UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                    FORM 10-K


              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended: December 31, 1997
                                       OR
            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the transition period from _____ to ____
  
                            -----------------------

                         COMMISSION FILE NUMBER: 0-21823


                                 FIBERCORE, INC.
             (Exact name of registrant as specified in its charter)

       Nevada                                           87-0445729
       ------                                           ----------
State or other jurisdiction of                      (I.R.S. Employer
incorporation or organization)                      Identification No.)

                        253 Worcester Road, P.O. Box 180
                               Charlton, MA 01507
                               ------------------
              (Address and Zip Code of principal executive offices)


                                 (508) 248-3900
                                 --------------
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: 
Common Stock, par value $.001 per share
---------------------------------------
                (Title of Class)

Indicate by check mark whether the registrant:

(1) has filed all  reports  required  to be filed by  Section 13 or 15(d) of the
Securities  Exchange  Act of 1934  during the  preceding  12 months (or for such
shorter period that the registrant was required to file such reports),

                      Yes   X              No


and



(2) has been subject to such filing requirements for the past 90 days.

                      Yes   X              No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].

The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
registrant as of March 12, 1998: $10,293,639.

Number of shares outstanding as of March 12, 1998:  35,774,822.



                      DOCUMENTS INCORPORATED BY REFERENCE

None
<PAGE>




                                 FIBERCORE, INC.
                                TABLE OF CONTENTS

                                                                           PAGE
                                                                           ----
PART I...................................................................    3
         ITEM 1.   BUSINESS..............................................    3
         ITEM 2.   PROPERTIES............................................   16
         ITEM 3.   LEGAL PROCEEDINGS.....................................   16
         ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                   HOLDERS...............................................   16

PART II  ................................................................   17
         ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND
                   RELATED STOCKHOLDER MATTERS...........................   17
         ITEM 6.   SELECTED FINANCIAL DATA...............................   18
         ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                   CONDITION AND RESULTS OF OPERATIONS...................   19
         ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
                   ABOUT MARKET RISK.....................................   25
         ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...........   26
         ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                   ACCOUNTING AND FINANCIAL DISCLOSURE...................   55

PART III ................................................................   56
         ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE
                   REGISTRANT............................................   56
         ITEM 11.  EXECUTIVE COMPENSATION................................   57
         ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                   AND MANAGEMENT........................................   60
         ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........   62

PART IV  ................................................................   65
         ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
                   ON FORM 8-K...........................................   65

SIGNATURES...............................................................   68

                                       2
<PAGE>
                                     PART I


ITEM 1.  BUSINESS

GENERAL

         FiberCore,  Inc.  ("FiberCore"  or the  "Company")  is  engaged  in the
business of developing,  manufacturing, and marketing single-mode and multi-mode
optical fiber and optical  fiber  preforms for the  telecommunications  and data
communications industry.

         The Company's products include single-mode and multi-mode optical fiber
and optical fiber preforms.  Preforms are the basic component from which optical
fiber is drawn and  subsequently  cabled.  The Company has  developed a patented
preform production  process which management  believes to be more cost effective
than existing  production  methods in use. Through its wholly owned  subsidiary,
Automated Light Technologies,  Inc. ("ALT"), the Company  manufactures  patented
cable monitoring systems, a patented long range fault locator,  cable protection
devices, and electro-optical talk sets.

         In June 1994, the Company formed a wholly owned  subsidiary in Germany,
FiberCore Glasfaser Jena GmbH ("FCJ"),  which leased a manufacturing facility in
Jena,  Germany  ("the Jena  Facility")  for a fixed  monthly  sum,  and acquired
certain  equipment  located in that facility from SICO  Quarzschmelze  Jena GmbH
("SICO").  Until the year 2001,  the  Company's  ownership  of the  equipment is
subject to the right of the German  government,  from which SICO  purchased  the
equipment,   to  repossess  the  equipment  in  the  event  the  Company  ceases
production.  The agreement  pursuant to which the Company acquired the equipment
provides  for the  issuance  of  2,221,141  shares  of  Common  Stock to SICO in
exchange for the equipment.  The Jena Facility is an existing 26,500 square foot
optical fiber manufacturing plant which has been in operation since 1986.

         On  July  18,  1995,  FiberCore,   Incorporated,   the  predecessor  to
FiberCore,  Inc., incorporated under the laws of the State of Nevada in November
1993,  merged into Venturecap,  Inc.  ("Venturecap"),  an inactive  corporation,
organized  under  the laws of the State of  Nevada  in 1987.  Venturecap  issued
3.671307   shares  in  exchange  for  each   outstanding   share  of  FiberCore,
Incorporated  and, as a result,  Venturecap  issued a total of 24,617,133 shares
for all of the outstanding shares of FiberCore,  Incorporated. After the merger,
Venturecap changed its name to FiberCore, Inc.

         On  September  18,  1995,   the  Company   acquired   Automated   Light
Technologies,  Inc. ALT, a Delaware corporation organized in 1986 and engaged in
the business of manufacturing  equipment which monitors and identifies faults in
fiber optic cables, cable protection devices, and electro-optical talk sets.

         In January  1996,  the  Company  established  a  subsidiary,  InfoGlass
Incorporated  ("InfoGlass"),  through which it intends eventually to conduct its
North American fiber optic business. InfoGlass is currently inactive.

         In November,  1997, the Company entered into a joint-venture  agreement
with PNB Equity Resource  Corporation Sdn. Bhd.  ("PERC") and Federal Power Sdn.
Bhd. ("FDP"), both of which are Malaysian  corporations,  to form FiberCore Asia
Sdn. Bhd.  ("FCA").  FCA, which is incorporated in Malaysia,  was established to
construct and operate a manufacturing facility in Malaysia for the production of
optical fiber and optical fiber  preforms.  The Company owns 51% of FCA, and FDP
and PERC own 37% and 12%, respectively.

                                       3
<PAGE>



                              BUSINESS (CONTINUED)

         The Company  granted FCA a license to use the Company's  technology for
its 51%  ownership,  while  FDP and PERC  contributed  cash and  notes for their
respective  ownership interest.  FCA is in the process of raising the additional
debt  financing  required to construct  and operate the plant and it is expected
that  production  will  begin  in 1999.  The  products  of FCA will be  marketed
principally in the Pacific Rim.

         The  following  is an  organizational  chart  depicting  the  Company's
principal subsidiaries and ownership percentage.

<TABLE>
<CAPTION>
                                                       FIBERCORE, INC.
                                                     CORPORATE STRUCTURE
                                                        HEADQUARTERS
                                                           ( USA )

--------------------------------------------------------------------------------------------------------------------------------
<S>                <C>                <C>                              <C>               <C>                        <C>   
FIBERCORE ASIA     FOI (PVT.) LTD.    FIBERCORE GLASFASER JENA GMBH    INFOGLASS, INC.   FIBERCORE MIDEAST LTD.      ALT, INC.
   SDN. BHD.          (PAKISTAN)                (GERMANY)                 (USA)                  (ASIA)                 (USA)
  (MALAYSIA)          30% OWNED                 100% OWNED              100% OWNED             100% OWNED            100% OWNED
  51% OWNED                                                                            MIDDLE EAST FIBER CABLES CO.   BY  FCI
                                                                                               15% OWNED BY
                                                                                         FIBERCORE MID EAST LTD.
</TABLE>

Company and ALT sales by product  group for the last three years were as follows
(includes sales of ALT prior to its acquisition by the Company):

                                                  Years Ended December 31
                                                  -----------------------
                                                   (dollars in thousands)

                                              1995          1996         1997
                                              ----          ----         ----

         Optical Fiber and Preform.......     $3,009       $7,907        $6,855
         ALT Products....................        246          189           223
                                              ------       -------       ------
                  Total..................     $3,255       $8,096        $7,078
                                              ======       ======        ======

RECENT DEVELOPMENTS

         In April 1995, the Company issued a note to AMP,  Incorporated  ("AMP")
(the "AMP Note"). The AMP Note is a ten year $5,000,000 convertible note. AMP, a
company listed on the New York Stock Exchange, with worldwide sales in excess of
$5.7 billion in 1997, is a  manufacturer  of electrical  and optical  connection
devices, systems and other equipment including fiber optic cable. Principal plus
accrued  interest  on the AMP Note at a rate of LIBOR  plus one  percent  may be
converted  into Common Stock through April 17, 2005.  Until April 17, 2000,  the
conversion price is $1.16 per share; thereafter the conversion price is equal to
the price per share paid by a third party investor in the private sale of Common
Stock  immediately  prior to such conversion.  The AMP Note is collateralized by
the  Company's  patents,  patent  applications,  licenses,  rights and royalties
arising from such  patents.  The AMP Note is subject to  prepayment on demand in
the event the  Company is the  issuer of  securities  to be sold by the  Company
under an effective  registration  statement.  On November 27, 1996 AMP converted
$3,000,000 of principal plus $540,985 of accrued  interest into 3,058,833 shares
of Common Stock of the Company.


                                       4
<PAGE>



                             BUSINESS (CONTINUED)

         In July 1996, AMP entered into a five year supply  contract  (renewable
at AMP's option for an additional five year period) with the Company whereby AMP
has  undertaken  to purchase from the Company at least 50% of AMP's future glass
optical fiber needs.  On November 27, 1996,  the Company  obtained an additional
$3,000,000  loan at an interest  rate of prime plus 1%,  adjustable on the first
business day of each  calendar  quarter,  from AMP to fund the  expansion of the
Jena Facility. In exchange AMP received a 10 year note and common stock purchase
warrants  exercisable  for up to  1,382,648  shares of Common Stock at $1.45 per
share and expiring on November 27, 2001. In connection with the new AMP loan and
the  expansion of the Jena  Facility,  the Company has been awarded a grant from
the German  Government of approximately  $2,700,000 and has received a loan from
Berliner   Bank   of   approximately   $4,280,000,   which   has   been   funded
contemporaneously  with the new  $3,000,000 AMP loan. The Company also agreed to
issue AMP  additional  shares of Common Stock in the event the  Company's  share
price does not exceed  $2.17 for 30  consecutive  trading  days by November  27,
1998.  The  issuance of  additional  shares  under the new AMP Loan would have a
dilutive effect on the Company's other  shareholders  and could adversely affect
the market price of the Common Stock.  As part of the new  $3,000,000  loan from
AMP,  Mohd A.  Aslami,  Charles De Luca,  M. Mahmud Awan and AMP entered  into a
Voting Agreement pursuant to which they agreed to vote together to elect a slate
of directors to the Board of  Directors  of the Company.  The proposed  slate of
directors  initially  consists  of Mohd A.  Aslami,  Charles De Luca,  Hans F.W.
Moeller,  one nominee of AMP and three outside directors,  one of whom is Dr. M.
Mahmud Awan.  The Voting  Agreement  also  requires a classified  and three year
staggered Board of Directors. Such Voting Agreement would remain in effect until
the  earlier  of (i)  termination  of the new  AMP  loan  agreement,  or (ii) an
underwritten public offering by the Company which generates at least $5,000,000.

