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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER: 0-21823
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FIBERCORE, INC.
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(Exact name of registrant as specified in its charter)
Nevada 87-0445729
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(State or other jurisdiction of (IRS Employer
incorporation 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
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.001 per share
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(Title of Class)
Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
Yes [X] No [ ]
and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K .
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The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 29, 2001: $ 156,789,000
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Number of shares outstanding as of March 29, 2001: 59,010,085
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's S-3 prospectus filed under the Securities Act of 1933 in
September 2000 is incorporated by reference into Part II hereof.
FIBERCORE, INC.
TABLE OF CONTENTS
Page
PART I....................................................................... 3
ITEM 1. BUSINESS..................................................... 3
ITEM 2. PROPERTIES...................................................19
ITEM 3. LEGAL PROCEEDINGS............................................20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........20
PART II......................................................................21
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS......................................................21
ITEM 6. SELECTED FINANCIAL DATA......................................22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS....................................23
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................32
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.....................................60
PART III.....................................................................61
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...........61
ITEM 11. EXECUTIVE COMPENSATION.......................................63
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT...................................................66
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............69
SIGNATURES...................................................................71
2
PART I.
ITEM 1. BUSINESS
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GENERAL
FiberCore, Inc. ("FiberCore" "FCI" or the "Company") is engaged in the business
of developing, manufacturing, and marketing singlemode and multi-mode optical
fiber and optical fiber preforms for the telecommunications and data
communications industry. Preforms are the basic component from which optical
fiber is drawn and subsequently cabled. The Company's principal operating units
are FiberCore Jena GmbH ("FCJ"), the Company's wholly owned subsidiary in
Germany and Xtal FiberCore Brasil S.A. ("Xtal"), the Company's 90% owned
subsidiary in Campinas, Brazil, which was acquired in June 2000.
FiberCore Asia Sdn.Bhd. ("FCA"), incorporated as a joint venture in Malaysia and
presently 51% owned by the Company with the right to increase the ownership up
to 58%, was established to build and operate a local manufacturing facility for
the production of optical fiber and preform in Malaysia's Multimedia Super
Corridor with tax-free status for five years extendable to 10 years.
Construction of the Malaysian facility required loan financing which, due to the
economic downturn in Asia, has been delayed. Discussions are currently in
progress with the lead syndicate bank to renew their previously approved loan
financing, and with the joint venture partners to increase FiberCore's equity to
approximately 90%. Notwithstanding the economic distress that has gripped the
Asia-Pacific region since mid-1997, this region has attracted significant
telecommunications investment, producing more than 30% of the world's fiber in
1999. The Company believes that these economies will improve, and the Company
plans to develop a significant presence in the region, at such time.
Through Infoglas, Inc. a wholly owned subsidiary, the Company is moving forward
with plans to build and operate a manufacturing facility in the United States
that will serve the domestic market. As part of its location search, the Company
has recently optioned land in North Carolina. The state of North Carolina has,
subject to various terms and conditions, proposed a land grant, tax credits and
other benefits with an estimated total value of $5.7 million if the Company were
to locate in North Carolina.
In March 2001, the Company formed FiberCore Thailand, ("FCT"), a wholly owned
subsidiary. With this facility planned in Thailand, the Company intends to
manufacture singlemode fiber and preform for sale primarily to the Asian/Pacific
market. Discussions are underway with various banks, including the Industrial
Development Bank of Thailand, to finance approximately 50% of the estimated $20
million cost for phase one of the project. The Company expects to finance the
remaining project cost of $10 million.
The Company's other subsidiaries serve fiber-related activities. Through
FiberCore Machinery ("FCM"), a wholly owned subsidiary of FCJ that was formed in
March 2000, the Company designs, manufactures and installs specialty equipment
used to manufacture optical fiber and preforms. Currently, FCM primarily
supplies preform manufacturing equipment to the Company's fiber manufacturing
operations.
3
In May 2000, FiberCore Quarz GmbH ("FCQ") was formed in Germany as a wholly
owned subsidiary of the Company. FCQ will be utilizing the Company's newly
patented Plasma Outside Vapor Deposition ("POVD") technology to complement the
supply of synthetic silica tube that has been in short supply over the past one
and one-half years. As a first phase of implementation, FCQ will be setting up a
pilot production facility in Jena, Germany. The facility will be financed
through a combination of German grants, loan guarantees and internal financing.
The POVD technology is also expected to reduce the cost of tubes to the Company,
its subsidiaries and affiliates. Initially the technology will be introduced to
the manufacturing of singlemode fiber and, at a later date, to multimode fiber.
Automated Light Technologies, Inc., a Delaware corporation organized in 1986 and
wholly owned subsidiary of the Company, manufactures equipment that monitors and
identifies faults in fiber optic cables, cable protection devices, and
electro-optical talk sets. In the past, the Company has focused its resources on
developing its optical fiber and preform business and, therefore, has not been
actively developing the ALT business. The Company, however, is now actively
exploring ALT business opportunities.
Middle East Fiber Cables is a cable manufacturer, located in Saudi Arabia, in
which the Company holds a 7% interest.
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| |
| FIBERCORE, INC. |
| USA |
| |
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|
|
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| | | | | |
- ------------------ ------------------------- | --------------------- ------------------------ -------------------
|*FiberCore Jena | |*Xtal FiberCore Brasil | | |**FiberCore Asia | |**FiberCore Thailand | |**Infoglas, Inc. |
| (100%) | | (90%) | | | (51%) | | (100%) | | (100%) |
| Germany | | Brazil | | | Malaysia | | Thailand | | USA |
| MM / SM Fiber | | Singlemode Fiber | | | Singlemode Fiber | | Singlemode Fiber | | MM / SM Fiber |
| & Preforms | | (some MM) | | | & Preform | | & Preform | | & Preform |
- ------------------ ------------------------- | --------------------- ------------------------ -------------------
| |
| -----------------------------------------------------
| | |
- ------------------ ------------------------- --------------------- ---------------------
|***FiberCore | |*** FiberCore Quarz | | ***MEFC | | ***ALT |
| Machinery | | (100%) | | (7%) | | (100%) |
| (100%) | | Germany | | Saudi Arabia | | USA |
| Germany | | Silica Jacketing | | Optical Fiber | | Cable Monitoring |
| Equipment | | & Deposition Tubes | | Cable | | & Fault Locating |
- ------------------ ------------------------- --------------------- ---------------------
* Fiber
** Fiber (planned)
*** Fiber Related
RECENT DEVELOPMENTS
SALE OF SECURITIES
The Company has completed the following sales of securities during the past
three years:
1) a private placement in reliance on Section 4(2) of the Securities Act of
1933 ("Section 4(2), dated July, 1999, pursuant to which the Company
issued to a private investor 1,000,000 shares of the Company's common
stock, par value $.001 per share ("Common Stock") for $250 thousand;
2) a private placement in reliance on Section 4(2), dated May 16, 2000,
pursuant to which the Company issued 485,002 shares to ten offshore
accredited investors for $1.55 million
3) a private placement in reliance on Section 4(2), dated May 19, 2000,
pursuant to which the Company issued 4,451,529 shares of Common Stock to
Tyco Electronics Corporation, a wholly owned subsidiary of Tyco
International Ltd, upon its conversion of $6.43 million outstanding debt,
including interest, and issued 2,765,487 shares of Common Stock upon the
exercise of warrants for $2 million;
4) a private placement in reliance on Section 4(2) with Crescent
International Ltd, ("Crescent") dated June 9, 2000, with respect to a $30
million commitment pursuant to which the Company:
o issued 1,200,274 shares of Common Stock for $3.5 million on June 9, 2000;
4
o issued $7.5 million in debt convertible into shares of Common Stock, of which
$2.0 million on June 29, 2000 and $1.5 million on December 29, 2000 were
converted into 685,871 and 590,760 shares of Common Stock, respectively. The
remaining $4.0 million held as of December 31, 2000 was converted into
1,570,680 shares of Common Stock on January 12, 2001; and
o can require Crescent to purchase up to $19 million of additional shares of
Common Stock, based on a market-based pricing formula; subject to certain
terms and limitations set forth in the Company's Agreements with Crescent and
with respect to which Crescent has registration rights,
5) a private placement in connection with transactions with Crescent,
pursuant to which the Company issued to Gruntal & Co, LLC ("Gruntal"), its
investment banker and agent, warrants to purchase up to 504,146 shares of
Common Stock at a weighted average exercise price of $3.56;
6) a private placement in reliance on Section 4(2), dated September 5, 2000,
pursuant to which the Company issued 1,352,275 shares of Common Stock to
Tyco Sigma Limited, a wholly owned subsidiary of Tyco International Ltd.,
for $9.0 million;
7) an offering in reliance on Regulation S, dated September 15, 2000 pursuant
to which the Company issued 155,718 shares of Common Stock to two venture
capital companies located outside the U. S. for $1.11 million; and
8) a private placement in reliance on Section 4(2), dated December 29, 2000
pursuant to which the Company issued to Gruntal warrants to purchase up to
100,000 shares of Common Stock at an exercise price of $5.00.
The Company used the proceeds from the foregoing sales of securities primarily
to finance the acquisition of Xtal and improvements at Xtal's facilities and for
research and development activities, working capital, and general corporate
purposes.
In connection with the Company's transaction with Crescent, the Company filed a
registration statement on Form S-3 which became effective on September 29, 2000.
The registration statement provided for Crescent's resale of the shares of
Common Stock previously issued to Crescent , the shares of Common Stock issuable
to Crescent upon exercise of warrants, and 456,886 shares of Common Stock
issuable upon exercise of warrants issued to Gruntal. The registration statement
also included a shelf registration of 4,200,000 shares of Common Stock which the
Company may sell through one or more underwritten offerings. As of December 31,
2000, the Company had not sold any shares under the registration statement.
Gruntal has limited additional registration rights with respect to shares
issuable upon the exercise of warrants and Crescent has registration rights with
respect to shares the Company may require Crescent to purchase.
5
NEW CREDIT FACILITY
The Company executed a $10 million, five-year loan agreement with Fleet National
Bank ("Fleet"), dated as of December 20, 2000, and which closed on December 26,
2000 (the "Loan Agreement"). The Company applied $2.15 million of the proceeds
obtained pursuant to the Loan Agreement toward completing the financing of a new
$25 million facility in Jena, Germany, designed to double the capacity of the
existing Jena plant.
The Company intends to use the remainder of the proceeds to partially finance
expansion of the Xtal manufacturing facility. The Company's repayment
obligations under the Loan Agreement are guaranteed (the "Guaranty") by Tyco
International Group S.A. ("TIGSA"), a wholly-owned subsidiary of Tyco
International Ltd.
In connection with the Guaranty, the Company issued to TIGSA one share of the
Company's Series A Preferred Stock entitling TIGSA to certain rights and
privileges. In the event of a breach of certain covenants set forth in an
agreement governing the Company's obligation to indemnify TIGSA in the event
TIGSA is required to pay Fleet pursuant to the Guaranty (the "Guarantor
Indemnification Agreement"), TIGSA's ownership of the share entitles TIGSA to
elect a number of individuals to the Company's board of directors sufficient to
give TIGSA control of the board until the termination of the Guarantor
Indemnification Agreement.
The Company's obligations under the Loan Agreement are unsecured, provided that
upon the occurence of an event of default under the Loan Agreement or in the
event TIGSA's credit rating is reduced below a certain threshold, Fleet may
trigger the attachment of a security interest in, among other things, certain
intellectual property rights owned by the Company and in the shares of capital
stock of the Company's subsidiaries.
ACQUISITION OF XTAL FIBRAS OPTICAS, S.A.
On June 20, 2000, the Company, through a wholly owned subsidiary, acquired as of
June 1, 2000, 90% of the capital stock of Xtal Fibras Opticas, S. A., ("Xtal"),
from Algar S. A., ("Algar"), one of the largest private conglomerates in Brazil,
and entered into an agreement to acquire the remaining 10% of the capital stock
(collectively, the "Acquisition"). Xtal's manufacturing facility is located in
Campinas, Brazil and manufactures primarily singlemode optical fiber for sale
mainly in Brazil.
At the closing of the Acquisition, the Company paid Algar $10 million in cash
and issued to Algar a $10 million, 6% note, payable on December 31, 2000.
According to the terms of the agreement, the Company was entitled to receive a
$1 million discount if the $10 million note was prepaid by August 31, 2000. On
August 29, 2000, Algar's Chief Operating Officer, on behalf of Algar, agreed to
allow the discount if the remaining $9 million of the note was paid by September
8, 2000. On September 8, 2000 the Company paid $9 million, together with
interest, to Algar. Subsequently, Algar disputed the understanding. On December
29, 2000, the Company, in full settlement of the dispute, paid Algar $200
thousand, receiving, in effect, an $800 thousand rather than a $1 million
discount. At the closing, the Company also issued a $2.5
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million, 6% note, payable in two installments of $1.25 million each, on
September 20, 2001, and on December 20, 2002, respectively. The obligation to
repay the $2.5 million note is contingent on Xtal's attaining specified
profitability targets in 2000 and 2001; the target in 2000 was achieved. The
Company may acquire the remaining 10% of the stock upon payment of $2.5 million,
plus 6% interest on or before June 20, 2003.
OTHER AGREEMENTS
On April 14, 2000, the Company entered into an exclusive investment banking
agreement with Gruntal & Co., LLC. ("Gruntal").
Gruntal received fees and warrants in connection with assistance provided in
entering into agreements with Crescent. Upon the Company's requiring Crescent to
purchase additional shares of common stock, the Company is obligated to issue
additional warrants to Gruntal to purchase a number of shares of common stock
equal to 6% of the aggregate number of shares issued to Crescent.
On December 29, 2000, the Company terminated the April 14, 2000 agreement and
entered into a new, one year agreement with Gruntal, pursuant to which, among
other things, the Company agreed to pay Gruntal $500 thousand and to issue a
five year warrant for 100,000 shares, at an exercise price of $5.00. Of the $500
thousand, $250 thousand was paid on January 5, 2001, and $125 thousand is due on
March 31, 2001 and June 30, 2001.
In January 2001, the Company engaged Merrill Lynch & Co. to act as a financial
advisor in connection with any proposed business combination transaction or
other corporate transactions.
RESIGNATION OF CHIEF FINANCIAL OFFICER
On July 31, 2000, Michael J. Beecher, the Company's Chief Financial Officer and
Treasurer, resigned for personal reasons. Steven Phillips, who has been a
director and financial consultant to the Company for many years, has assumed the
role of interim Chief Financial Officer and Treasurer until a permanent
replacement is recruited.
NEW BOARD MEMBER
On October 12, 2000, Michael A. Robinson, senior vice president and corporate
treasurer of Tyco International Ltd, was elected to the Company's Board of
Directors.
FIBER OPTIC PREFORM MANUFACTURING TECHNOLOGIES
Optical fibers are solid strands of hair-thin, high quality glass, which are
usually combined to form cables for transmitting information via light pulses
from one point to another. The fibers consist of a core of high-purity glass
that transmits light encased within a covering layer designed to reduce signal
loss through the side-walls of the fibers. Information transmitted through
optical fibers is converted from electrical impulses into light waves by a laser
or light
7
emitting diode. At point of reception, the light waves are converted back into
electrical impulses by a photo-detector.
Communication by means of light waves guided through glass fibers offers a
number of advantages over conventional means of transmitting information. Glass
fibers carry significantly more information than metallic conductors and, unlike
metallic conductors, are not subject to electromagnetic or radio frequency
interference. Signals of equal strength can be transmitted over much longer
distances through optical fibers than through metallic conductors and require
the use of fewer repeaters (devices which strengthen a signal). Further,
fiber-optic cables, which typically consists of numerous optical fibers encased
in one or more plastic sheaths, are substantially smaller and lighter than
metallic conductor cables of the same capacity, so they can be less expensive
and more easily installed, particularly in limited conduit or duct spaces.
There are two basic types of communication optical fibers: multi-mode fiber and
singlemode fiber. Multi-mode fiber has a larger core (the area where the light
travels) than singlemode fiber, carries less bandwidth and is more expensive. It
is generally used over relatively short distances in wiring buildings and groups
of buildings. The electronics and the connectors required to work with
multi-mode fiber are less costly than the electronics required for singlemode
fiber. For example, the light source for multi-mode fiber can be light emitting
diodes, while singlemode fiber requires laser light sources. Singlemode fiber is
used in long-distance trunk lines (cables between cities) and fiber-to-the-curb
(cable from a central office to the curb in front of an office building or
home).
The three basic technologies widely used to manufacture multi-mode and
singlemode optical fiber are:
1. Outside Vapor Deposition ("OVD"), otherwise known as the "Corning
process."
2. Inside Vapor Deposition ("IVD"), which is also known as Modified Chemical
Vapor Deposition ("MCVD") or the "Lucent process". Due to its flexibility
and relative ease of operation, this process is the most widely used
around the world by independent manufacturers.
3. Axial Vapor Deposition ("AVD"), also known as the "Japanese process". This
process is similar to the Corning process.
The basic production unit from which fiber "is drawn" is a preform. A preform is
a cylindrical high purity glass rod with a high refractive index glass material
in the central part of the rod (the "core") and a low refractive index glass
material in the outer part of the rod (the "clad"). The rod can be less than one
inch to several inches in diameter and one to several meters in length. From one
such preform many thousands of meters of optical fiber can be drawn. The OVD and
AVD processes both manufacture 100% of the glass composing the final preform and
are comparable in terms of machine speeds that manufacture glass per unit of
time. These speeds are significantly higher than those of the IVD process. In
contrast, the IVD process manufactures only about one-third of the total glass
required in the manufacture of a preform, with the balance of the glass being
purchased in the form of a tube at costs significantly lower than that of either
OVD or AVD, thus balancing the overall expense.
8
Optical fiber cable is produced from optical fiber by first coloring the coated
fiber and then encasing the fiber in a protective jacket.
PROPRIETARY MANUFACTURING PROCESS AND PRODUCTS
The Company manufactures both multi-mode and singlemode preforms and fiber, but
does not manufacture optical fiber cable, although MEFC, in which the Company
has an interest, draws fiber from preforms and manufactures fiber optic cable.
