipment out
of the Jena facility until 2001. In June 1994, we leased the Jena facility for a
fixed monthly sum and acquired certain equipment located in that facility from
Sico Quartzschmelze GmbH. In the event we default on our agreement with Sico
Quartzschmelze GmbH, the equipment purchased from Sico Quartzschmelze GmbH could
revert to Sico Quartzschmelze GmbH and Sico Quartzschmelze GmbH could purchase
any additional equipment owned by FiberCore Jena GmbH at fair market value.
Until the year 2001, our ownership of the equipment is subject to the right of
the German government, from whom Sico Quartzschmelze GmbH purchased the
equipment, to repossess the equipment in the event we cease production. This
contractual limitation could adversely affect our ability to take advantage of
less expensive labor markets and, consequently, adversely impact our Company's
profitability. In addition, the manufacturing equipment at the Jena facility
could revert to a German governmental entity if we do not properly maintain the
Jena facility or continue to employ a minimum number of 35 employees. We
currently have more than 90 employees.
WE PLAN TO EXPAND THROUGH ACQUISITIONS AND THEREFORE ARE EXPOSED TO ALL
ASSOCIATED RISKS
We are currently undergoing a period of rapid growth, both internally and
through acquisitions. We are exposed to the risks posed by our rapid expansion.
We may continue to pursue the acquisition of manufacturing facilities for our
core business and for new or complementary businesses, including individual
products or technologies, in an effort to expand capacity, enter new markets and
diversify our sources of revenue. We recently acquired Xtal Fibras Opticas, S.A.
There can be no assurance that such growth can be sustained or managed
successfully. Acquisitions and/or expansions may require significant additional
expenditures, prior to obtaining any benefits of such integration, including
integration and absorption costs, and these expenditures may strain management,
financial and operational resources. We may also lose key personnel from our
operations or those of any acquired business. Our ability to effectively manage
our operations and growth requires us to continue to improve our operational,
financial and management controls, reporting systems and procedures and to
attract and retain sufficient numbers of talented employees.
Additionally, future acquisitions may also result in potentially dilutive
issuances of equity securities, the incurring of additional debt, the assumption
of known and unknown liabilities, and the amortization of expenses related to
goodwill and other intangible assets, all of which could harm our business,
financial condition and operating results. Acquisitions in foreign countries may
pose additional problems, and we could experience certain inefficiencies as we
integrate new operations and manage geographically dispersed operations. Our
ability to integrate acquired operations, manage future growth effectively and
accomplish our overall objectives will depend in part on our ability to hire and
retain qualified management, sales, customer support and technical personnel.
Competition for such personnel is intense. If we are unable to manage growth
effectively, our business, financial condition and results of operations could
be materially and adversely affected. In addition, our results of operations
would be adversely affected if sales do not achieve growth sufficient to offset
increased expenditures associated with expansion.
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THE PROCEEDS FROM OPTIONS AND WARRANTS MAY NOT BE REALIZED
Although we would receive all of the proceeds from the cash exercise of our
outstanding warrants and options (up to approximately $9,300,000), there can be
no assurance that any of these securities will be exercised by the holders and
that such holders will not use a "cashless or net issuance" exercise. We intend
to utilize any proceeds for working capital and general corporate purposes. We
do not intend to use any proceeds to discharge debt prior to maturity.
WE HAVE NOT PAID DIVIDENDS AND DO NOT PLAN TO PAY DIVIDENDS
We have never paid cash dividends on our common stock and we do not
anticipate paying any cash dividends in the foreseeable future. We intend to use
any future earnings to finance the growth and development of our business.
WE HAVE GUARANTEED THE DEBTS OF OTHER COMPANIES
We could be liable for debts owed by third parties over whom we have no
control. Automated Light Technologies, Inc. is the primary guarantor of
approximately $240,000 in loan obligations of Allied Controls, Inc., a former
subsidiary of Automated Light Technologies, Inc., to the Department of Economic
Development for the State of Connecticut. The loan, which is due in 2006,
provides for monthly principal payments of $500 until April 2001, and
thereafter, $3,500 and interest at 1% per annum. As of the date of this
prospectus, Allied Controls, Inc. is current in its payments to the Department
of Economic Development.
In addition, we are a co-guarantor with other joint venture partners for
certain credit facilities provided by banks to Middle East Fiber Cables Co., a
Saudi Arabian joint venture. These credit facilities are collateralized by the
assets of the joint venture company. As of June 20, 2000, we were contingently
liable with respect to these loans in the amount of $792,000.
WE ARE INVOLVED IN DISPUTES AND LITIGATION
We are currently involved in various claims and disputes, arising from the
ordinary course of business. We believe these claims, individually or in the
aggregate, will not have a material adverse effect on our business. However, we
could be subject to future litigation. There is a dispute between us, Dr. M. M.
Awan, a former director, and Techman International Corp., a company controlled
by Dr. Awan, which is now the subject of a litigation that commenced in early
May, 2000. The dispute involves our $500,000 investment in Fiber Optic
Industries (Pakistan), certain loans made by Techman International Corporation
to us in the amount of $400,000, and other related matters. We do not believe
that this litigation will have a material adverse effect on us.
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SHAREHOLDERS MAY SUFFER DILUTION FROM THE EXERCISE OF OPTIONS, WARRANTS AND
CONVERTIBLE NOTES
Our common stock may become diluted. Immediately after this offering, we will
have a number of options, warrants, and convertible notes outstanding, pursuant
to which we are obligated to issue up to approximately 12,500,000 shares of our
common stock, including shares being sold by Crescent International Ltd.
pursuant to this prospectus. To the extent that these securities are issued,
exercised or converted, equity interests of our shareholders will be diluted.
The terms upon which we will be able to obtain additional equity capital may be
adversely affected since the holders of the outstanding warrants and convertible
notes can be expected to exercise or convert them at a time when we would be
able to obtain needed capital on terms more favorable to us than those provided
in the securities. In addition, the sale of common stock offered by this
prospectus, or merely the possibility that these sales could occur, could have
an adverse effect on the market price of our common stock.
Conversion of convertible notes issued to Crescent could further dilute our
common stock. The conversion price of Crescent International Ltd.'s remaining
balance of convertible debt is the lower of $4.2326 and a price based on a
formula determined at the time of conversion. We have limited rights to delay
conversion for up to 180 days from the date triggering those rights if the
conversion price determined by the formula is below $2.50 per share. At the
minimum trade price of $2.50, conversion by Crescent International Ltd. of its
convertible debt would result in the issuance of 1,600,000 shares. If our rights
to delay conversion have elapsed and at the time of conversion of the
outstanding $4 million balance of our $6 million convertible note, the
conversion price based on the formula is $1.75, upon conversion we could be
required to issue 2,285,714 shares of our common stock. We may, subject to
certain terms and conditions, require Crescent International Ltd. to purchase an
up to $1.5 million note, convertible into shares of our common stock. If our
rights to delay conversion have elapsed and at the time of conversion of the
$1.5 million convertible note, the conversion price based on the formula is
$1.75, upon conversion we could be required to issue 857,143 shares of our
common stock. We are required to register for resale shares issued upon
conversion of the convertible debt to the extent they are not registered under
the registration statement of which this prospectus is a part.
If the purchase price of our common stock, as determined by the formula, on
the date the registration statement of which this prospectus is a part is
declared effective by the Securities and Exchange Commission is less than
$2.916, then our common stock could be subject to further dilution upon Crescent
International Ltd.'s exercise of an "early put" warrant to purchase shares of
our common stock at an exercise price of $0.001 per share. The number of shares
of our common stock that can be purchased upon exercise of the early put warrant
is equal to the number of whole shares of our common stock that is determined by
subtracting (x) 1,200,274 from (y) 3,500,000 divided by the purchase price,
determined in accordance with our agreement with Crescent International Ltd.,
for one share of our common stock on the date the registration statement of
which this prospectus is a part becomes effective. For example, if the purchase
price for our common stock on the date the registration statement of which this
prospectus is a part is declared effective by the Securities and Exchange
Commission is $1.75, as determined in accordance with the formula, then the
number of shares issuable upon exercise of the early put warrant would be
799,726. In addition, our common stock is subject to further dilution upon the
issuance of an aggregate of up to 7,600,000 shares of our common stock to
Crescent that could occur if we require Crescent to purchase additional shares
of our common stock for up to $19 million (assuming a purchase price of $2.50
per share).
OUR COMMON STOCK IS TRADED ON A LIMITED MARKET
Our common stock is quoted on the Nasdaq OTC-Bulletin Board, which does not
provide the wide base of shareholders that other national markets and exchanges
provide. Additionally, the trading prices of stocks traded on the OTC-Bulletin
Board have a tendency to be more volatile than the prices of stocks traded on
national exchanges and our common stock has been subject to frequent significant
price fluctuations, due in part to speculative activity.
OUR COMMON STOCK PRICE IS VOLATILE
The market for our common stock has been subject to wide fluctuations in
response to variations in our anticipated or actual results of operations,
speculation and market conditions which may be unrelated to our operating
performance. As of June 28, 2000, our officers and directors held 14,791,420
shares and Tyco Electronic Corporation held 10,275,829 shares of the 52,203,563
shares outstanding. If all the common stock and warrants under this offering are
sold, approximately 12,900,000 additional shares of common stock will be
registered under the Securities Act, subject to the requirement of maintaining a
current prospectus for such securities. It is possible that the price of our
common stock will decline after the offering described in this prospectus is
priced into the market. The following table reflects the high and low closing
prices for our common stock for the last two years:
PERIOD HIGH LOW
2000
----
2nd quarter $ 6.13 $2.88
(to June 27, 2000)
1st quarter $10.31 $2.53
1999
----
4th quarter $2.13 $0.39
3rd quarter $0.69 $0.22
2nd quarter $0.36 $0.16
1st quarter $0.50 $0.13
1998
----
4th quarter $0.19 $0.11
3rd quarter $0.44 $0.14
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2nd quarter $0.50 $0.25
1st quarter $0.75 $0.29
OUR COMPANY IS CONTROLLED BY A FEW INDIVIDUALS
Several persons own, on a fully diluted basis, over 5% of our common stock
and could influence the company's decisions. Dr. Aslami, our President and Chief
Executive Officer, owns 14.87%, Mr. DeLuca, our Secretary, owns 9.74%, Mr.
Phillips, a director, owns, 5.01%, and Tyco Electronics Corporation owns
15.94%. These persons and Tyco Electronics Corporation, acting alone or
together, could control or strongly affect the votes of shareholders for
directors of FiberCore.
ENVIRONMENTAL REGULATIONS
Our company is subject to environmental protection laws in both Jena, Germany
and Campinas, Brazil concerning the use, storage, and disposal of any toxic and
hazardous materials. Any failure to comply with these regulations may result in
the issuance of fines and the suspension of operations. Neither FiberCore Jena
nor Xtal Fibras Opticas, S.A. has been cited in the past for any environmental
violations. Algar S. A. has agreed to remedy any existing violations associated
with Xtal Fibras Opticas, S.A. at the time of our acquisition of Xtal Fibras
Opticas S.A. and to indemnify us for any losses caused by any such violation
until it is remedied. This indemnification is subject to the risk that Algar may
fail to perform due to illiquidity or other reasons. Algar's indemnification is
secured by their 10% shareholder interest in Xtal Fibras Opticas, S.A.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and other reports, proxy statements and other
documents with the Securities and Exchange Commission. You may read and copy any
document we file at the SEC's public reference room at Judiciary Plaza Building,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. You should call
1-800-SEC-0330 for more information on the public reference room. Our SEC
filings are also available to you on the SEC's Internet site at
http://www.sec.gov.
This prospectus is part of the registration statement and the prospectus
supplement and does not contain all of the information included in the
registration statement and the prospectus supplement. Whenever a reference is
made in this prospectus to any contract or other document of ours, the reference
may not be complete and you should refer to the exhibits that are a part of the
registration statement or the prospectus supplement for a copy of the contract
or document.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus
information that we file with the SEC in other documents. This means that we can
disclose important information to you by referring to other documents that
contain that information. The information incorporated by reference is an
important part of this prospectus, and information that we file with the SEC in
the future and incorporate by reference will automatically update and may
supersede the information contained in this prospectus. We incorporate by
reference the following documents:
o The description of our common stock contained in our registration
statement on Form 8-A filed with the SEC on December 5, 1996, including
any amendments or reports filed for the purpose of updating such
description;
o Our Annual Report on Form 10-K for the fiscal year ended December 31,
1999;
o Our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2000;
o Our Current Report on Form 8-K Report filed on June 9, 2000;
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o Our Current Report on Form 8-K Report filed on June 15, 2000
All documents that FiberCore will file with the SEC under the provisions of
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, after
the date of this prospectus and prior to the termination of any offering of
securities under this prospectus shall be deemed to be incorporated by
reference, and to be a part of this prospectus from the date such documents are
filed.
Each of these documents is available from the SEC's web site and public
reference rooms described above. You may also request a copy of these documents,
excluding exhibits, at no cost, by contacting: Mr. Michael J. Beecher, Chief
Financial Officer, FiberCore, Inc., 253 Worcester Road, P.O. Box 180, Charlton,
Massachusetts 01501, telephone number (508) 248-3900.
You should rely only on the information incorporated by reference or provided
in this prospectus or any prospectus supplement. We have not authorized anyone
else to provide you with different information.
We are not making an offer of the securities covered by this prospectus in
any state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of those documents.
RECENT EVENTS
In two recent private placement transactions, we issued a total of 1,685,276
shares of our common stock and entered into an arrangement pursuant to which we
can obtain gross proceeds of up to $20.5 million through the issuance of
additional debt and equity, subject to certain terms and conditions. In
addition, we issued a total of 7,216,996 shares of our common stock to Tyco
Electronics Corporation upon its conversion of outstanding debt and exercise of
warrants to purchase shares of our common stock. (See the section entitled
"Recently Issued Securities" below on page 15.)
ACQUISITION OF XTAL FIBRAS OPTICAS, S.A.
On June 20, 2000, we closed on an agreement to acquire, as of June 1, 2000,
full ownership of Xtal Fibras Opticas, S. A., a wholly owned subsidiary of Algar
S.A. Xtal Fibras Opticas, S.A., a company located in Campinas, Brazil,
manufactures primarily singlemode optical fiber for sale mainly in Brazil. The
$25 million purchase price is payable over a three year period, and is subject
to certain adjustments. At the closing, we paid $10 million in cash and issued a
$10 million, 6% note, payable on December 31, 2000. We acquired 90% of the
common stock of Xtal, and also issued a $2.5 million note, due June 9, 2003. We
will acquire the remaining 10% of the stock upon repayment of the $2.5 million
note. Our obligation to pay an additional $2.5 million, the balance of the $25
million purchase price, is contingent on Xtal's achieving certain profitability
targets in 2000 and 2001. In addition, we will receive a $1 million discount, if
we redeem the $10 million note by August 31, 2000.
