UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to________________
Commission file number: 0-21823
FIBERCORE, INC.
(Exact name of registrant as specified in its charter)
Nevada 87-0445729
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
253 Worcester Road, P.O. Box 180
Charlton, MA 01507
(Address and Zip Code of principal executive offices)
(508) 248-3900
(Registrant's telephone number, including area code)
174 Charlton Road, P.O. Box 206, Sturbridge, MA 01566
( Former address, if changed since last report )
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-------------- -------------
The number of shares of the Registrant's common stock outstanding as of July 31,
1997 was 35,808,754.
FIBERCORE, INC. AND SUBSIDIARIES
INDEX
PAGE
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PART I FINANCIAL INFORMATION.............................................. 3
ITEM 1. FINANCIAL STATEMENTS...................................... 3
CONDENSED CONSOLIDATED BALANCE SHEETS
AT JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996........ 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND
1996 (UNAUDITED).......................................... 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)............................................... 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)............................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............. 8
PART II OTHER INFORMATION.................................................. 10
ITEM 1. LEGAL PROCEEDINGS......................................... 10
ITEM 2. CHANGES IN SECURITIES..................................... 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES........................... 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....... 10
ITEM 5. OTHER INFORMATION......................................... 10
ITEM 6. EXHIBITS & REPORTS ON FORM 8-K............................ 10
SIGNATURES.................................................................. 11
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share data) June 30, December 31,
1997 1996
(Unaudited)
ASSETS
Current assets:
Cash.................................................................................... $ 69 $ 190
Accounts receivable - net............................................................... 1,053 1,093
Inventories............................................................................. 2,732 1,921
Prepaid and other current assets........................................................ 91 18
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Total current assets........................................................... 3,945 3,222
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Property and equipment - net..................................................................... 4,685 3,771
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Other assets:
Restricted cash......................................................................... 2,172 2,498
Patents - net........................................................................... 6,325 6,648
Investments in joint ventures........................................................... 1,850 1,375
Other................................................................................... 117 128
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Total other assets............................................................. 10,464 10,649
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Total assets................................................................... $ 19,094 $17,642
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable........................................................................... $ 200 $ 200
Accounts payable........................................................................ 1,766 1,652
Accrued expenses........................................................................ 1,409 1,220
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Total current liabilities...................................................... 3,375 3,072
Long-term debt................................................................................... 7,507 4,545
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Total liabilities.............................................................. 10,882 7,617
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Stockholders' equity:
Preferred stock, $.001 par value, authorized 10,000,000 shares; no shares
issued and outstanding.................................................................. -- --
Common stock, $.001 par value, authorized 100,000,000 shares; issued and out-
standing: 35,808,754 at June 30, 1997 and 35,223,250 at December 31, 1996 36 35
Paid in capital......................................................................... 20,187 19,545
Accumulated deficit..................................................................... (11,471) (9,771)
Accumulated translation adjustment...................................................... (540) 216
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Total stockholders' equity..................................................... 8,212 10,025
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Total liabilities and stockholders' equity..................................... $ 19,094 $ 17,642
======= ======
See accompanying notes to the condensed consolidated financial statements.
3
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Dollars in thousands except share data)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
Net sales...................................................... $ 1,550 $ 2,055 $ 3,550 $ 4,025
Cost of sales ................................................. 1,251 1,844 2,966 3,746
------------ ------------ ------------ ------------
Gross profit ......................................... 299 211 584 279
Operating expenses:
Selling, general and administrative expenses ................ 687 671 1,452 1,264
Research and development .................................... 135 94 295 200
------------ ------------ ------------ ------------
Loss from operations ................................. (523) (554) (1,163) (1,185)
Interest income ............................................... 8 1 14 1
Interest expense .............................................. (193) (96) (392) (191)
Foreign exchange loss - net ................................... (63) -- (169) --
Other income .................................................. 24 46 10 54
------------ ------------ ------------ ------------
Net loss............................................. $ (747) $ (603) $ (1,700) $ (1,321)
============ ============ ============ ============
Loss per share of common stock................................ $ (0.02) $ (0.02) $ (0.05) $ (0.04)
============ ============ ============ ============
Weighted average shares outstanding ........................... 35,583,493 30,655,194 35,580,985 30,580,264
============ ============ ============ ============
See accompanying notes to the condensed consolidated financial statements.