The Company's patented technology can be best described as a "rod-and-tube"
process, or as a hybrid of the OVD, IVD, AVD, and the Company's latest POVD
processes. The Company's process takes advantage of available high quality doped
(adding other glass materials, such as germanium dioxide to the silica glass)
and undoped fused silica rods and tubes during the manufacturing process to
produce more efficiently singlemode optical fiber preform and singlemode fiber
at a substantially reduced cost than the alternative processes.
Specifically, the Company's process places a high-purity "core" glass rod inside
a high-purity glass tube or "clad", which has a lower refractive index than the
core, and collapses the tube over the rod to form an intermediate preform. The
Company purchases the glass tubes and manufactures the "core" glass inside of
the purchased glass tube. The composite material is subsequently converted to a
glass rod referred to as an intermediate preform or core rod. Such intermediate
preform can also be manufactured by any of the other existing processes. This
intermediate preform is placed inside another purchased tube and collapsed
together to form a final preform, which has the proper ratio of
core-to-outside-diameter-glass. The preform is then drawn into finished fiber by
placing it inside a "draw furnace", heated to approximately 2000 degrees
Celsius, and "stretched" into tens of thousands of meters of hair-thin, flexible
glass fiber. The Company believes that its patented process offers
manufacturing-cost and capital-investment advantages over the processes
currently in use by competitors for the manufacture of optical fiber, because
(i) the machine time necessary to produce a given size preform is significantly
less, thereby allowing the Company to produce more preforms in the same time
period; and (ii) in making the preform, the Company purchases the tube and
manufactures a much smaller portion of the clad and 100% of the core which
accounts for approximately 5% of the preform. Alternatively, the OVD process,
for example, manufactures 100% of the preform, requiring substantially more
capital investment. As FiberCore's POVD technology is further developed and
implemented into production, the Company expects improved gross profit margins.
ALT Products
ALT, a wholly owned subsidiary of the Company has four principal products.
ALT's Fiber Optic Cable Monitoring Systems ("FOCMS") facilitate the continuous
monitoring of fiber optic and copper cables. The FOCMS consist of sensors housed
in a protective cover placed at cable splice points and connected to a central
monitoring system. ALT holds two United States patents covering this technology.
ALT also manufactures patented long-range fault locators, which are generally
used in pairs. Typically, each device is applied at a point on a fiber optic
cable, less than 100 miles from the other unit. These devices can detect and
locate cable faults between the units.
9
In addition, ALT manufactures cable protection devices and talk sets. Protection
devices are installed at cable splice joints prior to the cables entering a
building to protect against hazardous electrical currents that could otherwise
be carried by metal sheaths encasing optical fibers, and electro-optical
talksets. Field personnel use talk sets to communicate over optical fiber,
twisted pair-cable (regular telephone cable), and metal sheaths encasing optical
fibers and copper cables.
In the past, the Company has focused its resources on developing its optical
fiber and preform business and, therefore, has not been actively developing the
ALT business. Accordingly, the activities of ALT have been limited. Currently,
however, the Company is actively exploring ALT business opportunities.
RESEARCH AND DEVELOPMENT
In 1997 and 1998, the Company filed two patents for a production process that
the Company believes will substantially reduce the Company's manufacturing cost
of optical fiber and preforms. In mid-1999, the Company installed the first
machine using this new process in Jena, Germany for research and development.
Based on strong preliminary results, the Company plans to increase production
capacity using this process in 2001. Under the first phase, several new machines
will be installed as a pilot plant. Additional machines will be installed based
on operating results from the pilot plant. The 1997 patent filing for Plasma
Outside Vapor Deposition ("POVD") was approved by the U.S. patent office during
the first quarter of 2001.
The Company conducts research and development ("R&D") activities primarily at
its manufacturing facilities. The Company's research and development activities
are designed to improve the production process of fiber and preforms with
special emphasis on cost reduction and the development of new processes and
products. Some of the development programs consist of:
1) NZDSF (Non-Zero Dispersion Shifted Fiber) to permit dispersion
compensation over a broad wavelength range with minimum fiber
non-linearities, which reduces total loss over the span, including lower
splice loss. This fiber will have application in the same areas as
Corning's LEAF and Lucent's TrueWave fiber, which are generally used for
long distance and applications, requiring very high bandwidth.
2) ValuGrade and EconoGrade products in both singlemode and multi-mode design
that are more suitable for shorter distances such as Internet access,
Feeder Loop (also known as "Metropolitan Area Network"), Fiber to the Curb
and Fiber to the Home applications. FiberCore has already received orders
for this new product line. Additional development continues to further
reduce the costs of these already low-cost products.
3) POVD process enhancements to manufacture cladding material for optical
fiber more economically and to increase production rate of both singlemode
and multi-mode preform relative to other competing technologies,
generating significant savings in production costs. FiberCore just
recently received its initial US patent on this process and expects to
receive counterpart patents in other regions of the world, one of which
has been issued. We further expect to apply and ultimately receive several
additional patents, as we continue the development of this process.
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In addition, the Company is conducting R&D activities in developing the
following new products:
1) Fiber Lasers. Fiber Lasers are being developed in cooperation with certain
research institutes and printing equipment manufacturers in Germany. This
program is partially funded by the German Government. This special Fiber
Laser generates laser light for heavy-duty laser printing. The program
started in the middle of 2000, and is expected to be completed by 2003.
2) Laser Power Transmitting Fibers ("LPTF"). LPTF's are used for high power
transmission in conjunction with various types of lasers. Fiber Laser and
LPTF are expected to replace gas lasers in certain applications such as
laser welding, laser cutting, and laser surgery. The Company is funding
the entire cost of this project.
3) Fiber for High Power Laser Transmission. This fiber is used for laser
projection applications, including laser television ("TV"), which are
expected to be more cost effective than flat panel TV's. The fiber, which
has been developed in cooperation with an independent research institute
and funded with government grants, is completed and products are being
marketed in Europe. At this time, although the volumes are relatively
small, the fiber price is relatively high.
4) Bragg Grading Fiber ("BGF"). These highly photosensitive fibers can also
create band-path that, like filters, will work in the dense wavelength
division multiplexing ("DWDM") applications. The Company is funding 55% of
this project through government grants and outside sources. The Company
has completed the development of these fibers; however, at present, the
imprinting of BGF's is being done in cooperation with a research institute
in Germany. The Company already begun marketing this fiber. This product
was developed for quasi distributed fiber sensors to be used for
monitoring buildings, bridges, aircraft, transformers and many other
applications. Additional work will be done to expand the application of
this product into the growing telecommunications market.
The Company's R&D expenditures have increased by 102% during 2000 from the prior
year and 52% during 1999 from the prior year. Such expenditures amounted to
$1.46 million, $722 thousand and $475 thousand for the fiscal years ended
December 31, 2000, 1999 and 1998, respectively.
Twenty-five (25) of the Company's employees devote substantially all of their
time to research and development. In addition, the Company has contracts with
several individuals who are involved in contract engineering and/or development
work, including software development.
SALES AND MARKETING
MARKETING STRATEGY
To capitalize on the growth in fiber demand, the Company's sales and marketing
strategy is to increase market penetration through developing long-term,
strategic relationship supply contracts
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for both preform and fiber products as rapidly as practical, expanding the
Company's global sales and marketing programs, and emphasizing the performance
and cost advantages of the Company's patented technology. The Company plans to
sell products in areas where it can reasonably expect to avoid direct
competition from major suppliers of fiber, such as Lucent Technologies and
Corning, and secure its customer base through strategic alliances. Consistent
with this strategy, initial marketing efforts for singlemode fiber and preform
have been focused on establishing strategic alliances in developing countries
where management believes the demand is growing more rapidly than in Europe and
the Americas. However, with the recent shortage of fiber, the Company has been
able to secure several long-term contracts for singlemode in Europe and the
Americas. Multi-mode fiber is marketed in Europe and the Americas where
management believes market opportunities are the greatest for this product. In
July 1999, the Company began selling into the United States and expects that
sales growth will be more rapid than in Europe.
Management believes the telecommunications infrastructure of developing
countries is in the early stages of evolution and competition is not well
established. In the past, developing countries would typically purchase older,
previously deployed communications technology and equipment. However, the lack
of a copper cable infrastructure, the desire to become more technologically
advanced, the rapid growth in cellular communication and electronic commerce
have driven most developing countries to choose fiber rather than copper to
develop a sophisticated communications network. These countries must first
install a fiber optic in-frastructure of trunk and feeder lines followed by
fiber, copper or wireless to the subscriber loop. The Company is initially
targeting the large fiber optic cable manufacturing companies in Asia, the
Middle East, the Pacific Rim, and certain European and Eastern European markets.
Ten employees devote substantially all of their time to sales and marketing,
covering several regions throughout the world, including the United States,
South America, Western and Eastern Europe, Asia Pacific, the Middle East and
Africa. In certain areas of these regions, independent sales representatives
assist in the sales and marketing efforts.
STRATEGIC RELATIONSHIPS
The Company is seeking to increase market penetration in optical fiber markets
through strategic alliances and/or joint ventures. The Company has several
strategic customer relationships and has established two joint ventures. In
addition, discussions are presently underway with potential foreign and domestic
investors, and joint venture partners, including cable manufacturers, to build
plants for producing optical fiber and optical fiber preform that would supply
existing or planned fiber optic cable plants.
These relationships are being formed so that the Company provides the preforms
and the related technology requirements, and the other partner provides the
financing, operating, and local marketing expertise. Using this approach, it may
be possible for the Company to more rapidly obtain market share with little, if
any, cash capital investment.
EXPANSION
12
The Company anticipates that product demand will be generated from its strategic
alliances, as well as from independent manufacturers of fiber optic cable. The
Company intends to capitalize on the expected growth of the fiber optics
industry by constructing a number of facilities to produce optical fiber and
optical fiber preforms. The Company plans to use a well-balanced, phased-in
approach for establishment of these facilities.
In response to high customer demand for the Company's fiber, the Company has
begun implementing its capacity expansion program.
Currently, a second and larger facility in Jena, Germany is under construction
and expected to be on-line by late 2001. This new facility will improve
manufacturing efficiency, increase the Company's competitiveness in the
marketplace, and more than double the current capacity. The Company has orders
sufficient to operate the existing Jena facility, as well as initial phase of
the planned facility, at capacity for the next three years.
The Company's Brazilian subsidiary, Xtal, has a current capacity of
approximately 1,000,000 kms of singlemode fiber per year. With the integration
of FiberCore and Xtal technologies, this capacity is expected to double within
the next year and is sold out for the next three years based on current orders
and commitments. The technology integration has already had an effect,
increasing Xtal's capacity from 500,000 kms in 1999. The plant also has
available excess building space as well as land for new construction, which will
allow the Company to add auxiliary processing equipment to further accelerate
capacity increases. Equipment has been ordered and plans are underway to take
full advantage of available space and increase capacity as quickly as possible
in order to satisfy customer requirements.
In the longer term, the Company is planning on new facilities in Malaysia, the
United States, and Thailand.
COMPETITION
The Company is the only "pure" fiber supplier in the Western Hemisphere and
Europe. With Corning, Lucent and Alcatel all involved in manufacturing cable and
limited (fiber) supply, independent cablers have turned to FiberCore for fiber,
which has altered the competitive environment. Due to this high demand for the
Company's fiber and to increase market share, the Company has concentrated on
manufacturing and selling fiber rather than preform. During 2000, the Company
began increasing its fiber manufacturing capability at FiberCore Jena in
Germany, and in June 2000 acquired Xtal in Brazil. In addition, the Company is
increasing capacity through building a new facility in Jena (planned to be
on-line in late 2001) and increasing capacity in Brazil through an equipment and
facilities expansion.
FIBER
The competition in multi-mode fiber products is limited to a few manufacturers
in North America and Europe. They include Corning, Inc., Lucent Technologies,
Alcatel, and Plasma Optical Fiber. Management believes that Corning, Inc.,
Lucent Technologies, and Alcatel generally supply the majority of their
production to their own cablers or joint venture partners. Therefore, in the US
and Europe, multi-mode fiber will be the primary product, due to the
13
Company's unique technological and cost advantage, coupled with the fact that
the other three large U.S. producers do not focus on the multi-mode fiber as
their primary business. Furthermore, FiberCore plans to offer several types of
multi-mode fibers for specific applications and performance advantages. These
include different glass composition for radiation resistant fiber for Government
applications, high performance multi-mode fiber for emerging network protocols,
such as Gigabit Ethernet, and special coatings for customer specific
applications. Additionally, because of manufacturing flexibility, the Company is
positioned to respond quickly to special customer requirements and applications.
The competition in the singlemode fiber market is much more extensive than in
the preform market or the multi-mode fiber market. Most of the competition for
fiber comes from Corning, Inc. and Lucent Technologies. Competition in the fiber
market was primarily based on availability and quality. However, the recent and
on-going global shortage has enabled the industry to raise prices after many
years of falling prices. In the past, with some exceptions, the Company's fiber
has been generally priced at comparable levels to fiber manufactured by the
larger producers. Overall, changes in both product and manufacturing have
enabled the Company to keep pace with global pricing trends and, if required,
compete below market levels. The Company began actively marketing its new line
of high performance products to support emerging protocols, as well as our
ValuGrade and EconoGrade line of products, which have excellent
price/performance characteristics.
PREFORM
Management believes that there is limited competition in the sale of preforms to
cable manufacturers who draw their own fiber. Such competition, however, is
expected to grow. The largest competitor in this product is Shin Etsu, a
Japanese company. In addition, Alcatel supplies limited quantities of singlemode
preform.
The predominant practice of most fiber manufacturers is to make fiber optic
preforms only for their internal use and not to sell preforms to other
fiber-optic manufacturers. Management believes these large companies will not
enter the preform market because of the built-in inherent disincentive in
selling preforms; they have already invested heavily in plant, equipment and
technology to convert preforms into fiber and/or cable, and by selling preforms
they would be giving up value-added margins. The Company's customers are not
vertically integrated and require preforms that are in limited supply.
ALT PRODUCTS
The Company's management believes there is limited or no direct competition for
its FOCMS product line except for Norscan Instruments, Ltd ("Norscan"). Most
other competing technologies and products are more complementary to the
Company's products than true competitors because these products and the
Company's products are both needed to perform short range and long range fault
locating.
Numerous companies manufacture cable protection devices. The Company believes,
however, that it has the only product approved by Underwriters Laboratories, an
internationally recognized certifying organization.
14
While other companies manufacture field talk sets that enable personnel to
communicate by twisted pair, metal sheath or optical fiber, the Company knows of
no other company that manufactures a product that enables personnel to
communicate over all three media, although many companies have or can acquire
the technology to create such a device.
CUSTOMERS, INVENTORY, BACKLOG AND ADVERTISING
A key element of the Company's marketing strategy is to maintain sufficient raw
material and finished goods inventories to enable the Company to fill customer
orders promptly.
15
CUSTOMERS REPRESENTING OVER 10% OF SALES
The following table is based on the total sales of the Company for all periods
presented.
2000 % of Sales
Cabelte Cabos
Electricos S/A 11%
Furukawa Industrial S/A 11%
1999
Leone AG 24%
Pinnacl Ltd. (1) 21%
Siemens AG (2) 10%
Optical Cable Corp. 10%
1998
Leone AG 23%
Pinnacl Ltd. (1) 22%
Siemens AG (2) 13%
Belden Wire & Cable 10%
(1) Acquired by Tyco International in 2001.
(2) Acquired by Corning in 2000.
In previous years, the loss of the top four customers (in percentage of sales)
would have had a material adverse effect on the Company. The broadening of the
Company's customer base coupled with longer-term contracts and agreements
presents less risk in the event that any of the top customers decide to cancel
contracts or orders. Further, several contracts contain "take or pay"
provisions, which means that customers are contractually obligated to pay under
the contracts whether or not they accept shipment of the fiber.
BACKLOG, SALES AND ADVERTISING
At December 31, 2000, the Company had a backlog of orders approximating $190
million ($12.8 million at December 31, 1999) of which $111 million are
multi-year "take or pay" contracts. This represents a 1,384% increase over the
backlog in the previous year. During 2000, ten of the Company's employees were
engaged in sales activities, three in Europe, one in North America, four in
South America, and two in Asia, the Middle East and Africa. The Company also
utilized manufacturers' sales representatives in certain geographic markets.
Assisted by local representatives, management intends to establish strategic
relationships with key managers of local CATV, telephone, and cable companies.
In addition, other management executives are engaged in negotiating long-term
supply agreements with current and potential customers.
In the past the Company promoted its products principally through direct
mailings, visits to potential customers, distribution of product brochures
through sales representatives and exhibiting at industry trade shows. Recently,
the Company embarked on a new advertising campaign emphasizing quality and its
new range of products, and has begun participating in
16
industry conferences such as the Kessler Marketing Intelligence conference. The
Company also provides product information on its U.S., German and Brazilian
websites.
PATENTS
The Company is highly dependent on its patents. The Company's long-term strategy
includes becoming a low-cost producer of fiber optic preforms and optical fiber
to independent manufacturers of fiber optic cable. To do this, the Company must
continually improve its manufacturing processes at its facilities by
implementing the Company's patented technologies, by developing new techniques
that lower production costs, and by offering new and competitive products. With
these patents, manufacturing efficiencies are increased, thereby reducing
manufacturing cost and improving overall profitability. The Company is also able
to expand its business and reduce the need for cash financing by leveraging the
Company's intellectual property. For example, in the Malaysian joint venture,
the Company contributed the value of its technology in return for a 51% interest
in the joint venture. Similarly, because of increases in manufacturing
efficiency provided by the Company's patented technology, the Company can
increase capacity with less equipment than otherwise needed. By capitalizing on
its technology, in this manner, the Company reduced its cash requirements and
the likelihood of additional shareholder dilution. The Company plans to use this
financing technique in future transactions when and as appropriate. The
Company's patents also help protect the Company from competition by preventing
others from using the technology covered by the patent.
In 1997 and 1998, the Company filed two patent applications in the U.S. for a
process, which the Company believes will improve the cost and efficiency of
producing optical fiber preforms. The 1997 patent filing was approved by the
U.S. patent office during the first quarter of 2001. This U.S. patent relates to
the Company's unique POVD technology. The Company has corresponding patent
applications in many foreign countries and expects that counterpart filings will
be issued in the near future; a POVD patent has been issued in South Africa.