AGREEMENTS WITH TYCO ELECTRONICS CORPORATION
On May 19, 2000, we entered into a two-year standstill agreement with Tyco
Electronics Corporation, a unit of Tyco International Ltd. under which Tyco
terminated a previous shareholder voting agreement. The standstill agreement
provided, among other things, that until May 19, 2002 Tyco will not, directly or
indirectly engage in certain activities, including the taking of certain actions
that could exercise control over us, and has agreed to vote all of its shares of
our common stock in favor of our management nominees to our board of directors
who are reasonably acceptable to Tyco.
On May 19, 2000, we also entered into an agreement with Tyco Electronics
Corporation pursuant to which Tyco exercised warrants to purchase, and converted
the outstanding balance on a convertible note and a term loan into, a total of
7,216,996 shares of our common stock. (See the section entitled "Recently Issued
Securities" below on this page.) The agreement also provided, among other
things, that (i) we are required to assist Tyco Electronics Corporation in
completing private placement transactions involving shares of our common stock;
(ii) if, as a result of those private placement transactions, Tyco no longer
owns 10% or more of the outstanding shares of our common stock, Tyco will
relinquish all registration rights currently held by it with respect to our
common stock; and
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(iii) in the event that the Purchase Agreement entered into between Tyco
Electronics Corporation and us in July 1996 expires on December 31, 2000,
because Tyco outsources its cable manufacturing to third parties, rather than
manufacture its own cable, Tyco will ensure that such third party cable
suppliers initiate discussions to purchase optical fibers from us. Tyco is
currently outsourcing much of its cable manufacturing requirements, and we have
been selling to Tyco Electronics Corporation's cable suppliers in lieu of
selling directly to Tyco Electronics Corporation.
RECENTLY ISSUED SECURITIES
COMMON STOCK ISSUED AND SECURITIES ISSUABLE TO CRESCENT INTERNATIONAL LTD.
On June 9, 2000, we entered into an agreement that allows us to issue and
sell and requires Crescent International Ltd. to purchase, upon our request,
equity and debt securities for consideration of up to $30,000,000 (minus
applicable fees and expenses). In connection with the transaction, on June 9,
2000 we issued to Crescent (i) 1,200,274 shares of our common stock for
consideration of $3,500,000; (ii) a secured $6 million convertible note, due
June 9, 2002 and (iii) related warrants, each as described more fully below. The
net proceeds received by us from the issuance of our common stock and the
convertible note after adjustment for fees and amounts held in escrow were
$8,970,219.
Under the agreement with Crescent International Ltd., we can obtain,
subject to applicable fees and expenses and certain terms and conditions: (i) an
additional $19 million by selling shares of our common stock to Crescent at
various points in time beginning 22 days after the Securities and Exchange
Commission declares the registration statement of which this prospectus is a
part, effective and (ii) an additional $1.5 million by issuing an additional
convertible note to Crescent International Ltd. before the registration
statement becomes effective.
Specifically, with regard to sale of shares of our common stock to Crescent
International Ltd., we can from time to time, at our option issue and sell
shares with an aggregate purchase price of up to twice the average daily trading
value during the 22 trading day period immediately preceding the date of the
notice by us requiring Crescent to purchase, but no more than $3.5 million at
one time; or in the event the trade price on each trading day between the date
we notify Crescent that we will sell them such shares and the date the sale
occurs is less than $2.50 per share, up to $20,000.
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Under the agreement we are required to register the shares issued and
issuable to Crescent through the registration statement of which this prospectus
is a part and subsequent registration statements.
On June 26, 2000, Crescent converted $2 million of the balance on our $6
million convertible note into 685,871 shares of our common stock.
Termination of Crescent International Ltd.'s Obligations
Crescent's International Ltd.'s commitment to provide the aforementioned
funds expires on June 9, 2002. We have the right to terminate the agreement
under which Crescent must purchase additional debt and equity at any time upon
30 days' written notice. Crescent has the right to terminate the agreement in
the event that we fail to perform certain actions required under that agreement.
WARRANTS ISSUED TO CRESCENT INTERNATIONAL LTD.
Early Put Warrant
On June 9, 2000, we issued an early put warrant to purchase shares of our
common stock to Crescent International Ltd. at an exercise price of $0.01 per
share. The early put warrant is exercisable only if the purchase price
(determined in accordance with the agreement with Crescent) for one share of our
common stock on the date on which the registration statement of which this
prospectus is a part becomes effective is lower than $2.916 per share. The
number shares of our common stock that can be purchased upon exercise of the
early put warrant is equal to the number of whole shares of our common stock
that is determined by subtracting (x) 1,200,274 from (y) 3,500,000 divided by
the purchase price, determined in accordance with our agreement with Crescent
Intl. Ltd., for one share of our common stock on the date the registration
statement of which this prospectus is a part becomes effective. At its sole
option, Crescent may effect a cashless exercise of the early put warrant.
In certain instances, in lieu of issuing shares of common stock upon
Crescent International Ltd.'s exercise of the early put warrant, we may, with
respect to all or part of the shares of our common stock issuable upon the
exercise of the early put warrant, pay to Crescent International Ltd. an amount
equal to the product of (a) the price of one share of common stock on the
trading day immediately preceding the day on which the warrant is exercised
multiplied by (b) the number of shares of common stock for which we elect to
pay. We may elect to execute this cash-out option in the event that, among other
things, the sum of (x) the number of shares issuable upon exercise of the
warrant plus (y) 1,200,274 exceeds the number of shares registered pursuant to
the registration statement of which this prospectus is a part. See the "Risk
Factors" subsection entitled "Stockholders May Suffer Dilution From the Exercise
of Options, Warrants and Convertible Notes."
Incentive Warrant
On June 9, 2000, we issued an incentive warrant to Crescent International
Ltd. to purchase up to 500,000 shares of our common stock at an exercise price
of $4.374 per share. The incentive warrant is exercisable in whole or in part at
any time until June 9, 2005, subject to certain extensions. At its sole option,
Crescent may effect a cashless exercise of the incentive warrant.
CONVERTIBLE NOTE ISSUED TO CRESCENT INTERNATIONAL LTD.
On June 9, 2000, we issued a $6 million secured convertible note, due June 9,
2002, to Crescent International Ltd. We may, subject to certain terms and
conditions, obtain up to an additional $1.5 million upon issuance of an
additional secured convertible note to Crescent International Ltd. Interest on
the convertible note is at a fixed rate of 8.0% per annum and has been waived
unless we fail to issue the shares of our common stock due upon conversion of
the convertible note or fail to issue certificates representing those shares
within ten trading days of conversion. The note is subject to optional
redemption by us under certain terms and conditions.
Conversion
At the option of the holder, the convertible notes may be converted into
shares of our common stock at a per share conversion price equal to the lower of
(i) $ 4.2326 and (ii) 93% of the lowest volume weighted average price on three
consecutive days during the 22 trading day period immediately preceding the date
of conversion. We have limited rights to delay conversion for up to 180 days if
the conversion price, which is determined by the above formula, is below $2.50
per share.
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The warrants and the convertible notes are subject to typical adjustment to
protect Crescent's shares from dilution upon the occurrence of certain events.
See the "Risk Factors" subsection entitled "Stockholders May Suffer Dilution
From the Exercise of Options, Warrants and Convertible Notes."
Collateral Securing the Convertible Notes
To secure our payment obligation with respect to the convertible note, we
caused FiberCore Jena GmbH to enter into a security agreement with Crescent
International Ltd. pursuant to which we transferred machinery and equipment in
our Jena facility for security purposes (as part of a standard arrangement to
effect a security interest under German law) to Crescent International Ltd. The
machinery and equipment collateral will be proportionately released to the
extent that the book value of the collateral exceeds 120% of the outstanding
balance on the convertible notes.
We also pledged all the capital stock of FiberCore Jena GmbH, our wholly
owned subsidiary, to Crescent International Ltd. to secure our payment
obligations with respect to the convertible notes. Crescent International Ltd.
has agreed to release the pledge once the outstanding balance on the convertible
notes is equal to 120% of the book value of the machinery and equipment
collateral.
LIQUIDATED DAMAGES
Pursuant to our agreement with Crescent International Ltd., we are subject
to certain liquidated damages if the registration statement of which this
propsectus is a part is not declared effective by the Securities and Exchange
Commission on or before September 7, 2000.
RIGHT OF FIRST REFUSAL
Crescent International Ltd. has the right of first refusal on any proposed
sale by us of our securities in a private placement transaction exempt from
registration under the Securities Act of 1933, subject to certain terms and
conditions.
10% LIMITATION WITH RESPECT TO CRESCENT INTERNATIONAL LTD.
Under the terms of the transaction with Crescent International Ltd., the
number of shares to be purchased by Crescent or to be obtained upon exercise of
warrants or conversion of the convertible note held by Crescent cannot exceed
the number of shares that, when combined with all other shares of common stock
and securities then owned by Crescent, would result in Crescent owning more than
9.9% of our outstanding common stock.
COMMON STOCK ISSUED TO TYCO ELECTRONICS CORPORATION
On May 19, 2000, we signed an agreement with Tyco Electronics Corporation.
Under the agreement, among other things, Tyco (i) exercised its warrant to
purchase 2,765,487 shares of our common stock at a purchase price of $2.0
million; (ii) converted the outstanding balance of $2.46 million on our
convertible note, issued to Tyco in April 1995, into 3,419,977 shares of our
common stock and (iii) converted the $4.13 million balance of its term loan to
us into 1,031,532 shares of our common stock and released its liens on all
collateral of ours held by Tyco. Tyco holds no additional warrants to purchase,
or securities convertible into, our common stock.
In certain instances, we are required to register for resale by Tyco
Electronics Corporation under the Securities Act of 1933 certain shares of our
common stock, including the 3,419,977 shares of our common stock issued upon the
conversion of the convertible note issued to Tyco and the 2,765,487 issued upon
exercise of the warrant held by Tyco, but only to the extent that registration
will not impair the rights of Crescent International Ltd. In the event that as
the result of the private placement(s) contemplated by the standstill agreement
between us and Tyco, Tyco holds less than ten percent of the outstanding shares
of our common stock, Tyco will relinquish all demand registration rights that it
has under the November 20, 1996 warrant and under the April 17, 1995 Convertible
Debenture Purchase Agreement between Tyco and us, Tyco will only have rights to
piggyback registration upon our approval.
COMMON STOCK ISSUED TO OTHERS
On May 16, 2000, upon completion of a private placement of our common stock,
we issued and sold 485,002 shares of our common stock at $3.20 per share to ten
offshore accredited investors, raising total gross capital of $1,555,000. The
purchasers were located outside of the United States and included both
individual investors who purchased 185,002 shares of our common stock and
venture capital companies which purchased 300,002 shares of our common stock.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of our common
stock being offered by the selling stockholder under this prospectus.
Unless otherwise indicated in an accompanying prospectus supplement, we
expect to use the net proceeds from the sale of the securities offered by us for
capacity expansion, including the purchase of buildings and equipment and/or for
the acquisition of manufacturing facilities. We will also use the proceeds for
research and development, working capital and general corporate purposes. We
may, however, change the allocation of these proceeds in response to
developments or changes that affect our business or our industry. Pending use of
the net proceeds for the above purposes, we plan to invest such funds in
short-term, investment grade, interest-bearing securities.
SELLING STOCKHOLDER
Crescent International Ltd., the selling stockholder, acquired or will
acquire the shares of our common stock registered by this prospectus; (i)
through our issuance of 1,200,274 shares of our common stock to Crescent in a
private placement transaction; (ii) upon exercise of warrants issued in
connection with such issuance; (iii) upon conversion of the outstanding
principal balance of $4 million on our $6 million convertible note issued to
Crescent and (iv) through our issuance of 685,871 shares of our common stock
issued upon conversion of $2 million of the outstanding principal balance of our
$6 million convertible note issued to Crescent.
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We have agreed to file a registration statement, of which this prospectus is
a part, to register the shares of the selling stockholder described above in
order to permit the selling stockholder to sell these shares from time to time
in the public market or in privately-negotiated transactions. We cannot
determine the actual number of shares of our common stock that we will issue,
because of the variables discussed herein. It is possible that we may be
required to register additional shares of our common stock. We plan to file
prospectus supplements, as necessary, to set forth the exact number of shares
that the selling stockholder is actually issued upon conversion, exchange or
exercise of the related securities. See the "Risk Factors" subsection entitled
"Stockholders May Suffer Dilution From the Exercise of Options, Warrants and
Convertible Notes."
The following table sets forth the number of shares of our common stock
issued or issuable to the selling stockholder:
----------------------------------------------------------------
SELLING NUMBER OF NUMBER OF NUMBER OF
STOCKHOLDER SHARES OF SHARES OF SHARES OF
COMMON STOCK COMMON STOCK COMMON STOCK
HELD PRIOR TO HELD AFTER OFFERED ON
COMPLETION OF COMPLETION OF BEHALF OF
OFFERING OFFERING(1) SELLING
STOCKHOLDER(1)
----------------------------------------------------------------
Crescent 4,185,871(2) 0% 4,185,871(2)
International
Ltd.
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------------------
(1) Assumes Crescent International Ltd. will offer and sell all of the shares
registered by the registration statement of which this prospectus is a
part.
(2) The shares of our common stock being offered on behalf of Crescent
International Ltd. consist of (i) 1,200,274 shares of our common stock
issued to Crescent International Ltd. on June 9, 2000; (ii) 500,000 shares
of our common stock issuable upon exercise of an incentive warrant issued
to Crescent International Ltd. on June 9, 2000; (iii) 199,726 shares of our
common stock issuable upon exercise of an early put warrant issued to
Crescent International Ltd. on June 9, 2000, based on an assumed share
price of $2.50 on the date the registration statement of which this
prospectus is a part becomes effective; (iv) 685,871 shares of our common
stock issued to the selling stockholder upon conversion of $2 million of
the outstanding principal balance on our $6 million convertible note issued
to the selling stockholder and (v) 1,600,000 shares of our common stock
issuable upon the conversion of the outstanding principal balance of $4
million on our $6 million convertible note issued to Crescent International
Ltd. on June 9, 2000, based on an assumed conversion price of $2.50 per
share. The number of shares of common stock issuable upon exercise of the
early put warrant and the conversion of the convertible note has been
assumed for purposes of registering shares of common stock under the
registration statement of which this prospectus is a part; the actual
number of shares so issuable may be higher and have a dilutive effect on
other shareholders. See the "Risk Factors" subsection entitled
"Stockholders May Suffer Dilution From the Exercise of Options, Warrants
and Convertible Notes."