         In 1995, the Company,  through its subsidiary,  FiberCore  MidEast Ltd.
("FME"),  entered into a joint venture  agreement  (the "MidEast JV  Agreement")
with Middle East Fiber Optic  Manufacturing  Company Limited ("MEOFC"),  a Saudi
Arabian company and John Royle and Sons, Inc. ("Royle"), a manufacturer of cable
manufacturing systems. Pursuant to the agreement, the parties jointly own Middle
East Fiber Cables Co.,  ("MEFC"),  a Saudi Arabian joint venture  company.  MEFC
will engage in the manufacture and sale of optical fiber and optical fiber cable
both inside and outside of Saudi Arabia.  The Company and Royle each contributed
$500,000 to the venture and each holds a 15% interest in MEFC. MEOFC contributed
$2,330,000  and holds a 70%  interest.  The Company and MEFC have entered into a
long-term  supply agreement for MEFC to purchase and the Company to supply fiber
and  preforms  totaling  approximately  $33,000,000  over the next  five  years.
Shipments  under this agreement  began in 1997. The Company may not transfer its
interest in MEFC to any entity other than Royle or MEOFC without the  permission
of such parties.

         In connection with the Company's  participation  in MEFC, on October 5,
1995,  Middle East Specialized  Cables Co.,  ("MESC") a Saudi Arabian Company in
which the owners of MEOFC have an interest,  purchased  367,131 shares of Common
Stock at an aggregate  price of $500,000.  In November  1996,  MESC  purchased a
second block of 367,131 shares of Common Stock for an additional  $500,000.  The
proceeds of this sale were used as the Company's  capital  contribution to MEFC,
described  above.  In 1997,  MESC was also issued 312,061 shares of Common Stock
and was  granted  Warrants  to  purchase  550,696  shares of Common  Stock at an
exercise  price of $1.63 per share  through  April 13, 1997,  upon delivery of a
supply  agreement,  valued at $33  million,  between the  Company and MEFC.  The
warrants expired without exercise.

                                       5
<PAGE>

                              BUSINESS (CONTINUED)

         On  November  1,  1995,  the  Company  entered  into  an  International
Distributor Agreement with Techman International Corp.  ("Techman").  Under such
agreement,  Techman will be issued  Warrants for the exercise of up to 1,000,000
shares of Common Stock. The Warrants will be exercised and the applicable shares
will be issued ratably by the Company as commissions on Company sales  generated
by Techman up to  $200,000,000.  Dr. M. Mahmud  Awan,  a former  director of the
Company, is president and sole shareholder of Techman.

         On January 11, 1996,  pursuant to a Share Purchase  Agreement,  Techman
agreed to purchase for $1,000,000 a total of 734,260 shares of Common Stock, and
Warrants  exercisable  at $1.63 per share into  550,696  shares of Common  Stock
expiring  on  January  11,  1998.  The  Warrants   expired   without   exercise.
Additionally,  Techman would be issued  312,061  shares of Common Stock upon the
delivery of a supply  agreement  between  Fiber Optic  Industries  (Pvt.)  Ltd.,
("FOI") and the Company.  FOI is a joint venture between the Company and Techman
which was formed for the purpose of  constructing  and operating a fiberdraw and
optical fiber cable  manufacturing  facility in Pakistan.  In 1996,  the 734,260
shares and the 312,061 shares, above, were issued to Techman in exchange for the
payment of  $1,000,000  and the  delivery  by Techman  of a twenty  year  supply
agreement between the Company and FOI. The Company used $500,000 of the proceeds
as an  additional  capital  contribution  in FOI.  The  Company  maintains a 30%
ownership  interest  in  FOI.  Due  to  a  delay  in  the  construction  of  the
manufacturing  plant, in 1997 the supply  agreement was canceled and the 312,061
shares have been canceled.  The Company may enter into a new supply agreement in
the future with FOI when the plant is completed.

         On July  31,  1996,  the  Company  borrowed  $500,000  under  two  loan
agreements with the spouses of the Chairman and Chief Executive  Officer and the
Executive Vice President of the Company. The loans are in the amount of $250,000
each, bear interest at the prime rate plus one percent  (currently 9.5%) and are
due on July 31,  1999.  In  conjunction  with the loans,  each  lender  received
Warrants  to  purchase  115,220  shares of Common  Stock at a price of $1.81 per
share. The Warrants expire on July 31, 2001.

         In  September  1997,  the  Company   borrowed   $150,000  from  Techman
International Corporation. The note bears interest at prime plus 1% per year and
matures on September 17, 1998. In conjunction with the note, Techman was granted
warrants to purchase 69,132 common shares of the Company at an exercise price of
$0.625 per share.

         In April 1997, the Company borrowed  $250,000 from Techman under a note
maturing in 2000.  The annual  interest  rate on the note is the prime rate plus
1%, adjustable  quarterly and payable  quarterly.  In conjunction with the note,
Techman was granted warrants to purchase 115,220 common shares of the Company at
an exercise price of $0.78 per share.

         In addition to the above two notes with Techman,  in 1997,  the Company
borrowed  $345,000  for  working  capital  from  the  Chief  Executive  Officer,
shareholders,  and certain companies of which certain directors of FiberCore are
shareholders. The loans bear interest at the prime rate plus one (1) percent per
year, and mature in 1998 ($125,000) and 2000 ($220,000).

         In  1997,  the  expansion  of  the  Jena  facility  was   substantially
completed,  more than  doubling  the  production  capacity  of that  plant.  The
expansion was funded by German government grants and loans as described above.

                                       6
<PAGE>



                              BUSINESS (CONTINUED)

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 which  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 single-mode fiber.  Multi-mode fiber has a larger core (the area where
the light travels) than  single-mode  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
single-mode  fiber.  For example,  the light source for multi-mode  fiber can be
light emitting  diodes,  while  single-mode  fiber requires laser light sources.
Single-mode  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
single-mode 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 "AT&T 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,

                                       7
<PAGE>



                              BUSINESS (CONTINUED)

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 single-mode  preforms and
fiber, but does not manufacture  optical fiber cable,  although MEFC and FOI, in
which the Company has an  interest,  intends to draw fiber from  preforms and to
manufacture 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 and the AVD  processes.
The  Company's  process  takes  advantage of available  high quality  doped1 and
undoped fused silica rods and tubes during the manufacturing  process to produce
more efficiently  single-mode  optical fiber preform and single-mode  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.  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) the  Company  purchases  the tube while  manufacturing  a much
smaller portion of the clad and all of the core which accounts for approximately
5% of the preform, while the OVD process, for example,  manufactures 100% of the
preform, requiring substantially more capital investment.

         Prior  to its  acquisition  by  the  Company,  the  Jena  Facility  was
manufacturing  multi-mode fiber and preform for the Eastern European market. The
Company's lease of the Jena Facility provides a potentially efficient, low-cost,
existing manufacturing operation. Management believes the time and cost required
to achieve  manufacturing  efficiencies at the Jena Facility were minimized as a
result of management's  knowledge and experience in fiber production and machine
design.



------------ 
1Doping means adding  other glass  materials,  such as germanium  dioxide to the
 silica glass.

                                       8
<PAGE>



                              BUSINESS (CONTINUED)

ALT PRODUCTS

         The Company's ALT subsidiary has four principal products,  all of which
are  manufactured  at the  Company's  Charlton,  Massachusetts  facility and are
marketed by independent sales representatives.

         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 purchased  one of these patents and know-how  relating to
fiber optic cable  monitoring  systems on September  7, 1986,  from  Norscan,  a
Canadian company. Norscan retained the right to use the technology in Canada and
the  rights to a Canadian  reissuance  of the  purchased  patent and has had the
technology in operation on the Trans Canada fiber optic network since 1988.  ALT
intends to make the technology widespread in other regions worldwide.  A dispute
exists between ALT and Norscan with respect to Norscan  selling FOCMS  products,
in  competition  with ALT  products,  that  utilize  technology  other  than the
technology assigned to ALT pursuant to its agreement with Norscan.  ALT contends
that, in so doing, Norscan is violating a non-competition provision of Norscan's
agreement  with ALT.  Failure by ALT and Norscan to resolve this  dispute  could
materially adversely affect the future sales of ALT products. (See Item 3. Legal
Proceedings)

         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,  which are
applied at cable splice  joints  prior to 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, which are used by
field personnel to communicate over optical fiber,  twisted pair-cable  (regular
telephone cable), and metal sheaths encasing optical fibers and copper cables.

         Customers for the FOCMS and other ALT Products have included  telephone
companies  worldwide,  including MCI  Telecommunications  Corp.,  AT&T Corp. and
Pacific Telesis.

         ALT also has developed  flood and leak detection  devices for the home.
ALT is not actively  marketing these products because of lack of resources,  but
may attempt to market such products in the future.

RESEARCH AND DEVELOPMENT

         The Company conducts research and development ("R&D") activities at its
Jena Facility and Charlton,  Massachusetts offices. Additionally, the Company is
conducting  product  development  R&D under two  contracts  with two  scientific
research   laboratories  in  Russia.  The  Company's  research  and  development
activities consist primarily of optical fiber manufacturing process improvements
and optical  fiber  product  development.  The Company is  currently  conducting
research in Germany  under  three  grants  from the German  government  totaling
approximately $388,287.