The Company is the registered owner in the United States of three patents
covering its cable monitoring systems and fault locating methods. The Company
acquired from Norscan a patent issued by the United Kingdom for the same
technology. In addition, the Company has filed international patent applications
covering this technology in various other countries around the world, although
none have yet been granted. Pursuant to the Company's agreement with Norscan,
Norscan has the right to a Canadian patent reissuance and may otherwise use the
technology in Canada. The Company has improved upon Norscan's technology and
obtained a European patent and United States patent, Patent No. 5,077,526, which
expires in 2008 covering the improvements. The Company also owns a United States
patent, Patent No. 4,947,469 expiring in 2007, and a European patent covering a
cable fault location method. In addition, the Company owns a United States
patent covering the provision of backup power to optical communications systems.
The Company's ability to compete effectively will depend, in part, on its
ability to protect its patents. There can be no assurance that the steps taken
by the Company to protect its intellectual property will be adequate to prevent
misappropriation or that others will not develop competitive technologies or
products. Furthermore, there can be no assurance that others will not
independently develop products that are similar or superior to the Company's
products or
17
technologies, duplicate any of the Company's technologies, or design around the
patents issued to the Company. In addition, the validity and enforceability of a
patent can be challenged after its issuance. While the Company does not believe
that its patents infringe upon the patents or other proprietary rights of any
other party, other parties may claim that the Company's patents do infringe upon
such patents or other proprietary rights. There can be no assurance that the
Company would be successful in defending against such a claim of infringement.
Moreover, the expense of defending against such a claim could be substantial.
INTERNATIONAL OPERATIONS
The Company is subject to all the risks of conducting business internationally.
These risks include unexpected changes in legislative or regulatory requirements
and fluctuations in the United States dollar, the Euro, the German mark, the
Brazilian real, and other currencies in which the Company is doing business from
time to time. The business and operations of FCJ and Xtal, 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 in Germany are high compared to the rest of the European Union,
the United States and Japan. In addition, Brazil's economy has been subject to
periods of high inflation. FCA, the Company's joint venture in Malaysia, which
has been delayed because of the financial crisis in Asia, is subject to similar
international risks. There is also the threat of regional conflict. The
Company's participation in MEFC is subject to the risks of doing business in
Saudi Arabia and the Middle East in general. These risks include, but are not
limited to, the threat of regional conflict. To date, essentially all of the
Company's revenues have come from its subsidiaries, FCJ and Xtal.
TRADEMARKS
FCJ is the owner of the registered trademark InfoGlas(R) under which it markets
its optical fiber products. In 1997, the Company filed for registration of the
trademarks "EconoGrade" and "ValuGrade" for products it introduced in the market
in 1998.
SEASONALITY
The Company's business does not have strong seasonal fluctuations, and the
Company does not expect material seasonal variations to revenue.
RAW MATERIALS
The Company presently can purchase all its raw material requirements for its
optical fiber and preform business. The major component of a preform is silica
glass tubing, which is available in various sizes. Various high purity gases
such as oxygen, nitrogen, argon, helium, chlorine and chemicals such as silicon
tetrachloride, silicon tetra fluoride and germanium tetrachloride are used in
the process of manufacturing preform. During 2000, FCJ purchased approximately
95% of its key glass tubing raw material from Heraeus Quarz Glas GmbH & Co. K G
("Heraeus") located in Hanau, Germany. XTAL purchased approximately 81% of its
preform requirements from Shin Etsu, a Japanese Company. Heraeus accounted for
approximately 95% and 90% of the German facilities glass tube requirements in
1999 and 1998, respectively. The Company recently entered into a five-year
contract with Heraeus to supply tubes. Quantities under the
18
contract, together with glass from other sources are expected to satisfy most of
the Company's current needs. Under the contract, the supply of glass increases
by over 50% in 2002, in line with the Company's existing commitments from its
customers. Quantities for 2003 will be set within the next several months which
is expected to be significantly higher than the 2002. The contract contains
mutual "take or pay" provisions to the extent that the Company purchases less
than or Heraeus delivers less than the agreed upon annual percentage covered by
the annual purchase order. For 2001, 2002 and 2003, the agreed upon percentage
rates are 90%, 80% and 70%, respectively. Given the Company's significant
backlog, it is unlikely that the Company will suffer any material consequences
as a result of its purchasing less the agreed upon percentage.
If the Company becomes unable to secure its raw material requirements, as
needed, there can be no assurance that the Company will be able to obtain raw
materials on commercially acceptable terms, and such failure to obtain raw
materials could have a material adverse effect on the Company. To limit the
possibility of future shortages of key materials, the Company has successfully
identified alternate suppliers. In addition, the Company plans to augment its
tube requirements through its own internally manufactured tubes, using its new
POVD technology. The Company believes this technology will yield a significant
competitive advantage through increased manufacturing efficiency and reduced
production costs. Both FCJ and Xtal have the capability to manufacture the
high-purity synthetic core glass using a first purchased cladding tube, as well
as adding additional purchased cladding tubes using the Company's patented
production process.
EMPLOYEES
At December 31, 2000, the Company employed 270 persons, of whom 3 are
executives, 51 are in sales and administration, 191 are in manufacturing and 25
are principally in research and development. Of the 270 employees, 8 are
headquartered in the United States, 139 in Brazil, and 123 in Germany. Almost
all of Xtal's production and industrial employees are members of a union. The
collective bargaining agreement covering substantially all members (executives
are not covered) provides for an annual distribution to employees of a specified
amount, as agreed by the Union and Xtal in the first quarter of each year, for
the following year. The Company is not party to any other collective bargaining
agreements and the Company does not maintain a pension plan. The Company
considers its relations with employees to be satisfactory and believes that its
employee turnover does not exceed the industry average.
ITEM 2. PROPERTIES
The Company leases 5,000 square feet of office space as its Corporate
Headquarters in Charlton, Massachusetts. The monthly rent is $2,250, and the
rental agreement is on a monthly basis.
The Company has two manufacturing facilities. The FCJ's facility, which is
located in Jena, Germany, is leased at a monthly cost of approximately $24,000
and occupies approximately 30,000 sq. ft., including 20,700 sq. ft. of
production space, 6,100 sq. ft. of office and storage space and an additional
3,200 sq. ft. of outside facilities for gas storage tanks. The Company owns all
machinery and equipment at the facilities, subject to certain restrictions, at
the Jena
19
facility. In 1999, the term of the lease for the Jena operation was extended to
December 31, 2001 and is renewable for additional terms aggregating 25 years, at
the option of the Company; the Company intends to remain in this facility.
The Company owns the land and buildings at the Xtal facility, which comprises
approximately 215,300 sq. ft. The site is comprised of 6 separate buildings for
a total of 82,800 sq. ft. that contain 14,000 sq. ft. of production space,
36,800 sq. ft. of support and storage space, 11,000 sq. ft of external
facilities, and 21,000 sq. ft of office space.
The Company maintains casualty and liability insurance at both facilities.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently in litigation with Techman International Corp.
("Techman") and M. Mahmud Awan who controls Techman, relating to certain
investments, contracts and other claims. Both parties are seeking approximately
$500,000. In addition, the Company is suing Techman and Awan for the return of
shares that have been canceled by the Company because of the failure of Techman
and Awan to satisfy certain conditions related to their issuance. In September
2000, the court found that there is reasonable likelihood that the Company would
recover on its claims and, accordingly, granted the Company's motion for an
attachment and preliminary injunction with respect to certain assets of Techman
and Awan (Superior Court Department, Docket No. 00-0812C). The litigation is in
the discovery phase. Based on the court's ruling, the Company believes it is
likely to prevail in this matter.
In addition to the above, the Company is subject to various claims that arise in
the ordinary course of business. The Company believes such claims, individually
or in the aggregate, will not have a material adverse affect on the business of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
(The remainder of this page intentionally left blank.)
20
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
In November, 2000, the Company's stock began trading on the NASDAQ small-cap.
The Company's stock previously traded on the Over the Counter (OTC) Bulletin
Board, where the public market was limited. There were 211 holders of record and
approximately 15,000 beneficial owners of Common Stock as of March 1, 2001. Set
forth below for the periods indicated are the high and low prices for the Common
Stock as reported on the Bulletin Board and Nasdaq small-cap. The Company's
stock trades under the symbol FBCE.
STOCK PRICE AND DIVIDEND POLICY
Period High Low
2000
- ----
4th quarter $ 7.16 $2.19
3rd quarter $ 9.31 $4.41
2nd quarter $ 7.00 $2.81
1st quarter $11.00 $1.72
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
The payment of dividends, if any, in the future is within the discretion of the
Board of Directors and will depend on the Company's earnings, its capital
requirements, financial condition, contractual and legal restrictions and other
relevant factors. Under the Loan Agreement, and related documents, the Company
is prohibited from paying dividends as long as the loan remains outstanding. The
Company does not expect to declare or pay any dividends in the foreseeable
future. In addition, the ability of the Company to pay cash dividends in the
future will be subject to its ability to meet certain other of its obligations.
See ITEM 1 : RECENT DEVELOPMENTS, Sale of Securities for a description of the
Company's recent sales of unregistered securities and the Company's registration
statement on Form S-3.
21
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data of the Company for each of the years 2000,
1999, 1998, 1997, and 1996 has been derived from the audited financial
statements and notes thereto of the Company and its predecessors. The
information set forth below is qualified by reference to, and should be read in
conjunction with, the consolidated financial statements and related notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
YEARS ENDED DECEMBER 31,
(Dollars in thousands except share data)
2000(1) 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------
Operating Data:
Net Sales ............................ $ 36,919 $ 12,126 $ 8,201 $ 7,078 $ 8,096
------------ ------------ ------------ ------------ ------------
Costs and expenses:
Cost of sales ........................ 25,118 9,820 6,534 5,702 7,200
Selling, general, and administrative.. 5,071 3,237 2,981 3,148 4,324
Research and development ............. 1,459 722 475 434 420
Interest expense, net ................ 5,832 952 746 638 387
Other income (expense), net .......... 226 (336) 208 (213) 102
------------ ------------ ------------ ------------ ------------
Loss before provision for income taxes
and minority interest .............. (335) (2,941) (2,327) (3,057) (4,133)
(Provision) benefit for income taxes.. (2,054) 937 (15) (21) --
------------ ------------ ------------ ------------ ------------
Loss before minority interest
(2,389) (2,004) (2,342) (3,078) (4,133)
Minority interest in income of
consolidated subsidiary ............ (308) -- -- -- --
------------ ------------ ------------ ------------ ------------
Net loss ............................. $ (2,697) $ (2,004) $ (2,342) $ (3,078) $ (4,133)
============ ============ ============ ============ ============
Basic and diluted loss per share ........ $ (0.05) $ (0.05) $ (0.07) $ (0.09) $ (0.13)
============ ============ ============ ============ ============
Weighted average shares outstanding ..... 49,043,882 36,610,544 35,833,501 35,744,182 31,695,693
============ ============ ============ ============ ============
Balance Sheet Data:
Working capital ...................... $ 2,047 $ 1,041 $ 1,425 $ 3,208 $ 191
Total assets ......................... 67,453 24,062 25,768 26,107 17,642
Long-term obligations ................ 9,849 9,563 10,204 9,851 4,587
Total liabilities .................... 28,551 14,085 14,864 13,351 7,618
Minority interest .................... 4,750 3,263 3,263 3,217 --
Accumulated deficit .................. (19,893) (17,196) (15,192) (12,850) (9,772)
Stockholders' equity ................. 34,152 6,714 7,641 9,539 10,024
(1) Includes results from the acquisition of Xtal as of June 1, 2000.
Additionally, interest expense, net, includes $5,405 of non-cash,
non-recurring interest expense on convertible debt.
22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Dollars, Deutsche Marks, Brazilian Reais, and Euros in Thousands)
BACKGROUND
Certain statements in this Form 10-K constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors, which may cause the actual results,
performance, or achievements of the Company, or industry results, to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. The important factors
that could cause actual results to differ materially from those indicated by
such forward-looking statements include, but are not limited to (i) the
information being of a preliminary nature and therefore subject to further
adjustment; (ii) the ability of the Company to contain costs, to grow internally
or by acquisition and to integrate acquired businesses into the Company's group
of companies; (iii) the uncertainties of litigation; (iv) the Company's
dependence on significant customers and suppliers; (v) changing conditions in
the optical fiber industry which could adversely affect the Company's business;
(vi) unsettled economic conditions in several of the countries in which the
Company operates; (vii) competitive actions by other companies, including the
development by competitors of new or superior services or products, price
reductions or the entry into the market of new competitors; (viii) the delivery
of and ability to commission new equipment as scheduled; and (ix) all the risks
inherent in the development, introduction, and implementation of new products
and services; and other factors both referenced and not referenced in this Form
10-K. When used in this Form 10-K, the words "estimate", "project",
"anticipate", "expect", "intend", "believe", "plan" and similar expressions are
intended to identify forward-looking statements, and the above described risks
inherent therein.
The Company's principal operating companies are FCJ and Xtal. FCJ manufactures
principally multi-mode fiber; Xtal manufactures principally singlemode fiber.
The Company maintains its corporate headquarters in Charlton, Massachusetts,
which is staffed primarily by executive, accounting and administrative
personnel. The following discussion and analysis of the results of operations is
based on the Company's audited financial statements for the years ended December
31, 2000, 1999 and 1998.
RESULTS OF OPERATIONS
Year Ended December 31, 2000
The results for the twelve (12) month period ended December 31, 2000 includes
the operations of Xtal, from June 1, 2000.
Net sales for the year ended December 31, 2000 increased by $24,793, or 204%,
over 1999. The increase includes the sales of Xtal for the seven months ended
December 31, 2000 of $21,916. Additionally, sales from the Company's German
subsidiary increased by $2,870 or 24% for the year ended December 31, 2000. The
revenue increase is primarily due to increases in product
23
shipped to new and continuing customers, as well as increases in product prices.
High product demand, higher pricing and strong sales growth at both facilities
continued to strengthen during the year, and this trend is expected to continue
for 2001.
Cost of sales increased by $15,298 or 156% over 1999 due to the increase in
volume shipped, offset by a decrease in costs per unit of production. Of the
$15,298, $14,978 relates to Xtal. Due to the mix of products sold it is not
practicable to disclose costs per unit of production for each of the different
products. Average production costs overall declined by approximately 26% from
1999 to 2000. This decrease in production costs was the result of changes in the
mix of products produced, improved production yields (lower raw material
consumption for the volume produced) and production process improvements
resulting in a greater volume of production per machine hour. The Company
continuously invests in process development to further reduce costs.
Gross profit was $11,801 or 32% of net sales in 2000 compared to $2,306 or 19%
of net sales in 1999. Of the $9,495 increase, Xtal accounted for $6,938; FCJ
accounted for $2,553, a 111% increase over the $2,306 reported for the prior
year. The rise in gross profit results from the addition of Xtal, increases in
prices and quantities shipped, and manufacturing process improvements. The
Company anticipates that gross margins will continue to improve as production
levels are increased, as the Company continues to integrate its technology
between operations, and as cost reductions and process improvements are
implemented at both facilities.
Selling, general and administrative costs increased by $1,834 or 57%, over 1999.
This increase is almost entirely attributable to expenses incurred by Xtal.
Selling, general and administrative costs were 14% of net sales in 2000 compared
to 27% of net sales in 1999, reflecting a higher sales base. Research and
development costs were $1,459, an increase of $737 or 102% over the prior year.
Of this increase, $558 or 75% relates to Xtal. The Company intends to continue
its research and development to increase production, reduce manufacturing costs
and develop new products. Accordingly, the Company plans to double 2000 spending
levels on research and development for 2001. The Company believes that this
investment will result in substantially lower production costs in the future,
thus increasing profitability and maintaining the Company's competitiveness.
Interest income increased $257 in 2000 compared to 1999 primarily due to the
increase in income from the investments of the DM 3,850 security deposit with
the Berliner Bank and interest income from Xtal.
Non-cash interest expense of $5,405, which was offset by an increase in paid-in
capital, relates to the deemed beneficial conversion feature of the $7,500
convertible notes issued to Crescent International Ltd. in June and July 2000.
Other interest expense was $794 in 2000 compared to $1,062 in 1999. The decrease
was attributable primarily to the repayment and conversion of 1999 outstanding
loans.
The Company recorded a tax provision of $2,054 in 2000 compared to a net tax
benefit of $937 in 1999. The provision for 2000 is primarily the result of
taxable income earned by the Company's foreign operations in Brazil and Germany.
The provision also reflects no benefit for U.S. operating losses and the $5,405
non-cash interest expense described above. In 1999, the Company recognized the
future tax benefit of the remaining net operating loss carryover from the German
subsidiary.
24
Excluding the effect of non-cash interest charges of $5,405, net income for 2000
was $2,708 rather than a net loss of $2,697 compared to a net loss of $2,004 for
1999. The primary cause of the $4,712 increase was the increase in sales, the
increase in gross margins, the decrease in the percentage of selling, general
and administrative expenses to net sales, partially offset by higher research
and development expenses and the provision for taxes.
Year Ended December 31, 1999
Net sales for the year ended December 31, 1999 were $3,925 greater (47.9%) than
net sales in 1998. The increase was principally due to a 123% increase in volume
shipped to new and existing customers in 1999 compared to 1998, offset by lower
average selling prices ranging from 15% to 33%. Average selling prices decreased
in the first half of 1999 compared to 1998, primarily due to an increase in the
available supply of fiber in the market. In addition, the Company began selling
into the North American market in the second half of 1999, where average prices
were slightly lower than in Europe. This oversupply condition appears to have
disappeared completely in the last quarter of 1999, and prices have stabilized
and increased for some products. The current demand for the Company's products
exceeds the Company's capacity, and, therefore, the Company is expanding its
production capacity in Germany and seeking other alternatives to supply its
customers' requirements. Substantially all of the Company's sales are through
FCJ.
Cost of sales increased by $3,286 or 50.3% over 1998 due to the increase in
volume shipped, offset by a decrease in costs per unit of production. Due to the
mix of products sold it is not practicable to disclose costs per unit of
production for each of the different products. Average production costs overall
declined by approximately 28% from 1998 to 1999. This decrease in production
costs was the result of changes in the mix of products produced, improved
production yields (lower raw material consumption for the volume produced) and
production process improvements resulting in a greater volume of production per
machine hour. The Company continuously invests in process development to further
reduce costs.