The selling stockholder and we are not making any representation that any
shares covered by the prospectus will or will not be offered for sale or resale.
The selling stockholder reserves the right to accept or reject, in whole or in
part, any proposed sale of shares. The shares offered by this prospectus may be
offered from time to time by the selling stockholder named above and by us. In
addition to the number of shares held by the selling stockholder, the selling
stockholder may be required to purchase additional shares of our common stock
for up to $19 million and a $1.5 million note convertible into shares of our
common stock.
We are not aware of any material relationship between FiberCore and the
selling stockholder within the past three years other than as a result of the
ownership of the stockholder's shares.
PLAN OF DISTRIBUTION
The selling stockholder may sell the securities registered on its behalf in
the registration statement of which this prospectus is a part from time to time
on the public markets, through agents, underwriters or dealers, or directly to
one or more purchasers. We are registering $4,200,000 shares of our common stock
for sales to be made by us through an underwriter or to Crescent International
Ltd. pursuant to our ability to require Crescent to purchase additional shares
of our common stock for up to $19 million and an up to $1.5 million note
convertible into shares of our common stock.
18
<PAGE>
AGENTS
The selling stockholder and/or we may designate agents who agree to use their
best efforts to solicit purchases for the period of their appointment or to sell
securities on a continuing basis.
UNDERWRITERS
We will use an underwriter to sell shares of our common stock offered by us.
Crescent will be an underwriter with respect to shares of our common stock (i)
issued to and if required by us under our agreement with Cresent to be purchased
by Crescent, or (ii) which were acquired by Crescent upon conversion into shares
of our common stock of the up to $1.5 million note which we may require Crescent
to purchase. If the selling stockholder and/or we use underwriters for the sale
of securities, the underwriters will acquire the securities for their own
account. The underwriters may resell the securities in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The obligations of the
underwriters to purchase the securities will be subject to the conditions set
forth in the applicable underwriting agreement. Any public offering price and
any discounts or concessions allowed or paid to dealers may be changed from time
to time. Underwriters, dealers and agents that participate in the distribution
of the securities may be underwriters as defined in the Securities Act of 1933
and any discounts or commissions they receive from us and any profit on their
resale of the securities may be treated as underwriting discounts and
commissions under the Securities Act of 1933. The applicable prospectus
supplement will identify any underwriters, dealers and agents whom we have
agreed to indemnify against certain civil liabilities under the Securities Act
of 1933. Underwriters, dealers and agents may engage in transactions with or
perform services for us or our subsidiaries in the ordinary course of their
businesses.
DIRECT SALES
The selling stockholder might also sell securities to one or more purchasers
without using underwriters or agents.
STABILIZATION ACTIVITIES
Any underwriter may engage in over-allotment, stabilizing transactions, short
covering transactions and penalty bids in accordance with Regulation M under the
Securities Exchange Act of 1934. Over-allotment involves sales in excess of the
offering size, which create a short position. Stabilizing transactions permit
bids to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Short covering transactions involve purchases of the
securities in the open market after the distribution is completed to cover short
positions. Penalty bids permit the underwriters to reclaim a selling concession
from a dealer when the securities originally sold by the dealer are purchased in
a covering transaction to cover short positions. Those activities may cause the
price of the securities to be higher than it would otherwise be. If commenced,
the underwriters may discontinue any of the activities at any time.
DESCRIPTION OF CAPITAL STOCK
The following description of our common stock and preferred stock summarizes
the material terms and provisions of these types of securities. For the complete
terms of our common stock and preferred stock, please refer to our Certificate
of Incorporation and bylaws, which are incorporated by reference into the
registration statement, of which this prospectus is a part.
Under our Certificate of Incorporation, our authorized capital stock consists
of 100,000,000 shares of common stock, $0.001 par value per share, and
10,000,000 shares of preferred stock, $0.001 par value per share.
COMMON STOCK
As of June 28, 2000, 52,203,563 shares of our common stock were issued and
outstanding. All outstanding shares of our common stock are duly authorized,
validly issued, fully paid and non-assessable. Please refer to the description
of our common stock contained in our registration statement on Form 8-A filed
with the SEC on
19
<PAGE>
December 5, 1996, including any amendments or reports filed for the purpose of
updating such section which is incorporated by reference into this prospectus.
TRANSFER AGENT AND REGISTRAR
Interstate Transfer Company, 10 West Broadway, Suite 510, Salt Lake City,
Utah 84301 is the transfer agent and registrar of our common stock.
PREFERRED STOCK
As of June 28, 2000, no shares of preferred stock were outstanding. Our
Certificate of Incorporation authorizes our board of directors to issue
preferred stock in one or more series and to determine the voting rights and
dividend rights, dividend rates, liquidation preferences, conversion rights,
redemption rights, including sinking fund provisions and redemption prices, and
other terms and rights of each such series.
NEVADA ANTI-TAKEOVER LAWS
We are incorporated under the laws of the State of Nevada and are therefore
subject to various provisions of the Nevada corporation laws which may have the
effect of delaying or deterring a change in control or management of us.
Nevada's "Combination with Interested Stockholders Statute," Nevada Revised
Statutes 78.411-78.444, which applies to Nevada corporations like us having at
least 200 stockholders, prohibits an "interested stockholder" from entering into
a "combination" with the corporation, unless certain conditions are met. A
"combination" includes (a) any merger with an "interested stockholder," or any
other corporation which is or after the merger would be, an affiliate or
associate of the interested stockholder, (b) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of assets, in one transaction or
a series of transactions, to an "interested stockholder," having (i) an
aggregate market value equal to 5% or more of the aggregate market value of the
corporation's assets, (ii) an aggregate market value equal to 5% or more of the
aggregate market value of all outstanding shares of the corporation, or (iii)
representing 10% or more of the earning power or net income of the corporation,
(c) any issuance or transfer of shares of the corporation or its subsidiaries,
to the "interested stockholder," having an aggregate market value equal to 5% or
more of the aggregate market value of all the outstanding shares of the
corporation, (d) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by the "interested stockholder," (e)
certain transactions which would have the effect of increasing the proportionate
share of outstanding shares of the corporation owned by the "interested
stockholder," or (f) the receipt of benefits, except proportionately as a
stockholder, of any loans, advances or other financial benefits by an
"interested stockholder." An "interested stockholder" is a person who (i)
directly or indirectly owns 10% or more of the voting power of the outstanding
voting shares of the corporation or (ii) an affiliate or associate of the
corporation which at any time within three years before the date in question was
the beneficial owner, directly or indirectly, of 10% or more of the voting power
of the then outstanding shares of the corporation.
A corporation to which the statute applies may not engage in a "combination"
within three years after the interested stockholder acquired its shares, unless
the combination or the interested stockholder's acquisition of the shares that
caused the interested stockholder to become an interested stockholder was
approved by the board of directors before the interested stockholder acquired
such shares. If this approval was not obtained, then after the three-year period
expires, the combination may be consummated if all the requirements in the
Company's Certificate of Incorporation are met and either (a)(i) the board of
directors of the corporation approves, prior to such person becoming an
"interested stockholder," the combination or the purchase of shares by the
"interested stockholder" or (ii) the combination is approved by the affirmative
vote of holders of a majority of voting power not beneficially owned by the
"interested stockholder" at a meeting called no earlier than three years after
the date the "interested stockholder" became such or (b) the aggregate amount of
cash and the market value of consideration other than cash to be received by
holders of common shares and holders of any other class or series of shares
meets the minimum requirements set forth in Sections 78.411 through 78.443,
inclusive, and prior to the consummation of the combination, except in limited
circumstances, the "interested stockholder" will not have become the beneficial
owner of additional voting shares of the corporation.
20
<PAGE>
The above provisions do not apply to corporations that so elect in a charter
amendment approved by a majority of the disinterested shares. Such a charter
amendment, however, would not become effective for 18 months after its passage
and would apply only to stock acquisitions occurring after its effective date.
Our Certificate of Incorporation does not exclude us from the restrictions
imposed by the above provisions.
Nevada's "Control Share Acquisition Statute," Sections 78.378 through 78.3793
of the Nevada Revised Statutes, prohibits an acquirer, under certain
circumstances, from exercising voting rights of shares of a target corporation's
stock after crossing certain threshold ownership percentages, except such voting
rights as are granted by the target corporation's stockholders.
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
Our by-laws provide for a broad right for indemnification for any person who
is or was involved in any manner in any threatened, pending, or completed
investigation, claim, action, suit, or proceeding by reason of the fact that
such person had agreed to become a director, officer, employee, or agent of our
company.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
LEGAL MATTERS
The validity of the securities we are offering will be passed upon for us by
Lionel, Sawyer & Collins, Nevada. Certain legal matters in connection with this
offering shall be passed upon by Cadwalader, Wickersham and Taft, New York.
EXPERTS
The financial statements incorporated in this prospectus by reference from
the Company's Annual Report on Form 10-K for the year ended December 31, 1999
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The financial statements of Xtal Fibras Opticas S.A. as of December 31, 1999
and 1998, and for each of the years then ended, included in this prospectus have
been audited by Deloitte Touche Tohmatsu, Auditores Independentes, as stated in
their report appearing herein, and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
21
<PAGE>
FiberCore, Inc.
PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined balance sheet as of March
31, 2000 and the pro forma combined statements of operations for the year ended
December 31, 1999 and the quarter ended March 31, 2000 give effect to; (i) the
acquisition of 90% of Xtal Fibras Opticas S.A. ("Xtal"), accounted for under the
purchase method of accounting; (ii) the private placement of the $6.0 million
convertible note and sale of FiberCore, Inc. common stock of $3.5 million to
Crescent International Ltd. ("Crescent") and related use of net proceeds, for
the acquisition; (iii) the issuance of common stock to Tyco Electronics
Corporation ("Tyco") on the exercise of common stock warrants in the amount of
$2.0 million, and the related use of proceeds for the acquisition, and; (iv) the
effect of the indemnification by Algar S.A. (the seller) for certain costs and
liabilities of Xtal. The historical financial information has been derived from
the respective historical financial statements of FiberCore, Inc. and Xtal, and
should be read in conjunction with these financial statements and the related
notes contained elsewhere herein or incorporated herein by reference.
The unaudited pro forma combined balance sheet at March 31, 2000
assumes that the acquisition, private placement of the convertible notes and the
sale of FiberCore, Inc. common stock to Crescent, the issuance of common stock
to Tyco on the exercise of common stock warrants and the indemnification by
Algar for certain costs and liabilities of Xtal. occurred on March 31, 2000.
The unaudited pro forma combined statements of operations combines
FiberCore's and Xtal's historical statements of operations for the year ended
December 31, 1999 and quarter ended March 31, 2000 and gives effect to the
acquisition, the private placement of the convertible notes and the sale of
FiberCore, Inc. common stock to Crescent, the issuance of common stock to Tyco
on the exercise of common stock warrants, and the indemnification by Algar for
certain costs and liabilities of Xtal as if they occurred on January 1, 1999.
Pro forma adjustments are based upon preliminary estimates, available
information and certain assumptions that management deems appropriate. The total
estimated purchase cost of Xtal has been allocated on a preliminary basis to the
assets and liabilities based on management's estimates of their fair value with
the excess cost over the net assets acquired allocated to goodwill. Subsequent
to closing, the assets purchased and liabilities assumed will be fair valued and
the necessary studies completed to ascribe values to assets and indentifiable
intangibles, if any.
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 dates indicated, nor is it necessarily indicative of
future operating results or financial position of the combined company.
<PAGE>
FIBERCORE, INC.
PRO FORMA combined Balance Sheet
As of March 31, 2000
<TABLE>
<CAPTION>
(Dollars in thousands) FIBERCORE XTAL PRO FORMA COMBINED
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,274 $ 49 $ 383 (a) $ 1,706
Accounts receivable, net 1,848 4,186 1,008 (b) 7,042
Inventories 2,852 3,578 6,430
Prepaid and other current assets 71 999 250 (c) 1,320
--------- --------- ----------- ---------
TOTAL CURRENT ASSETS 6,045 8,812 1,641 16,498
--------- --------- ----------- ---------
Property and equipment, net 3,497 10,467 2,500 (d) 16,464
Other assets:
Notes receivables from joint venture partners 4,949 4,949
Restricted cash 1,884 1,884
Patents, less accumulated amortization 4,636 4,636
Investments in joint ventures 1,425 1,425
Deferred/Recoverable tax asset 812 145 957
Other assets 417 7 424
Goodwill 7,634 (d) 7,634
--------- --------- ----------- ---------
TOTAL OTHER ASSETS 14,123 152 7,634 21,909
--------- --------- ----------- ---------
TOTAL ASSETS $ 23,665 $ 19,431 $ 11,775 $ 54,871
========= ========== =========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 1,415 $ 290 $ 10,000 (a) $ 11,705
Accounts payable 1,531 4,011 5,542
Accrued taxes other than income 441 441
Accrued expenses 1,552 837 1,700 (e) 4,089
--------- --------- ----------- ---------
TOTAL CURRENT LIABILITIES 4,498 5,579 11,700 21,777
Long-term interest payable 1,373 1,373
Long-term taxes 697 697
Long-term debt 8,125 733 6,000 (a) 14,858
Other liabilities 801 801
--------- --------- ----------- ---------
TOTAL LIABILITIES 13,996 7,810 17,700 39,506
--------- --------- ----------- ---------
Minority interest 3,264 1,263 (f) 4,527
--------- --------- ----------- ---------
STOCKHOLDERS' EQUITY
Preferred stock 11,497 (11,497)(g) 0
Common stock 42 11,497 (11,495)(g) 44
Appropriated retained earnings - legal reserve 140 (140)(g) 0
Additional paid in capital 25,251 4,431 (g) 29,682
Accumulated deficit (17,692) (8,015) 8,015 (g) (17,692)
Accumulated other comprehensive loss (1,196) (3,498) 3,498 (g) (1,196)
--------- --------- ----------- ---------
TOTAL STOCKHOLDERS' EQUITY 6,405 11,621 (7,188) 10,838
--------- --------- ----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 23,665 $ 19,431 $ 11,775 $ 54,871
========= ========== =========== =========
</TABLE>
<PAGE>
FIBERCORE, INC.