4
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands except share data)
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Net loss ................................................................ $(1,700) $(1,321)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ........................................... 645 684
Other ................................................................... 48 --
Foreign currency translation loss ....................................... 299 --
Changes in assets and liabilities:
Accounts receivable (81) (62)
Inventories ............................................................. (1,024) 96
Prepaid and other current assets ........................................ 42 14
Other assets............................................................. 20 --
Accounts payable ........................................................ 223 (297)
Accrued expenses ........................................................ 260 163
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Net cash used in operating activities ................................ (1,268) (723)
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Cash flows from investing activities:
Purchase of property and equipment ...................................... (2,069) (233)
Reimbursement from government grant ..................................... 262 --
Other ................................................................... (50) (95)
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Net cash used in investing activities ................................ (1,857) (328)
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Cash flows from financing activities:
Proceeds from sale of common stock ...................................... 103 426
Proceeds from long-term debt ............................................ 2,914 --
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Net cash provided by financing activities ............................ 3,017 426
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Effect of foreign exchange rate change on cash ............................ (13) --
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Decrease in cash .......................................................... (121) (625)
Cash, beginning of period ................................................. 190 833
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Cash, end of period ....................................................... $ 69 $ 208
======= =======
Supplemental Disclosure:
Shares issued in exchange for investment in joint venture .............. $ 425 $ --
See accompanying notes to the condensed consolidated financial statements.
5
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and Marks in thousands except share data)
1. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of June 30, 1997 and the
related condensed statements of operations for the three and six month periods
and statements of cash flows for the six month periods ended June 30, 1997 and
1996 included herein have been prepared by the Company in accordance with the
rules and regulations of the Securities and Exchange Commission for reports on
Form 10-Q. These statements are unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of such financial statements have
been included and such adjustments consist of normal recurring items.
The condensed consolidated financial statements do not contain certain
information included in the Company's annual audited financial statements. These
financial statements should be read in conjunction with the annual audited
financial statements and notes thereto for the year-ended December 31, 1996
included in the Company's Report on Form 10-K.
2. INVENTORIES
Inventories consist of the following:
June 30, 1997 December 31, 1996
------------- -----------------
Raw materials $1,288 $ 841
Work-in-progress 342 403
Finished goods 1,102 677
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Total $2,732 $ 1,921
===== =======
3. LONG-TERM DEBT
During the six months ended June 30, 1997, the Company drew down 4,384
German Marks (approximately $2,514) under a loan agreement with the Berliner
Bank. The proceeds were used to fund the expansion of the Company's plant in
Germany. The total loan commitment by the bank is 7,700 German Marks
(approximately $4,415) and bears interest at 6.25% annually. The loan is due on
September 30, 2006. The loan is collateralized by a deposit with the bank of
approximately $2,172.
Also during the six months ended June 30, 1997, the Company borrowed
$150 from a shareholder under a note maturing in 2000. The annual interest rate
on the note is the prime rate plus 1% adjustable quarterly and payable
quarterly. In conjunction with the note, the lender was granted warrants to
purchase 69,132 shares of common stock of the Company at an exercise price of
$1.53 per share. The warrants expire on March 7, 2002. The proceeds of the note
were used for working capital.
In April 1997, the Company borrowed $250 from Techman International
Corp. ("Techman") under a note maturing in 2000. The annual interest rate on the
note is the prime rate plus 1%, adjustable quarterly and payable quarterly. In
conjunction with the note, Techman was granted warrants to purchase 115,220
common
6
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
shares of the Company at an exercise price of $0.78 per share. The warrants
expire on April 17, 2002. Dr. M. Mahmud Awan, a director and shareholder of the
Company, is the President and sole shareholder of Techman.
4. SHAREHOLDERS' EQUITY
During the six months ended June 30, 1997, in connection with the
Middle East Fiber Cables Co., ("MEFC") joint venture agreement and the share
purchase agreement with Middle East Specialized Cables Company (a partner in the
joint venture), the Company issued 312,061 shares of common stock on the
execution of a long-term supply agreement with MEFC.
Also, during the period, the Company issued 263,443 shares on exercise
of warrants and employee stock options.
5. ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128") "Earnings Per
Share" which is effective for financial statements issued after December 15,
1997. The statement established new standards for computing and disclosure of
earnings per share ("EPS") and requires restatement of prior years EPS
information. The statement requires dual presentation of "basic" EPS and
"diluted" EPS. Basic EPS is based on the weighted average number of common
shares outstanding, excluding common stock equivalents. Diluted EPS reflects the
potential dilution of EPS that could occur if securities or other contracts to
issue common shares were exercised or converted. Had SFAS 128 been effective for
the periods ended June 30, 1996 and 1997, there would have been no change in the
loss per share as reported since common stock equivalents and other contracts to
issue shares, if exercised or converted, would be anti-dilutive.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which requires that changes in comprehensive income be shown in a
financial statement that is displayed with the same prominence as other
financial statements. This statement is effective for periods beginning after
December 15, 1997. Management is currently evaluating the effects of this change
on the Company's financial statements.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information", which changes the way public
companies report information about segments. This statement is effective for
periods beginning after December 15, 1997. Management is currently evaluating
the effects of this change on the Company's financial statements.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Sales for the three and six months ended June 30, 1997 were $1,550,000
and $3,550,000, respectively, compared to sales of $2,055,000 and $4,025,000 for
the same periods in 1996. This decrease was effected by the decline in value of
the German Mark versus the U. S. dollar from the first half of 1996 to the first
half of 1997 of approximately 11%. Substantially all of the Company's sales are
in the Company's German subsidiary, FiberCore Glasfaser Jena GmbH. Sales of the
subsidiary in German Marks were DM 2,632,957 and DM 5,874,036 for the quarter
and six months ended June 30, 1997 compared to DM 3,167,254 and DM 5,941,973 for
the same periods in 1996. The decrease in sales of approximately 17% for the
quarter ended June 30, 1997 compared to the same period in 1996 was due to a
delay in shipments to one customer for which production had been reserved. The
delay was caused by a delay in the delivery of production equipment for that
customer by a third party.