                                       9

<PAGE>



                              BUSINESS (CONTINUED)

         The  Company  incurred  costs of  $434,000,  $420,000,  and $75,000 for
research and process  development  for the fiscal years ended December 31, 1997,
1996, and 1995, respectively.  The principal purpose of the research activity is
to improve the production process for the manufacturing of fiber preforms,  with
concentration on reducing production time and reducing raw material  consumption
per unit of product.  ALT's expenditures are principally for product development
and enhancements of its products.

         Seven of the Company's employees devote substantially all of their time
to research and development, which includes process and product development.

SALES AND MARKETING

         The Company's initial marketing efforts are being primarily targeted at
the   overseas   markets,   particularly   toward   developing   nations   whose
telecommunications  infrastructure is in the early stages of evolution and where
competition  is not well  established.  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.

         The Company's  sales and marketing  objective is to develop  long-term,
strategic  relationship/supply  contracts for both preform and fiber products as
rapidly as practical,  emphasizing the cost advantages of the Company's patented
technology.

JOINT MARKETING ARRANGEMENTS

         The Company is seeking to increase market  penetration in optical fiber
markets through  strategic  alliances  and/or joint ventures similar to the MEFC
joint venture.  Currently,  negotiations are underway with several potential new
joint venture  partners.  These  relationships  are being structured so that the
Company  provides the preforms and the related  technology  requirements and the
partner provides the financing, operating and local marketing expertise. In this
way, it may be possible  for the Company to rapidly  obtain  market  penetration
with little,  if any, capital  investment.  Discussions  regarding similar joint
ventures  and/or  strategic  alliances are underway in India,  China and several
other countries,  although there can be no assurances that such discussions will
lead to the consummation of any transactions.

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.  This strategy  requires a substantial  amount of
working  capital  to  maintain   inventories  at  a  level  sufficient  to  meet
anticipated demand.

                                       10

<PAGE>



                              BUSINESS (CONTINUED)

CUSTOMERS REPRESENTING OVER 10% OF SALES

         The following  table is based on the total sales of the Company for all
periods presented. 
                                                      % OF SALES
                   1997
                     Customer A                          42%
                     Customer B                          18%
                     Customer C                     Less than 10%

                   1996
                     Customer A                          56%
                     Customer B                          15%
                     Customer C                     Less than 10%

                   1995
                     Customer A                          60%
                     Customer B                     Less than 10%
                     Customer C                          10%

         The Company believes that only the loss of Customers A and B would have
a material adverse effect on the Company.

BACKLOG, SALES AND ADVERTISING

         At December 31, 1997 the Company had a backlog of orders  approximating
$4.1 million ($7.4 million at December 31, 1996).  The decrease in backorders is
principally  due to a decrease in demand for single mode fiber from one customer
in Germany  and the delay in the  start-up  of MEFC.  During  1997,  four of the
Company's  employees  were engaged in sales  activities as part of their duties,
and  the  Company  utilized   manufacturers  sales  representatives  in  certain
geographic  markets.  In 1998,  the  Company is  planning  to employ a full-time
international  marketing/sales  manager  and one full time sales  person for the
European  market.  Also in 1998, the Company  intends to expand its  independent
sales representative organization to provide broader representation primarily in
the  Pacific  Rim.  Assisted  by local  representatives,  management  intends to
establish potential relationships with key managers of local cable and telephone
companies.  In addition,  other management executives are engaged in negotiating
long-term supply agreements with current and potential  customers.  Sales of ALT
products  are  made  by  one  salaried   full-time  Company  employee  based  in
Massachusetts,  who is engaged in sales as only a portion of his duties, as well
as by a number of independent sales agents.

         Due to the  nature of the  industry,  the  Company  does not  currently
engage in extensive  advertising.  The Company promotes its products principally
through  direct  mailings  to  potential  customers,   distribution  of  product
brochures through sales representatives and exhibiting at industry trade shows.

                                       11

<PAGE>



                              BUSINESS (CONTINUED)

COMPETITION

FIBER 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.  At present,  the  competition  for  single-mode
preforms on a world-wide  basis is limited to two United  States  manufacturers,
SpecTran Corporation  ("SpecTran"),  and Alcatel U.S.A. SpecTran's product sales
are for unique fiber  applications.  Alcatel  U.S.A.  is  marketing  single mode
preforms and has the  capability  to market  multi-mode  preforms now and in the
future.  In Europe,  Lycom,  Alcatel and Nokia,  Shin-Etsu from Japan and DaiWoo
from Korea are marketing single mode preforms.

         The predominant  practice of most fiber  manufacturers is to make fiber
optic  preform  only for their  internal  use and not to sell  preform  to other
fiber-optic  manufacturers.  Management  believes these large companies will not
enter the preform  market since demand for fiber  currently  exceeds  supply and
fiber manufacturers have an 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 disadvantages associated with selling preforms to third
parties  for  companies  like  Corning  and AT&T do not  apply  to the  Company,
because,  unlike those  companies,  the Company's  customers are not  vertically
integrated, and require preforms which are in limited supply.

         Due to the  current  high demand for fiber,  the Company has  initially
concentrated on manufacturing  and selling fiber and currently plans to increase
its fiber  manufacturing  capability.  Because  competition in the production of
preforms  is  somewhat   limited,   the  Company   plans  to  focus  its  future
manufacturing and marketing efforts on the preform segment of the market.

FIBER

         The  competition  in  multi-mode  fiber  products  is  limited to a few
manufacturers  in North America and Europe.  They include Corning  Incorporated,
AT&T,  Alcatel and SpecTran in the United  States and Plasma  Optical  Fiber and
Alcatel in Europe. Management believes that Corning, AT&T, and Alcatel generally
supply  the bulk of their  production  to their  own  cablers  or joint  venture
partners.

         The competition in the single-mode  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 and AT&T.  Both Corning and AT&T have
several joint ventures  throughout the world, but, it is believed by management,
they generally play significantly smaller roles than their partners. Competition
in the fiber market is primarily  based on availability  and quality.  With some
exceptions,  the Company's  fiber is generally  priced at  comparable  levels to
fiber manufactured by the larger producers.

                                       12

<PAGE>



                              BUSINESS (CONTINUED)

ALT PRODUCTS

         The  Company's  management  believes  there  is  limited  or no  direct
competition  for its FOCMS  product line except  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.

         Numerous companies  manufacture field talksets that enable personnel to
communicate over either 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.

PRODUCT WARRANTIES

         Customers may obtain refunds for any defective fiber and fiber preforms
shipped by the Company within 90 days of delivery.  The Company extends one year
warranties on ALT Products.

PATENTS

         The Company is the registered owner in the United States of U.S. Patent
No. 4,596,589 relating to optical fiber fabrication.  The patent,  which expires
in 2003,  was acquired in 1993 from Gregory  Perry, a co-founder of the Company.
The  existing  patent  provides  a  more  efficient  method  for  fabricating  a
single-mode  optical fiber preform by  substantially  reducing the time and cost
required to produce the preform. The patent also provides an efficient method of
attaching  cladding  material  around a single-mode  fiber core. The Company has
filed an application in the United States and European  Common Market  improving
upon the  process  covered  by the above  patent,  and  intends to file in other
foreign  jurisdictions,  as well as filing further  improvement  patents for its
process.

         In conjunction  with its  acquisition of equipment  located at the Jena
Facility,  the  Company  acquired  the right and title to all SICO  patents  and
expertise  developed or owned by SICO relating to fiber optics. In the event the
Company were to default on its obligations to SICO, the Company's title to these
patents  could revert to SICO.  Without the use of SICO patents and  technology,
the Company's expense in manufacturing  optical fiber and optical fiber preforms
could increase substantially.

         In 1997,  the  Company  filed a patent  application  in the U.S.  for a
process  which the Company  believes  will  improve the cost and  efficiency  of
producing  optical  fiber  preforms.  The Company is currently in the process of
preparing additional patent applications for the production of optical fiber and
preforms which are expected to be filed in 1998.

                                       13

<PAGE>



                              BUSINESS (CONTINUED)

         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 the first such U.S. patent, Patent No. 4,480,251,  which covers
cable monitoring  systems and expires in 2001, from Norscan.  A patent issued by
the United Kingdom for the same technology was also acquired by the Company from
Norscan. 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. (See Item 3. Legal Proceedings).

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 and the
German mark,  and other  currencies in which the Company is doing  business from
time to time. The Company has limited foreign currency  fluctuation exposure and
does not currently engage in foreign currency hedging transactions. The business
and  operations of the  Company's  Germany  subsidiary,  FCJ, are subject to the
changing  economic  and  political  conditions  prevailing  from time to time in
Germany. Labor costs, corporate taxes and employee benefit expenses are high and
weekly working hours are shorter compared to the rest of the European Union, the
United  States and Japan.  The  Company's  joint  venture,  FCA,  in Malaysia is
subject to similar  international  risks,  including  the currency  fluctuations
recently  experienced in the Pacific Rim region. The Company's  participation in
MEFC and its  investment  in FOI are  subject to the risks of doing  business in
Saudi Arabia,  and in the Middle East in general.  These risks include,  but are
not limited to, the threat of regional  conflict.  In 1997,  1996 and 1995,  FCJ
accounted for 97%, 98%, and 90% of the Company's sales, respectively.

                                       14

<PAGE>



                              BUSINESS (CONTINUED)

TRADEMARKS

         FCJ is the owner of the registered  trademark  InfoGlass(R) under which
it  markets  its  optical  fiber  products.  In  1997,  the  Company  filed  for
registration of the trademarks  "EconoGrade"  and  "ValueGrade"  for products it
intends to begin marketing in 1998. ALT is the owner of the registered trademark
Floodhound(R)  which is used in the sale of the Company's  water leak  detection
devices. These products are not currently marketed by the Company.