PRO FORMA Income Statement
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
(Dollars in thousands) FIBERCORE XTAL PRO FORMA COMBINED
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 12,126 $ 17,772 $ 29,898
Cost of sales 9,820 16,043 340 (h) 26,203
----------- --------- --------- ----------
Gross profit 2,306 1,729 (340) 3,695
Operating expenses:
Selling, general and administrative expenses 3,237 2,256 (557)(i) 4,936
Research and development 722 0 722
Amortization of goodwill 0 0 382 (j) 382
----------- --------- --------- ----------
Income (loss) from operations (1,653) (527) (165) (2,345)
Interest income 110 405 515
Interest expense (1,062) (2,646) (830)(k) (4,538)
Other (expense) income - net (336) (233) (569)
----------- --------- --------- ----------
Income (loss) before income taxes (2,941) (3,001) (995) (6,937)
Provision for income taxes 937 (8) 929
----------- --------- --------- ----------
Net income (loss) $ (2,004) $ (3,009) $ (995) $ (6,008)
=========== ========= ========= ==========
Basic and diluted income (loss)
per share of common stock $ (0.05) $ (0.15)
=========== ==========
Weighted average shares outstanding 36,610,544 2,231,826(l) 38,842,370
=========== ========= ==========
</TABLE>
<PAGE>
FIBERCORE, INC.
PRO FORMA Income Statement
Three months Ended March 31, 2000
<TABLE>
<CAPTION>
(Dollars in thousands) FIBERCORE XTAL PRO FORMA COMBINED
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 3,453 $ 6,794 $ 10,247
Cost of sales 2,721 6,270 85 (h) 9,076
----------- --------- --------- ----------
Gross profit 732 524 (85) 1,171
Operating expenses:
Selling, general and administrative expenses 697 280 (114)(i) 863
Research and development 237 0 237
Amortization of goodwill 95 (j) 95
----------- --------- --------- ----------
Income (loss) from operations (202) 244 (66) (24)
Interest income 72 13 85
Interest expense (226) (91) (270)(k) (587)
Other (expense) income - net (82) (60) (142)
----------- --------- --------- ----------
Income (loss) before income taxes (438) 106 (336) (668)
Provision for income taxes (58) (8) (66)
----------- --------- --------- ----------
Net income (loss) $ (496) $ 98 $ (336) $ (734)
=========== ========= ========= ==========
Basic and diluted income (loss)
per share of common stock $ (0.012) $ (0.017)
=========== ==========
Weighted average shares outstanding 41,678,243 2,231,826 43,910,069
=========== ========= ==========
</TABLE>
<PAGE>
FIBERCORE, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
(a) Adjustment represents the impact to cash, notes payable and long term debt
by funding activities and the acquisition of Xtal.
<TABLE>
<CAPTION>
Notes Long Term
Cash Payable Debt
----------------------------------------
<S> <C> <C> <C>
Exercise of common stock warrants by Tyco $ 2,000
Sale of common stock to Crescent $ 3,500
Issuance of a convertible note to Crescent $ 6,000 $ 6,000
Funds held in escrow - Crescent $ (250)
Cost of issue and legal fees $ (867)
Acquisition of Xtal from Algar $ (10,000) $ 10,000
----------------------------------------
$ 383 $ 10,000 $ 6,000
========================================
</TABLE>
(b) Adjustment represents the receivables for costs accrued by Xtal for which
the seller (Algar S.A.) has indemnified FiberCore, Inc. These accruals will
be paid by the seller under the indemnification agreement.
(c) Adjustment represents the amount of $250, held in escrow as part of the
Crescent investment agreement.
(d) Adjustments to reflect the purchase of 90% of Xtal for $21,500.
Purchase Price for Xtal.................................$ 21,500
NBV of assets acquired..................................$ 11,366
--------
Excess..................................................$ 10,134
========
The allocation of the excess is as follows;
Goodwill................................................$ 7,634
Property & Equipment....................................$ 2,500
--------
$ 10,134
(e) Adjustment represents the estimated costs of $1,700 for commissions, legal,
accounting and other fees related to the acquisition and Crescent
financing.
(f) Under the Xtal acquisition agreement, Algar will continue to own 10% of
Xtal. The adjustment represents Algar's minority interest in Xtal.
(g) Adjustment represents the impact on equity by the funding activities and
the elimination of equity of Xtal.
<TABLE>
<CAPTION>
Accumulated
Preferred Common Legal Additional Accumulated Other Comprehensive
Stock Stock Reserve Paid in Capital Deficit Income & (Deficit)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tyco exercise of warrants $ 1 $ 1,999
Sale of stock to Crescent 1 2,432
Elimination's - Xtal $ (11,497) $ (11,497) $ (140) $ 8,015 $ 3,498
--------------------------------------------------------------------------------------------------
Total $ (11,497) $ (11,495) $ (140) $ 4,431 $ 8,015 $ 3,498
==================================================================================================
</TABLE>
<PAGE>
(h) Adjustment represents the depreciation on the write-up to fair market value
on major assets purchased
Year Ending Quarter Ending
Dec. 31,1999 Mar. 31, 2000
------------- --------------
Depreciation on Building @ 25 yrs. $ 40 $ 10
Depreciation on Equipment @ 5 yrs. $ 300 $ 75
------------- --------------
Total $ 340 $ 85
============= ==============
(i) Adjustment represents costs accrued by Xtal for which the seller (Algar)
has indemnified FiberCore, Inc. These accruals will be paid by the seller
under the indemnification agreement referenced in note (b).
(j) Adjustment to reflect amortization of goodwill reported on the purchase of
Xtal referenced in note (c) over 20 years.
(k) Adjustment to reflect the interest on two (2) notes (Algar for $10,000 and
Crescent for $6,000), referenced in note (a). The Algar note is at 6% per
year and is due 7 months following the closing, and the Crescent note is at
8% per year and is due on June 9, 2002.
(l) The increase in the weighted average shares outstanding for the year ended
December 31, 1999 and the three months ended March 31, 2000 are as follows:
Exercise of common stock warrants by Tyco.......................1,031,552
Sale of common stock to Crescent............................... 1,200,274
----------
2,231,826
==========
<PAGE>
XTAL FIBRAS
OPTICAS S.A.
Financial Statements as of
December 31, 1999 and 1998 and for each
of the years then ended
Deloitte Touche Tohmatsu Auditores Independentes
<PAGE>
INDEX TO FINANCIAL STATEMENTS PAGE
----
REPORT OF INDEPENDENT AUDITORS F-1
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND 1998
AND FOR EACH OF THE YEARS THEN ENDED
Balance Sheets F-2
Statements of Operations F-4
Statements of Comprehensive Loss F-5
Statements of Changes in Shareholders' Equity F-6
Statements of Cash Flows F-7
Notes to the Financial Statements F-9
INTERIM FINANCIAL STATEMENTS
FINANCIAL STATEMENTS AS OF MARCH 31, 2000 AND DECEMBER 31, 1999
AND FOR THE THREE MONTH PERIOD THEN ENDED
Interim Balance Sheets F-30
Interim Statements of Operations F-32
Interim Statements of Comprehensive Income F-33
Interim Statements of Changes in Shareholders' Equity F-34
Interim Statements of Cash Flows F-35
Notes to the Interim Financial Statements F-37
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
To the Board of Directors and Shareholders of XTAL Fibras Opticas S.A.:
We have audited the accompanying balance sheets of XTAL Fibras Opticas S.A. as
of December 31, 1999 and 1998, and the related statements of operations,
comprehensive loss, cash flows and changes in shareholders' equity for each of
the years then ended, all expressed in United States dollars. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the accompanying financial statements present fairly, in all
material respects, the financial position of XTAL Fibras Opticas S.A. as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE TOUCHE TOHMATSU Campinas, Brazil
Auditores Independentes May 31, 2000
F-1
<PAGE>
XTAL FIBRAS OPTICAS S.A.
------------------------
BALANCE SHEETS
(Expressed in thousands of United States dollars)
------------------------------------------------------------------------------
December 31
------------------
1999 1998
-------- --------
ASSETS
Current assets
Cash and cash equivalents 225 36
Trade accounts receivable, net (note 5) 4,807 1,838
Inventories (note 6) 4,053 7,829
Prepaid expenses, other 497 1,076
-------- --------
Total current assets 9,582 10,779
-------- --------
Property, plant and equipment, net (note 8) 10,378 16,446
Recoverable taxes 101 149
Loans - related parties - 57
Escrow deposits (note 7) 7 10
-------- --------
108 216
-------- --------
Total assets 20,068 27,441
======== ========
(Continue)
F-2
<PAGE>
XTAL FIBRAS OPTICAS S.A.
------------------------
BALANCE SHEETS
(Expressed in thousands of United States dollars) (continued)
------------------------------------------------------------------------------
December 31
------------------
1999 1998
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
Trade accounts payable - suppliers 4,952 4,177
Current portion of long-term debt (note 9) 340 68
Taxes other than income 356 46
Payroll and other charges 614 668
Other 21 144
-------- --------
Total current liabilities 6,283 5,103
-------- --------
NON-CURRENT LIABILITIES
Long-term debt (note 9) 288 55
Intercompany (note 10) 624 -
Long-term taxes 852 1,028
Other long-term liabilities (note 14 (a)) 741 341
Deferred income tax (note 4) 41 48
-------- --------
Total non-current liabilities 2,546 1,472
Commitments and contingencies (note 14)
SHAREHOLDERS' EQUITY
Preferred stock - no par value, 49,963,256 shares authorized
and 5,137,571 and 472,033 issued and outstanding at
December 31, 1999 and 1998, respectively 11,497 5,194
Common stock - no par value, 49,963,256 shares authorized
and 5,137,571 and 472,033 issued and outstanding at
December 31, 1999 and 1998, respectively 11,497 5,194
Appropriated retained earnings:
Legal reserve 140 140
Unappropriated retained (deficit) (8,113) (9,672)
Accumulated other comprehensive (loss) income (3,782) 2,836
Advance for future increase of Capital (note 14 (b)) - 17,174
-------- --------
Total shareholders' equity 11,239 20,866
-------- --------
Total liabilities and shareholders' equity 20,068 27,441
======== ========
The accompanying notes are an integral part of these financial statements.
------------------------------------------------------------------------------
F-3
<PAGE>
XTAL FIBRAS OPTICAS S.A.
------------------------
STATEMENTS OF OPERATIONS
(Expressed in thousands of United States dollars)
------------------------------------------------------------------------------
Years ended
December 31
------------------
1999 1998
-------- --------
GROSS SALES
Total gross sales 25,164 13,944
Value-added and excise tax on sales (7,392) (3,220)
-------- --------
NET SALES 17,772 10,724
-------- --------
Cost of sales (16,043) (11,869)
-------- --------
GROSS PROFIT (LOSS) 1,729 (1,145)
Selling and marketing expenses (456) (1,870)
General and administrative expenses (1,500) (2,461)
Depreciation (300) (79)
-------- --------
Operating expenses (2,256) (4,410)
NON-OPERATING (EXPENSES) INCOME
Interest income (note 3) 405 129
Interest expenses (note 3) (2,646) (2,937)
Other non-operating (expense) income, net (233) 39
-------- --------
LOSS BEFORE INCOME TAX AND SOCIAL CONTRIBUTION (3,001) (8,324)
INCOME TAX (EXPENSES) BENEFIT AND SOCIAL CONTRIBUTION (8) 21
-------- --------
NET (LOSS) (3,009) (8,303)
======== ========
The accompanying notes are an integral part of these financial statements.
------------------------------------------------------------------------------
F-4
<PAGE>
XTAL FIBRAS OPTICAS S.A.
------------------------
STATEMENTS OF COMPREHENSIVE LOSS
(Expressed in thousands of United States dollars) (Continued)
------------------------------------------------------------------------------
Years ended
December 31
------------------
1999 1998
-------- --------
NET LOSS (3,009) (8,303)
-------- --------
Other comprehensive loss:
Foreign currency translation adjustment (6,618) (701)
Recognition of deferred tax liability on change in
functional
Currency (note 2 (b)) - (74)
-------- --------
Net translation (loss) in the year (6,618) (775)
-------- --------
COMPREHENSIVE LOSS (9,627) (9,078)
======== ========
The accompanying notes are an integral part of these financial statements.
------------------------------------------------------------------------------
F-5
<PAGE>
XTAL FIBRAS OPTICAS S.A.
------------------------
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Expressed in thousands of United States dollars)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Advance
Appropriated Accumulated For
retained Unappropriated other future
earnings retained comprehensive increase
Common Preferred legal earnings income of
stock stock reserve (deficit) (loss) capital Total
--------- -------- --------------- -------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AS OF JANUARY, 1, 1998 5,194 5,194 140 (1,369) 3,611 - 12,770
Net loss to common and preferred shares - - - (8,303) - - (8,303)
Recognition of deferred tax liability
on change
in functional currency (note 2 (b)) - - - - (74) - (74)
Net translation loss for the year - - - - (701) - (701)
Advance for future increase of capital - - - - - 17,174 17,174
--------- -------- --------------- -------------- --------------- ------------ -------
BALANCES AS OF DECEMBER 31, 1998 5,194 5,194 140 (9,672) 2,836 17,174 20,866
--------- -------- --------------- -------------- --------------- ------------ -------
Net loss to common and preferred shares - - - (3,009) - - (3,009)
Net translation loss for the year (6,618) (6,618)
Increase in capital (note 14 (b)) 6,303 6,303 - 4,568 - (17,174) -
--------- -------- --------------- -------------- --------------- ------------ -------
BALANCES AS OF DECEMBER 31, 1999 11,497 11,497 140 (8,113) (3,782) - 11,239
========= ======== =============== ============== =============== ============ =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
------------------------------------------------------------------------------
F-6
<PAGE>
XTAL FIBRAS OPTICAS S.A.
