ITEM 1. BUSINESS --------
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.
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.
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;
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.
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
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
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.
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.
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.
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
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
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
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.
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.
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%
Leone AG 24% Pinnacl Ltd. (1) 21% Siemens AG (2) 10% Optical Cable Corp. 10%
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
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
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
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.
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
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.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5.
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 - ---- 4th quarter $ 7.16 $2.19 3rd quarter $ 9.31 $4.41 2nd quarter $ 7.00 $2.81 1st quarter $11.00 $1.72 - ---- 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.
ITEM 6.
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".
(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.
ITEM 7.
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
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.
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.
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.
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
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.
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.
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ITEM 7A.
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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ITEM 8.
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
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
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
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.
See accompanying notes to consolidated financial statements
See accompanying notes to consolidated financial statements.
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.
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.
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
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 ========= ========== ==========
(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.
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.
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 ===== =====
(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:
Depreciation on property and equipment charged to expense was $1,793 in 2000, $1,058 in 1999 and $928 in 1998.
(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 ------
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.
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
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
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
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.
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,
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
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
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 ========== ========== ==========
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.
(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%
Leone AG 24% Pinnacl Ltd. (1) 21% Siemens AG (2) 10% Optical Cable Corp. 10%
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.
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.
(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.
(16) QUARTERLY FINANCIAL INFORMATION (unaudited)
(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.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 10.
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
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
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.
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.
* 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 $0.1875 per share, which was the closing price of the shares as of the date of the agreement.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no stock options granted to executive officers during the year ended December 31, 2000.
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AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTIONS/SAR VALUES
The following table lists the options/SARs exercised during the year and the options/SARs held by the executive officers that were unexercised at December 31, 2000.
Number of Securities Value of Underlying unexercised unexercised In-the-money Options/SARs at options/SARs at Shares Value Fiscal Year-End (#) Fiscal Year-End acquired on Realized Exercisable/ ($) 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.
ITEM 12.
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.
(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.
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.
ITEM 13.
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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PART IV
ITEM 14.
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.
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
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)
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)
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.