Gross profit was $2,306 or 19.0% of net sales in 1999 compared to $1,667 or
20.3% of net sales in 1998. The slightly lower margin percentage was due to the
lower average selling prices noted above, and the higher costs of selling into
the North American market. Despite these lower prices and higher selling costs,
the Company was able to substantially offset these declines through improvements
in production efficiencies and yields thus lowering per unit production costs.
Selling, general and administrative expenses increased by $256 or 8.6% in 1999
compared to 1998. This increase was principally due to an increase in bad debt
expense of $242 and higher sales costs at the Company's German subsidiary,
offset by lower administrative costs at the parent company. The increase in bad
debt expense was primarily due to the write off of $389 due from one customer as
a result of a dispute involving a specific sale. Although the Company continues
to sell to this customer, the Company does not anticipate future similar
write-offs related to this customer and the customer does not represent a
significant part of the Company's total sales.
Research and development costs increased $247 or 52% in 1999 over 1998. The
increase is principally attributable to the costs to develop a new technology
for the production of preform.
25
The Company believes that this investment will result in substantially lower
production costs in the future, thus increasing profitability and maintaining
the Company's competitiveness.
Interest income increased $45 in 1999 compared to 1998 primarily due to the
increase in income from the investments of the DM 3,850 security deposit with
the Berliner Bank.
Interest expense increased 30.9% to $1,062 in 1999 compared to $811 in 1998.
This increase is attributable to the higher average balance of outstanding loans
used for working capital in 1999 at the parent company and the higher average
outstanding balance in 1999 of the working capital lines of credit at the German
subsidiary.
Other expense-net was $336 in 1999 compared to other income-net of $208 in 1998.
This change was principally due to the foreign currency exchange loss of $329 on
the German mark deposit with the Berliner Bank that is held as security for the
loan, compared to a foreign currency exchange gain on this deposit in 1998. The
Deutsche Mark declined in value by approximately 14% from the end of 1998 to the
end of 1999.
The Company recorded a net tax benefit of $937 in 1999 as a result of
recognizing the future tax benefit of the remaining net operating loss carryover
from the German subsidiary. The net loss tax benefits had previously been fully
reserved; however, the Company's German subsidiary has had three continuous
years of operating profits and projects an operating profit for the year 2000,
and therefore, the tax benefits of the loss carryover are more than likely to be
realized.
The net loss for the year 1999 was $2,004 compared to $2,342 for 1998, a
decrease of $338 or 14.4%. The primary cause of the decrease was the increase in
gross profit and the recognition of the tax benefit described above, partially
offset by the higher administrative, research and development and interest
costs.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company anticipates that the results of operations will continue to improve
in 2001 as compared to the operating results experienced in prior years. This
expectation is based on a projected increase in sales both in dollar amounts and
volume, and the projected continuing improvement in manufacturing costs. In
addition, the Company's profit margins will continue to benefit from a reduction
in manufacturing costs, yield improvements, and strong pricing.
The Company currently has a backlog of orders aggregating approximately
$190,000. Shipment is scheduled for years 2001 to 2003, as orders exceed the
Company's current capacity at FCJ and Xtal. The backlog at December 31, 1999 and
1998 was approximately $12,800 and $3,900, respectively. The increase in the
order backlog at December 31, 2000 reflects the tight supply situation in the
industry, as well as the Company's position as the only "pure" fiber supplier in
the Western Hemisphere and Europe. With more than 58% of the Company's $190,000
backlog as "take or pay" contracts (customers are contractually obligated to pay
under the contracts whether or not they accept shipment of the fiber), the
Company expects that revenue for 2001 will more than double.
26
This expected increase in sales and improved profitability is expected to have a
positive impact on the Company's cash flow, such that the Company projects that
cash flow from operations will continue to improve.
The Company anticipates that high product demand will continue to generate from
its broadening customer base of independent cable manufacturers, as well as from
strategic alliances. The Company intends to capitalize on the expected growth of
the fiber optics industry by constructing a number of facilities to produce
optical fiber and preforms, using a well-balanced, phased-in approach for the
establishment of these facilities.
Currently, a second and larger facility in Jena, Germany is under construction
and expected to be on-line by late 2001. This new facility will improve
manufacturing efficiency; increase the Company's competitiveness in the
marketplace, and more than double current capacity. The Company has orders
sufficient to operate the existing Jena facility, as well as initial phase of
the planned facility, at capacity for the next 3 years.
The Company's Brazilian subsidiary, Xtal, has a current capacity of
approximately 1,000,000 kms of singlemode fiber per year. With the integration
of FiberCore and Xtal technologies, this capacity is expected to double within
the next year and is sold out for the next three years based on current orders
and commitments. The technology integration has already had an effect,
increasing Xtal's capacity from approximately 500,000 kms in 1999. The plant
also has available excess building space as well as land for new construction,
which will allow the Company to add auxiliary processing equipment to further
increase capacity more rapidly. Equipment has been ordered and plans are
underway to take full advantage of available space and increase capacity as
quickly as possible in order to satisfy customer requirements.
In the longer term, the Company is planning on new facilities in Malaysia, the
United States, and Thailand, at a total estimated project cost of $90,000. The
cost of each facility is estimated at $40,000 for Malaysia, $30,000 for the
U.S. and $20,000 for Thailand.
The Company plans to finance the expansions through a combination of long-term
borrowings, government grants, equity placements, and customer and internal
financing.
In June 2000, the Company concluded a financing arrangement with Crescent
International Ltd. with respect to a $30,000 commitment. Through a series of
transactions in 2000, the Company sold $11,000 of securities pursuant to the
arrangement and as of December 31, 2000, the Company could require Crescent to
purchase up to $19,000 of additional shares of Common Stock, based on a
market-based pricing formula; subject to certain terms and limitations set forth
in the Company's Agreements with Crescent and with respect to which Crescent has
registration rights.
In December 2000, the Company closed on a $10,000, five (5) year revolving
credit loan agreement with Fleet National Bank, but the maximum principal amount
of the loan decreases by $750 on December 26, 2001 and each subsequent year.
Loan payments, in the amount of $750, may be made by way of a reduction in the
amount available under the credit facility. As of December 31, 2000 the Company
borrowed $2,150. These funds were used to increase the capitalization of FCJ
with respect to FCJ's $25,000 project financing, which closed in January 2001.
The financing included approximately $11,000 in loans and equipment leases, and
$8,000
27
in grants from agencies of the German government. The Company contributed the
balance of the funds. The Company intends to use the remainder of the proceeds
to partially finance expansion of the Xtal manufacturing facility.
The Company is not relying on the conversion of warrants and options to fund its
expansion plans; however, if all of the outstanding warrants and options are
exercised for cash, the total proceeds that the Company would receive upon the
exercise is approximately $8,000. To the extent that warrants and options are
exercised, the Company intends to use the proceeds from the exercise of such
warrants and options primarily for working capital purposes, including debt
service.
In addition, a substantial amount of the Company's outstanding loans are
long-term. Aside from the Fleet loan, principal under the 1996 Berliner Bank
loan is due and payable in 2006; however, interest at 6.25% is paid quarterly.
Subsequent to December 31, 2000, a certain $4,000 convertible note was converted
into shares of the Company. Deferred financing costs were related to the Fleet
loan and financing at FCJ.
The following changes in balance sheet amounts are net of the effect of the
change in the currency exchange rates from December 31, 1999 to December 31,
2000.
Year Ended December 31, 2000
For the year ended December 31, 2000, the Company generated $9,171 in cash from
operating activities. This was a major improvement over the $348 used for
operating activities in 1999. This significant improvement was due primarily to
the increase in sales and gross profit, higher depreciation costs and other
non-cash costs incurred, including a non-cash interest charge of $5,405, in
2000.
Accounts receivable increased by $2,629 due to the significant increase in sales
in 2000 and the acquisition of Xtal compared to 1999. Inventory decreased by
$363 also due to the increase in sales. Accounts payable increased by $3,164 in
2000 due to a decrease in payables at the parent company offset by an increase
at FCJ and as a result of the acquisition of Xtal.
During 2000, the Company invested $9,950 in fixed assets, principally for the
expansion project at FCJ and for equipment purchases at Xtal. Cash paid for the
acquisition of Xtal amounted to $19,586.
The Company received net proceeds of $15,211 from the sale of common stock,
principally from the exercise of warrants to purchase common stock by Tyco, and
by Tyco's $9,000 purchases of common stock. The Company received proceeds from
long-term debt, net of repayment of $9,741. The principal proceeds of long-term
debt were $7,500 of convertible notes from Crescent, $3,500 of which were
converted to common shares of the Company prior to year-end and $4,000 which
were converted in January. The Company also received $2,150 from Fleet Bank
which was used for the expansion at FCJ. Loan repayments in addition to the
Crescent conversion included repayment of $9,000 to Algar, used for the Xtal
acquisition.
28
Year Ended December 31, 1999
For the year ended December 31, 1999, the Company used $348 for operating
activities. This was a substantial improvement over the $1,281 used for
operating activities in 1998. This significant improvement was due primarily to
the increase in sales and gross profit, higher depreciation costs and other
non-cash costs incurred in 1999.
Accounts receivable increased by $1,185 due to the significant increase in sales
in 1999 compared to 1998. Inventory decreased by $807 also due to the increase
in sales. Accounts payable decreased by $108 in 1999 due to a decrease in
payables at the parent company offset by an increase at the German subsidiary.
The increase at FCJ is primarily due to the increase in purchases of raw
materials for production. Accrued liabilities increased $98 in 1999 over 1998,
principally due to an increase in accrued interest on notes payable.
During 1999, the Company invested $1,156 in fixed assets, principally for new
equipment at the Jena facility. This was funded in part by $556 in grants from
the German government. Other assets increased by $49 in 1999, principally for
investments in new patents.
Notes payable increased by $755 in 1999 over 1998, principally due to borrowings
under the lines of credit at FCJ used for working capital, and notes to certain
officers and directors for previously unpaid salaries, fees and expenses. The
Company received $250 in proceeds from the sale of common shares in 1999.
Long-term interest payable increased by $391 due to the increase in accrued
interest payable on the Tyco loans wherein the interest is payable at maturity
in 2005 and 2006.
ALT
Although the Company has not been aggressively marketing the ALT products due to
limited resources, there is an active market for these products and the Company
plans to invest in marketing these products. The patents have an intrinsic value
and the Company has developed a business plan to capitalize on this value and
intends to implement the plan. The Company further believes that the ALT patents
had and have significant future value, and the future net cash flows from sales
of ALT products will be sufficient to fully recover the patent costs in a
reasonable period of time. In addition, the Company is currently in discussions
with entities that have interest in the ALT product lines.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which requires that an entity recognize all
derivatives as either assets or liabilities in the consolidated balance sheets
and measure those instruments at fair value. The accounting for changes in fair
value of a derivative depends on the intended use of the derivative and its
resulting designation. The Company will adopt FAS 133, as amended by FAS 138,
beginning January 1, 2001. Adoption of this new accounting standard will result
in a cumulative after-tax gain of $195 in the Consolidated Statement of
Operations.
29
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30
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks from changes in foreign currency exchange
rates and interest rates. The Company has two principal operating subsidiaries.
FiberCore Jena is located in Germany and its functional currency is the Euro.
Xtal is located in Brazil and its functional currency is the Brazilian Real.
Foreign Currency Risk. FiberCore Jena may, from time to time, purchase
short-term forward exchange contracts to hedge payments and/or receipts due in
currencies other than the Euro or Deutsche Mark. At December 31, 2000 ,
FiberCore Jena had outstanding forward exchange contracts for the sale of U.S.
Dollars totaling $300, which contracts mature at various dates in 2001. The
weighted-average exchange rate in these contracts is $ .8865 per Euro. A 10%
change in the year-end exchange rate would not have a material impact on the
results of operations.
At December 31, 2000, the Company had a long-term loan denominated in DM
totaling DM7,700. The principal of the loan is due at maturity, September 2006.
Interest on the loan is payable quarterly at the fixed rate of 6.25% per annum.
A 10% change in the DM exchange rate to the U.S. dollar could increase or
decrease the interest cash flow requirements of the Company by approximately $23
for each of the years 2000 through 2005, and by approximately $17 in 2006.
Substantially all of the Company's sales are through FCJ and Xtal. Additionally,
at December 31, 2000, 24%, 38%, and 8% of the Company's assets are at its
German, Brazilian, and Malaysian subsidiaries, respectively. The Company,
therefore, is subject to foreign currency translation gains or losses in
reporting its consolidated financial position and results of operations.
Interest Rate Risk. At December 31, 2000, the Company had a long-term loan with
an interest rate based on the prime rate or LIBOR which is adjusted quarterly
based on the prevailing market rates. A 10% change in the interest rate on this
loan would not have a material impact on the results of operations.
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31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Independent Auditors' Report..................................................33
Consolidated Balance Sheets at December 31, 2000 and 1999.....................34
Consolidated Statements of Operations for the Years Ended December 31, 2000,
1999 and 1998..............................................................35
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended
December 31, 2000, 1999 and 1998...........................................36
Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended December 31, 2000, 1999 and 1998.....................................37
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000,
1999, and 1998.............................................................38
Notes to Consolidated Financial Statements for the Years Ended December 31,
2000, 1999 and 1998........................................................39
32
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
FiberCore, Inc.
Charlton, Massachusetts
We have audited the accompanying consolidated balance sheets of FiberCore, Inc.
and subsidiaries as of December 31, 2000 and 1999, and the related consolidated
statements of operations, comprehensive income (loss), changes in stockholders'
equity and cash flows for each of the three years in the period ended December
31, 2000. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of FiberCore, Inc. and subsidiaries as
of December 31, 2000 and 1999, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America.
DELOITTE & TOUCHE LLP
Hartford, Connecticut
March 29, 2001
33
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
(Dollars in thousands except share data) 2000 1999
-------- --------
ASSETS
Current assets:
Cash ........................................................................ $ 5,051 $ 487
Accounts receivable, less allowance for doubtful accounts of $836 in 2000 and
$220 in 1999 .............................................................. 8,332 1,927
Other receivables ........................................................... 707 86
Inventories ................................................................. 6,193 3,047
Prepaid and other current assets ............................................ 466 16
-------- --------
Total current assets ...................................................... 20,749 5,563
-------- --------
Property and equipment ......................................................... 26,033 7,109
Less accumulated depreciation .................................................. (4,612) (3,047)
-------- --------
Property and equipment - net .............................................. 21,421 4,062
-------- --------
Other assets:
Notes receivable from joint venture partners ................................ 4,949 4,949
Restricted cash ............................................................. 1,849 1,981
Patents, less accumulated amortization of $3,496 in 2000 and $2,838 in 1999 . 4,171 4,762
Investment in joint venture ................................................. 925 925
Deferred tax asset .......................................................... 722 905
Goodwill, net of accumulated amortization of $363 ........................... 11,336 --
Other ....................................................................... 1,331 915
-------- --------
Total other assets ........................................................ 25,283 14,437
-------- --------
Total assets .............................................................. $ 67,453 $ 24,062
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable ............................................................... $ 2,253 $ 1,588
Accounts payable ............................................................ 8,621 1,536
Accrued expenses ............................................................ 4,892 1,398
Advance payments from customers ............................................ 2,936 --
-------- --------
Total current liabilities ............................................. 18,702 4,522
Long-term interest payable ................................................. -- 1,267
Long-term debt ............................................................. 9,849 8,296
-------- --------
Total liabilities ......................................................... 28,551 14,085
-------- --------
Minority interest .............................................................. 4,750 3,263
-------- --------
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock, $.001 par value, authorized 10,000,000 shares; no shares
issued and outstanding .................................................... -- --
Series A preferred stock, $.001 par value, authorized 1 share; 1 share issued
and outstanding ........................................................... -- --
Common stock, $.001 par value, authorized 100,000,000 shares; shares issued
and outstanding: 57,667,970 in 2000 and 41,404,602 in 1999 ................ 58 42
Additional paid-in-capital .................................................. 56,219 24,874
Accumulated deficit ......................................................... (19,893) (17,196)
Accumulated other comprehensive loss:
Accumulated translation adjustment .......................................... (2,232) (1,006)
-------- --------
Total stockholders' equity ................................................ 34,152 6,714
-------- --------
Total liabilities and stockholders' equity ................................ $ 67,453 $ 24,062
======== ========
See accompanying notes to consolidated financial statements.
34
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2000, 1999, and 1998
(Dollars in thousands except share data)
2000 1999 1998
------------ ------------ ------------
Net sales ........................................... $ 36,919 $ 12,126 $ 8,201
Cost of sales ....................................... 25,118 9,820 6,534
------------ ------------ ------------
Gross profit ..................................... 11,801 2,306 1,667
Operating expenses:
Selling, general and administrative
expenses........................................ 5,071 3,237 2,981
Research and development ......................... 1,459 722 475
------------ ------------ ------------
Income (loss) from operations .................. 5,271 (1,653) (1,789)
Interest income ..................................... 367 110 65
Non-cash interest expense on convertible debt........ (5,405) -- --
Other interest expense .............................. (794) (1,062) (811)
Other income (expense), net ......................... 226 (336) 208
------------ ------------ ------------
Loss before income taxes and minority interest ...... (335) (2,941) (2,327)
(Provision) benefit for income taxes ................ (2,054) 937 (15)
------------ ------------ ------------
Loss before minority interest ....................... (2,389) (2,004) (2,342)
Minority interest in income of subsidiary ........... (308) -- --
------------ ------------ ------------
Net Loss ............................................ $ (2,697) $ (2,004) $ (2,342)
============ ============ ============
Basic and diluted loss per share of common stock .... $ (0.05) $ (0.05) $ (0.07)
============ ============ ============
Weighted average shares outstanding ................. 49,043,882 36,610,544 35,833,501
============ ============ ============
See accompanying notes to consolidated financial statements.
35
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Years Ended December 31, 2000, 1999 and 1998
(Dollars in thousands )
2000 1999 1998
---- ---- ----
Net loss $(2,697) $(2,004) $(2,342)
Other comprehensive (loss) income:
Foreign currency translation (1,226) (466) 328
adjustments
-------- -------- --------
Comprehensive loss $(3,923) $(2,470) $(2,014)
======== ======== =======
See accompanying notes to consolidated financial statements.