------------------------
STATEMENTS OF CASH FLOWS
(Expressed in thousands of United States dollars)
------------------------------------------------------------------------------
Years ended
December 31
------------------
1999 1998
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (3,009) (8,303)
Adjustments to reconcile net loss to cash provided by (used
in)
operating activities:
Depreciation 1,116 1,294
Allowance for doubtful accounts - 1,367
Write-down for slow moving inventories 136 -
Write-down for investments - 36
Gain or loss on disposal of fixed assets (12) (1)
Exchange translation (578) 1,111
Deferred income tax 8 (21)
Decrease (increase) in assets
Trade accounts receivable (2,969) 1,241
Inventories 3,640 (1,444)
Other current assets 579 (744)
Recoverable taxes 48 (47)
Escrow deposits 3 1
Increase (decrease) in liabilities
Trade accounts payable 775 (1,121)
Taxes other than income 310 (91)
Payroll and other charges (54) 124
Other current liabilities (123) 144
Long-term taxes (176) 258
Other long-term liabilities 400 195
-------- --------
Net cash provided by (used in) operating activities 94 (6,001)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (900) (2,789)
Proceeds on disposal of property, plant and equipment 317 32
-------- --------
Net cash (used in) investing activities (583) (2,757)
-------- --------
(Continue)
F-7
<PAGE>
XTAL FIBRAS OPTICAS S.A.
------------------------
STATEMENTS OF CASH FLOWS
(Expressed in thousands of United States dollars) (Continued)
------------------------------------------------------------------------------
Years ended
December 31
------------------
1999 1998
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term debt:
Proceeds 726 21,622
Repayments (110) (14,153)
Intercompany loans:
Proceeds 5,177 9,181
Repayments (5,103) (7,971)
-------- --------
Net cash provided by financing activities 690 8,679
-------- --------
Effect of exchange rate changes on cash and cash equivalents (12) (10)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 201 (79)
Cash and cash equivalents, as of beginning of the year 36 125
-------- --------
Cash and cash equivalents, as of end of the year 225 36
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest 34 459
Taxes on income - -
The accompanying notes are an integral part of these financial statements.
------------------------------------------------------------------------------
F-8
<PAGE>
XTAL FIBRAS OPTICAS S.A.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(Expressed in thousands of United States dollars, except number of shares and
where otherwise noted)
------------------------------------------------------------------------------
1. THE COMPANY AND ITS OPERATIONS
Xtal Fibras Opticas S.A. ("the Company") is a privately held corporation
organized under the laws of the Federative Republic of Brazil and
headquartered in Uberlandia, state of Minas Gerais, with manufacturing
facilities in Campinas, state of Sao Paulo.
The Company is engaged in the business of manufacturing, marketing and
selling optical fibers and optical components, byproducts or similar
products.
XTAL is a subsidiary of Algar S.A. Empreendimentos e Participacoes
("Algar"), which owns approximately 99.99% of the total outstanding capital
shares. Algar has subsidiaries working in Telecommunications (telephone
services, engineering construction and maintenance of communications
networks and long distance transmission), Agribusiness, Services and
Leisure. Algar has approximately 23 companies and 4 divisions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of presentation
The accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America ("U.S. GAAP"), which differ in certain respects from generally
accepted accounting principles in Brazil ("Brazilian GAAP"), as
applied by the Company in the preparation of its statutory financial
statements and for other purposes.
Shareholders' equity and operations included in these financial
statements differ from those included in the statutory accounting
records as a result of (i) the effects of differences between the rate
of devaluation of the Brazilian real ("R$") against the United States
dollar ("$", "U.S.$", or "U.S. dollar"), and (ii) differences in the
methods of measuring amounts under U.S. GAAP and Brazilian GAAP.
b) Foreign currency translation
The Company, which transacts the majority of its business in Brazilian
reais, and, to a lesser extent, in U.S. dollars, has selected the U.S.
dollar as its reporting currency. The U.S. dollar amounts for all
periods presented have been remeasured (translated) following the
guidelines established in Statement of Financial Accounting Standards
("SFAS") No. 52, "Foreign Currency Translation" ("SFAS 52").
F-9
<PAGE>
Prior to December 31, 1997 and pursuant to SFAS 52 and Emerging Issues
Task Force ("EITF") D-55, "Determining a Highly Inflationary Economy",
Brazil was considered to have a highly-inflationary economy.
Accordingly, the Company's reporting currency (US$) was defined as its
functional currency and the remeasurement procedures adopted by the
Company through this date were as follows:
(i) Inventories, property, plant and equipment and accumulated
depreciation, as well as shareholders' equity accounts, were
translated at historical exchange rates and monetary assets and
liabilities denominated in Brazilian currency were translated at
period-end exchange rates (December 31, 1997 - R$ 1.1164: US$
1.00);
(ii) Depreciation and other costs and expenses relating to assets
remeasured at historical exchange rates were calculated based on
the U.S. dollar amount of the assets. Other accounts in the
statements of operations and cash flows were translated at the
average exchange rates prevailing during the period;
(iii) the translation gain or loss resulting from this remeasurement
process was included in the statements of operations currently;
and
(iv) pursuant to paragraph 9(f) of SFAS No. 109 "Accounting for Income
Taxes" ("SFAS 109"), deferred taxes were not recorded with
respect to differences relating to assets and liabilities
translated at historical rates that resulted from changes in
exchange rates or indexing for Brazilian tax purposes.
As from January 1, 1998 the Company concluded that the Brazilian
economy had ceased to be highly inflationary and changed its
functional currency from the reporting currency (U.S. dollars) to the
local currency (R$). Accordingly, as of January 1, 1998 the Company
translated the U.S. dollar amounts of non-monetary assets and
liabilities into reais at the current exchange rate and those amounts
became the new accounting bases for such assets and liabilities. The
resulting deferred taxes associated with the differences between the
new functional currency bases and the tax bases ((iv) above) were
reflected as a deferred tax liability with a corresponding debit taken
directly to the cumulative translation adjustment component of
shareholders' equity.
In mid-January 1999, significant changes occurred in the Brazilian
government's foreign exchange rate policy, which resulted in the
elimination of exchange controls referred to as trading bands. These
trading bands ensured that the real to U.S. dollar exchange rate
remained within a given range. On January 15, 1999, the Brazilian
Central Bank ceased to intervene in the foreign exchange market,
except in exceptional circumstances to mitigate excessive volatility,
and the real to U.S. dollar exchange rate was allowed to fluctuate
freely. On July 30, 1999, the real was trading at approximately R$
1.7892 to US$ 1.00, as compared to the exchange rates in effect on
December 31, 1998 of R$ 1.2087 to US$ 1.00 and on December 31, 1999 of
R$ 1.7890 to US$ 1.00.
The effects of the real devaluation has resulted in a net translation
loss, arising from the translation of the balance sheet accounts
(monetary and non-monetary assets and liabilities) from Brazilian
reais to U.S. dollars. The translation loss has been allocated
directly to the cumulative translation account in shareholders'
equity.
F-10
<PAGE>
c) Foreign currency transactions
Monetary assets and liabilities of Xtal, denominated in currencies
other than the functional currency are measured into their respective
functional currencies at exchange rates in effect at the balance sheet
date. The resulting exchange gains or losses are included in the
statement of operations.
d) Use of estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of
the dates of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. In the preparation
of these financial statements, estimates and assumptions have been
made by management concerning the selection of useful lives of
property, plant and equipment, provisions necessary for trade
receivables, inventories and contingent liabilities, income tax
valuation allowances and other similar evaluations. Actual results may
vary from those estimates.
e) Cash and cash equivalents
Cash and cash equivalents include cash on hand, interest-bearing time
deposits and other interest-bearing short-term securities denominated
in Brazilian reais. Time deposits classified as cash equivalents have
original maturities of three months or less.
f) Accounts receivable
Accounts receivables are stated at estimated realizable values.
Allowances are recorded, when necessary, in an amount considered by
management to be sufficient to meet probable future losses related to
uncollectible accounts.
g) Inventories
Inventories are stated at the lower of average cost of acquisition or
production, or market.
h) Property, plant and equipment
Owned property, plant and equipment is recorded at cost. Expenditures
for maintenance and repairs are charged to expense when incurred.
F-11
<PAGE>
Depreciation is provided on a straight-line basis over the useful
lives of the assets as follows:
Years
-------
Buildings and improvements 10-25
Machinery and equipment 3-10
Furniture and fixtures 5-10
Installations 6-10
Vehicles 5
EDP equipment 3
Assets under construction are not depreciated until they are placed in
service.
i) Recoverability of long-lived assets
In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of" ("SFAS
121"), management reviews long-lived assets, primarily property, plant
and equipment to be held and used in the business and certain deposits
and tax incentive investments, for impairment whenever events or
changes in circumstances indicate that the carrying value of an asset
or group of assets may not be recoverable.
Assets are grouped and evaluated for possible impairment at a plant
level; impairment is assessed based on undiscounted cash flows from
forecasted operating results of the business over the estimated
remaining lives of the assets.
j) Compensated absences
Vacation expense is fully accrued in the period the employee renders
services to earn such vacation.
F-12
<PAGE>
k) Income taxes
Brazilian income taxes comprise federal income tax and social
contribution, the latter a federally mandated tax based on income, as
recorded in XTAL's respective accounting records. There are no state
or local income taxes in Brazil.
For the purposes of these financial statements, the Company has
applied SFAS 109 for all periods presented. SFAS 109 requires the
application of the comprehensive liability method of accounting for
income taxes. Under this method, a company is required to recognize a
deferred tax asset or liability for all temporary differences and
operating losses, except that, prior to 1998 and in accordance with
paragraph 9(f) of SFAS 109, deferred taxes were not recorded for
differences relating to certain assets and liabilities that were
remeasured from reais to U.S. dollars at historical exchange rates and
that resulted from changes in exchange rates or indexing to inflation
in local currency for tax purposes. Such accumulated differences were
recognized in shareholders' equity when the Company adopted the real
as the functional currency on January 1, 1998.
Deferred tax assets and liabilities are measured using enacted tax
rates in effect for the year in which those temporary differences are
expected to be recovered or settled. Under SFAS 109, the effect on
deferred tax assets and liabilities of changes in tax rates is
recognized in income in the period that includes the enactment date.
Deferred tax assets and liabilities are reduced through the
establishment of a valuation allowance, as appropriate, if, based on
the weight of evidence, it is more likely than not that the deferred
tax assets will not be realized.
l) Summary of Brazilian tax structure
Taxes in Brazil are levied by the federal, state, and municipal
governments. Additionally, certain taxes are levied related to
employment of personnel. The principal federal taxes applicable to
Xtal are:
o Corporate Income Tax (IRPJ)
o Social contribution on net profits (CSLL)
o Social contribution on turnover (COFINS)
o Social integration contribution on turnover (PIS)
o Financial transactions tax (IOF)
The main state tax is the merchandise circulation tax (ICMS), or
simply the state value added tax (VAT). The principal municipal tax is
the service tax (ISS).
F-13
<PAGE>
Corporate Income Tax: In general, all business entities are liable for
corporate income tax, including both corporations (S.A.'s) and limited
liability companies (limitadas). A consortium is not regarded as a
separate taxable entity for tax purposes; each company belonging to
the consortium is taxed individually. The corporate income tax rate is
15% on annual net income of $R240,000 or less and 25% on net income
before taxes greater than $R240,000. Additionally an 8% tax is levied
on net income before taxes for social contribution (discussed below)
and, as such, brings the total effective tax rate to 33%. The total
33% is a creditable for US income tax purposes.
Social Contribution on Net Profit: The social contribution on net
profit (CSLL) is intended to fund social and welfare programs and is
paid in addition to the corporate income tax. The rate is calculated
as 8% of net income before taxes.
Social Contribution on Turnover: Social contribution on turnover
(COFINS) is levied at 2% of monthly sales to finance social security
and welfare programs.
Social Integration Contribution on Turnover: Legal entities must
contribute 0.65% of monthly sales to a federal program (PIS), whose
purpose is to allow employees to participate in Brazil's economic
growth.
Financial Transaction Tax: The financial transaction tax (IOF) is
levied on specific Brazilian and foreign financial transactions. The
tax is payable by borrowers, purchases of securities and foreign
currency. The rates vary according to the maturity terms and types of
transactions. The rate has been as high as 25%. Currently a tax of 2%
is levied on foreign loans with initial terms less than two years. The
tax is used by the government in the implementation of monetary
policy.
F-14
<PAGE>
ICMS: ICMS is a sales value added tax levied by the states on the
circulation of merchandise and transportation services and represents
the major source of revenue for the states. It is charged on each
delivery of goods from the production stage to the consumer stage.
Assets imported from abroad are also taxable. Other taxable items
include interstate and inter municipal transportation services,
communication services, and the generation and distribution of
electric energy. ICMS rates vary from 0% to 25% but are most commonly
found in the 17%-18% range. The tax is usually paid monthly and is
calculated by successive sellers collecting ICMS on all sales (output
tax) and subtracting ICMS paid during the month on purchases (input
tax). If the output tax exceeds the input tax the excess must be
remitted to the state, conversely if the input tax exceeds the output
tax the residual is carried forward to be used against future output
tax collections.
Service Tax: Service tax (ISS) is levied on gross sales derived from
services rendered. The tax rates vary between 2% and 10%, but the
typical rate is 5%. Activities classified as services are set forth in
federal legislation. The following activities are normally considered
services: consulting, advertising, engineering, building,
transportation, activities of hospitals, public entertainment,
tourism, leasing of equipment, activities of hotels, and movie
studios.
Recoverable taxes: The recoverable taxes included in the balance
sheet accounts relate to excise tax (IPI) imposed on goods or products
imported or manufactured in Brazil. The tax is levied on the price of
transactions, inclusive of ancillary expenses and ICMS. Tax rates
differ according to the characterization of product, with luxury items
subject to the highest rate of 365%, and the average rate being 15%.
Limited exemptions may apply. The tax is "equivalent" (as determined
under the IPI laws) to a value added tax; that is, entities are
entitled to record input tax credits for IPI paid and collect
offsetting IPI debits from their customers.
m) Pension plan
The Company participates in a single-employer funded
defined-contribution pension plan (the "Fundo Integrativo Dos
Funcionarios do Grupo Algar"). Pension plan benefits for the Fundo
Integrativo Dos Funcionarios do Grupo Algar Plan, are based primarily
on participants' compensation on retirement and years of service. The
Plan is available to substantially all employees of the Company.
n) Other assets and liabilities
Other assets and liabilities are stated at known or likely amounts
plus related charges and monetary adjustments and provisions for
market value adjustment, if applicable.
o) Sales and expenses
Sales revenues are recognized as finished goods are shipped and as
other products are supplied. Expenses and costs are recognized on the
accrual basis.
