UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to________________
Commission file number: 0-21823
FIBERCORE, INC.
(Exact name of registrant as specified in its charter)
Nevada 87-0445729
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
253 Worcester Road, P.O. Box 180
Charlton, MA 01507
(Address and Zip Code of principal executive offices)
(508) 248-3900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The number of shares of the Registrant's common stock outstanding as of April
30, 1998 was 35,774,822.
FIBERCORE, INC. AND SUBSIDIARIES
INDEX
Page
PART I FINANCIAL INFORMATION................................................ 3
ITEM 1. FINANCIAL STATEMENTS........................................ 3
CONDENSED CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997......... 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND 1997 (UNAUDITED)......................... 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED).. 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)................................................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............... 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.. 8
PART II OTHER INFORMATION ................................................... 8
ITEM 1. LEGAL PROCEEDINGS........................................... 8
ITEM 2. CHANGES IN SECURITIES....................................... 8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................. 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 8
ITEM 5. OTHER INFORMATION........................................... 8
ITEM 6. EXHIBITS & REPORTS ON FORM 8-K.............................. 8
SIGNATURES ............................................................ 9
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share data)
March 31, December 31,
1998 1997
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(Unaudited)
ASSETS
Current assets:
Cash ........................................................................... $ 856 $ 2,128
Accounts receivable - net........................................................... 1,038 1,501
Notes receivable from joint venture partners........................................ 5,211 4,883
Inventories......................................................................... 3,319 3,057
Prepaid and other current assets.................................................... 206 22
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Total current assets....................................................... 10,630 11,591
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Property and equipment - net................................................................. 4,900 4,808
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Other assets:
Restricted cash..................................................................... 2,081 2,140
Patents - net....................................................................... 5,851 6,014
Investments in joint ventures....................................................... 1,425 1,425
Other ........................................................................... 268 129
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Total other assets......................................................... 9,625 9,708
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Total assets............................................................... $ 25,155 $ 26,107
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable....................................................................... $ 580 $ 594
Accounts payable.................................................................... 1,204 1,778
Accrued expenses.................................................................... 1,014 1,128
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Total current liabilities.................................................. 2,798 3,500
Long-term debt ........................................................................... 9,861 9,851
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Total liabilities.......................................................... 12,659 13,351
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Minority interest ........................................................................... 3,412 3,217
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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; shares
issued and outstanding: 35,774,822 at March 31, 1998 and December 31,1997......... 36 36
Paid in capital..................................................................... 23,221 23,221
Accumulated deficit................................................................. (13,367) (12,850)
Accumulated other comprehensive income (deficit):
Foreign currency translation adjustment........................................... (806) (868)
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Total stockholders' equity................................................. 9,084 9,539
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Total liabilities and stockholders' equity................................. $ 25,155 $ 26,107
============= ==============
See accompanying notes to the condensed consolidated financial statements.
3
FIBERCORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Dollars in thousands except share data)
Three Months Ended
March 31,
----------------------------------
1998 1997
--------------- ---------------
Net sales............................................................................... $ 1,563 $ 2,000
Cost of sales........................................................................... 1,254 1,715
--------------- ---------------
Gross profit .................................................................. 309 285
Operating expenses:.....................................................................
Selling, general and administrative expenses.......................................... 553 765
Research and development.............................................................. 122 160
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Loss from operations........................................................... (366) (640)
Interest income......................................................................... 54 6
Interest expense........................................................................ (162) (199)
Foreign exchange loss-net............................................................... (101) (106)
Other income (expense) ............................................................. 58 (14)
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Net loss....................................................................... (517) (953)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments.............................................. 60 (453)
--------------- ---------------
Comprehensive loss............................................................. $ (457) $ (1,406)
=============== ===============
Basic and diluted loss per share of common stock........................................ $ (0.01) $ (0.03)
=============== ===============
Weighted average shares outstanding..................................................... 35,774,822 35,364,148
=============== ===============
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)
Three Months Ended
March 31,
----------------------------
1998 1997
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Cash flows from operating activities:
Net loss.............................................................................. $ (517) $ (953)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization......................................................... 361 340
Other ............................................................................... 38 53
Foreign currency translation loss..................................................... --- 149
Changes in assets and liabilities:
Accounts receivable................................................................... 425 (177)
Inventories........................................................................... (344) (189)
Prepaid and other current assets...................................................... (183) (67)
Other assets........................................................................ --- 8
Accounts payable...................................................................... (608) (82)
Accrued expenses...................................................................... (99) 147
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Net cash used in operating activities.............................................. (927) (771)
---------- -----------
Cash flows from investing activities:
Purchase of property and equipment.................................................... (388) (949)
Reimbursement from government grant................................................... --- 115
Other ............................................................................... (151) ---
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Net cash used in investing activities.............................................. (539) (834)
---------- -----------
Cash flows from financing activities:
Proceeds from sale of common stock.................................................... --- 103
Proceeds from long-term debt.......................................................... --- 2,170
Repayment of notes-net................................................................ (11) ---
Increase in long-term interest payable................................................ 104 ---
---------- -----------
Net cash provided by financing activities.......................................... 93 2,273
---------- -----------
Effect of foreign exchange rate change on cash.......................................... 101 (30)
---------- -----------
(Decrease) increase in cash............................................................. (1,272) 638
Cash, beginning of period............................................................... 2,128 190
---------- -----------
Cash, end of period..................................................................... $ 856 $ 828
========== ===========
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
(Unaudited)
(Dollars in thousands except share data)
1. Basis of Presentation
The condensed consolidated balance sheet as of March 31, 1998 and the
related condensed statements of operations and cash flows for the three months
ended March 31, 1998 and 1997 included herein have been prepared by the Company
in accordance with the rules and regulations of the Securities and Exchange
Commission for reports on Form 10-Q. These statements are unaudited. In the
opinion of management, all adjustments necessary for a fair presentation of such
financial statements have been included and such adjustments consist of normal
recurring items.