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 1995, the Company's optical
fiber and preform business  purchased  approximately 90% of its key glass tubing
raw material from one supplier.  This supplier accounted for over 46% and 50% of
the Company's  glass tube  requirements in 1996 and 1997,  respectively.  If the
Company becomes unable to continue to purchase raw materials from this supplier,
there  can be no  assurance  that the  Company  will not  face  difficulties  in
obtaining raw materials on  commercially  acceptable  terms,  which could have a
material  adverse  effect  on the  Company.  To limit  future  shortages  of key
materials, the Company successfully identified other suppliers of this material.
The Jena Facility has 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.

         The Company's ALT subsidiary uses raw materials  widely  available from
numerous suppliers.

EMPLOYEES

         At December 31, 1997,  the Company  employed 84 persons,  of whom 4 are
executives,  10 are  engaged  in sales and  administration,  63 are  engaged  in
manufacturing  and  7 are  engaged  principally  in  research  and  development.
Seventy-five (75) of the Company's employees are located in Jena,  Germany.  The
Company is not party to any  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.

                                       15

<PAGE>



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
lease expires on September 30, 1998. The Company plans to renew the lease.

         The  Company's  optical  fiber and  preform  manufacturing  facility is
located  in Jena,  Germany.  The  facility  is leased  from  SICO.  It  occupies
approximately   26,500  sq.  ft.,   including  17,200  sq.  ft.  of  clean  room
manufacturing 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 facility,  subject to certain  restrictions.  The
lease  expires in 2000 and is renewable  for  additional  terms  aggregating  25
years.  The Company  maintains  casualty  and  liability  insurance  on the Jena
Facility.  There is no assurance that in the event of a loss, policy limits will
not be exceeded.

ITEM 3.  LEGAL PROCEEDINGS

         In January  1998,  Corning,  Incorporated  ("Corning")  filed an action
against the Company  claiming  that the  Company  infringed a Corning  patent by
marketing and selling  certain  optical fiber products in the United States.  In
March 1998 the Company and Corning concluded a settlement  agreement wherein the
Company has acknowledged  the validity of Corning's patent and agreed,  prior to
the  expiration of the patent,  not to make,  market,  and sell or offer to sell
infringing  optical  fiber or optical  fiber  preforms  in the United  States in
violation of Corning's patent except to certain customers.  In turn, Corning has
agreed not to seek  damages and will dismiss the action.  The Company  maintains
that it has not sold any significant amounts of fiber and preforms in the United
States in violation of Corning's patent which expires in July, 1999.  Management
believes that the result of this action will not have a material  adverse impact
on the Company.

         The Company's FiberCore Jena subsidiary, SICO and SICO's president, Mr.
Walter Nadrag (who was previously the Managing  Director of FiberCore  Jena) are
defendants in a lawsuit in Germany brought against them by COIA GmbH ("COIA"), a
former  customer,  claiming  damages  of  approximately  $200,000  arising  from
FiberCore  Jena's alleged failure to comply with a sales contract.  The case was
dismissed  by the lower court and COIA  appealed  this  decision.  On appeal the
court  found  that  although  there was a  contract,  COIA was not  entitled  to
damages.  COIA may seek fulfillment of the claimed contract.  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  affect  on the  business  of the
Company.

         The Company's ALT  subsidiary is in a dispute with Norscan,  a Canadian
company, with respect to Norscan selling FOCMS products, in competition with ALT
products  and in  violation  of a  non-competition  agreement  between  ALT  and
Norscan. Although no litigation has commenced as of the date of this report with
respect to this  dispute,  ALT would be the  claimant in any lawsuit  brought in
connection with this matter.  Failure by ALT and Norscan to resolve this dispute
could have a material adverse affect on the future sales of ALT Products.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.


                                       16

<PAGE>



                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's  stock is traded on the Over the Counter  (OTC)  Bulletin
Board.  There were 224 holders of record and approximately 800 beneficial owners
of Common Stock as of March 12, 1998.  The public market for the Common Stock on
the Bulletin  Board,  where the stock trades under the symbol FBCE,  is limited.
Set forth below for the periods  indicated  are the high and low closing  prices
for the Common Stock as reported on the Bulletin Board.

STOCK PRICE AND DIVIDEND POLICY

                Period                   High Bid               Low Bid
                ------                   --------               -------

           1996
           ----
              1st quarter                $3.12                    $2.00
              2nd quarter                $7.25                    $1.75
              3rd quarter                $7.44                    $3.00
              4th quarter                $4.13                    $2.63

           1997
           ----
              1st quarter                $6.25                    $0.63
              2nd quarter                $1.50                    $0.44
              3rd quarter                $1.06                    $0.50
              4th quarter                $0.88                    $0.31

         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.  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.


                                       17

<PAGE>



ITEM 6.  SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL DATA

         The following  selected  financial  data of the Company for each of the
years 1997,  1996,  1995,  1994,  and 1993,  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".

<TABLE>
<CAPTION>
                                                    YEARS ENDED DECEMBER 31,
                                                (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

----------------------------------------------------------------------------------------------------------------------------
                                                 1997(1)         1996(1)           1995(1)      1994(2)(3)        1993(2)(3)
<S>                                              <C>              <C>            <C>           <C>                       
Operating Data:
  Net sales...............................        $ 7,078          $ 8,096        $ 3,094        $   231              ---
                                                  -------          -------        -------        -------
  Costs and expenses:
  Cost of sales...........................          5,702            7,200          4,509          1,064              ---
  Research and development................            434              420             75             90              ---
  Selling, general, and administrative....          3,148            4,324          2,100            700           $    1
  Interest expense, net...................            638              387            368              7              ---
  Other expense (income), net.............            234             (102)            51             (5)             ---
                                                  -------          -------        -------        -------           ------
  Loss before provision for income taxes..         (3,078)          (4,133)        (4,009)        (1,625)              (1)
  Provision for income taxes..............            ---              ---            ---            ---              ---
                                                  -------          -------        -------        -------           ------
  Net loss................................       $ (3,078)         $(4,133)       $(4,009)       $(1,625)          $   (1)
                                                 ========          =======        =======        ========      ========== 
Basic and diluted loss per share..........       $  (0.09)         $ (0.13)       $ (0.15)       $ (0.07)             ---
                                                 ========          =======        =======        ========                
Weighted average shares
  outstanding.............................     35,744,182       31,695,693     26,584,630     22,873,322       21,309,323
                                               ==========       ==========     ==========      ==========      ===========
Balance Sheet Data:
  Working capital (deficit)...............          8,091              191           (277)          (519)             403
  Total assets............................         26,107           17,642         14,783          4,270              645
  Long-term obligations...................          9,851            4,587          5,000            456              ---
  Total liabilities.......................         13,351            7,618          8,415          1,687                4
  Minority interest.......................          3,217              ---            ---            ---              ---
  Accumulated deficit.....................        (12,850)          (9,772)        (5,638)        (1,628)              (3)
  Stockholders' equity....................          9,539           10,024          6,368          2,583              641
</TABLE>

---------
1. Includes the results of ALT from September 18, 1995.

2. Does not include the results of ALT.

3. Reflects the Venturecap merger as of the beginning of the period.


                                       18

<PAGE>



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
        OF OPERATIONS

                    (Dollars and Deutsche Marks 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;  (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 or the entry
into the market of new  competitors;  (viii) the  ability of the Company to deal
with the Year 2000 Issue on a timely basis;  (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",   and  similar   expressions  are  intended  to  identify
forward-looking statements, and the above described risks inherent therein.

         FiberCore,  Incorporated, the predecessor to the Company, was organized
under the laws of the State of Nevada on November 5, 1993. Venturecap,  Inc. was
a development stage enterprise,  with no significant operations,  no significant
assets  or  liabilities  and  was  inactive  from  1990  until  the  time of the
Venturecap Merger with FiberCore,  Incorporated on July 18, 1995. The Venturecap
Merger has been  accounted  for as a pooling  of  interests.  Subsequent  to the
Venturecap Merger,  Venturecap changed its name to FiberCore,  Inc. (hereinafter
"FiberCore" or the "Company").

         The Company operates  primarily  through its FiberCore Jena subsidiary.
The Company  maintains  its  headquarters  in Charlton,  Massachusetts  which is
staffed by executive,  research and engineering,  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, 1997, 1996 and 1995.

RESULTS OF OPERATIONS

         Year Ended December 31, 1997

         Total  revenues  for the year ended  December  31,  1997 were $7,078 or
12.6% lower than revenues

                                       19

<PAGE>



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

in 1996.  The  decrease  was  principally  due to a decline  in the value of the
German mark versus the U.S.  dollar of 13.3%.  Average  selling  prices were 26%
higher  in 1997  compared  to  1996,  due to an  increase  in  sales  volume  of
multi-mode  fiber  and  a  decrease  in  sales  volume  of  single-mode   fiber.
Substantially,  all of the  Company's  sales are through its German  subsidiary,
FiberCore Jena.

         Cost of sales  decreased by 20.8% from 1996 to 1997.  This decrease was
attributable to the decline in the value of the German mark and a lower per unit
cost of  production  resulting  from  upgrades to the  production  equipment and
production process improvements.  As a result of these improvements gross profit
for the year ended  December  31, 1997 was $1,376 or 19.4% of sales  compared to
$896 or 11.1% of sales in 1996.

         Selling,  general,  and  administrative  costs decreased $1,176 in 1997
from 1996 or 27.2%.  This decrease was  principally due to the costs incurred in
1996 of $846 for the value of  options  granted  to  employees  and $421 for the
costs  associated with the  registration of the Company's  common stock with the
Securities   and   Exchange   Commission.    Additionally,    FiberCore   Jena's
administrative  costs increased by approximately $135 after giving effect to the
decline in value of the mark.  This increase was  principally due to an increase
in administrative personnel and other administrative costs.

         Interest  expense  increased  69.0% to $664 in 1997 compared to $393 in
1996. This increase was due to the increase in interest on the AMP loans of $172
resulting from a higher average interest rate on these loans in 1997 compared to
1996. Additionally, the Company incurred an increase in interest costs of $62 on
loans borrowed for working capital  purposes,  and approximately $40 of interest
and fees on the Berliner  Bank loan.  Interest of $176 on the Berliner Bank loan
was capitalized during the year for the expansion of the German plant.