F-15
<PAGE>
p) Environmental expenditures
Expenditures relating to ongoing compliance with environmental
regulations, designed to minimize the environmental impact of the
Company's operations, are charged against earnings on the date
expended. Provisions for expenditures are charged against earnings at
the time that they are considered to be probable and reasonably
estimable. Management believes that, at present, its plant is in
substantial compliance with the environmental regulations applicable
to it.
q) Marketing costs
Marketing costs are reported in selling and marketing expenses and
include costs of advertising and other marketing activities.
r) Start-up costs
In accordance with the American Institute of Certified Public
Accountants ("AICPA") Statement of Position ("SOP") 98-5, "Reporting
the Costs of Start-Up Activities", start-up costs are expensed as
incurred.
s) Concentration of credit risk
Financial instruments, which potentially subject the Company to
concentrations of credit risk, are principally bank deposits and
accounts receivable. Cash and cash equivalents are deposited with high
credit quality financial institutions. Accounts receivables typically
represent purchases and are derived from the revenues earned from
customers in Brazil and are denominated in Brazilian reais. The
company maintains an allowance for uncollectible accounts based upon
the expected collectibility of accounts receivable. During the years
ended December 31, 1999 and 1998, approximately 53 % and 56 % in gross
sales were generated from two clients.
t) Comprehensive income (loss)
Effective January 1, 1998, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." Under SFAS 130 changes in net assets
of an entity resulting from transactions and other events and
circumstances from non-owner sources are reported in a financial
statement for the period in which they are recognized. Adoption of
SFAS 130 did not impact the financial statements of the Company.
u) Segment Reporting
Effective January 1, 1998, the Company adopted SFAS 131, "Disclosures
about Segments of an Enterprise and Related Information." The company
operates as a single segment and will evaluate additional segment
disclosure requirements as it expands its operations.
F-16
<PAGE>
v) New accounting pronouncements
In June 1999, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No.
133", which defers the effective date of SFAS No. 133 to all fiscal
quarters of all fiscal years beginning after June 15, 2000. SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities",
issued in June 1998, requires that all derivative financial
instruments be reflected on the balance sheet at fair value, with
changes in fair value recognized periodically in earnings or as a
component of other comprehensive income, depending on the nature of
the underlying item being hedged. In the event that an entity does not
effectively hedge against an underlying item, changes in the fair
value of the derivative will be recognized currently in the statement
of operations. The impact of adopting this statement is not expected
to be material to the Company.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software developed or Obtained for Internal Use." SOP 98-1
provides guidance on accounting for the costs of computer software
developed or obtained for internal use. The pronouncement identifies
the characteristics of internal use software and provides guidance on
new cost recognition principles. The impact of adopting this statement
was not material to the Company.
3. INTEREST INCOME AND EXPENSES
For the years
Ended December 31
-----------------
1999 1998
------- -------
Interest income
Interest income on cash equivalents 3 27
Interest income on intercompany credit 152 12
Exchange rate variations 248 78
Other 2 12
------- -------
405 129
======= =======
Interest expense
Interest expense on loan debt - (737)
Interest expense on Intercompany loan (795) (246)
Exchange rate variations on loans/supplies (1,300) (637)
Interest on liabilities other than loans (39) (51)
Banking charges, taxes and other (512) (1,266)
------- -------
(2,646) (2,937)
======= =======
F-17
<PAGE>
4. INCOME TAXES
Income taxes in Brazil include federal income tax and social contribution.
The Brazilian statutory rates for the years presented are as follows:
Year ended
December 31,
-----------------
1999 1998
-------- -------
% %
- -
Federal income tax 25.00 25.00
Social contribution 12.00 8.00
-------- -------
Composite income tax rate 37.00 33.00
======== =======
The amount reported as income tax (expense) benefit in the consolidated
statements of operations is reconciled to tax expense at the statutory
federal income tax rate as follows:
Year ended
December 31,
-----------------
1999 1998
-------- -------
$ $
- -
Income before income taxes (3,009) (8,303)
======== =======
Tax benefit, at statutory rates 1,113 2,740
Increase in valuation allowance (1,113) (2,740)
Effect of changes in tax rates (2) -
Effects of differences between indexation and
translation;
Depreciation on a different asset base 13 24
Other (19) (3)
-------- -------
Tax (expense) benefit as reported in the
Statement of operations (8) 21
======== =======
The major components of the deferred tax accounts are as follows:
As of December 31
--------------------
1999 1998
--------- ---------
Brazilian net operating loss carryforwards 2,459 2,044
Deferred income tax relating to temporary differences 620 629
--------- ---------
Gross deferred income tax assets 3,079 2,673
Valuation allowance (3,079) (2,673)
--------- ---------
Deferred income tax assets, net of valuation - -
allowances
========= =========
As of December 31
--------------------
1999 1998
--------- ---------
Deferred income tax liabilities:
Deferred non current income tax liability on change
in functional
Currency 41 48
--------- ---------
Total non-current deferred income tax liabilities 41 48
========= =========
F-18
<PAGE>
5. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivables relate primarily to sales to domestic customers.
The Company has concentration credit risk for accounts receivable from some
customers, which is subject to business cycle variations. Such customers
held balances at each year-end as follows:
December 31
-----------------
1999 1998
------- --------
Furukawa Ind. S/A Produtos Eletronicos 899 -
Marsicano S/A Ind. e Cond. Eletricos 923 1,367
Cabelte Cabos Eletricos 585 -
Telcon Fios e Cabos para Telecomunicacao 836 346
Alcatel Telecomunicacoes S/A 2,028 -
Cabelte Industris Brasileira Ltda. - 847
Other 459 645
------- --------
5,730 3,205
Allowance for doubtful account (923) (1,367)
------- --------
Total 4,807 1,838
======= ========
6. INVENTORIES
December 31
-----------------
1999 1998
------- --------
Finished products 640 3,777
Work in process 772 556
Raw materials and indirect materials 2,332 2,552
Resale materials 153 336
Imports in progress 292 608
------- --------
4,189 7,829
Allowance for slow-moving inventory (136) -
------- --------
4,053 7,829
======= ========
7. ESCROW DEPOSITS
The Company is contesting the payment of certain taxes and has made
court-approved escrow deposits of equivalent amounts pending final
decisions. Deposits of US$ 7 (1998- US$ 10), which relate to proceedings
for which the Company has received favorable rulings or for which loss is
not considered probable, have no offsetting allowances.
F-19
<PAGE>
8. PROPERTY, PLANT AND EQUIPMENT
Years 1999 1998
------ -------- ---------
Land 140 207
Buildings and improvements 10-25 4,228 5,817
Machinery and equipment 3-10 8,972 8,749
Furniture and fixtures 5-10 163 218
Installations 6-10 934 728
Vehicles 5 29 53
EDP equipment 3 238 222
-------- --------
14,704 15,994
Accumulated depreciation (4,344) (4,773)
Projects in progress 18 5,225
-------- --------
10,378 16,446
======== ========
9. LONG-TERM DEBT
Long-term loans and financing relate primarily to permanent asset import
financing, at an interest rate of LIBOR plus 0.75% to 2.18% per annum,
secured by Algar S.A. Empreendimentos e Participacoes. The maturities of
long-term debt are as follows:
December 31
------------
1999
---------
2000 340
2001 288
---------
Total long-term debt 628
Current portion of long-term debt 340
---------
Total 288
=========
F-20
<PAGE>
10. RELATED PARTY TRANSACTIONS/BALANCES
Transactions/balances with related parties were as follows:
<TABLE>
<CAPTION>
Administrative Interest
Assets Liabilities expenses expense, net
----------- --------------- ------------------- -----------------
<S> <C> <C> <C> <C>
1999
----
Due to related parties:
Algar S.A. Empreendimentos
e Participacoes - 624 203 770
Algar Telecom S.A. - 203 -
----------- --------------- ------------------- -----------------
- 624 406 770
=========== =============== =================== =================
1998
----
Due from related parties:
Algar S.A. Empreendimentos
e Participacoes 57 - - -
Due to related parties:
Algar S.A. Empreendimentos
e Participacoes - - 308 281
----------- --------------- ------------------- -----------------
57 - 308 281
=========== =============== =================== =================
</TABLE>
The $624 loan matures on September 30, 2000 and carries interest at a rate
of 17.81%. Company management considers related-party transactions/balances
as usual market transactions. Intercompany transactions/balances relate to
contracts at average interest rates, which during the year approximated the
market rates.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced sale or liquidation sale. Significant
differences can arise between the fair value and carrying amounts of
financial instruments that are recognized at historical cost amounts.
F-21
<PAGE>
The carrying amounts and fair values of the Company's financial instruments
as of December 31 are as follows:
As of December 31
-----------------------------------
1999 1998
----------------- -----------------
Carrying Fair Carrying Fair
Amount value Amount Value
--------- ------ --------- ------
On balance sheet financial instruments:
Cash and cash equivalents 225 225 36 36
Escrow deposits 7 7 10 10
Long-term debt (including current
portion) 628 628 123 123
The values provided are representative of the fair values as of December
31, 1999 and 1998 and do not reflect subsequent changes in the economy,
interest and tax rates, and other variables that may impact determination
of fair value. The following methods and assumptions were used in
estimating fair values for financial instruments:
Cash and cash equivalents and short-term investments: The carrying amount
reported in the balance sheet for cash and cash equivalents and short-term
investments approximates fair value due to the short maturity of these
instruments.
Escrow deposits: The carrying amount of escrow deposits approximates fair
value, as interest is receivable on such deposits at a variable market
rate.
Long-term debt: The carrying value of the Company's long term debt
approximates fair value due to the interest rates of these instruments.
12. SHAREHOLDERS' EQUITY
Capital and shareholder rights
(i) Share capital
Subscribed and paid-in capital comprises 10,275,142 shares of no par
value, of which 5,137,571 are common shares and 5,137,571 are
preferred shares.
F-22
<PAGE>
(ii) Share rights
Common shares have the right to vote at shareholder meetings while
preferred shares are non-voting. Preferred shares do, however, have
priority in the return of capital in the event of liquidation and in
the receipt of a mandatory non-cumulative dividend (the "Mandatory
dividend") of 25% of consolidated net income as determined in
accordance with Brazilian Corporate Law, due to both preferred and
common shareholders. Under Brazilian Corporate Law, any payment of
interim dividends and interest attributable to shareholders equity is
netted off against the amount of the Mandatory Dividend in the year of
payment (applicable). In any year, the board of directors of the
Company may determine that it is inadvisable in view of the Company's
financial position to pay the Mandatory Dividend. In this case, any
retained earnings of the Company must be allocated to a special
reserve account. Furthermore, in the event that the Mandatory Dividend
is omitted for three consecutive years, the preferred shares acquire
voting rights until payment of such dividends is reserved.
(iii) Appropriated retained earnings
Under Brazilian Corporate Law, Xtal is required to appropriate 5% of
its annual statutory accounting basis local currency earnings, after
absorbing accumulated losses, to a statutory reserve until each such
reserve equals 20% of paid capital. The reserve may be used to
increase capital or absorb losses, but may not be distributed as
dividends.
(iv) Unappropriated retained earnings
Dividend distributions are limited to retained earnings of the Company
as determined in accordance with the Brazilian Corporate Law. There
were no distributable retained earnings as of December 31, 1999 and
1998, respectively.
(v) Dividends
Dividends are payable in Brazilian reais, and are reflected in the
financial statements upon approval. Brazilian Law permits the payment
of dividends only from retained earnings based on the amounts stated
in the Company's statutory accounting records. No dividends were
declared or paid for the years ended 1999 and 1998, respectively.
F-23
<PAGE>
13. PAYROLL, PROFIT SHARING AND RELATED CHARGES
Approximately 100% of the Company's production and industrial employees are
members of the Participacao nos Resultados da Epresa (the "Union"). The
collective bargaining agreement (between the Union and Xtal - covering all
Company employees who are formally members of the Union, executives are not
covered), provides for an annual distribution to employees of a specified
amount, as agreed by the Union and the Company in the first quarter of each
year, for the following year. On an individual employee basis, the
distribution is dependent on department and grade. Expenses of the Company
under these programs are included in general and administrative expenses
and amounted to $ 119 and $65 for the years ended December 31, 1999, and
1998, respectively.
14. COMMITMENTS AND CONTINGENCIES
(a) Accrued liability for legal proceedings
The Company is contesting the payment of certain taxes and
contributions and has made court escrow deposits (restricted deposits
for legal proceedings) of equivalent or lesser amounts pending final
legal decisions. Probable losses, provided as liabilities of the
Company based on the advice of outside legal counsel, are summarized
below:
December 31
----------------
1999 1998
-------- -------
Labor claims (1) 41 -
Income tax withheld at source - Intercompany loan 310 -
Income tax and social contribution 60 81
Value-added sales taxes ("ICMS") 164 129
Value-added sales taxes ("IPI") 146 126
Other 20 5
-------- -------
Total accrued liabilities for legal proceedings 741 341
======== =======
-----------------
(1) The Company is party to a number of lawsuits filed by former
employees related to overtime, dangerous working conditions and
various employment relationships. As of December 31, 1999 the Company
has accrued $ 41 relating to such lawsuits. Escrow deposits against
probable losses relating to labor claims totaled $ 150 as of December
31, 1999.
Management believes, based on advice from its attorneys, that the
provision for contingencies is sufficient to meet probable and
reasonably estimable losses, and that the ultimate resolution will not
have a significant effect on the Company's liquidity, consolidated
financial position or results of operations.
F-24
<PAGE>
(b) Financial guarantee and recourse arrangement (Advance for future
increase of capital)
On December 1, 1998, XTAL entered into an agreement of Advance of
Financial Resources to offset various supplier and financial debt with
Algar S.A. Empreendimentos e Participacoes ("Algar" or Parent Company)
for a total amount of US$ 4.2 million (advance for future increase of
capital). Such agreement was accounted for by the Parent Company as a
capital contribution and Xtal duly amended their by-laws and Social
Contract on April 27, 1999, to effectively increase capital. At
December 31, 1999, (pound)627 (approximately US$ 1,013) remained
payable in the name of Xtal to Unibanco at an interest rate of LIBOR
plus 11.79%. Several machines are given as guaranty for this loan. In
connection with the acquisition agreement described in Note 16, Algar
assumed the (pound)627 liability. This amount is not recorded as a
liability in the accompanying financial statements.
On December 31, 1998, XTAL entered into a second agreement of Advance
of Financial Resources for Future Capital Increase with Algar S.A.