36
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 2000, 1999 and 1998
(Dollars in thousands except share data)
COMMON STOCK ACCUMULATED
----------------------- OTHER RETAINED TOTAL
PAR PAID-IN COMPREHENSIVE EARNINGS STOCKHOLDERS'
SHARES VALUE CAPITAL INCOME (LOSS) (DEFICIT) EQUITY
-------------- ------ --------- ---------------- ---------- ---------------
Balance, December 31, 1997...... 35,774,822 $ 36 $23,221 $ (868) $(12,850) $ 9,539
Issuance of stock on exercise
of options and warrants ..... 161,641 41 41
Contribution of capital in FCA.. 75 75
Foreign currency translation
adjustment................... 328 328
Loss for the year............... (2,342) (2,342)
-------------- ------ --------- ---------------- ---------- ---------------
Balance, December 31, 1998...... 35,936,463 $ 36 $23,337 $ (540) $(15,192) $ 7,641
Sale of stock for cash.......... 1,000,000 1 249 250
Issuance of stock for
conversion of debt .......... 4,468,139 5 1,060 1,065
Issuance of stock options for
services..................... 94 94
Discount on notes for value of
warrants..................... 134 134
Foreign currency translation
adjustment................... (466) (466)
Loss for the year............... (2,004) (2,004)
-------------- ------ --------- ---------------- ---------- ---------------
Balance, December 31, 1999...... 41,404,602 $ 42 $24,874 $(1,006) $(17,196) $ 6,714
Sale of stock for cash.......... 3,193,369 3 12,893 12,896
Issuance of stock for
conversion of debt .......... 8,704,275 9 10,164 10,173
Issuance of stock on exercise
of options and warrants ..... 4,132,800 4 2,405 2,409
Issuance of stock options for
services..................... 232,924 478 478
Deemed interest on convertible
debt......................... 5,405 5,405
Foreign currency translation
adjustment................... (1,226) (1,226)
Loss for the year (2,697) (2,697)
-------------- ------ --------- ---------------- ---------- ---------------
Balance, December 31, 2000...... 57,667,970 $ 58 $56,219 $(2,232) $(19,893) $34,152
============== ====== ========= ================ ========== ===============
See accompanying notes to consolidated financial statements
37
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2000, 1999 and 1998
(Dollars in thousands except share data) 2000 1999 1998
-------- -------- --------
Cash flows from operating activities:
Net loss ....................................................... $ (2,697) $ (2,004) $ (2,342)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Issuance of stock options for services
performed .................................................... 119 94 --
Depreciation and amortization .................................. 2,815 1,932 1,735
Deferred income tax (benefit) .................................. 100 (952) --
Non-cash interest expense ...................................... 5,405 391 416
Foreign currency translation loss and other .................... 235 209 20
Changes in assets and liabilities:
Accounts receivable ............................................ (2,629) (1,185) (31)
Other receivables .............................................. (625) 411 30
Inventories .................................................... 363 807 (1,187)
Prepaid and other current assets ............................... 312 (41) 90
Accounts payable ............................................... 3,164 (108) (114)
Accrued expenses ............................................... 2,609 98 102
-------- -------- --------
Net cash provided by (used in) operating activities .......... 9,171 (348) (1,281)
-------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment ............................ (9,950) (1,156) (1,895)
Reimbursement from government grant ............................ 165 556 929
Cash used for acquisition ...................................... (19,586) -- --
Cash acquired from acquisition ................................. 196 -- --
Other .......................................................... (17) (49) (205)
-------- -------- --------
Net cash used in investing activities ........................ (29,192) (649) (1,171)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock ......................... 15,211 250 41
Proceeds from long-term debt ................................... 10,650 -- --
Proceeds from notes payable .................................... 300 755 597
Repayment of notes payable ..................................... (1,209) -- (37)
Financing costs ................................................ (328) -- --
-------- -------- --------
Net cash provided by financing activities .................... 24,624 1,005 601
-------- -------- --------
Effect of foreign exchange rate change on cash .................... (39) 329 (127)
-------- -------- --------
Increase (decrease) in cash ....................................... 4,564 337 (1,978)
Cash, beginning of year ........................................... 487 150 2,128
-------- -------- --------
Cash, end of year ................................................. $ 5,051 $ 487 $ 150
======== ======== ========
Supplemental disclosure:
Cash paid during the year for interest ......................... $ 600 $ 310 $ 274
Common stock issued for conversion of debt ..................... 10,173 1,065 --
See accompanying notes to consolidated financial statements.
38
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Incorporation and nature of operations
FiberCore, Inc. (the "Company") is primarily engaged in the business of
developing, manufacturing, and marketing singlemode and multi-mode optical fiber
and optical fiber preforms for the telecommunications and data communications
industry. The Company reports as a single segment enterprise.
The Company's principal operating companies are FiberCore Jena GmbH ("FCJ"), a
wholly owned subsidiary in Germany and Xtal FiberCore Brasil, ("Xtal"), a 90%
owned Brazilian company acquired June 1, 2000. FCJ manufactures principally
multi-mode fiber; Xtal manufactures principally singlemode.
In March 2000, FCJ formed FiberCore Machinery ("FCM"), a wholly owned subsidiary
in Germany, which designs and manufactures the specialized fiber equipment used
by the Company's operating units.
In May 2000, FiberCore Quarz GmbH ("FCQ") was formed in Germany as a wholly
owned subsidiary of FiberCore, Inc. FCQ will be utilizing the Company's newly
patented Plasma Outside Vapor Deposition ("POVD") technology to complement the
supply of synthetic silica tube that has been in short supply over the past one
and half years.
Automated Light Technologies, Inc. ("ALT"), a wholly owned subsidiary of the
Company, is a manufacturer and distributor of fiber optic cable monitoring and
fault locating systems for the telecommunications industry.
FiberCore Asia Sdn. Bhd. ("FCA") was formed in 1997 to construct an
optical-fiber manufacturing facility in Malaysia. Construction of the Malaysian
facility required loan financing which, due to the economic downturn in Asia,
has been delayed.
The Company's common stock is listed on the Nasdaq Small-cap.
b) Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
39
c) Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries. All intercompany balances and transactions have
been eliminated in consolidation. Minority interest on the balance sheet
includes 10% ownership of Xtal, by its former owner, Algar, S.A.
The Company holds a 51% ownership in FCA, which is consolidated in the financial
statements. Minority interest on the balance sheet includes the Malaysian
partners' 49% ownership.
The Company's 7% ownership interest in Middle East Optical Fiber Cable Co.
("MEFC") is carried at cost of $925. As part of a restructuring that occurred in
2000, certain MEFC shareholders contributed additional capital, thereby reducing
the Company's previously held 15% interest to 7%.
d) Inventories
Inventories are valued at the lower of cost or market using the first-in,
first-out method.
e) Property and equipment
Property and equipment is stated at cost, net of grants received applicable to
acquisitions. The cost of maintenance and repairs is charged to expense as
incurred. Expenditures for significant renewals or improvements to properties
and equipment are added to the basis of the asset. Property and equipment is
depreciated using the straight-line method over the estimated useful lives of
the assets.
f) Restricted Cash
In connection with the 1997 expansion of the FCJ facility, the Company obtained
a loan from the Berliner Bank in Germany. Cash in the amount of German marks
3,850 (approximately U.S. $1,849 at December 31, 2000), has been deposited with
this institution as collateral for this loan.
g) Patents
Patents are amortized on a straight-line basis over seventeen years, which is
the estimated useful life of the patents. The Company evaluates the
recoverability of patents from expected future cash flows.
h) Fair value of financial instruments
The Company has financial instruments, which consist of cash, short-term
receivables, accounts payable and notes payable, for which their carrying
amounts approximate fair value due to the short maturity of those instruments.
The principal amount of the long-term debt approximates fair value because the
interest rates on these instruments approximate current market rates.
40
i) Translation of foreign currencies
The translation of foreign subsidiaries financial statements into U.S. dollars
is performed for balance sheet accounts using current exchange rates in effect
at the balance sheet date and for revenue and expense accounts using an average
exchange rate for the period. Unrealized gains or losses resulting from
translation are included in stockholders' equity as other comprehensive income
(loss).
j) Revenue
Revenue is recognized when products are shipped.
k) Research and Development
Research and development costs are expensed as incurred. The Company received
$209, $161, and $66 in grants for research and development activities in 2000,
1999 and 1998, respectively. The grant funds received are accounted for in other
income. The principal terms of the grants are that the grant funds received are
used only for the specific project for which the grants were awarded and that
the research project is completed in accordance with the terms of the grant
award. The projects progress is evaluated on a periodic basis (usually
quarterly) and in the event that the Company determined that the conditions of
the grant were not met or the grantor has advised the Company that the funds
were not used as intended, then the Company would record the liability at the
date of such determination with an offsetting charge to income. The Company has
completed or is completing all research projects in accordance with the terms of
the grants and therefore has not recorded any obligation to repay any grant
funds received.
l) Income taxes
The Company accounts for income taxes in accordance with the asset and liability
method. Deferred taxes are recognized for the future tax consequences
attributable to the differences between the book and tax basis of assets and
liabilities. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enacted date.
m) Loss per share of common stock
Basic loss per share of common stock is computed based on the weighted average
shares outstanding during the year. The stock purchase warrants, stock options
and convertible debt have not been included in the computation of diluted loss
per share since the effect would be anti-dilutive.
n) Stock-based compensation
FASB Statement No. 123 "Accounting for Stock-Based Compensation" defines a fair
value based method of accounting for an employee stock option or similar equity
instrument. However, the Company will continue to measure compensation cost for
employee stock
41
compensation transactions using the intrinsic value based method of accounting
prescribed by APB Opinion No. 25 "Accounting for Stock Issued to Employees" as
permitted under FASB 123.
o) Forward exchange contracts
In 2000, FiberCore Jena GmbH, the Company's German subsidiary, entered into
forward exchange contracts for the sale of U.S. dollars. At December 31, 2000,
outstanding contracts totaled $300. Gains and losses on the contracts are
recorded in the Consolidated Statements of Operations. The contract values
approximated the market values at December 31, 2000.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which requires that an entity recognize all
derivatives as either assets or liabilities in the consolidated balance sheets
and measure those instruments at fair value. The accounting for changes in fair
value of a derivative depends on the intended use of the derivative and its
resulting designation. The Company will adopt FAS 133, as amended by FAS 138,
beginning January 1, 2001. Adoption of this new accounting standard will result
in a cumulative after tax gain of $195 in the Consolidated Statements of
Operations.
p) Reclassifications
Certain amounts in the prior year financial statements have been reclassified to
conform to the 2000 presentation.
(2) EARNINGS PER SHARE
Basic earnings per share ("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.
For the years ended December 31, 2000, 1999 and 1998, there was no difference
between basic and diluted earnings per share due to the losses of the Company.
The following table shows securities outstanding as of December 31, that could
potentially dilute basic EPS in the future that were not included in the
computation of diluted EPS because to do so would have been antidilutive.
2000 1999 1998
--------- ---------- ----------
Employee stock options.......... 4,516,783 6,073,151 2,020,225
Warrants to acquire common
stock........................ 3,368,276 5,190,613 4,903,185
Common stock to be issued
for convertible debt.......... 1,570,680 5,616,699 4,927,232
--------- ---------- ----------
Total 9,455,739 16,880,463 11,850,642
========= ========== ==========
42
(3) ACQUISITIONS AND STRATEGIC INVESTMENTS
On June 20, 2000, the Company closed on an agreement to acquire, as of June 1,
2000, full ownership of Xtal FiberCore, Brasil (formerly "Xtal Fibras Opticas,
S. A."), a wholly owned subsidiary of Algar S. A. The $25,000 purchase price is
payable over a three year period; however, $2,500 is subject to achieving
certain profitability targets. At the closing, the Company paid $10,000 in cash
and issued to Algar a $10,000 note payable with interest at 6% payable on
December 31, 2000 for 90% of Xtal. According to the terms of the agreement, the
Company was entitled to receive a $1,000 discount if the $10,000 note was
prepaid by August 31, 2000. On August 29, 2000, Algar's Chief Operating Officer,
on behalf of Algar, agreed to allow the discount if the remaining $9,000 of the
note was paid by September 8, 2000. On September 8, 2000, the Company paid
$9,000, together with interest, to Algar. Subsequently, Algar disputed the
understanding. On December 29, 2000, the Company, in full settlement of the
dispute, paid Algar $200, receiving, in effect, an $800 rather than a $1,000
discount. At the closing, the Company also issued a $2,500, 6% note, payable in
two installments of $1,250 each, on September 20, 2001, and on December 20,
2002, respectively. The obligation to repay the $2,500 note is contingent on
Xtal's attaining specified profitability targets in 2000 and 2001; the target in
2000 was achieved. The Company may acquire the remaining 10% of the stock upon
payment of an additional $2,500, plus 6% interest on or before June 20, 2003.
The cost of the acquisition of $22,486 exceeds the preliminary estimate of the
fair value of the net assets acquired by $11,699. This excess, which has been
accounted for under purchase accounting as goodwill, is being amortized over
twenty (20) years.
Assuming the acquisition of Xtal had occurred at the beginning of each period
presented, the pro forma net sales, gross profit, net loss and basic and diluted
loss per share of common stock are provided below.
ProForma
Year Ended December 31,
(unaudited)
------------------------------
2000 1999
------------ ------------
Net sales .................................................. $ 48,408 $ 29,898
Gross Profit ............................................... $ 13,461 $ 4,035
Net Loss ................................................... $ (2,390) $ (5,420)
Basic and diluted loss per share of common stock............ $ (.05) $ (.13)
Weighted average shares outstanding ........................ 51,866,828 42,614,451
In November 1997, the Company entered into a joint-venture agreement with
Federal Power Sdn. Bhd. ("FDP") and PNB Equity Resource Corporation ("PERC") to
form FiberCore Asia Sdn. Bhd. ("FCA") in Malaysia. FCA was established to
construct and operate an optical fiber preform manufacturing facility in
Malaysia. The Company owns 51% of FCA, and FDP and PERC own 37% and 12%,
respectively.
43
The Company granted FCA a license to use the Company's technology in exchange
for the Company's ownership interest, and FDP and PERC contributed cash of
$1,683 and notes of $4,949 for their ownership interests. Due to the economic
situation in Malaysia and the Pacific Rim the debt financing required for the
project has not, as yet, been obtained. The Company and the other shareholders
in FCA are continuing to seek alternative financing and additional equity
partners for FCA.
The Company holds a 7% interest, carried at $925, in Middle East Fiber Cable Co.
("MEFC"), a cable manufacturing company that operates in Saudi Arabia. As part
of restructuring that occurred in 2000, certain MEFC shareholders contributed
additional capital, thereby reducing the Company's previously held 15% interest
to 7%. In 2000, the Company made approximately $807 in preform sales to MEFC.
MEFC began operations in 1998 and the Company believes that its share in the
value of MEFC exceeds its investment. The Company is a co-guarantor with the
other joint venture partners for certain credit facilities provided by banks to
MEFC. The assets of MEFC also collateralize these credit facilities. At December
31, 2000, the Company was contingently liable for these loans in the amount of
approximately $400.
(4) RECEIVABLES
Activity in the allowance for doubtful accounts consisted of the following for
the years ended December 31:
2000 1999 1998
----- ----- -----
Balance at beginning of period .............. $ 220 $ 200 $ 33
Additions charged to expense ................ 17 409 167
Xtal allowance acquired ..................... 803 -- --
Deductions .................................. (204) (389) --
----- ----- -----
Balance at end of period ............... $ 836 $ 220 $ 200
===== ===== =====
Other receivables consist of the following at December 31:
2000 1999
----- -----
Value added tax ............................. $ 567 $ 32
Other ....................................... 140 54
----- -----
Total .................................. $ 707 $ 86
===== =====
44
(5) INVENTORIES
Inventories consist of the following at December 31:
2000 1999
------ ------
Raw materials .................... $4,418 $1,745
Work-in-process .................. 992 361
Finished goods ................... 783 941
------ ------
Total ...................... $6,193 $3,047
====== ======
(6) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
ESTIMATED
USEFUL LIVES 2000 1999
------------ ------------ ------------
Land $ 1,248 $ ---
Buildings 25 years 3,010 ---
Office equipment............................. 2-5 years 695 360
Machinery and equipment...................... 2-12 years 16,006 9,303
Furniture and fixtures....................... 5-7 years 21 21
Leasehold improvements....................... 3-10 years 405 380
Construction in progress..................... 8,321 803
------------ ------------
29,706 10,867
Less grant proceeds received................. (3,673) (3,758)
------------ ------------
Total............................... $ 26,033 $ 7,109
============ ============
Depreciation on property and equipment charged to expense was $1,793 in 2000,
$1,058 in 1999 and $928 in 1998.
45
(7) ACCRUED EXPENSES
Accrued expenses consist of the following at December 31:
2000 1999
------ ------
Accrued wages, benefits & taxes $1,593 $ 398
Accrued interest 120 198
Accrued legal and audit 266 140
Other 2,913 662
------ ------
Total $4,892 $1,398
====== ======
(8) NOTES PAYABLE
Notes payable consist of the following at December 31:
2000 1999
----------- -----------
Convertible note payable to an officer of the Company
with interest at 8.0% per year, due December 31, 2000,
convertible into common shares of the Company at $0.25
per share. (Converted in 2000). $ ------ $ 192
Convertible note payable to an officer of the Company
with interest at 8.0% per year, due December 31, 2000,
convertible into common shares of the Company at $0.25
per share. (Converted in 2000). ------ 119
Convertible note payable to shareholder with interest
at prime plus 1% (9.25% at December 31, 1999), due
March 6, 2000. (Converted in 2000). ------ 220
Note payable to an officer of the Company, interest at
prime plus 1%, due September 17, 2000. ------ 50
Convertible note payable with interest at 8.0% per
year, due December 31, 2000, convertible into common
shares of the Company at $0.25 per share. A director
of the Company controls the lender. (Converted in
2000). ------ 181
Note payable to Algar S.A with interest at 6%, due
September 20, 2001 1,250 ------
46
Amounts outstanding under working capital loans from
Brazilian banks with interest at 18.33%, due January
31, 2001 512 ------
Amounts outstanding under revolving lines of credit
from German banks with interest at 8.0%. ------ 859
Discount attributable to warrants issued in
conjunction with notes. ------ (33)
Note payable to Dresdner Bank with interest at 7.56%,
due February 20, 2001 312 ------
Notes payable to Banespa Bank with interest at 7.56%,
due March 25, 2001 179 ------
------ ------
Total $2,253 $1,588
====== ======
In conjunction with certain of the notes, the Company issued to related party
lenders in 1999 an additional 812,425 warrants to purchase common shares of the
Company at exercise prices of $0.25 and $0.26 per share, the closing market
price at the dates of issue. The fair value of the warrants has been recorded as
debt discount. Related party interest expense on these notes in 2000 and 1999
was $72 and $90, respectively.