The condensed consolidated financial statements do not contain certain
information included in the Company's annual audited financial statements. These
financial statements should be read in conjunction with the annual audited
financial statements and notes thereto for the year-ended December 31, 1997
included in the Company's Report on Form 10-K.
2. Inventories
Inventories consist of the following:
March 31, December 31,
1998 1997
--------- ------------
Raw materials $ 875 $ 997
Work-in-progress 346 315
Finished goods 2,098 1,745
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Total $ 3,319 $ 3,057
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3. Accounting Pronouncements
Effective for 1998, the Company implemented Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income". Other
comprehensive income (loss) for the Company consists of foreign currency
translation adjustments. The reports for prior periods included in the financial
statements have been restated to reflect this change.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations for the Three Months Ended March 31, 1998 and 1997
Sales for the three months ended March 31, 1998 were $437,000 lower than
sales for the same period in 1997, a decrease of 21.9%. This decrease was due in
part to a decline in the value of the German Mark versus the U.S. dollar of 9%.
Additionally, sales of single mode fiber decreased during the first quarter of
1998 due to increased competition in the European cable market which effected
sales of this fiber to the Company's cable customers. The Company believes that
this was not the result of the Company's pricing which is competitive. During
the first quarter 1998 shipments of the Company's multi-mode fiber increased by
16.2% over the same period in 1997.
Gross profit for the first quarter of 1998 improved to $309,000 or 19.8% of
sales compared to $285,000 or 14.3% of sales for the first quarter of 1997. This
increase was the result of process improvements and increased production
efficiency at the Company's FiberCore Jena subsidiary.
Selling, general and administrative costs decreased $212,000 or 27.7% in
the first quarter 1998 compared to the first quarter of 1997. This decrease was
principally due to a decrease in legal, consulting and other administrative
costs of the parent company.
Research and development costs decreased $38,000 or 23.8% in the first
quarter of 1998 compared to the same period in 1997. This decrease was the
result of assigning certain of the development personnel to the design of the
FiberCore Asia manufacturing facility.
Interest income increased $48,000 during the first three months of 1998
compared to the first three months of 1997 as a result of the earnings on the
deposit with the Berliner Bank for security of the Berliner Bank loan.
Other income-net for the first quarter 1998 was $58,000 compared to net
expense of $14,000 in the same period of 1997. This increase in income is due to
research grants received by the Company's German subsidiary.
As a result of the changes described above, the net loss for the period
decreased 45.8% from $953,000 for the first quarter of 1997 to $517,000 in the
first quarter of 1998.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company utilized cash for operations of $927,000 during the first
quarter of 1998 compared to $771,000 in the first quarter of 1997. This was the
result of the loss for the period of $517,000 offset by depreciation,
amortization and other non-cash charges of $399,000. Accounts receivable
decreased $425,000 as a result of the lower sales for the quarter and collection
of grants due from the German government. Inventories increased by $344,000
during the first quarter as a result of the increase in production capacity and
the decrease in sales of single-mode fiber. The Company anticipates that the
inventory will be reduced in the second and third quarters of 1998. Accounts
payable and accrued expense were reduced by $707,000 during the first quarter.
The Company invested $388,000 in equipment in the German subsidiary
completing the expansion of that facility during the first quarter of 1998.
Additionally, the Company deferred costs of $149,000 related to the Malaysia
manufacturing facility.
Long-term interest payable increased $104,000 during the first quarter of
1998, principally due to the accrual of interest on the AMP loans wherein the
interest is payable at maturity of these loans.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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.
8
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: May 8, 1998 /s/ Mohd Aslami
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Dr. Mohd A. Aslami
Chairman, President and Chief Executive Officer
(Duly Authorized Officer)
Date: May 8, 1998 /s/ Michael J. Beecher
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Michael J. Beecher
Chief Financial Officer and Treasurer
(Principal Financial Officer)
9