Empreendimentos e Participacoes ("Algar") for a total amount of $13
million (Advance for future increase of capital) and such amount was
consigned in an account on behalf of Algar. This agreement was also
accounted for by the Parent Company as a capital contribution whereby
Xtal amended their by-laws and Social Contract to effectively increase
capital. In association with this agreement, there were two other
Agreements for the Assumption of Debt by the parties with the
following terms:
Algar assumes the debts of Xtal before various banks for a total of
US$ 8 million Algar assumes the debts of Xtal for a supplier totaling
US$ 3.5 million
Such agreements, added to the balance of intercompany loans payable in
the amount of US$ 1.5 million, were also accounted for by the Parent
company as a capital contribution. Xtal effectively registered these
amounts by amending and registering their Social Contract on April 27,
1999, to effectively increase capital. Approximately US$ 1.5 million,
due September 19, 2000, remains payable in the name of Xtal to Banco
Brascan S/A at an interest rate of LIBOR plus 2% per year. Also, US$
384 thousand and US$ 288 thousand, due October 31 and August 31, 2000
respectively, remain payable in the name of Xtal to Dresdner Bank
Lateinamerika AG at an interest rate of LIBOR plus 0.75% per year.
Algar remained the guaranty for this amount should Xtal default. In
connection with the acquisition agreement described in Note 16, Algar
assumed these liabilities, totaling approximately US$ 2,172. These
amounts are not recorded as liabilities in the accompanying financial
statements.
F-25
<PAGE>
(c) Postemployment benefits
The Company makes monthly contributions based on payroll expense to
the government pension, social security and severance indemnity plans.
Such payments are expensed as incurred.
In addition, certain payments are due on dismissal of employees
pursuant to Article 18 of Law 8.036 (dated May 11, 1990) being
principally (i) one month's salary, and (ii) a severance payment based
on the accumulated balance of each employees government severance
indemnity account. The Company makes contributions to the government
severance indemnity plan for each of its employees on a monthly basis;
the additional severance payment made by the Company is calculated at
40% of the balance of this account. Severance benefits payable to
employees do not vest or accumulate.
(d) Environmental issues
The Company is subject to Federal, State and Local laws and
regulations relating to the environment. These laws generally provide
for control of air and effluent emissions and require responsible
parties to undertake remediation of hazardous waste disposal sites.
Civil penalties may be imposed for noncompliance.
Future information and developments will require the Company to
continually reassess the expected impact of environmental matters.
However, the Company has evaluated its total environmental exposure
based on current available data and believes that compliance with all
applicable laws and regulations will not have a material impact on the
Company's liquidity, consolidated financial position or results of
operations.
F-26
<PAGE>
15. SEGMENT INFORMATION
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS 131"). SFAS 131 adopts a
"management approach" for segment reporting; this approach designates the
internal organization that is used by management for making decisions and
assessing performance as the source of the Company's reportable segments.
SFAS 131 also requires disclosure about products and services, geographical
areas, and major customers.
(a) Description of the types of products and services from which the
reportable segment derives its revenues
The Company has one reportable segment: optical fibers and related
byproducts. The segment produces two types of communication optical
fibers (as of December 31, 1999); multi-mode and single-mode fiber.
The Company has one production facility in Campinas.
(b) Measurement of segment profit and loss and segment assets
The accounting policies underlying the financial information provided
for the one segment is based on Brazilian GAAP. These amounts do not
differ from US GAAP. The Company's reportable segment offers separate
products. The reportable segment is the responsibility of one product
manager who has knowledge of product lines, operational risks and
opportunities.
(c) Geographical areas
International sales and operations for the Company account for
approximately 4% of consolidated net sales and long-lived assets,
respectively.
16. SUBSEQUENT EVENTS
o Changes in tax legislation
In 1999, the Government introduced changes to the income tax law with
effective dates throughout 2000. The significant provisions of these
changes are summarized below:
(i) The COFINS (tax for social security financing) rate remains
unchanged at 3%; however, beginning in January 2000, 33.33% of
COFINS can no longer be offset against Social Contribution on Net
Income ("CSSL");
(ii) The CSSL rate was reduced from 12% to 9% beginning in February
2000, and from 9% to 8% beginning January 2003; and
(iii) The assumed credit of IPI (Excise tax) can be offset against PIS
(Employees' Profit Participation Program) and COFINS.
F-27
<PAGE>
o Firm Commitment for the Acquisition of the Company
On April 26, 2000, the Company consummated an agreement with
Fibercore, Inc. (the "Buyer") and Algar S.A. (the "Seller") which sets
forth the terms and conditions for the sale of 90% of the outstanding
common stock or substantially all the assets and specified liabilities
of XTAL, subject to Algar holding a 10% equity interest in Xtal. On
the closing date (not to exceed 60 days from acceptance of the
acquisition agreement), a shareholders agreement shall be entered into
providing certain criteria. The purchase price for XTAL shall be US$
25 million, payable as follows and subject to the following terms and
conditions:
(i) Within 30 days of the signing or May 31, 2000, whichever is
later, Buyer shall pay the seller a sum of US$ 2 million in the
form of a deposit. This deposit may be returned to the buyer,
inclusive of accrued interest, based on reasonable interest
rates, if certain events do not transpire.
(ii) An additional US$ 8 million shall be paid in cash on closing
date, which is to be 60 days from the April 26, 2000 agreement or
June 30, 2000, whichever date is later.
(iii) US$ 10 million via a promissory note, bearing interest at 6%,
delivered at the closing date, and payable 180 days following the
close, or December 31, 2000, whichever is later. The promissory
note may be reduced in principal to US$ 7.5 million in the event
the seller does not deliver to the Buyer on the closing date, an
executed non cancelable 3 year purchase order (the "Purchase
Order"), at prevailing market prices which covers 50% of the
fiber optical requirements of Algar. The purchase price can be
reduced further, to US$ 6.5 million, provided that the Buyer
makes all payments thereunder on or before August 31, 2000.
(iv) In the event the Buyer does not make the payment under the
promissory note above, the buyer shall pay an additional 3%, in
addition to the original 6% per annum, plus the following
extensions:
(v) US$ 1.25 million through a promissory note bearing interest at 6%
per annum, payable 450 days following the closing date. The
principal and interest amount of the promissory note may be
reduced proportionately in the event the gross profit of Xtal for
the year 2000 does not achieve certain levels. US$ 1.25 million
through a promissory note bearing interest at 6% per annum,
payable 810 days following the closing date. The principal and
interest amount of the promissory note may be reduced
proportionately in the event the gross profit of Xtal for the
year 2001 does not achieve certain levels.
F-28
<PAGE>
(vi) On the date which is 1,080 days following the closing date, the
Buyer shall, pursuant to the Buyer's call option, acquire the
remaining shares held by the Seller in Xtal or in the purchasing
entity upon payment in cash of US$ 2.5 million plus interest at a
rate of 6% per annum. The Buyer reserves the right to prepay this
amount at any time without penalty.
o Employment agreements
As part of the acquisition agreement, reasonable efforts are to be
made in executing agreements with key employees by XTAL or the buyer
for not less than one year, under customary terms and conditions.
These include, where appropriate, non-compete, confidentiality and
non-solicitation customer agreements.
------------------------------------------------------------------------------
F-29
<PAGE>
XTAL FIBRAS OPTICAS S.A.
------------------------
INTERIM BALANCE SHEETS
(Expressed in thousands of United States dollars)
------------------------------------------------------------------------------
March 31, December 31,
2000 1999
------------ ------------
ASSETS (Unaudited)
Current assets
Cash and cash equivalents 49 225
Trade accounts receivable, net 4,186 4,807
Inventories (note 3) 3,578 4,053
Prepaid expenses, other 999 497
------------ ------------
Total current assets 8,812 9,582
------------ ------------
Property, plant and equipment, net 10,467 10,378
Recoverable taxes 145 101
Other 7 7
------------ ------------
152 108
------------ ------------
Total assets 19,431 20,068
============ ============
(Continued)
F-30
<PAGE>
XTAL FIBRAS OPTICAS S.A.
------------------------
INTERIM BALANCE SHEETS
(Expressed in thousands of United States dollars) (Continued)
------------------------------------------------------------------------------
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Trade accounts payable - suppliers 4,011 4,952
Current portion of long-term debt 290 340
Taxes other than income 441 356
Payroll and other charges 818 614
Other 19 21
------------ ------------
Total current liabilities 5,579 6,283
------------ ------------
NON-CURRENT LIABILITIES
Long-term debt - 288
Intercompany 733 624
Long-term taxes 651 852
Other long-term liabilities 801 741
Deferred income tax 46 41
------------ ------------
2,231 2,546
Commitments and contingencies (note 4)
SHAREHOLDERS' EQUITY
Preferred stock - no par value, 49,963,256 shares
authorized and 5,137,571 issued and outstanding
at March 31, 2000 and December 31, 1999 11,497 11,497
Common stock - no par value, 49,963,256 shares
authorized and 5,137,571 issued and
outstanding at
March 31, 2000 and December 31, 1999 11,497 11,497
Appropriated retained earnings:
Legal reserve 140 140
Unappropriated retained (deficits) (8,015) (8,113)
Accumulated other comprehensive (loss) (3,498) (3,782)
------------ ------------
Total shareholders' equity 11,621 11,239
------------ ------------
Total liabilites and shareholders' equity 19,431 20,068
============ ============
The accompanying notes are an integral part of these Financial Statements.
------------------------------------------------------------------------------
F-31
<PAGE>
XTAL FIBRAS OPTICAS S.A.
------------------------
INTERIM STATEMENTS OF OPERATIONS
(Expressed in thousands of United States dollars)
------------------------------------------------------------------------------
March 31, March 31,
2000 1999
------------ -----------
(Unaudited) (Unaudited)
GROSS SALES
Total gross sales 9,454 1,201
Value-added and excise tax on sales (2,660) (287)
------------ -----------
Net sales 6,794 914
Cost of sales (6,270) (885)
------------ -----------
GROSS PROFIT 524 29
Selling and marketing expenses (106) (106)
General and administrative expenses (150) (339)
Depreciation (24) (26)
------------ -----------
Operating expenses (280) (471)
NON-OPERATING (EXPENSES) INCOME
Interest income 13 231
Interest expenses (91) (1,674)
Other non-operating (expense) income, net (60) 3
------------ -----------
INCOME (LOSS) BEFORE INCOME TAX AND
SOCIAL CONTRIBUTION 106 (1,882)
INCOME TAX (EXPENSES) BENEFIT AND SOCIAL (8) (131)
CONTRIBUTION
------------ -----------
Net income (loss) 98 (2,013)
============ ===========
The accompanying notes are an integral part of these Financial Statements.
------------------------------------------------------------------------------
F-32
<PAGE>
XTAL FIBRAS OPTICAS S.A.
------------------------
INTERIM STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Expressed in thousands of United States dollars) (Continued)
------------------------------------------------------------------------------
March 31, March 31,
2000 1999
------------ ------------
(Unaudited) (Unaudited)
Net income (loss) 98 (2,013)
------------ ------------
OTHER COMPREHENSIVE INCOME (LOSS),
NET OF TAX:
Foreign currency translation adjustment 284 (3,468)
------------ ------------
Other comprehensive income (loss) 284 (3,468)
------------ ------------
Comprehensive income (loss) 382 (5,481)
============ ============
The accompanying notes are an integral part of these Financial Statements.
------------------------------------------------------------------------------
F-33
<PAGE>
XTAL FIBRAS OPTICAS S.A.
------------------------
INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Expressed in thousands of United States dollars)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Appropriated
retained Unappropriated Accumulated
earnings retained other
Common Preferred legal earnings Comprehensive
stock stock reserve (deficit) income (loss) Total
----- ----- ------- --------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCES AS OF 11,497 11,497 140 (8,113) (3,782) 11,239
JANUARY 1, 2000 (AUDITED)
Net income available to common
and preferred shares - - - 98 - 98
Net translation gain for the period - - - - 284 284
------- ------- ------- -------` ------- -------
BALANCES AS OF
MARCH 31, 2000 (UNAUDITED) 11,497 11,497 140 (8,015) (3,498) 11,621
======= ======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
------------------------------------------------------------------------------
F-34
<PAGE>
XTAL FIBRAS OPTICAS S.A.
------------------------
INTERIM STATEMENTS OF CASH FLOWS
(Expressed in thousands of United States dollars)
------------------------------------------------------------------------------
Years ended
March 31
---------------------
2000 1999
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES (Unaudited) (Unaudited)
Net income (loss) 98 (2,013)
Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Depreciation 329 239
Allowance for doubtful accounts-reversal (53) -
Exchange translation 55 (802)
Deferred income taxes 8 131
Decrease (increase) in assets:
Trade accounts receivable 674 999
Inventories 475 1,162
Other current assets (502) 92
Recoverable tax (44) 44
Other assets - 3
Increase (decrease) in liabilities
Trade accounts payable (941) (2,941)
Taxes other than on income 85 (15)
Payroll and other charge 204 (205)
Other current liabilities (2) (24)
---------- ---------
Long-term taxes (201) (256)
---------- ---------
Other long-term liabilities 60 (80)
---------- ---------
Net cash provided by (used in) operating activities 245 (3,666)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (170) (840)
Proceeds on disposal of property, plant and equipment 1 237
---------- ---------
Net cash used in investing activities (169) (603)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term debt
Proceeds 13 680
Repayments (343) (102)
Intercompany
Proceeds 345 3,872
Repayments (272) (132)
---------- ---------
Net cash (used in) provided by financing activities (257) 4,318
---------- ---------
(Continue)
F-35
<PAGE>
XTAL FIBRAS OPTICAS S.A.
------------------------
INTERIM STATEMENTS OF CASH FLOWS
(Expressed in thousands of United States dollars) (Continued)
------------------------------------------------------------------------------
Years ended
March 31
---------------------
2000 1999
---------- ---------
(Unaudited) (Unaudited)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 5 (11)
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (181) 49
CASH AND CASH EQUIVALENTS AS OF
BEGINNING OF THE YEAR 225 36
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR 49 74
========== =========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the period for:
Interest 55 25
Taxes on income - -
------------------------------------------------------------------------------
The accompanying notes are an integral part of these Financial Statements.
------------------------------------------------------------------------------
F-36
<PAGE>
XTAL FIBRAS OPTICAS S.A.
------------------------
NOTES TO THE INTERIM FINANCIAL INFORMATION
(Expressed in thousands of United States dollars, except number of shares and
where otherwise noted) (Continued)
------------------------------------------------------------------------------
1 INTERIM FINANCIAL STATEMENTS
The interim financial statements (the "Interim Financial Statements") of
XTAL Fibras Opticas S.A. (the "Company") has been prepared in accordance
with generally accepted accounting principles in the United States ("U.S.