         Other expense was $234 in 1997 compared to other  income-net of $102 in
1996.  This  change was  principally  due to an  increase  in  foreign  currency
exchange  losses of $294 on the German mark deposit with the Berliner  Bank that
is security for the loan and a decrease in German research grants of $58.

         The net loss for the year 1997 was $3,078  compared to $4,133 for 1996,
a  decrease  of $1,055 or  25.5%.  The  primary  cause of the  decrease  was the
increase in gross profit,  the decrease in administration  costs,  offset by the
increase in interest expense and other expenses as described above.

         Year Ended December 31, 1996

         Total  revenues  for the year  ended  December  31,  1996  were  $8,096
compared  with  revenues  of $3,094 for the year ended  December  31,  1995,  an
increase of 162%.  This increase in revenues was  attributable  to the Company's
increase of production  capacity resulting from an upgrade of the Jena Facility,
and the Company's sales and marketing  efforts  resulting in the addition of new
customers.

         Gross profit for the year ended  December 31, 1996 was $896 compared to
a loss of $1,415 for the year ended  December  31,  1995.  This  difference  was
attributable  to the higher  volume of  production  and the  upgrade of the Jena
Facility since its  acquisition in July 1994. The  improvement  and upgrading of
machinery and equipment and production  process  technology  changes resulted in
better production yields and lower per unit production costs.

                                       20

<PAGE>



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

         Selling,  general and administrative  expenses were $4,324 for the year
ended December 31, 1996 compared to $2,100 for the year ended December 31, 1995,
an increase of 106%.  This increase was due  primarily to non-cash  compensation
expense of $846 incurred in connection with the grant to employees and others of
options  to  acquire  382,184  shares  of  common  stock  of  the  Company,  the
acquisition of ALT in September,  1995, which accounted for $704 of the increase
and  approximately  $421 of legal,  accounting,  and  other  costs  incurred  in
connection  with the Company's  registering its common stock with the Securities
and Exchange Commission.  Additionally, the commencement of increased production
at the Jena Facility,  the Company's  increased sales and marketing  efforts and
the addition of personnel in Germany, added to this increase in costs.

         Interest expense for the year ended December 31, 1996 was $393 compared
to  $516,  a  decrease  of 24% from the year  earlier  comparable  period.  This
decrease was due to the  repayment  in 1995 of a working  capital line of credit
that was outstanding for most of 1995, offset by the interest on the AMP Note.

         Interest income was $6 for the year ended December 31, 1996 compared to
$148 in 1995.  The decrease of $142 or 96% was  principally  due to the interest
earned on the short-term investment of the $5,000 AMP loan in 1995. The AMP loan
proceeds were used in 1995 to repay a line of credit and investments in the Jena
Facility.

         Other  income,  net of other  expense,  was  $102  for the  year  ended
December 31, 1996 compared to net expense of $51 in 1995.  The increase in other
income in 1996 was  principally due to the receipt of research grants of $109 in
Germany.

         The net  loss for the year  ended  December  31,  1996 was  $4,133,  an
increase  of $124 (3%) from the loss of  $4,009 in the  corresponding  period in
1995.  The primary cause of the increase was the  improvement in sales and gross
profit at the Jena Facility offset by the changes in administrative and interest
income and expense as described above.

LIQUIDITY AND CAPITAL RESOURCES

         GENERAL

         The Company  expects to continue to incur  operating  losses until such
time  as  the  Jena  Facility's  recent  expansion  is  fully  operational,  and
manufacturing  inefficiencies are substantially eliminated. The Company has and,
with  additional  capital,  will  continue to transfer  its more  efficient  and
productive  technology  to its Jena Facility with  management's  expectation  of
improved  operating  results.  The  expansion  of the  Jena  Facility,  recently
completed,  will result in improved  production yields thus lowering  production
costs per unit of preform and fiber.  Additionally,  the expansion will increase
throughput resulting in increased production volume. Management anticipates that
these increased sales combined with lower per unit production costs will lead to
profitability.

         The Company,  therefore,  has sought  additional  financing for working
capital,  expansion and technology development from one or more of the following
sources: (i) issuance of convertible

                                       21

<PAGE>



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

instruments  or stock in private or public  offerings;  (ii)  exercise  of stock
Options and Warrants;  and (iii) loans from officers,  directors,  and principal
stockholders of the Company.  Funds for such loans to the Company from officers,
directors,  and principal  stockholders would be derived, in part, from sales or
pledges (to obtain loans) of Common Stock by such individuals. Additionally, the
Company,  through  its  Malaysian  subsidiary  FCA, is in the process of raising
approximately $40.0 million in debt financing to finance the construction of the
FCA  manufacturing  plant.  The  Company's  plan to  construct  the  facility in
Malaysia,  despite  the  current  economic  situation  in the  Pacific  Rim,  is
considered to be a long-term investment  strategy.  Management believes that the
Malaysian economy, despite recent events, is basically stable, and stronger than
the  economies  of other  countries  in the  region.  Additionally,  the  region
continues to invest in infrastructure projects of which optical fiber is a part.
Demand for the  Company's  products  is  projected  to  continue  to grow in the
Pacific Rim region at a faster rate than in other major  markets.  Substantially
all of the products  that are planned to be produced in the  Malaysian  facility
are targeted for export outside of Malaysia.

         The Company believes that its success in raising  additional capital is
dependent on investors' beliefs in the Company's technology, its position in the
fiber optics industry, and its strategic business plan. Achieving  profitability
is  dependent,  in part,  on  raising  additional  funds to  invest  in  capital
expenditures.  In this  regard,  in 1996 the  Company  received a grant from the
German government of 4,000 Deutsche Marks (DM) (approximately $2,700) and a loan
from the  Berliner  Bank of 7,700 DM  (approximately  $4,280).  These  funds are
committed to the upgrade and expansion of the Jena Facility  described above. On
November 27, 1996, AMP loaned the Company $3,000, part of which has been used as
collateral  for the  Berliner  Bank  Loan.  As part of the AMP  loan,  AMP  also
converted  $3,000 of principal  plus  interest on the existing  $5,000 loan into
3,058,833 shares of Common Stock.

         The Company is not relying on the conversion of Warrants and Options to
fund the upgrade and expansion of the Jena  Facility;  however,  if the Warrants
and Options are  exercised,  the total  proceeds  that the Company would receive
upon the exercise is approximately  $7,182.  To the extent that the Warrants and
Options are exercised, the Company intends to use the proceeds from the exercise
of such  Warrants  and Options  for working  capital  purposes,  including  debt
service  (approximately  $80 per quarter beginning January 1997 through December
2001).  There are long payment deferral  periods on a substantial  amount of the
Company's  outstanding  loans.  Under  the AMP  Note,  the  remaining  $2,000 in
principal  and accrued  interest  are due and payable at maturity in April 2005.
Similarly,  under the $3,000 AMP loan, payments of interest are deferred for the
first five years. Thereafter,  accrued and unpaid interest is payable quarterly.
The  principal  and any  remaining  accrued  interest  is payable at maturity on
November 27, 2006. As for the German loan,  principal is also due and payable at
the tenth anniversary of closing; however, interest at 6.25 % is due and payable
quarterly.  The Company does not foresee any  inability to meet its current debt
requirements.

         The Company currently has a backlog of orders aggregating approximately
$4,100  which is  scheduled  to be shipped in 1998.  The backlog at December 31,
1996 and 1995 was approximately $7,400 and $4,800, respectively. The decrease in
backorders is principally due to a decrease in demand for single-mode fiber from
one customer in Germany and the delay in the start-up of MEFC. Additionally, the
Company has entered into, or is negotiating,  long-term supply agreements which,
in the  opinion  of  management,  could  generate  sales of up to  approximately
$251,000 in the aggregate.  These include supply  agreements with MEFC, AMP, FOI
for Oman Fiber Optics Company and others. Pursuant

                                       22

<PAGE>



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

to the supply  agreement  with AMP,  which  provides for an initial term of five
years and for an additional  five year term at AMP's option,  AMP has undertaken
to purchase at least 50% of its global fiber requirements from the Company.  The
Company  estimates that this could amount to over $60,000 in sales over the five
year  period,  significantly  improving  the  Company's  cash flow and  profits,
although  there can be no  assurance  that actual  sales will reach this amount.
Shipments to MEFC began in the fourth  quarter 1997 and  shipments to AMP in the
U.S. are expected to begin in 1998.

         The following changes in balance sheet amounts are net of the effect of
the change in the currency exchange rates from December 31, 1996 to December 31,
1997.

         Year Ended December 31, 1997

         During the year ended December 31, 1997, the Company used $1,724 net of
depreciation and amortization for operations, before changes in working capital.
Accounts  receivable  increased  by $354  principally  due to the  sales  of ALT
products  and a large sale to MEFC in December  1997.  Inventories  increased by
$1,398 as a result of the increase in  production  in  FiberCore  Jena and lower
than expected shipments of preforms to MEFC. This lower shipment was due to MEFC
not having completed the installation of their draw tower. The increase in other
receivables of $202 was due to an outstanding  receivable for German  government
grants of $422 reduced by a decrease in VAT taxes receivable.

         Accounts payable  increased $260,  principally due to advances received
and to be repaid to one of the partners in FCA. Accrued liabilities increased by
$37 primarily due to increases in accrued interest for loans.

         Cash  used in  investing  activities  was  $2,551  for the  year  ended
December 31, 1997.  This was  principally due to the investment for expansion of
the Jena  facility  of  $4,211  reduced  by  grants  received  from  the  German
government of $1,775.

         Cash received from financing activities included $328 received from the
exercise of employee stock options and $394 in short-term borrowings for working
capital.  The  Company  drew  down  $4,280  on the  Berliner  Bank  loan for the
expansion  of the  Jena  plant.  Additionally,  the  Company  borrowed  $470  in
long-term loans to finance operations. Long-term interest payable increased $418
due to the interest on the AMP loans which is payable at maturity.