On December 29, 2000, related party convertible notes issued to two officers and
an outside director in July 1999, totaling $548, including related party
interest expense, were converted into 2,190,850 common shares of the Company.
During February and March 2000, the Company borrowed a total of $300 from the
spouses of two officers and from a company affiliated with an outside director.
In exchange, the Company issued each party a $100 unsecured note, bearing
interest at 14%. The notes were repaid in September 2000.
Pursuant to the acquisition of Xtal, the Company issued $2,500 of 6% notes,
payable in two installments of $1,250 each, on September 20, 2001, and on
December 20, 2002, respectively. The obligation to repay the $2,500 note is
contingent on Xtal's attaining specified profitability targets in 2000 and 2001;
the profitability target for 2000 was met and, accordingly, $1,250 is reflected
above. At December 31, 2000, the Company's Brazilian subsidiary, Xtal maintained
two lines of credit of R$ 1,000 (approximately US $512) with Brazilian banks.
The notes bear interest at 18.33% per year. Interest expense on amounts drawn
under these notes was $13 in 2000. The notes, which were unsecured, were paid in
full in January 2001.
47
The conversion prices of convertible notes either equaled or exceeded the
trading price of the Company's stock on the date of issue. All of the proceeds
of the notes were used for working capital.
(9) LONG-TERM DEBT
Long-term debt consists of the following at December 31:
2000 1999
----------- -----------
Note payable to Berliner Bank, interest at 6.25%, due
September 30, 2006. $ 3,699 $ 3,962
Convertible note payable to Tyco Electronics Corp.
(formerly AMP, Incorporated) interest at 3-month
London Interbank Offered Rate plus one percent (6.40%
at December 31, 1999), due April 17, 2005. --- 2,000
Note payable to Tyco, interest at prime plus one
percent (9.25% at December 31, 1999), due November 27,
2006. --- 3,000
Convertible note payable to Crescent International,
interest at 8%, due June 9, 2002 (Converted January
11, 2001). 4,000 ---
Discount attributable to warrants issued in
conjunction with the $3,000 note, above --- (666)
Fleet Bank line of credit - Floating rate (8 1/2% at
December 31, 2000), due December 26, 2005 2,150 ---
----------- -----------
Total $ 9,849 $ 8,296
=========== ===========
During the year ended December 31, 1997, the Company drew down 7,700 German
marks (approximately U.S. $3,699 at December 31, 2000) under a loan agreement
with the Berliner Bank. The proceeds were used to fund the expansion of the
Company's plant in Germany. The loan bears interest at 6.25% annually and is due
on September 30, 2006. A cash deposit of approximately $1,849 collateralizes the
loan. The Berliner Bank loan contains certain financial ratio covenants. At
December 31, 2000, the Company was in compliance with these covenants.
In April 1995, FiberCore issued to Tyco, a floating rate, collateralized, ten
year debenture in the amount of $5,000, due April 17, 2005, with interest, at an
annualized rate adjusted quarterly, equal to the 3-month London Interbank
Offered Rate plus 1%, (6.4% at December 31, 1999). No interest was due until the
earlier of: Tyco conversion of debt to stock, a public financing by the Company,
which provided Tyco the right to call the loan, or maturity. On November 27,
1996, Tyco converted $3,000 of principal and $541 of accrued interest relating
to the original $5,000 ten year debenture, into 3,058,833 shares of common stock
of the Company. The Company's patents, patent applications, licenses, rights and
royalties resulting from such patents and the
48
equipment of FCJ collateralized the Tyco notes. The remaining principal balance
remained subject to the terms of the original debenture agreement and was
convertible into shares of the Company at $0.66 per share.
As an additional part of this agreement, on November 27, 1996, Tyco issued to
the Company $3,000 under a ten-year note, secured by equipment owned by the
Company, with interest at prime plus one percent. Terms of the debenture state
that interest would accrue, but would not be payable for the first five years of
the loan and that a portion of the proceeds would be used as collateral for the
German bank loan relating to the 1997 expansion of the FCJ facility. The
principal was due before the maturity date if a major financing was completed or
the bank released the collateral.
In conjunction with the $3,000 note above, Tyco was issued five-year warrants to
acquire 2,765,487 shares of the Company's stock at an exercise price of
approximately $0.72 per share. Interest expense on the Tyco notes was $165, $391
and $416 for the years ended December 31, 2000, 1999 and 1998, respectively.
On May 19, 2000 in a private placement, the Company issued 4,451,509 shares of
common stock to Tyco Electronics Corporation, a wholly owned subsidiary of Tyco
International Ltd, upon conversion of all outstanding debt and accrued interest,
in the amount of $6,432. The remaining debt discount of $629 was recorded as a
credit to additional paid-in-capital. In addition, Tyco paid $2,000 upon the
exercise of warrants to purchase 2,765,487 shares of common stock. In connection
with the debt conversion, Tyco released its liens on the Company's assets.
As part of a private placement transaction with Crescent International Ltd.
("Crescent"), the Company issued on June 9, 2000 and July 5, 2000 secured, two
year, 8% convertible notes, in the amounts of $6,000 and $1,500, respectively.
On June 26, and December 29, 2000, Crescent converted $2,000 of the $6,000 note
and the $1,500 note into 685,871 and 590,760 shares of common stock,
respectively. The convertible notes are convertible into common shares of the
Company at the lower of (i) the volume-weighted-average trading prices during
the 10 trading days preceding the closing, or (ii) 93% of the average of the
lowest three consecutive weighted-average trading prices during the 22 trading
days preceding the conversion. In connection with the deemed beneficial
conversion feature of the $6,000 and $1,500 note and, in accordance with
accounting pronouncements, the Company recorded as of June 9, 2000 and July 5,
2000 $5,317 and $88, respectively, of non-cash interest expense offset by an
increase in paid in capital. The adjustments have no effect to the net equity of
the Company. The remaining $4,000 of the June 9, 2000 note was converted by
Crescent on January 11, 2001 into 1,570,680 shares. In addition, Crescent
released its liens and pledges on all collateral.
On December 26, 2000, the Company closed on a $10,000, five (5) year revolving
credit loan agreement with Fleet National Bank, but the maximum principal amount
of the loan decreases by $750 on December 26, 2001 and each subsequent year.
Contemporaneously with each reduction, the Company shall repay to the Bank the
amount, if any, by which the outstanding principal balance exceeds the loan
commitment as so reduced, together with accrued interest and unpaid interest,
thereon. The Company is required to pay commitment fees of 1% per annum on the
49
unused balance of the Fleet revolving credit loan. The loan is guaranteed by
Tyco Sigma Limited, a wholly owned subsidiary of Tyco International Ltd.,
pursuant to a Guarantor Indemnification Agreement entered into with the Company
and three managing shareholders of the Company. Under the guarantee, the Company
is obligated to make quarterly payments to Tyco Sigma Limited in an amount equal
to .4% (1.6% annually) on the $10,000. At the Company's election, the interest
rate is equal to either the bank's prime rate or 1.5% above the bank's LIBOR
rate, which is set at one, two and three month intervals. In addition, so long
as obligations remain owing to Fleet, the Company will not pay any dividends or
make similar distributions. While the Company entered into a Pledge and Security
Agreement with respect to substantially all of the Company's assets, as part of
the closing, the Pledge and Security Agreement is not effective and no security
interest shall attach unless the bank elects upon the occurrence of an event of
default or the existence of an adverse credit rating with respect to Tyco
International Group S.A. If an event of a default occurs, Tyco Sigma can
exercise its rights as holder of its one (1) share of the Series A Preferred
Stock. The holder of Series A Preferred Stock can cause the Company's Board of
Directors to be expanded to include a sufficient number of additional Series A
directors such that the Series A directors constitute a majority of the Board of
Directors. If the Guarantor Indemnification Agreement is terminated, all Series
A directors will be deemed to resign, and the Series A Preferred Stock will
automatically be cancelled. The Series A Preferred Stock contains no other
voting rights or dividend, liquidation, conversion, or other monetary rights or
preferences.
Scheduled maturities of long-term debt are as follows at December 31, 2000:
2002* 4,000
2005 2,150
2006 3,699
-----------
Total $ 9,849
===========
* On January 11, 2001 Crescent International converted the $4,000 of
convertible debt outstanding as of December 31, 2000 into 1,570,680 shares
of the Company.
(10) COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries have entered into various leases for its office
and production space. The Company's office lease is on a monthly basis at a
monthly rental of $2. FCJ conducts its operations from premises under an
operating lease. The lease provides for fixed monthly rental payments of $24
through its expiration on December 31, 2001, and is renewable for up to 25 years
at the Company's option; the Company intends to remain at these premises. Xtal
owns the land and buildings in which its operations are conducted.
The Company has an outstanding S-3 registration statement, which was declared
effective on September 29, 2000 by the Securities and Exchange Commission. The
S-3 covers primarily the
50
resale of securities held by Crescent International Ltd. and underwritten sales
of common stock, from time to time, by the Company.
In January 2001, the Company closed on $25,000 project financing for expansion
of FCJ. A second larger facility in Jena, Germany is under construction and
expected to be on-line by late 2001. This new facility will improve
manufacturing efficiency; increase the Company's competitiveness in the
marketplace, and more than double current capacity. The existing capacity, at
the Jena facility, as well as initial planned capacity is currently sold out for
the next 3 years. The financing included approximately $11,000 in loans and
equipment leases, and $8,000 in grants from agencies of the German government.
The Company contributed the balance of the funds, as well as guarantees the
loans and equipment leases.
The Company has a vendor supply contract which contains mutual "take or pay"
provisions to the extent that the Company purchases less than or the vendor
delivers less than the agreed upon annual percentage covered by the annual
purchase order. For 2001, 2002 and 2003, the agreed upon percentage rates are
90%, 80% and 70% respectively. Given the Company's significant backlog, it is
unlikely that the company will suffer any material consequences as a result of
its purchasing less than the agreed upon percentage.
Future minimum lease payments under non-cancelable operating leases (with
minimum or remaining lease terms in excess of one year) are as follows, as of
December 31, 2000:
FISCAL YEAR ENDING DECEMBER 31, AMOUNT
------------------------------- ------
2001................................... $ 971
2002................................... 1,683
2003................................... 1,527
2004................................... 1,504
2005................................... 1,502
-------
Total............................ $ 7,187
=======
Included in the statements of operations for the years ended December 31, 2000,
1999 and 1998 is rent expense of $396, $384, and $372, respectively.
The Company is currently in litigation with Techman International Corp.
("Techman") and M. Mahmud Awan who controls Techman relating to certain
investments, contracts and other claims. Both parties are seeking approximately
$500. In addition, the Company is suing Techman and Awan for the return of
shares that have been canceled by the Company because of the failure of Techman
and Awan to satisfy certain conditions related to their issuance. In September
2000, the court found that there is reasonable likelihood that the Company would
recover on its claims and, accordingly, granted the Company's motion for an
attachment and preliminary injunction with respect to certain assets of Techman
and Awan (Superior Court Department, Docket No. 00-0812C). The litigation is in
the discovery phase. Based on the court's ruling, the Company believes it is
likely to prevail in this matter.
51
ALT is contingently liable for certain debt of a former subsidiary, Allied
Controls, Inc. ("Allied"), in the amount of approximately $235. Allied is
current in its payments with respect to this debt.
The Company is a co-guarantor with the other joint venture partners for certain
credit facilities provided by banks to MEFC. The assets of MEFC collateralize
the obligations under the credit facility. At December 31, 2000, the Company was
contingently liable for these loans in the amount of approximately $400.
In addition to the above, the Company is subject to various claims, which arise
in the ordinary course of business. The Company believes such claims,
individually or in the aggregate, will not have a material adverse effect on the
financial position or results of operations of the Company.
(11) STOCKHOLDERS' EQUITY
The Company has completed the following sales of securities during the past
three years:
1) a private placement in reliance on Section 4(2), dated July, 1999,
pursuant to which the Company issued to a private investor 1,000,000
shares of Common Stock for $250;
2) a private placement in reliance on Section 4(2), dated May 16, 2000,
pursuant to which the Company issued 485,002 shares to ten offshore
accredited investors for $1,550;
3) a private placement in reliance on Section 4(2), dated May 19, 2000,
pursuant to which the Company issued 4,451,529 shares of Common Stock to
Tyco Electronics Corporation, a wholly owned subsidiary of Tyco
International Ltd, upon its conversion of $6,432 outstanding debt,
including interest, and issued 2,765,487 shares of Common Stock upon the
exercise of warrants for $2,000;
4) a private placement in reliance on Section 4(2) with Crescent dated June
9, 2000, with respect to a $30,000 commitment pursuant to which the
Company:
o issued 1,200,274 shares of Common Stock for $3,500 on June 9, 2000;
o issued $7,500 in debt convertible into shares of Common Stock,
of which $2,000 on June 29, 2000 and $1,500 on December
29, 2000 were converted into 685,871 and 590,760 shares of Common
Stock, respectively. The remaining $4,000 held as of December
31, 2000 was converted into 1,570,680 shares of Common Stock on
January 12, 2001; and
o can require Crescent to purchase up to $19,000 of additional shares
of Common Stock, based on a market-based pricing formula; subject to
certain terms and limitations set forth in the Company's Agreements
with Crescent and with respect to which Crescent has registration
rights,
52
5) a private placement in connection with transactions with Crescent,
pursuant to which the Company issued to Gruntal, its investment banker and
agent, warrants to purchase up to 504,146 shares of Common Stock at a
weighted average exercise price of $3.56;
6) a private placement in reliance on Section 4(2), dated September 5, 2000,
pursuant to which the Company issued 1,352,275 shares of Common Stock to
Tyco Sigma Limited, a wholly owned subsidiary of Tyco International Ltd.,
for $9,000;
7) an offering in reliance on Regulation S, dated September 15, 2000 pursuant
to which the Company issued 155,718 shares of Common Stock to two venture
capital companies located outside the U.S. for $1,110; and
8) a private placement in reliance on Section 4(2), dated December 29, 2000
pursuant to which the Company issued Gruntal Warrants to purchase up to
100,000 shares of Common Stock at an exercise price of $5.00.
The Company used the proceeds from the foregoing sales of securities primarily
to finance the acquisition of Xtal and improvements at Xtal's facilities and for
research and development activities, working capital, and general corporate
purposes.
The following represents the stock option activity, price range and weighted
average price during the three years ended December 31, 2000.
Weighted
Number of Exercise Price Average
Shares Range Exercise
--------- -------------- -----
Outstanding at December 31, 1997 1,387,778 $0.003-$2.00 $1.32
Granted in 1998 695,703 $0.1875 $0.1875
Exercised in 1998 (63,256) $0.003-$2.00 $0.84
--------- -------------- -----
Outstanding at December 31, 1998 2,020,225 $0.003-$1.58 $0.95
Granted in 1999 4,052,926 $0.1875-$2.125 $0.49
--------- -------------- -----
Outstanding at December 31, 1999 6,073,151 $0.003-$2.125 $0.641
Granted in 2000 110,416 $3.81-$4.906 $3.915
Exercised in 2000 (1,172,986) $0.003-$1.58 $0.47
Expired in 2000 (493,798) $1.16-$2.13 $1.42
--------- -------------- -----
Outstanding at December 31, 2000: 4,516,783 $.1875-$4.906 $0.60
========= ============== =====
At December 31, 2000:
Exercisable 3,840,117 $0.1875-$4.906 $0.39
Not Exercisable 676,666 $0.32-$3.81 $1.75
53
Options vest at various dates, generally over the three-year period from the
date of the grant. The options granted in 2000, 1999 and 1998 expire ten (10)
years from the grant date. Options granted prior to 1998 have no expiration
date.
A summary of the status of the Company's stock options and weighted average
prices at December 31, 2000 are as follows:
Weighted Weighted
Average Average
Range of Options Exercise Remaining Options Exercise
Exercise Price Outstanding Price Years Exercisable Price
-------------- ----------- ----- ----- ----------- -----
$0.1875 - $0.5625 3,700,658 $ 0.25 8 3,433,992 $0.22
$0.57 - $1.50 148,709 $ 1.45 * 148,709 $1.45
$1.50 - $4.906 667,416 $ 2.35 8 257,416 $2.04
---------- ------- --------- -------
$0.1875 - $4.906 4,516,783 $ 0.60 3,840,117 $0.39
========== ======= ========= =======
* Options granted and exercisable have no expiration date.
The Company applies APB Opinion 25 in accounting for its stock compensation
plans. Had compensation cost been determined on the basis of fair value pursuant
to FASB Statement No. 123, net loss and loss per share would have been as
follows:
2000 1999 1998
--------- --------- ---------
Net loss
As reported $ (2,697) $ (2,004) $ (2,342)
======= ======= ======
Pro forma $ (3,076) $ (2,230) $ (2,391)
======= ======= =======
Basic and diluted loss
per share
As reported $ (0.05) $ (0.05) $ (0.07)
======= ======= =======
Pro forma $ (0.06) $ (0.06) $ (0.07)
======= ======= =======
The weighted average fair value of options granted during 2000, 1999 and, 1998
was $3.09, $0.29 and $0.07, respectively.
The fair value of each option granted is estimated on the grant date using the
Black-Scholes model. The following assumptions were made in estimating fair
value:
Assumptions Stock Plan
----------- ----------
Dividend yield --
Risk-free interest rate 5.0%
Expected life 3 years in 2000, 10 years in 1999 and
2 years in 1998
Expected volatility 140% in 2000, and 50% for 1999 and 1998
54
At December 31, 2000 there were outstanding warrants to purchase 3,368,276
common shares at exercise prices ranging from $0.25 to $7.179 per share. Of the
warrants outstanding, 1,881,462 were held by certain officers of the Company and
their spouses. Warrants issued in conjunction with debt issues were valued using
the Black-Scholes method and the Company recorded debt discount for the fair
value of these warrants. The debt discount was amortized to interest expense
over the term of the loans.
The warrants are exercisable from the date of the grant and expire at various
dates to December 2005.