Gross profit increased to $299,000 (19.3% of sales) and $584,000 (16.5%
of sales) for the quarter and six months ended June 30, 1997, respectively,
compared to $211,000 (10.3% of sales) and $279,000 (7.0% of sales) for the
corresponding periods in 1996. The improved profit margin resulted from
increased production efficiency at the German facility resulting in improvement
of production yields, offset by the decline in the value of the German Mark as
discussed above.
Selling, general and administrative costs increased by $16,000 (2.3%)
for the quarter ended June 30, 1997 compared to the same period in 1996. This
increase was primarily due to an increase in personnel costs in Germany offset
by a decrease in legal and accounting fees. For the six months ended June 30,
1997, these costs increased by $188,000 (14.9%). This increase was principally
attributable to an increase in travel and consulting fees of approximately
$85,000 related to the development of overseas projects, costs of approximately
$35,000 incurred in connection with a registration covering resales of the
Company's common stock and an increase in other administrative costs of
approximately $65,000 due to the growth of the German subsidiary.
Research and development costs increased $41,000 (43.6%) and $95,000
(47.5%) during the quarter and six month periods ended June 30, 1997,
respectively, compared to the corresponding periods in 1996. This increase was
due to costs incurred for a specific product development project in Germany.
Interest expense increased by $97,000 (101%) and $201,000 (105%) for
the quarter and six months ended June 30, 1997 compared to the same periods in
1996. The increase was due principally to interest and fees on the Berliner Bank
loan consummated in the last quarter of 1996 and drawn down in the first and
second quarters of 1997, and interest on the $3.0 million loan from AMP
Incorporated which was received in November 1996.
During the three and six month periods ended June 30, 1997, the Company
incurred a $63,000 and $169,000 foreign currency translation loss, respectively,
principally due to a loss on the German Mark collateral deposit with the
Berliner Bank.
As a result of the changes as described above, the Company had a net
loss for the three months ended June 30, 1997 that was 23.9% more than the loss
in the same period of 1996. The loss for the six months ended June 30, 1997 was
28.7% greater than the loss in the corresponding period in 1996. The Company's
German subsidiary, however, had a profit of $14,000 and $38,000 for the three
and six months ended June 30, 1997, respectively, compared to a profit of
$24,000 and a loss of $26,000 for the corresponding periods in 1996,
respectively.
8
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash decreased by $121,000 during the six months ended
June 30, 1997. Cash used in operations was $1,268,000 in the first half 1997
compared to $723,000 in the same period in the prior year. This resulted from
the loss in the first half 1997 of $1,700,000 offset by depreciation and
amortization of $645,000 and other non-cash charges of $347,000 and changes in
other working capital items of $(560,000). The Company's current ratio improved
from 1.0 at December 31, 1996 to 1.2 at June 30, 1997. The Company's German
subsidiary is now generating a positive cash flow from operations and management
anticipates that this will continue.
Inventory increased $811,000 at June 30, 1997 compared to December 31,
1996, principally due to an increase in the raw material inventory in the German
subsidiary in anticipation of vacation shut-downs during July and August by
principal vendors, and an increase in finished goods due to a delay in shipments
to one customer caused by a delay in the completion of the customer's production
facility.
During the first six months of 1997, the Company invested $2,069,000 in
new equipment and the expansion of the production facility in Germany. This was
funded, in part, by $262,000 in grants from the German government. Additionally,
the Company drew down approximately $2,514,000 under the Berliner Bank loan to
finance this expansion.
Also during the six months ended June 30, 1997, the Company received
$103,000 from the issuance of common stock for the exercise of options and
warrants. The Company also borrowed $400,000 for short-term working capital
needs.
Management anticipates that its German subsidiary will continue to
generate a positive cash flow from operations and the Company will be able to
sustain its operations through short-term borrowing. The Company's German
subsidiary has a committed working capital line of credit from a German bank for
1,000,000 German Marks, approximately $573,000.
9
PART II - OTHER INFORMATION
ITEMS 1 - 5
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
None
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FiberCore, Inc.
(Registrant)
Date: August 8, 1997 /s/ Mohd Aslami
---------------
Dr. Mohd A. Aslami
Chairman, President and Chief Executive Officer
(Duly Authorized Officer)
Date: August 8, 1997 /s/ Michael J. Beecher
----------------------
Michael J. Beecher
Chief Financial Officer and Treasurer
(Principal Financial Officer)
11