         Year Ended December 31, 1996

         During the year ended  December 31, 1996,  the Company used net cash of
$1,972 for operating  activities,  principally  resulting  from the loss for the
period of $4,133 reduced by depreciation and amortization of $1,226 and non-cash
compensation  expense of $846. Inventory increased $514 due to the higher volume
of  production  during the year.  Accounts  payable was  reduced by $159,  while
accrued  expenses  increased  by $829.  The  increase  in  accrued  expenses  is
principally  attributable  to an increase in accrued  salaries,  legal and audit
fees.  Certain  officers  deferred  payment of their salaries during the year to
improve the Company's cash available for other purposes. Also, during the period
the Company  utilized cash in investing  activities of $1,150,  principally  for
equipment  ($1,161) and investments in joint ventures ($950),  reduced by grants
from the German government ($960) used to acquire equipment. Cash

                                       23

<PAGE>



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

generated through  financing totaled $2,479,  principally from the sale of stock
($1,500) and new borrowings  ($3,700),  reduced by collateral for a bank loan to
finance  investments  in the Jena  Facility  ($2,498),  and  repayment of a note
($200).

         The  proceeds  from the sale of stock  noted above were  received  from
Techman under the Techman Share Purchase Agreement entered into in January 1996.
Under that  Agreement,  Techman  subscribed  to purchase  734,260  shares of the
Company for $1,000.  The payment of $1,000 resulted in an increase in equity and
was used as working capital, improving the Company's ability to meet its current
obligations, and as a capital contribution for the FOI joint venture ($450). The
sale of stock to MESC  ($500)  was used as a  capital  contribution  to the MEFC
joint venture.

         ALT

         ALT was  acquired  by the Company as of  September  18,  1995.  ALT has
historically  operated  at a  loss,  has  cumulative  losses  from  its  date of
inception,  and requires  additional capital to operate.  The Company intends to
raise additional funds for ALT,  however,  there is no assurance that such funds
will be  available.  In 1997,  ALT  received  and filled an order from  Pakistan
Telecom in the amount of $165, for a test  installation of the fiber optic cable
monitoring system.  The Company  anticipates that Pakistan Telecom will place an
order for  additional  installations  estimated  to be  valued at  approximately
$1,600,  although  there can be no  assurance  that such sales will be realized.
Additionally,  the Company plans to engage a full-time  sales manager for ALT in
1998 which management believes will result in increased sales of ALT products.

         YEAR 2000 ISSUES

         The Year 2000 Issue is the result of computer  programs  being  written
using two digits  rather  than four to define the  applicable  year.  Any of the
Company's  computer  systems that have  time-sensitive  software or hardware may
recognize  a date using "00" as the year 1900  rather  than the year 2000.  This
could  result in a system  failure or  miscalculations  causing  disruptions  of
operations,  including,  among other  things,  a temporary  inability to process
transactions, send invoices, or engage in similar normal business activities.

         The Company is in the process of reviewing  its systems and programs to
identify  those  that  could   potentially  have  an  impact  on  the  Company's
operations.  In 1997, the Company's  principal operating  subsidiary,  FiberCore
Jena,  installed new accounting and  administrative  software and hardware which
the  supplier has assured the Company is Year 2000  compliant.  The Company will
verify this in 1998.  The Company has not as yet  completed an assessment of the
cost to bring other operating systems into compliance.

         The  Company  does  not have  significant  interface  application  with
customers,   suppliers   and  others.   However,   the  Company  has   initiated
communications  with all of its  significant  suppliers  and large  customers to
determine  the  extent  to  which  the  Company's  systems  and  operations  are
vulnerable  to those third  parties'  failure to  remediate  their own Year 2000
Issue.  There can be no guarantee  that the systems of other  companies on which
the  Company's  systems  rely  will be  timely  converted  and would not have an
adverse effect on the Company's systems.

                                       24

<PAGE>



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

         The Company  will  utilize  both  internal  and  external  resources to
reprogram,  or replace,  and test its software for Year 2000 modifications.  The
Company  anticipates  completing  the Year 2000  project not later than June 30,
1999,  which is prior to any anticipated  impact on its operating  systems.  The
total cost to the Company of these Year 2000 Compliance  activities has not been
and is not  anticipated  to be material to its financial  position or results of
operations in any given year.

         ACCOUNTING PRONOUNCEMENTS

         In June 1997,  the FASB issued SFAS No. 130,  "Reporting  Comprehensive
Income",  which  requires  that  changes in  comprehensive  income be shown in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial  statements.  Also in  June  1997,  the  FASB  issued  SFAS  No.  131,
"Disclosures  About  Segments of an Enterprise and Related  Information",  which
changes  the way public  companies  report  information  about  segments.  These
statements  are  effective  for 1998.  Management  is currently  evaluating  the
effects of these  statements on the  Company's  financial  statements,  however,
these  statements will only effect  disclosure and presentation in the financial
statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Not applicable.










                                       25

<PAGE>



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                         PAGE

Independent Auditors' Reports..............................................27-28

Consolidated Balance Sheets at December 31, 1997 and 1996..................   29

Consolidated Statements of Operations for the Years Ended
     December 31, 1997, 1996 and 1995......................................   30

Consolidated Statements of Stockholders' Equity for the Years
     Ended December 31, 1997, 1996 and 1995................................   31

Consolidated Statements of Cash Flows for the Years Ended
     December 31, 1997, 1996 and 1995......................................   32

Notes to Consolidated Financial Statements for the Years Ended
     December 31, 1997, 1996 and 1995......................................   33



                                       26
<PAGE>
INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
FiberCore, Inc.
Charlton, Massachusetts

We have audited the accompanying  consolidated balance sheets of FiberCore, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the related  consolidated
statements of operations, changes in stockholders' equity and cash flows for the
years then ended.  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  generally   accepted  auditing
standards.  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, 1997 and 1996,  and the  results of their  operations  and cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

DELOITTE & TOUCHE LLP

Hartford, Connecticut
March 27, 1998


                                       27

<PAGE>



                LETTERHEAD OF MOTTLE MCGRATH BRANEY & FLYNN, P.C.

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
FiberCore, Inc. and Subsidiaries

We have audited the accompanying consolidated statements of operations,  changes
in stockholders'  equity, and cash flows of FiberCore, Inc. and Subsidiaries for
the year ended December 31, 1995. These  consolidated  financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material  respects,   the  results of  operations, changes  in
stockholders' equity, and cash flows of FiberCore, Inc. and Subsidiaries for the
year ended December 31, 1995 in conformity  with generally  accepted  accounting
principles.

                                       /s/ MOTTLE McGRATH BRANEY & FLYNN, P.C.
                                       ---------------------------------------
                                           MOTTLE McGRATH BRANEY & FLYNN, P.C.



Worcester, Massachusetts
July 29, 1996


                                       28

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
(Dollars in thousands except share data)                                                                 1997           1996
                                                                                                         ----            ----
                                                              ASSETS
<S>                                                                                                  <C>              <C>     
Current assets:
     Cash.......................................................................................       $ 2,128        $   190
     Accounts receivable, less allowance for doubtful accounts of $33 in 1997 and
       $36 in 1996..............................................................................           937            675
     Notes receivable from joint venture partners...............................................         4,883             --
     Other receivables..........................................................................           564            418
     Inventories................................................................................         3,057          1,921
     Prepaid and other current assets...........................................................            22             18
                                                                                                       -------        -------
         Total current assets...................................................................        11,591          3,222
                                                                                                       -------        -------

Property and equipment..........................................................................         6,559          5,244
Less accumulated depreciation...................................................................         1,751          1,473
                                                                                                       -------        -------
         Property and equipment - net...........................................................         4,808          3,771
                                                                                                       -------        -------
Other assets:
     Restricted cash............................................................................         2,140          2,498
     Patents, less accumulated amortization of $1,520 in 1997 and $861 in 1996..................         6,014          6,648
     Investments in joint ventures..............................................................         1,425          1,375
     Other......................................................................................           129            128
                                                                                                       --------       -------
         Total other assets.....................................................................         9,708         10,649
                                                                                                       -------        -------
         Total assets...........................................................................       $26,107        $17,642
                                                                                                       =======        =======

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

     Notes payable..............................................................................       $   594        $   200
     Accounts payable...........................................................................         1,778          1,653
     Accrued expenses...........................................................................         1,128          1,178
                                                                                                       -------        -------
         Total current liabilities..............................................................         3,500          3,031
Long-term interest payable......................................................................           460             42
Long-term debt..................................................................................         9,391          4,545
                                                                                                       -------        -------
         Total liabilities......................................................................        13,351          7,618
                                                                                                       -------        -------

Minority interest ..............................................................................         3,217            ---
                                                                                                       -------        -------

Commitments and contingencies (Note 10)

Stockholders' equity:

     Preferred stock, $.001 par value, authorized 10,000,000 shares;  no shares issued
     and outstanding............................................................................           ---            ---
     Common stock, $.001 par value, authorized  100,000,000 shares; shares issued and
     outstanding:  35,774,822 in 1997 and 35,233,250 in 1996....................................            36             35
     Additional paid in capital.................................................................        23,221         19,545
     Accumulated deficit........................................................................       (12,850)        (9,772)
     Accumulated translation adjustment.........................................................          (868)           216
                                                                                                       -------        -------
         Total stockholders' equity.............................................................         9,539         10,024
                                                                                                       -------        -------
         Total liabilities and stockholders' equity.............................................       $26,107        $17,642
                                                                                                       =======        =======

</TABLE>
          See accompanying notes to consolidated financial statements.
                                       29


<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

(Dollars in thousands except share data)

<TABLE>
<CAPTION>
                                                                        1997               1996                1995
                                                                        ----               ----                ----

<S>                                                              <C>                 <C>                <C>            
Net sales...............................................          $        7,078      $        8,096     $        3,094
Cost of sales ..........................................                   5,702               7,200              4,509
                                                                  ---------------     ---------------    ---------------
     Gross profit (loss)................................                   1,376                 896             (1,415)

Operating expenses:
  Selling, general and administrative expenses .........                   3,148               4,324              2,100
  Research and development..............................                     434                 420                 75
                                                                  ----------------    ---------------    -----------------
     Loss from operations...............................                  (2,206)             (3,848)            (3,590)