(12) INCOME TAXES
The provision (benefit) for income taxes consists of the following components:
2000 1999 1998
------------- ------------- -------------
Current:
Federal $ -- $ -- $ --
State 8 15 15
Foreign 1,946 -- --
------------- ------------- -------------
$ 1,954 $ 15 $ 15
============= ============= =============
Deferred:
Federal $ -- $ -- $ --
State -- -- --
Foreign 100 (952) --
------------- ------------- -------------
100 (952) --
------------- ------------- -------------
$ 2,054 $ (937) $ 15
============= ============= =============
The provision for income taxes differs from the amount computed by applying the
statutory U.S. Federal income tax rate to income before income taxes as a result
of the following:
2000 1999 1998
---------- ---------- ----------
U.S. Federal income tax (benefit) at
statutory rate $ (113) $ (1,000) $ (791)
State income taxes, net of Federal
benefit 5 12 15
Non-deductible expenses 2,181 287 252
Foreign tax rate differential (269) 46 17
Recognition of NOL -- (905) --
U.S. operating losses with no benefit 303 623 522
Other, net (53) -- --
---------- ---------- ----------
$ 2,054 (937) $ 15
========== ========== ==========
55
The significant components of the net deferred taxes as of December 31, 2000 and
December 31, 1999 were as follows:
2000 1999
------- -------
Deferred Assets:
Reserves $ 789 $ --
Net Operating loss carry-forward 7,397 5,699
Foreign tax credit 273 --
------- -------
Total Deferred Tax Asset 8,459 5,699
Valuation allowance (7,737) (4,794)
------- -------
Net Deferred Tax Asset $ 722 $ 905
======= =======
The liability method of accounting for deferred income taxes requires a
valuation allowance against deferred tax assets if, based on the weight of
available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized. In 2000, the Company established a full
valuation allowance against the pre-acquisition net operating losses of Xtal
that was acquired in June 2000. The net deferred tax asset applicable to the
U.S. operations is also fully reserved. During 1999, the Company reversed the
valuation allowance attributable to the net deferred tax asset applicable to
FCJ. This resulted in an income tax benefit of $952. FCJ has had operating
profits for the years 1997 to 2000 and projects continued profitability in 2001.
Therefore, it is probable that the deferred tax asset will be realized. The
total valuation allowance increased $2,943, $338, $769 in 2000, 1999, and 1998
respectively.
The Company has net operating loss carry forwards available of approximately
$12,853 at December 31, 2000 for federal tax purposes. As a result, there is no
federal income tax expense for the years 2000, 1999, and 1998. The majority of
the net operating loss carry forwards expire in the years 2009 through 2020.
ALT has pre-acquisition net operating loss carry forwards available of
approximately $519 at December 31, 2000 for federal and state tax purposes. The
loss carry forwards expire between the years 2001 and 2010.
FCJ has net operating loss carry forwards at December 31, 2000 of approximately
$255 for corporation tax purposes and has fully utilized its net operating loss
carry forward for trade income tax purposes. Under German tax law, the losses
can be carried forward indefinitely. In addition, FCJ has "profit participation
account" deductions of $955 which can be used to reduce future taxable income
for corporate and trade tax purposes.
Xtal has pre-acquisition net operating loss carry forwards of approximately
$4,369 for corporate income and social contribution taxes. The use of the losses
is limited to 30% of taxable income per year and the losses can be carried
forward indefinitely.
56
(13) MAJOR CUSTOMERS
The approximate net product sales by the Company to its major customers and the
related percentages are as follows:
2000 % of Sales
Cabelte Cabos
Electricos S/A 11%
Furukawa Industrial S/A 11%
1999
Leone AG 24%
Pinnacl Ltd. (1) 21%
Siemens AG (2) 10%
Optical Cable Corp. 10%
1998
Leone AG 23%
Pinnacl Ltd. (1) 22%
Siemens AG (2) 13%
Belden Wire & Cable 10%
(1) Acquired by Tyco International in 2001
(2) Acquired by Corning in 2000
The Company purchases raw materials from various suppliers and in some cases
there are a limited number of suppliers for certain materials. In 2000, 1999 and
1998 one supplier accounted for approximately 90%, of the Company's requirement
of one particular item. The Company has recently entered into a five- year
contract with that supplier, which helps to ensure that the Company will have
sufficient quantities of this raw material to meet existing customer
requirements for fiber. Additionally, the Company is actively working to secure
additional quantities, and over the next twelve months plans to internally
manufacture this raw material to augment its requirements.
57
The major customers listed below accounted for approximately the following
amounts and related percentages of the trade accounts receivable balance of the
Company at December 31:
CUSTOMER 2000 1999 1998
- -------------------- ---------------- -------------- ---------------
AMOUNT % AMOUNT % AMOUNT %
------ ---- ------ --- ------ ---
Cabelte Cabos
Electricos S.A. $2,728 30 $ --- --- $--- ---
Brasfio Industria e
Comercio S.A. 1,495 16 --- --- --- ---
Pinnacl, Ltd. (1) --- --- 669 34 120 14
Leone AG --- --- 472 24 --- ---
Siemens AG (2) --- --- --- --- 212 25
(1) Acquired by Tyco International in 2001
(2) Acquired by Corning in 2000
(14) RELATED PARTY TRANSACTIONS
In 2000, the Company had sales to MEFC of $807, in which the Company holds a 7%
interest; sales in 1999 to MEFC were $236. On August 1, 2000, Mr. Steven
Phillips assumed the role of interim Chief Financial Officer. Prior to that
date, the Company had a consulting agreement with One Financial Group
Incorporated, a company controlled by Mr. Phillips who is also a director of the
Company. One Financial Group provided services as a financial advisor and for
the period January 1 to July 31, 2000, the Company incurred costs of $116 in
connection with services rendered by One Financial Group. In 1999, One Financial
Group was granted options to purchase common stock of the Company in lieu of
receiving cash payment for services valued at $94. In 1998, One Financial Group
provided $46 in services.
58
(15) FOREIGN OPERATIONS
The Company has operations in four principal geographic areas: the United States
(Company and ALT), Germany (FCJ), Brazil (Xtal) and Malaysia (FCA). Following is
a summary of information by area for the years ended December 31, 2000, 1999 and
1998:
2000 1999 1998
------- ------- -------
Net sales to customers in:
United States $ 4,241 $ 1,697 $ 135
Germany 5,944 5,432 5,015
United Kingdom 2,995 2,895 1,801
Brazil 22,276 -- --
Other 1,463 2,102 1,250
------- ------- -------
Net sales as reported in the accompanying
consolidated statements of operations $36,919 $12,126 $ 8,201
======= ======= =======
Long-lived assets:
United States (1) $19,273 $ 9,375 $ 9,499
Germany 7,432 3,788 4,885
Brazil 13,943 -- --
Malaysia 5,334 5,336 5,299
------- ------- -------
Total long-lived assets $45,982 $18,499 $19,683
======= ======= =======
(1) Includes $11,336 of Goodwill
Inter-company sales are eliminated in consolidation and are excluded from net
sales reported in the accompanying consolidated statements of operations.
Identifiable assets are those that are identifiable with operations in each
geographic area. FCA (Malaysia) had no significant operations since its
formation in 1997.
59
(16) QUARTERLY FINANCIAL INFORMATION (unaudited)
QUARTERS FIRST SECOND THIRD FOURTH
- ----------------------------------- -------- -------- -------- --------
2000 (1)
- --------
Net sales $ 3,453 $ 6,413 $ 13,188 $ 13,865
Gross Profit 732 1,690 3,859 5,520
Net (loss) income (2) (496) (5,333) 836 2,296
Basic (loss) income per share (4) ($ 0.01) ($ 0.11) $ 0.02 $ 0.04
Diluted (loss) income per share (3) ($ 0.01) ($ 0.11) $ 0.01 $ 0.04
1999
- --------
Net sales $ 2,655 $ 2,371 $ 2,824 $ 4,276
Gross profit 318 425 261 1,302
Net loss (655) (719) (589) (41)
Basic and diluted loss per share (4) $ (0.02) $ (0.02) $ (0.02) $ 0.00
1998
- --------
Net sales $ 1,563 $ 1,879 $ 2,301 $ 2,458
Gross profit 309 271 352 735
Net loss (517) (548) (680) (597)
Basic and diluted loss per share $ (0.01) $ (0.02) $ (0.02) $ (0.02)
(1) The Company purchased Xtal as of June 1, 2000
(2) During the second quarter the Company recorded a non-cash interest charge
of $5,317 related to beneficial conversion features on convertible debt.
(3) As the Company reported a consolidated net loss for the year ended
December 31, 2000, basic and diluted earnings per share for that period
were the same. As the Company reported a consolidated net income for the
third and fourth quarter of 2000, the Company had both basic and diluted
earnings per share for those periods.
(4) The sum of the quarterly loss per share does not equal the annual loss per
share due to rounding.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
60
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS AND DIRECTORS
The following tables set forth certain information with respect to each person
who was an executive officer or director of the Company as of December 31, 2000.
NAME AGE POSITION
---- --- --------
Dr. Mohd A. Aslami 54 Chairman of the Board of Directors,
Chief Executive Officer, and
President
Charles De Luca 63 Managing Director of FiberCore Jena
GmbH and Director
Steven Phillips 55 Chief Financial Officer and
Treasurer, and Director
Hedayat Amin-Arsala 59 Director
Javad K. Hassan 60 Director
Michael A. Robinson 35 Director
Dr. Aslami is a co-founder, Chairman of the Board of Directors and Chief
Executive Officer of the Company. Dr. Aslami has served as Chairman and Chief
Executive Officer of FiberCore Jena, the Company's wholly owned subsidiary in
Germany, since 1994. Dr. Aslami also co-founded ALT in 1986, and served as its
President, Chief Executive Officer and director from 1986 to 1994. Dr. Aslami
received a Ph.D. in chemical engineering from the University of Cincinnati in
1974.
Mr. De Luca is Managing Director of FiberCore Jena GmbH and is a co-founder and
director of the Company. Mr. De Luca also co-founded and became an Executive
Vice President and director of ALT in 1986. Mr. De Luca received his MBA in
marketing and business management from St. Johns University in 1974.
Mr. Phillips became interim Chief Financial Officer and Treasurer of the Company
in August 2000, after previously serving as a financial consultant to the
Company for many years. He became a director of the Company in May 1995 and
became a director of ALT in May 1989. He also served as interim Chief Financial
Officer for a start-up internet company and as Chief Financial Officer of the
Winstar Government Securities Company L.P., a registered U.S. Government
securities dealer which he co-founded. Since August 1987, Mr. Phillips has
served as a director, Secretary and Chief Financial Officer of James Money
Management, Inc. a private investment company.
Mr. Amin-Arsala held various senior positions with the World Bank for 18 years.
He was in charge of World Bank operations in countries of East and South Asia,
retiring in 1987. He served as the Minister of Finance for the Afghan Interim
Government from 1989 to 1992, and Minister of Foreign Affairs for Afghanistan
from 1993 to 1996. Since 1996, Mr. Amin-Arsala
61
has acted in an advisory capacity to the United Nations and the United States
Agency for International Development and has served a number of governmental and
non-governmental humanitarian organizations.
Mr. Hassan joined AMP Incorporated (now Tyco) in 1988 as Vice President of
Technology and in 1993 was appointed Corporate Vice President, Strategic
Businesses, later renamed Global Interconnect Systems Business ("GISB") where he
pioneered and deployed a new strategy to take Tyco from a connector company to a
global interconnection systems and solutions organization. He was named
President of GISB in 1993. After retiring from Tyco in 1998, Mr. Hassan founded
and is Chairman and CEO of NeST (Network Systems and Technologies), a provider
of software systems and electronics design and manufacturing with over 2000
employees. He is Chairman of AM Communications, a public company providing
broadband network monitoring and management systems to cable TV operators, and
General Partner to MESA (Middle East and Southeast Asia) Venture Capital Fund
for targeted investments in US- based technology companies. He is a member of
the board of several companies and currently serves as Chairman of the
Electronic Development Commission for the Government of Kerala in India. Mr.
Hassan's membership on the Board of Directors of FiberCore, Inc. is not pursuant
to any agreement with Tyco. Mr. Hassan received a B.S.M.E. degree from Kerala
University in 1962, a Masters of Materials Science degree from the University of
Bridgeport, Connecticut in 1968 and was elected IEEE Fellow, Institute of
Electrical and Electronics Engineers in 1986.
Mr. Robinson became a director of the Company in October 2000. Mr. Robinson is
Senior Vice President and Corporate Treasurer of Tyco International Ltd., a
global, diversified manufacturing and service company. Mr. Robinson was
appointed Treasurer of Tyco in March 1998. Prior to this appointment, he was a
Vice President in the Investment Banking Department at Merrill Lynch, focusing
on conglomerate and healthcare companies. Previously, he held positions at
Colgate-Palmolive and Bankers Trust Company. Mr. Robinson holds a Bachelors
Degree in Accounting, summa cum laude, from Florida A&M University and a Masters
of Business Administration Degree from the Graduate School of Business at
Harvard University.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Pursuant to Section
16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules
thereunder, the Company's executive officers and directors are required to file
with the Securities and Exchange Commission and the National Association of
Securities Dealers, Inc. reports of ownership and changes in ownership of Common
Stock. Copies of such reports are required to be furnished the Company. Based
solely on review of the copies of such reports furnished to the Company, or
written representations that no other reports were required, the Company
believes that during the year ended December 31, 1999 all of its executive
officers and directors complied with the requirements of Section 16(a), except
that: Mohd Aslami, an officer and director of the Company, did not timely file
the reports on Form 4 in April, July, and October and the annual Form 5 with
respect to his acquisition of 1,114,644 options to purchase shares of the
Company and did not timely report his spouse's acquisition of 1,271,676 common
shares issued on the conversion of debt; Mr. Charles De Luca, an officer and
director of the Company, did not timely file the reports on Form 4 in April,
July, and October and the annual Form 5 with respect to his acquisition of
515,296 options to purchase shares of the Company and did not timely report his
spouse's acquisition of 1,271,676 common shares issued on the conversion of
debt; and, Michael Beecher, a former officer of the Company, did not timely file
62
the reports on Form 4 in April, July, and October and the annual Form 5 with
respect to his acquisition of 408,972 options to purchase shares of the Company.
Mr. Hedayat Amin-Arsala, a director of the Company, did not timely file the
annual Form 5 with respect to his acquisition of 54,666 options to purchase
shares of the Company and did not timely report his acquisition of 1,488,243
shares on conversion of a loan in December 1999. Also, Mr. Javad K. Hassan, a
director of the Company did not timely file the annual Form 5 with respect to
his acquisition of 53,333 options to purchase shares of the Company.
ITEM 11. EXECUTIVE COMPENSATION
Following is a summary of the compensation earned and/or paid to the Company's
Chief Executive Officer and its most highly compensated executive officers for
the last three years.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
- ------------------------------------------------------ --------------------------------------------------------------
AWARDS
Restricted Securities
Fiscal Other Annual Stock Underlying
Name and Principal Position Year Salary $ Bonus $ Compensation Award(s)$ Options/SARs(#)
--------------------------- ---- -------- ------- ------------ --------- ---------------
Dr. Mohd Aslami 2000 200,000 70,000 --- --- ---
Chairman, Chief Executive 1999 133,334 --- --- --- 1,114,644
Officer & President 1998 156,583 --- --- --- 184,911
--- --- --- ---
Charles De Luca 2000 115,000 25,000 --- --- ---
Director, Managing Director, 1999 76,761 --- --- --- 515,296
FiberCore Jena GmbH 1998 97,116 --- --- --- 106,324
Steven Phillips (*) 2000 83,333 21,000 --- --- ---
Chief Financial Officer,
Treasurer and Director
Michael J. Beecher** 2000 67,083 --- --- ---
Chief Financial Officer & 1999 86,250 --- --- --- 408,972
Treasurer 1998 100,000 --- --- --- ---
* For the five months commencing August 1, 2000
** For the seven months ended July 31, 2000
Under an agreement dated October 1, 1998, in 1999 Dr. Aslami, Mr. De Luca and
Mr. Beecher accepted salary reductions of 33.3%, 33.3%, and 25.0%, respectively
and were awarded stock options for these salary reductions to purchase shares of
739,644, 425,296, and 318,972, respectively. The option exercise price is
$0.1875 per share, which was the closing price of the shares as of the date of
the agreement.
63
OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no stock options granted to executive officers during the year ended
December 31, 2000.
(The remainder of this page intentionally left blank.)
64
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTIONS/SAR VALUES
The following table lists the options/SARs exercised during the year and the
options/SARs held by the executive officers that were unexercised at December
31, 2000.
Number of
Securities Value of
Underlying unexercised
unexercised In-the-money
Options/SARs at options/SARs at
Shares Value Fiscal Year-End (#) Fiscal Year-End
acquired on Realized Exercisable/ ($) Exercisable/
Name exercise (#) ($) Unexercisable Unexercisable
---- ------------ --- ------------- -------------
Dr. Mohd Aslami 184,911 $704,973 925,557/250,000 $2,862,512/$375,000
Charles De Luca 106,324 $405,360 501,346/60,000 $1,607,114/$90,000
Steven 104,290 $397,606 1,348,791/416 $4,582,840/ 0
Phillips(*)
(*) Includes options exercised and held by One Financial Group, Incorporated, a
company controlled by Mr. Phillips.
COMPENSATION OF DIRECTORS
The Company maintains a compensation plan for outside directors (directors who
are not employees of the Company), wherein each outside director receives an
initial award of 10,000 non-qualified stock options and a fee of $10,000 per
year, payable quarterly, and $250 for each Board of Directors meeting or
Committee of the Board meeting attended. After the first year, outside directors
are awarded 5,000 stock options, which are exercisable one year from the grant
date.
On August 1, 2000, Mr. Steven Phillips assumed the role of interim Chief
Financial Officer upon the July 31, 2000 resignation of Mr. Beecher, the former
Chief Financial Officer. Prior to that date, the Company had a consulting
agreement with One Financial Group Incorporated, ("OFG") a company controlled by
Mr. Phillips who is also a director of the Company. OFG provided services as a
financial advisor and for the period January 1 to July 31, 2000, the Company
incurred costs of $116,000 in connection with services rendered by OFG. In 1999,
OFG was granted options to purchase common stock of the Company in lieu of
receiving cash payment for services valued at $94,000. In 1998, the Company
incurred costs of $46,000 to OFG.