GAAP"), which differ in certain respects from generally accepted accounting
principles in Brazil ("Brazilian GAAP"), as applied by the Company in the
preparation of its statutory financial statements and for other purposes.
Shareholders' equity and net (loss) income included in these Interim
Financial Statements differ from those included in the accounting records
as a result of (i) the effects of differences between the rate of
devaluation of the Brazilian real ("R$") against the United States dollar
("$", "US$ "or "U.S. dollar") and (ii) differences in the methods of
measuring amounts under U.S.GAAP and Brazilian GAAP.
These Interim Financial Statements should be read in conjunction with the
U.S. GAAP financial statements and related notes as of December 31, 1999
and 1998, and for each of the years then ended. For purposes of these
Interim Financial Statements, certain information and note disclosures
normally included in annual financial statements prepared in accordance
with generally accepted accounting principles have been omitted. The
Company believes that the disclosures made are adequate to make the
information not misleading.
The Interim Financial Statements are unaudited. In the opinion of
management, however, they include all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of results of such
interim periods. The interim results for the period ended March 31, 2000,
are not necessarily indicative of results for the full calendar year.
2 BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
There have been no material changes in the basis of presentation or the
accounting policies adopted by the Company during the current period.
(a) Foreign currency translation
The U.S. dollar amounts for the periods presented have been remeasured
(translated) from the Brazilian currency amounts in accordance with
the criteria set forth in Statement of Financial Accounting Standards
("SFAS") No. 52, "Foreign currency translation" ("SFAS 52").
F-37
<PAGE>
Xtal has translated all assets and liabilities into U.S. dollars at
the current exchange rate (March 31, 2000 - R$ 1.7473: US$ 1.00 and
March 31, 1999 - R$ 1.7220: US$ 1.00, respectively), and all accounts
in the statements of operations and cash flows at the average rates of
exchange in effect during the periods (R$ 1.7737: US$ 1.00 for the
period ended March 31, 2000 and R$ 1.7708: US$ 1.00 for the period
ended March 31, 1999, respectively). The translated amounts include
local currency indexation and exchange variances on assets and
liabilities denominated in foreign currencies. The related translation
adjustments are made directly to the cumulative translation adjustment
account in shareholders' equity.
In mid-January 1999, significant changes occurred in the Brazilian
government's foreign exchange rate policy, which resulted in the
elimination of exchange controls, referred to as trading bands. These
trading bands ensured that the real to U.S. dollar exchange rate
remained within a given range. On January 15, 1999, the Brazilian
Central Bank ceased to intervene in the foreign exchange market,
except in exceptional circumstances to mitigate excessive volatility,
and the real to U.S. dollar exchange rate was allowed to fluctuate
freely. On July 30, 1999, the real was trading at approximately R$
1.7892 to US$ 1.00, as compared to the exchange rate in effect on
December 31, 1998 of R$ 1.2087 to US$ 1.00.
The effects of the real devaluation has resulted in a net translation
loss, arising from the translation of the balance sheet accounts
(monetary and non-monetary assets and liabilities) from Brazilian
reais to U.S. dollars. The translation loss has been allocated
directly to the cumulative translation account in shareholders'
equity. Foreign exchange transaction gains or losses are reflected
directly in income currently.
3. INVENTORIES
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
Finished products 525 640
Work in process 675 772
Raw material and indirect materials 2,300 2,332
Resale materials 144 153
Imports in progress 73 292
------------ ------------
3,717 4,189
Allowance for slow-moving inventory (139) (136)
------------ ------------
3,578 4,053
============ ============
F-38
<PAGE>
4. COMMITMENTS AND CONTINGENCIES
(a) Tax and legal claims
The Company is contesting the payment of certain taxes and
contributions and has made court escrow deposits (restricted deposits
for legal proceedings) of equivalent or lesser amounts pending final
legal decisions. Probable losses, provided as liabilities of the
Company based on the advice of outside legal counsel, are summarized
below:
March 31, December 31,
2000 1999
----------- ------------
(Unaudited)
Labor claims (1) 42 41
Income tax withheld at source - 329 310
Intercompany loan
Income tax and Social contribution 63 60
Value-added sales taxes ("ICMS") 183 164
Value-added sales taxes ("IPI") 154 146
Others 30 20
----------- ------------
Total accrued liabilities for legal 801 741
proceedings
=========== ============
-----------------
(1) The Company is party to a number of lawsuits filed by former
employees. As of March 31, 2000 the Company has accrued $ 42
relating to such lawsuits. Escrow deposits (restricted deposits
for legal proceedings) against probable losses relating to labor
claims totaled $ 150.00 as of March 31, 2000 (1999 - $ 0.00).
Management believes, based on advice from its attorneys, that the
provision for contingencies is sufficient to meet probable and
reasonably estimable losses in the event of unfavorable rulings, and
that the ultimate resolution will not have a significant effect on the
Company's liquidity, consolidated financial position or results of
operations.
Financial guarantee and recourse arrangement (Advance for future increase
of capital)
On December 1, 1998, XTAL entered into an agreement of Advance of
Financial Resources to offset various supplier and financial debt with
Algar S.A. Empreendimentos e Participacoes ("Algar" or Parent Company)
for a total amount of US$ 4.2 million (advance for future increase of
capital). Such agreement was accounted for by the Parent Company as a
capital contribution and Xtal duly amended their by-laws and Social
Contract on April 27, 1999, to effectively increase capital. At March
31, 2000, (pound)502 (approximately US$ 800) remained payable in the
name of Xtal to Unibanco at an interest rate of LIBOR plus 11.79%.
Several machines are given as guaranty for this loan. In connection
with the acquisition agreement described in Note 16 of the annual
financial statements, Algar assumed the (pound)502 liability. This
amount is not recorded as a liability in the accompanying financial
statements.
F-39
<PAGE>
On December 31, 1998, XTAL entered into a second agreement of Advance
of Financial Resources for Future Capital Increase with Algar S.A.
Empreendimentos e Participacoes ("Algar") for a total amount of $13
million (Advance for future increase of capital) and such amount was
consigned in an account on behalf of Algar. This agreement was also
accounted for by the Parent Company as a capital contribution whereby
Xtal amended their by-laws and Social Contract to effectively increase
capital. In association with this agreement, there were two other
Agreements for the Assumption of Debt by the parties with the
following terms:
Algar assumes the debts of Xtal before various banks for a total of
US$ 8 million Algar assumes the debts of Xtal for a supplier totaling
US$ 3.5 million.
Such agreements, added to the balance of intercompany loans payable in
the amount of US$ 1.5 million, were also accounted for by the Parent
company as a capital contribution. Xtal effectively registered these
amounts by amending and registering their Social Contract on April 27,
1999, to effectively increase capital. Approximately US$ 1.5 million,
due September 19, 2000, remains payable in the name of Xtal to Banco
Brascan S/A at an interest rate of LIBOR plus 2% per year. Also, US$
384 thousand and US$ 288 thousand, due October 31 and August 31, 2000
respectively, remain payable in the name of Xtal to Dresdner Bank
Lateinamerika AG at an interest rate of LIBOR plus 0.75% per year.
Algar remained the guaranty for this amount should Xtal default. In
connection with the acquisition agreement described in Note 16 of the
annual financial statements, Algar assumed these liabilities, totaling
approximately US$ 2,172. These amounts are not recorded as liabilities
in the accompanying financial statements.
(c) Postemployment benefits
The Company makes monthly contributions based on payroll expense to
the government pension, social security and severance indemnity plans.
Such payments are expensed as incurred.
In addition, certain payments are due on dismissal of employees
pursuant to Article 18 of Law 8.036 (dated May 11, 1990) being
principally (i) one month's salary, and (ii) a severance payment based
on the accumulated balance of each employees government severance
indemnity account. The Company makes contributions to the government
severance indemnity plan for each of its employees on a monthly basis;
the additional severance payment made by the Company is calculated at
40% of the balance of this account. Severance benefits payable to
employees do not vest or accumulate.
(d) Environmental issues
The Company is subject to Federal, State and Local laws and
regulations relating to the environment. These laws generally provide
for control of air and effluent emissions and require responsible
parties to undertake remediation of hazardous waste disposal sites.
Civil penalties may be imposed for noncompliance.
Future information and developments will require the Company to
continually reassess the expected impact of environmental matters.
However, the Company has evaluated its total environmental exposure
based on current available data and believes that compliance with all
applicable laws and regulations will not have a material impact on the
Company's liquidity, consolidated financial position or results of
operations.
*****
------------------------------------------------------------------------------
F-40
<PAGE>
================================================================================
We have not authorized any person to
make a statement that differs from what
is in this prospectus. If any person
does make a statement that differs from
what is in this prospectus, you should FIBERCORE, INC.
not rely on it. This prospectus is not
an offer to sell, nor is it seeking an
offer to buy, these securities in any
state in which the offer or sale is not __________SHARES
permitted. The information in this OF COMMON STOCK
prospectus is complete and accurate as
of its date, but the information may
change after that date.
UNTIL ___, ALL DEALERS THAT EFFECT
TRANSACTIONS IN THESE SECURITIES, ----------------------------------
WHETHER OR NOT PARTICIPATING IN THIS PROSPECTUS
OFFERING, MAY BE REQUIRED TO DELIVER A ----------------------------------
PROSPECTUS. THIS IS IN ADDITION TO THE
DEALER'S OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
June ___, 2000
================================================================================
22
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following statement sets forth the estimated expenses in connection with
the offering described in the registration statement (all of which will be borne
by FiberCore).
Securities and Exchange Commission Fee _____
Printing and Engraving Expenses* **
Accountants' Fees and Expenses* **
Legal Fees and Expenses* **
Blue Sky Filing Fees* **
Miscellaneous* **
TOTAL* **
-----------------
* estimated. Does not include fees that may be payable to an underwriter.
** will be provided in a subsequent amendment
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The registrant's by-laws provide for a broad right for indemnification for
any person who is or was involved in any manner in any threatened, pending, or
completed investigation, claim, action, suit, or proceeding by reason of the
fact that such person had agreed to become a director, officer, employee, or
agent of our company. Section 78.751 of the Nevada Revised Statutes, as amended,
authorizes the registrant to indemnify any director or officer under certain
prescribed circumstances and subject to certain limitations against certain
costs and expenses, including attorneys' fees actually and reasonably incurred
in connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which such person is a party by reason of
being a director or officer of the registrant if it is determined that such
person acted in accordance with the applicable standard of conduct set forth in
such statutory provisions.
The registrant may also purchase and maintain insurance for the benefit of
any director or officer, which may cover claims for which the registrant could
not indemnify such person.
ITEM 16. EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
Incentive Warrant, dated June 9, 2000, by and between
4.1* FiberCore, Inc. and Crescent International Ltd.
4.2* Early Put Warrant, dated June 9, 2000, by and between
FiberCore, Inc. and Crescent International Ltd.
4.3* Convertible Note, due June 9, 2002, issued by FiberCore,
Inc. to Crescent International Ltd.
4.4* Registration Rights Agreement, dated June 9, 2000, by and
between FiberCore, Inc. and Crescent International Ltd.
4.5** Agreement, dated May 19, 2000, by and between FiberCore,
Inc. and Tyco Electronics Corporation
4.6** Standstill Agreement, dated May 19, 2000, by and between
FiberCore, Inc. and Tyco Electronics Corporation
5.1 Opinion of Lionel, Sawyer & Collins
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Deloitte Touche Tohmatsu, Auditores Independentes
24.1 Power of Attorney (included on signature page of this
registration statement)
23
<PAGE>
-----------------
* Incorporated by reference to the exhibits to our Current Report on Form 8-K
filed June 15, 2000.
** Incorporated by reference to the exhibits to our Current Report on Form 8-K
filed June 9, 2000.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes;
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to the registration statement of which this
prospectus is a part:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the "Calculations of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (i) and (ii) above do not apply if the
registration statement is on Form S-3 and the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or Section
15(d)of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for the purpose of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of the
registration statement of which this prospectus is a part in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of the registration statement of which this prospectus is a
part as of the time it was declared effective.
(6) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused the registration
statement of which this prospectus is a part to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Charlton and Commonwealth
of Massachusetts on the 29th day of June, 2000.
FIBERCORE, INC.
By: /s/ Dr. Mohd A. Aslami
-----------------------------------------
Name: Dr. Mohd A. Aslami
Title: Chairman, Chief Executive Officer and
President (Principal Executive Officer)
SIGNATURES AND POWER OF ATTORNEY
We, the undersigned officers and directors of FiberCore, Inc., hereby
severally constitute and appoint Mohd A. Aslami and Michael J. Beecher and each
of them singly, our true and lawful attorneys with full power to any of them,
and to each of them singly, to sign for us and in our names in the capacities
indicated below the registration statement on Form S-3 filed herewith and any
and all pre-effective and post-effective amendments to said registration
statement, and any subsequent registration statement for the same offering or
for any additional offerings (as contemplated by the registration statement
filed herewith) which may be filed under Rule 415 or Rule 462, and generally to
do all such things in our name and on our behalf in our capacities as officers
and directors to enable FiberCore, Inc. to comply with the provisions of the
Securities Act of 1933, as amended, and all requirements of the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they may
be signed by our said attorneys, or any of them, to said registration statement
and any and all amendments thereto or to any subsequent registration statement
for the same offering or for any additional offerings (as contemplated by the
registration statement of which this prospectus is a part filed herewith) which
may be filed under Rule 415 or Rule 462.
Pursuant to the requirements of the Securities Act of 1933, the registration
statement of which this prospectus is a part or amendment has been signed below
by the following persons in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Dr. Mohd A. Aslami
------------------------- Chairman, Chief Executive Officer June 29, 2000
Dr. Mohd A. Aslami and President (Principal Executive
Officer)
/s/ Charles DeLuca
------------------------- Secretary June 29, 2000
Charles DeLuca
/s/ Michael J. Beecher
------------------------- Chief Financial Officer and June 29, 2000
Michael J. Beecher Treasurer
/s/ Steven Phillips
------------------------- Director June 29, 2000
Steven Phillips
/s/ Hedayat Armin-Arsala
------------------------- Director June 29, 2000
Hedayat Armin-Arsala
/s/ Javad K. Hassan
------------------------- Director June 29, 2000
Javad K. Hassan
25