Interest income.........................................                      26                   6                148 
Interest expense........................................                    (664)               (393)              (516)
Other (expense) income..................................                    (234)                102                (51)
                                                                  ---------------     ---------------    ---------------- 

     Net loss...........................................          $       (3,078)     $       (4,133)    $       (4,009)
                                                                  ==============      ==============     ==============

Basic and diluted loss per share of common stock........          $        (0.09)     $        (0.13)    $        (0.15)
                                                                  ===============     ===============    ===============

Weighted average shares outstanding.....................              35,744,182          31,695,693         26,548,630
                                                                  ===============     ===============    ===============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       30

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
(Dollars in thousands except share data)
                                                                      1997              1996               1995
                                                                      ----              ----               ----
<S>                                                               <C>                 <C>               <C>       
Common Stock:
  Balance, beginning of year....................................      $      35         $      30         $     25
  Stock issued for acquisition of ALT...........................                                                 5
  Sale of stock for cash........................................                                2
  Reissuance of stock for conversion of debt....................                                3
  Stock issued on exercise of options and warrants..............              1           
                                                                      ---------         ---------         --------
  Balance, end of year..........................................      $      36         $      35         $     30
                                                                      =========         =========         ========

Additional Paid in Capital:

  Balance, beginning of year....................................      $  19,545         $  11,761         $  4,677
  Issuance of stock for services................................                                                44
  Reissuance of treasury stock as loan incentive................                                              (455)
  Stock issued for acquisition of ALT...........................                                             6,995
  Sale of stock for cash........................................                            1,498              500
  Issuance of stock for conversion of debt......................                            4,052
  Issuance of stock for investment in joint venture.............            425               425
  Discount on AMP note for value of warrants....................                              963
  Compensation cost of options issued to employees..............                              846
  Stock issued on exercise of options and warrants..............            328
  Contribution of capital in Malaysia joint venture (FCA).......          3,348
  Stock canceled on cancellation of supply agreement with FOI...           (425)               
                                                                      ---------         ---------         ---------
  Balance, end of year..........................................      $  23,221         $  19,545         $ 11,761
                                                                      =========         =========         ========

Accumulated Translation Adjustment:

  Balance, beginning of year....................................      $     216         $     215         $     10
  Change in translation adjustment for the year.................         (1,084)                1              205
                                                                      ---------         ---------         --------
  Balance, end of year..........................................      $    (868)        $     216         $    215
                                                                      =========         =========         ========

Accumulated Deficit:

  Balance, beginning of year....................................      $  (9,772)        $  (5,639)        $ (1,630)
  Loss for the year.............................................         (3,078)           (4,133)          (4,009)
                                                                      ---------          --------         --------
  Balance, end of year..........................................      $ (12,850)        $  (9,772)        $ (5,639)
                                                                      =========          ========         ========

Treasury Stock:

  Balance, beginning of year....................................      $       0         $       0         $   (500)
  Issuance of stock as loan incentive...........................              0                 0              500
                                                                      ---------         ---------         --------
  Balance, end of year..........................................      $       0         $       0         $      0
                                                                      =========         =========         ========
</TABLE>

           See accompanying notes to consolidated financial statements

                                       31

<PAGE>

<TABLE>
<CAPTION>
                                                  FIBERCORE, INC. AND SUBSIDIARIES
                                               CONSOLIDATED STATEMENTS OF CASH FLOWS

                                           YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995

      (Dollars in thousands except share data)                                        1997        1996        1995
                                                                                      ----        ----        ----
<S>                                                                                <C>         <C>          <C>     
      Cash flows from operating activities:
         Net loss ...........................................................      $(3,078)    $(4,133)     $(4,009)
      Adjustments to reconcile net loss to net cash used  
         in  operating activities:
         Depreciation and amortization  .....................................        1,354       1,226          747
         Compensation cost for stock options  ...............................          ---         846          --- 
         Foreign currency translation loss and other ........................          319         105           73
      Changes in assets and liabilities:
         Accounts receivable   ..............................................         (354)        (93)        (555)
         Other receivables ..................................................         (202)       (132)          11 
         Inventories  .......................................................       (1,398)       (514)      (1,131)
         Prepaid and other current assets ...................................           (6)         11          (20)
         Accounts payable ...................................................          260        (159)         853
         Accrued expenses ...................................................           37         829          799
                                                                                   -------      ------      -------
           Net cash used in operating activities ............................       (3,068)     (2,014)      (3,232)
                                                                                   -------      ------      -------
      Cash flows from investing activities:
         Purchase of property and equipment .................................       (4,211)     (1,161)      (1,817)
         Reimbursement from government grant                                         1,775         960          ---
         Investments in joint ventures ......................................          (50)       (950)         (54) 
         Other ..............................................................          (65)          1          224
                                                                                   -------      ------      -------
            Net cash used in investing activities ...........................       (2,551)     (1,150)      (1,647)
                                                                                   -------      ------      -------
      Cash flows from financing activities:
         Cash contribution by minority shareholders in FCA ..................        1,683         ---          ---
         Proceeds from issuance of common stock on exercise of
            options .........................................................          328       1,500          500
         Proceeds from long-term debt .......................................        4,750       3,500        5,000
         Restricted long-term cash deposits..................................          ---      (2,498)         ---
         Proceeds from notes payable ........................................          394         200          ---
         Repayment of notes payable .........................................          ---        (200)          (7)
         Increase in long-term interest payable..............................          418          42          ---
         Other...............................................................          ---         (23)         (39)
                                                                                   -------      ------      -------
              Net cash provided by financing activities                              7,573       2,521        5,454
                                                                                   -------      ------      -------
      Effect of foreign exchange rate change on cash.........................          (16)        ---          ---
                                                                                   -------      ------      -------
      Increase (decrease) in cash............................................        1,938        (643)         575
      Cash, beginning of year ...............................................          190         833          258
                                                                                   -------      ------      -------
      Cash, end of year .....................................................      $ 2,128      $  190      $   833
                                                                                   =======      ======      =======
      Supplemental disclosure:
         Cash paid during the year for interest                                    $   222      $  18      $   183
         Shares issued for investment in joint venture                             $   425      $ ---      $   ---
         Reduction of equipment book value due to
             cancellation of capitalized lease                                     $   ---      $ ---      $   499

</TABLE>


          See accompanying notes to consolidated financial statements.

                                       32

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)  Incorporation and nature of operations

FiberCore,  Inc.  (the  "Company")  is  involved in the  research,  development,
production  and  sales of  optical  fiber and  optical  fiber  preforms  for the
telecommunications   industry.   FiberCore  Glasfaser  Jena  GmbH  ("FCJ"),  the
Company's  principal  operating  subsidiary  located  in  Germany,  manufactures
optical fiber and optical fiber  preforms.  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.

FiberCore Incorporated,  the predecessor to FiberCore,  Inc. was organized under
the laws of the State of Nevada on November 5, 1993. On July 18, 1995, FiberCore
Incorporated merged with Venturecap,  Inc., ("Venturecap"),  an inactive company
organized  in the State of  Nevada  in 1987.  Following  the  merger  Venturecap
changed its name to FiberCore, Inc. The merger was accounted for as a pooling of
interests and, accordingly, the Company's consolidated financial statements have
been restated for all prior periods as if the merger took place at the beginning
of  such  periods.  In  January,  1997  the  Company  registered  all  its  then
outstanding  shares  under  an S-1  filing  with  the  Securities  and  Exchange
Commission.     The    Company's    common    stock    is    traded    on    the
Over-The-Counter-Bulletin Board under the symbol "FBCE".

(b)  Use of estimates in the preparation of financial statements

The preparation of financial  statements in conformity  with generally  accepted
accounting principles 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  material  intercompany  balances  and
transactions have been eliminated in consolidation.

(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.

                                       33

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

In 1996 and 1997 the Company  received  grants from the German  government to be
used in the expansion of the FCJ facility. All grant proceeds received have been
netted against the cost of the assets acquired.

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 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
(U.S.  $2,140),  has been deposited with this institution as collateral for this
loan.

(g)  Patents

Patents are amortized on a straight-line basis over seventeen years. The Company
evaluates the recoverability of patents from expected future cash flows.

(h)  Investments in joint ventures

The Company has a 30% ownership  interest in Fiber Optic Industries  (Pvt.) Ltd.
("FOI"), which is accounted for using the equity method of accounting.

The  Company's  15%  ownership  interest in Middle East Optical  Fiber Cable Co.
("MEFC") is carried at cost.

The Company holds a 51% ownership in FCA which is  consolidated in the Financial
Statements.  Minority  interest  on the balance  sheet  reflects  the  Malaysian
partners' 49% ownership.  There is no minority interest impact on the results of
operations as FCA had no activity in 1997.

(i)  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.

(j)  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

                                       34

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

accounts  using an average  exchange  rate for the period.  Unrealized  gains or
losses resulting from translation are included in stockholders' equity.

(k)  Revenue

Revenue is  recognized  when  earned  which is  principally  when  products  are
shipped.

(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.

(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  and stock
options have not been included in the  computation of basic 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".

(o)  Reclassifications

Certain amounts in the prior year financial statements have been reclassified to
conform to the 1997 presentation.

(2)  EARNINGS PER SHARE

In 1997, the Company adopted Statement of Financial Accounting Standards No. 128
"Earnings Per Share",  issued by the Financial  Accounting  Standards Board. The
statement established new standards for computing and disclosure of earnings per
share  ("EPS") and  requires  restatement  of prior years EPS  information.  The
statement requires dual presentation of "basic" EPS and "diluted" EPS. Basic EPS
is based on the weighted average number of common shares outstanding,  excluding
common stock  equivalents.  Diluted EPS reflects the  potential  dilution of EPS
that could occur if  securities  or other  contracts to issue common shares were
exercised or converted. At December 31, 1997, 1996 and 1995,

                                       35

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(2)  EARNINGS PER SHARE (CONTINUED):

there would have been 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.
   