65
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of
the Common Stock as of March 1, 2001, with respect to (i) each person known by
the Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each executive officer named in the Executive Compensation Table,
(iii) each director of the Company and (iv) all the directors and executive
officers of the Company as a group. Unless otherwise indicated, each of the
shareholders has sole voting and investment power with respect to the shares
beneficially owned.
NAME AND ADDRESS(1) SHARES OWNED % OWNED
------------------- --------- -------
Mohd Aslami................. 9,864,514 (2), (9) 14.6
Charles De Luca............. 6,377,592 (3), (9) 9.5
Steven Phillips............. 3,275,653 (4), (9) 4.9
Hedayat Amin-Arsala......... 2,412,940 (5) 3.6
Javad K. Hassan............. 68,333 (6) .1
Michael Robinson............ --- (7) 0
Tyco International Ltd. .... 11,628,204 (8), (9) 17.2
Crescent International Ltd. 3,277,885 (10) 6.0
All directors and executive
officers as a group
(6 persons)............... 21,199,032 32.7%
(1) The addresses of the persons and entities named in this table are as
follows: Messrs. Aslami, De Luca, Phillips, Amin-Arsala and Hassan, c/o
Fibercore, Inc., P. O. Box 180, 253 Worcester Road, Charlton, Ma 01507;
Mr. Robinson and Tyco International Ltd., 9 West 57th Street, New York,
New York 10022; Crescent International Ltd., Clarendon House, 2 Church
Street, Hamilton, H11, Bermuda.
(2) Includes 1,389,158 shares and warrants to purchase 323,082 shares held by
Dr. Aslami's wife, 316,420 shares held by Dr. Aslami's minor child and
1,587,569 shares held by the Ariana trust of which Dr. Aslami's wife is
the trustee and his children are beneficiaries. Also includes 2,052,016
options and warrants to purchase shares of the Company held directly by
Dr. Aslami, which includes 250,000 stock options granted on February 21,
2001.
(3) Includes 2,666,772 shares and warrants to purchase 323,082 shares held by
Elizabeth De Luca, Mr. De Luca's wife. Also includes 937,566 options and
warrants to purchase shares of the Company held directly by Mr. De Luca,
which includes 60,000 stock options granted on February 21, 2001.
(4) Includes 1,702,826 options and warrants to purchase shares of the Company,
which includes 61,000 stock options granted on February 21, 2001 and
1,243,712 in options held by One Financial Group, Incorporated, a Company
controlled by Mr . Phillips.
(5) Includes 110,499 shares held by Mr. Amin-Arsala's wife and options to
acquire 13,667 shares held by Mr. Amin-Arsala, as outside director
compensation.
(6) Includes options to acquire 68,333 held by Mr. Hassan, as outside director
compensation.
(7) Mr. Robinson, Senior Vice President and Corporate Treasurer of Tyco
International Ltd, was elected to the Company's Board of Directors on
October 12, 2000.
66
(8) Of the total, 10,275,849 shares are held by Tyco Electronics Corporation
and 1,352,375 shares are held by Tyco Sigma Limited. Both entities are
wholly owned subsidiaries of Tyco International Ltd., a company traded on
the New York Stock Exchange.
(9) Under the Guarantor Indemnification Agreement, Mohd Aslami, Steven
Phillips and Charles De Luca are subject to various restrictions with
regard to the sale of their common stock.
(10) According to Crescent's amended Schedule 13G, dated as of December 31,
2000, DMI Trust, with an address of: Norfolk House, P.O. Box N-7130,
Bahamas, owns 100% of the Capital Stock of Crescent and Greenlight
(Switzerland) SA with an address of: 84 ar.Louis Casia CH-1216 Geneva,
Switzerland, serves as principal investment manager to Crescent and has
broad investment discretion over the investment in the Company. The
3,277,885 shares indicated include (i) shares issued to Crescent on June
9, 2000, (ii) shares issued to Crescent upon the conversion of convertible
debt and (iii) an additional 500,000 shares issuable upon exercise of a
warrant issued to Crescent on June 9, 2000.
67
Arrangements which Could Result in Change of Control
In connection with TIGSA's Guaranty of the Company's obligations under the Fleet
Loan Agreement, the Company issued to TIGSA one share of the Company's Series A
Preferred Stock entitling TIGSA to certain rights and privileges. In the event
of a breach of certain covenants set forth in the Guarantor Indemnification
Agreement TIGSA's ownership of the share entitles TIGSA to elect a number of
individuals to the Company's Board of Directors sufficient to give TIGSA control
of the board until the termination of the agreement.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LOANS
During February and March 2000, the Company borrowed a total of $300,000 from
the spouses of two officers and from a company affiliated with an outside
director. In exchange, the Company issued each party a $100,000 unsecured note,
bearing interest at 14%. The notes were repaid in September 2000.
On December 29, 2000, convertible notes issued to two officers and an outside
director in July 1999, totaling $548,000 including related party interest
expense, were converted into 2,190,850 common shares of the Company. Related
party interest expense on these notes in 2000 and 1999 was $72,000 and $90,000
respectively.
CONSULTING
On August 1, 2000, Mr. Steven Phillips assumed the role of interim Chief
Financial Officer upon the July 31, 2000 resignation of Mr. Beecher, the former
Chief Financial Officer. Prior to that date, the Company had a consulting
agreement with OFG a company controlled by Mr. Phillips who is also a director
of the Company. OFG provided services as a financial advisor and for the period
January 1 to July 31, 2000, the Company incurred costs of $116,000 in connection
with services rendered by OFG. In 1999, OFG was granted options to purchase
common stock of the Company in lieu of receiving cash payment for services
valued at $94,000. In 1998, the Company incurred costs of $46,000 to One
Financial Group.
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69
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
See ITEM 8 of this Report.
2. FINANCIAL STATEMENT SCHEDULES
The required disclosures are included in the footnotes to the
Financial Statements.
3. EXHIBITS
The exhibits included as part of this report are listed in the
attached Exhibit Index, which is incorporated herein by
reference.
(b) Reports on Form 8-K
o Current Report on Form 8-K Report filed on October 20, 2000;
o Current Report on Form 8-K Report filed on November 16, 2000; and
o Current Report on Form 8-K Report filed on November 20, 2000.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FIBERCORE, INC.
(Registrant)
By: /s/ Mohd A. Aslami March 30, 2001
--------------------------
Dr. Mohd A. Aslami
Chairman, Chief Executive Officer
and President (Principal Executive Officer)
By: /s/ Steven Phillips March 30, 2001
--------------------------
Steven Phillips
Interim Chief Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ Mohd A. Aslami Chairman of the Board, March 30, 2001
- ----------------------- President
Dr. Mohd A. Aslami Chief Executive Officer,
Director
/s/ Charles De Luca Secretary and Director March 30, 2001
- -----------------------
Charles De Luca
/s/ Steven Phillips Director March 30, 2001
- -----------------------
Steven Phillips
/s/Michael A. Robinson Director March 30, 2001
- ----------------------
Michael A. Robinson
71
EXHIBIT INDEX
The following lists the exhibits which are filed as part of this report.
Those which have been previously filed are incorporated by reference to such
previous filing as indicated below.
EXHIBIT
NUMBER
- ------
2.1 Agreement dated February 13, 1987 between Norscan Instruments Ltd.
and Automated Light Technologies, Inc. ("ALT"). (1)
2.2 Agreement and Plan of Reorganization dated as of July 18, 1995
between Venturecap, Inc. and FiberCore Incorporated. (1)
2.3 Agreement of Merger dated as of July 18, 1995 between Venturecap,
Inc. and FiberCore Incorporated. (1)
2.4 Agreement and Plan of Reorganization dated as of September 18, 1995
between the FiberCore, Inc. Alt Merger Co., and ALT. (1)
2.5 Investment Agreement, dated June 1, 2000, by and among FiberCore,
Inc. and Algar S.A.-Empreendimentos e Participacoes Xtal Fibras
Opticas S.A. and Mamore Participacoes S.A. (2)
3.1 Certificate of Incorporation of FiberCore, Inc. (1)
3.2 Amended and Restated By-Laws of FiberCore, Inc., adopted December
18, 2000. (3)
4.1 Agreement, dated May 19, 2000, by and between FiberCore, Inc. and
Tyco Electronics Corporation. (5)
4.2 Standstill Agreement, dated May 19, 2000, by and between FiberCore,
Inc. and Tyco Electronics Corporation. (5)
4.3 Incentive Warrant, dated June 9, 2000, by and between FiberCore,
Inc. and Crescent International Ltd. (4)
4.4 Early Put Warrant, dated June 9, 2000, by and between FiberCore,
Inc. and Crescent International Ltd. (4)
4.5 Convertible Note, due June 9, 2002, issued by FiberCore, Inc. to
Crescent International Ltd. (4)
4.6 Registration Rights Agreement, dated June 9, 2000, by and between
FiberCore, Inc. and Crescent International. (4)
4.7 Loan Agreement, dated June 20, 2000, by and between Algar S.A.
Empreendimentos e Participacoes, FiberCore Inc., and FiberCore Ltda.
(2)
4.8 Loan Agreement, dated June 20, 2000, by and between Algar S.A.
Empreendimentos e Participacoes, FiberCore Inc., and FiberCore Ltda.
(2)
4.9 Warrant issued to Gruntal & Co., LLC, dated April 14, 2000, to
purchase up to 300,000 Shares of FiberCore Common Stock. (6)
4.10 Warrant issued to Gruntal & Co., LLC, dated June 9, 2000, to
purchase up to 30,000 Shares of FiberCore Common Stock. (6)
4.11 Warrant issued to Gruntal & Co., LLC, dated June 9, 2000, to
purchase up to 72,016 Shares of FiberCore Common Stock. (6)
4.12 Warrant issued to Gruntal & Co., LLC, dated June 26, 2000, to
purchase up to 54,870 Shares of FiberCore Common Stock. (6)
4.13 Convertible Note, dated July 5, 2000, issued by FiberCore, Inc. to
Crescent International Ltd. (6)
4.14 Designations of Rights Privileges and Preferences of Series A
Preferred Stock Registrant, dated as of December 19, 2000. (3)
10.1 Subordination dated November 5, 1990 between Connecticut Development
Authority ("CDA"), Mohd Aslami and Charles De Luca. (1)
72
10.2 Promissory Note dated December 5, 1990 issued by ALT to CDA. (1)
10.3 Guaranty dated December 5, 1990 issued to CDA by Mohd Aslami and
Charles De Luca. (1)
10.4 Collateral Assignment and Security Agreement dated December 5, 1990
between ALT and CDA. (1)
10.5 Security Agreement dated as of December 5, 1990 between ALT and CDA.
(1)
10.6 Assignment dated November 8, 1993 by Gregory Perry to FiberCore
Incorporated of U.S. Patent No. 4,596,589. (1)
10.7 Agreement dated June 7, 1994 between Sico Quarzschmelze Jena, GmbH
("Sico") and FiberCore Inc., to lease building and equipment and to
manufacture optical fiber and optical fiber preform. (1)
10.8 Agreement dated July 1, 1994 between FiberCore Incorporated and
FiberCore Glasfaser Jena GmbH. (1)
10.9 Joint Venture Agreement dated May 21, 1995 between the Company,
Techman International, Corp. ("Techman") and the other parties named
therein. (1)
10.10 Lease dated August 19, 1995 between Sico and FiberCore Glasfaser
Jena GmbH. (1)
10.11 Agreement dated August 19, 1995 between Sico and FiberCore Glasfaser
Jena GmbH, with supplemental agreement by Walter Nadrag. (1)
10.12 Cooperation Agreement dated December 19, 1995 between Sico and
FiberCore, Inc. (1)
10.13 Agreement dated January 25, 1996 between FiberCore, Inc., FiberCore
Glasfaser, Jena and Sico. (1)
10.14 Joint Venture Agreement dated January 31, 1996 between Middle East
Optic Fiber Company ("MEOFC"), Royle Mid East Ltd. and FiberCore Mid
East Ltd. (1)
10.15 Share Purchase Agreement dated January 11, 1996 between FiberCore,
Inc. and Techman. (1)
10.16 Grants Agreements between FiberCore Glasfaser Jena GmbH and the
Ministry of Economics and Infrastructure in the amount of DM
2,300,000 dated June 12, 1996 and December 30, 1995. (1)
10.17 Intercompany Loan Agreement between FiberCore, Inc. and FiberCore
Glasfaser Jena GmbH in connection with the loan from Berliner Bank
AG dated July 10, 1996. (1)
10.18 Supply contract between AMP Incorporated and FiberCore, Inc. dated
July 29, 1996. (1)
10.19 Loan Agreement between FiberCore, Inc. and Berliner Bank AG for the
amount of DM 7,700,000 dated September 6, 1996. (1)
10.20 Note Purchase and Warrant Agreement between FiberCore, Inc. and
Bereshkai S. Aslami in the amount of $250,000 and granting Warrants
to purchase up to 115,220 shares of Common Stock. (1)
10.21 Note Purchase and Warrant Agreement between FiberCore, Inc. and
Elizabeth De Luca in the amount of $250,000 and granting Warrants to
purchase up to 115,220 shares of Common Stock. (1)
10.22 Forbearance Agreement between ALT and CDA Authority and granting of
Warrants dated August 27, 1996. (1)
10.23 Forbearance Agreement between ALT and CII and granting of Warrants
dated July 31, 1996. (1)
10.24 Long-term supply agreement between FiberCore, Inc. and Middle East
Optical Fiber Cable Co. (MEFC) dated November 1, 1996. (1)
10.25 Consulting Agreement dated January 1, 1997 between One Financial
Group Incorporated and FiberCore, Inc. (7)
10.26 Note Purchase and Warrant Agreement dated April 16, 1997 between
FiberCore, Inc. and Techman. (7)
10.27 Note Purchase and Warrant Agreement dated September 17, 1997 between
FiberCore, Inc. And Techman. (7)
10.28 Joint Venture Agreement dated November 17, 1997 between FiberCore,
Inc., Federal Power Sdn. Bhd., and PNB Equity Resource Corporation
Sdn. (7)
10.29 Put Option Agreement dated November 17, 1997 between FiberCore,
Inc., Federal Power Sdn. Bhd. and PNB Equity Resource Corporation
Sdn. Bhd. (7)
10.30 Agreement for the Acquisition of Xtal Fibras Opticas S.A. by
FiberCore, Inc., dated April 26, 2000. (8)
10.31 Share Pledge Agreement, dated June 20, 2000, by and between
FiberCore, Inc., Algar S.A. - Empreendimentos e Participacoes, Xtal
Fibras Opticas S.A., and Mamore Participacoes S.A. (2)
73
10.32 Shareholders' Agreement, dated June 20, 2000, by and between Mamore
Participacoes S.A., FiberCore Ltda., Algar S.A. - Empreendimentos e
Participacoes, FiberCore, Inc., Mamore Participacoes S.A., and Xtal
Fibras Opticas S.A. (2)
10.33 Supply Agreement, dated June 20, 2000, by and between Xtal Fibras
Opticas, S.A., Algar S.A. - Empreendimentos e Participacoes, and
FiberCore, Inc. (2)
10.34 Patent Assignment and Transfer Agreement, dated June 20, 2000, by
and between Algar S.A. Empreendimentos e Participacoes and Fibras
Opticas S.A. (2)
10.35 Securities Purchase Agreement by and between Crescent International
Ltd. and FiberCore, Inc., dated June 9, 2000. (4)
10.36 Security Agreement between FiberCore Jena GmbH and Crescent
International Ltd., dated June 9, 2000. (4)
10.37 Pledge Agreement between FiberCore Inc., and Crescent International
Ltd., dated, June 9, 2000. (4)
10.38 Pledge Side Letter to Crescent International Ltd. by FiberCore Inc.,
dated June 9, 2000. (4)
10.39 Supply Agreement, dated July 19, 2000, by and between Xtal Fibras
Opticas, S.A. and Furukawa Industrial S/A Electric Products. (6)
10.40 Supply Agreement, dated July 17, 2000, by and between Xtal Fibras
Opticas, S.A. and Telcon Fios e Cabos para Telecomunicacoes S/A. (6)
10.41 Supply Agreement, dated July 7, 2000, by and between Xtal Fibras
Opticas, S.A. and Pirelli Cabos S/A. (6)
10.42 Loan Agreement between FiberCore, Inc. and Fleet National Bank,
dated as of December 20, 2000. (3)
10.43 Revolving Credit Note executed by FiberCore, Inc. in favor of Fleet
National Bank, dated as of December 20, 2000. (3)
10.44 Limited Guaranty by Tyco International S.A., dated as of December
20, 2000. (3)
10.45 Pledge and Security Agreement between FiberCore, Inc. and Fleet
National Bank, dated as of December 20, 2000. (3)
10.46 Collateral Assignment of Patents and Trademarks and Security
Agreement between FiberCore, Inc. and Fleet National Bank, dated as
of December 20, 2000. (3)
10.47 Guarantor Indemnification Agreement among Tyco International Group
S.A., FiberCore, Inc., Mohd Aslami, Charles DeLuca and Steven
Phillips, dated as of December 26, 2000. (3)
21.1 List of subsidiaries of FiberCore, Inc. (7)
23.1 Consent of Deloitte & Touche LLP.
(1) denotes incorporated herein by reference to the Annual Report on Form 10-K
for the year ended December 31, 1996, filed with the Commission on March 26,
1997.
(2) denotes incorporated herein by reference to the exhibits to the Current
Report on Form 8-K, filed July 3, 2000, as amended July 10, 2000.
(3) denotes incorporated herein by reference to the exhibits to the Current
Report on Form 8-K, filed January 10, 2001.
(4) denotes incorporated herein by reference to the exhibits to the Current
Report on Form 8-K, filed June 15, 2000.
(5) denotes incorporated herein by reference to the exhibits to the Current
Report on Form 8-K, filed June 9, 2000.
(6) denotes incorporated herein by reference to the exhibits to the Registration
Statement on Form S-3/A, filed September 19, 2000.
(7) denotes incorporated herein by reference to the Annual Report on Form 10-K
for the year ended December 31, 1997, filed with the Commission on March 26,
1998.
(8) denotes incorporated herein by reference to the exhibits to the Quarterly
Report on Form 10-Q, filed on May 4, 2000.
74