                                           1997        1996         1995
                                           ----        ----         ----

    Employee stock options               1,387,778     978,434     577,893
    Warrants to acquire common stock     4,968,818   4,549,249   1,238,615
    Common stock to be issued for
        convertible debt                 2,060,308   1,881,446   4,319,281
                                         ---------   ---------   ---------
             Total                       8,416,904   7,409,129   6,135,789
                                         =========   =========   =========


(3)  ACQUISITIONS AND STRATEGIC INVESTMENTS

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  for the
Company's  ownership,  and FDP and PERC  contributed cash of $1,683 and notes of
$4,883 for their ownership. As part of the joint venture agreement,  the Company
has entered  into a put option  agreement  with FDP and PERC wherein the Company
has agreed to purchase  FDP's and PERC's shares,  at their option,  in the event
that certain production benchmarks are not achieved.

The Company also entered into a support  contract with FCA to provide design and
construction management for the facility,  marketing services and administrative
support services.

On September 18, 1995, the Company  acquired all the  outstanding  stock of ALT.
The purchase  method of  accounting  for  business  combinations  was used.  The
operating  results  of ALT have  been  included  in the  Company's  consolidated
results of operations from the date of acquisition.  The acquisition,  valued at
approximately  $7,000,  was made  with  the  issuance  of  8,811,137  shares  of
restricted common stock of the Company valued at approximately  $0.80 per share.
The  fair  value  of  assets  acquired  was   approximately   $7,700,  of  which
approximately $7,500 is attributable to patents developed or acquired by ALT.

                                       36

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(3)  ACQUISITIONS AND STRATEGIC INVESTMENTS (CONTINUED):

In April 1995, the Board of Directors ratified actions by FiberCore Incorporated
to enter  into a joint  venture  with  John  Royle & Sons Co.  and  Middle  East
Specialized  Cables  Company  ("MESC")  for a period  of 15 years to be known as
Middle East Fiber  Cables Co.  ("MEFC").  As part of the  agreement  the Company
issued to MESC 734,262 shares of common stock for $1,000,  (approximately  $1.36
per share). The agreement also provides that MESC will receive 312,061 shares of
common stock upon the  completion  and  execution of a product  supply  contract
between the Company and MEFC.  The agreement was completed and the shares issued
in 1997.  The Company  invested $500 of the $1,000  purchase  price in MEFC as a
capital contribution to the joint venture, as required by the agreement,  and in
the process acquired a 15% interest in MEFC. MEFC constructed it's manufacturing
facility in 1996 and 1997 and began  operations  in late 1997.  The Company is a
co-guarantor with the other joint venture partners for certain credit facilities
provided by banks to MEFC. These credit  facilities are also  collateralized  by
the assets of MEFC. At December 31, 1997 the Company was contingently liable for
these loans in the amount of $792.

On  January  11,  1996,  as part  of a share  purchase  agreement  with  Techman
International  Corporation  ("Techman"),  a related  party,  a joint venture was
established between the Company and Techman. The joint venture,  FOI, is located
in  Pakistan.  The Company  has a 30%  ownership  interest  in FOI.  The Company
acquired its interest in FOI by making a $500 capital  contribution to the joint
venture and issuing  312,061 shares of Company common stock to Techman valued at
approximately  $1.36 per share, ($425) for a long term agreement to supply fiber
and preforms to FOI. FOI was formed in 1996 and had no significant operations in
1996 or  1997.  In  December  1997,  due to a delay in the  construction  of the
manufacturing  plant,  the supply  agreement was canceled and the 312,061 shares
have been canceled.  The Company may enter into a new supply  agreement with FOI
when the plant is completed.

(4)      RECEIVABLES

Activity in the allowance for doubtful  accounts  consisted of the following for
the years ended December 31:

                                         1997             1996              1995
                                         ----             ----              ----

Balance at beginning of period.......... $ 36             $ 39              $ --
Additions charged to expense............                     1                28
Additions - Other.......................                    --                11
Deductions..............................    3(1)             4                --
                                         ----             ----              ----

Balance at end of period................ $ 33             $ 36              $ 39
                                         ====             ====              ====
     (1)  Includes the effect of foreign currency exchange rate changes.


                                       37

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(4)  RECEIVABLES (CONTINUED):

Other receivables consist of the following at December 31:

                                       1997             1996
                                       ----             ----

German government grants...........    $423             $ --
Value added tax....................     112              181
MEFC...............................      --              219
Other..............................      29               18
                                       ----             ----
         Total.....................    $564             $418
                                       ====             ====


Notes receivable of $4,883 are due from the minority shareholders in FCA for the
balance of their capital contribution and are due in 1998.


(5)  INVENTORIES

Inventories consist of the following at December 31:

                                       1997              1996
                                       ----              ----

Raw materials...............           $  997           $  841
Work-in-process.............              315              403
Finished goods..............            1,745              677
                                       ------           ------
         Total..............           $3,057           $1,921
                                       ======           ======


(6)  PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31:

                                      ESTIMATED
                                     USEFUL LIVES     1997              1996
                                     ------------     ----              ----

Office equipment.................     2-5 years      $  243            $  156
Machinery and equipment..........     2-12 years      5,619             5,068
Furniture and fixtures...........     5-7 years          21                18
Leasehold improvements...........     3-10 years          7                 7
Construction in progress.........                     3,267               955
                                                     ------            ------
                                                      9,157             6,204
Less grant proceeds received.....                    (2,598)             (960)
                                                     ------            ------
         Total...................                    $6,559            $5,244
                                                     ======            ======
                                       38

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(6)  PROPERTY AND EQUIPMENT (CONTINUED):

Depreciation on property and equipment charged to expense was $560 in 1997, $548
in 1996, and $523 in 1995. During 1997 the Company capitalized interest costs of
$178 on the expansion project at FiberCore Jena.


(7)  ACCRUED EXPENSES

Accrued expenses consist of the following at December 31:

                                                1997              1996
                                                ----              ----

Accrued interest.........................       $  116            $   30
Accrued wages, benefits & taxes..........          547               568
Accrued legal and audit..................           80               170
Other....................................          385               410
                                                ------            ------
         Total...........................       $1,128            $1,178
                                                ======            ======




                                       39

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(8)  NOTES PAYABLE

Notes payable consist of the following at December 31:

                                                                   1997     1996
                                                                   ----     ----
Convertible note payable to a director of ALT,  interest at
the prime rate plus 1% (9.5%,  at  December  31,  1997)with
principal and interest due April 1, 1998, all principal and
accrued interest,  if any, convertible into common stock of
the Company at approximately $1.36 per share.                     $218      $200

Note payable to an officer of the Company, interest at prime
plus 1%, due September 17, 1998.                                    50       ---

Note payable to Techman International Corporation with
interest at prime plus 1% due September 17, 1998.                  150       ---

Note  payable  with  interest  at  prime  plus  1%  due  on
September  30,  1998.  A  director  of  the  Company  is  a
principal of the lender.                                            25       ---

Notes payable with interest at prime plus 1% due on
September 30, 1998.                                                 12       ---

Amount outstanding under a revolving line of credit from the
Berliner Bank with interest at 8.5%.                               139       ---
                                                                  ----      ----
                  Total                                           $594      $200
                                                                  ====      ====

In  September  1997,  the  Company  borrowed  $150  from  Techman  International
Corporation.  The note bears  interest  at prime plus 1% per year and matures on
September 17, 1998. In conjunction  with the note,  Techman was granted warrants
to purchase  69,132 common shares of the Company at an exercise  price of $0.625
per share. Dr. M. Mahmud Awan, a former director of the Company is the President
and sole shareholder of Techman.  In 1997, the Company incurred interest expense
of $4 on this note.

Also,  during  the year the  Company  borrowed  $50  from the  President  of the
Company.  The  interest  rate is prime plus 1% and the note matures on September
17,  1998.  In  conjunction  with the note the  lender was  issued  warrants  to
purchase 62,500 common shares of the Company at an exercise price of $0.6875 per
share. Interest expense on this note was $1 in 1997.

In September  and  November,  1997 the Company also  borrowed $75 under  various
notes with  interest  at prime plus 1%. The notes  mature on the  earlier of the
receipt of proceeds from any new financing  received by the Company or September
30, 1998.  In  conjunction  with the notes the lenders were granted  warrants to
purchase 55,000 common shares of the Company at an exercise price of $0.6875 per
share.

                                       40

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(8)  NOTES PAYABLE (CONTINUED):

Mr.  Steven  Phillips,  a director of the Company,  is a principal of one of the
lenders.  In  December,  1997 the Company  repaid $38 of these  notes.  Interest
expense on these notes was $2 in 1997.

During the year the Company's subsidiary, FiberCore Jena, drew down $139 under a
$556 revolving line of credit with the Berliner Bank. The note bears interest at
8.5% and the weighted average interest rate for 1997 was 8.5%.

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:         1997      1996
                                                                 ----      ----

Note payable to Berliner Bank, interest at 6.25%, due
September 30, 2006.                                             $4,280   $  ---

Convertible note payable to AMP Incorporated ("AMP"),
interest at 3-month London Interbank Offered Rate plus
one percent (6.78% at December 31, 1997), due April 17,
2005.                                                            2,000    2,000

Note payable to AMP, interest at prime plus one percent
(9.5% at December 31, 1997), due November 27, 2006.              3,000    3,000

Discount attributable to warrants issued in conjunction
with the $3,000 note above.                                       (859)    (955)

Note payable with interest at prime plus 1% (9.5% at
December 31, 1997) due March 6, 2000.                              220      ---

Note payable to Techman International Corporation with
interest at prime plus 1% (9.5% at December 31, 1997),
due April 16, 2000.                                                250      ---

Notes payable to the spouses of officers of the
Company, with interest at prime plus one percent (9.5%
at December 31, 1997), due July 31, 1999.                          500      500
                                                                ------  -------
                  Total                                         $9,391  $ 4,545
                                                                ======= =======

During the year ended  December  31,  1997,  the Company  drew down 7,700 German
Marks

                                       41

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(9)  LONG-TERM DEBT (CONTINUED):

(approximately  $4,280)  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. The loan
is collateralized by a deposit with the bank of approximately $2,140.

In  April  1995,  FiberCore   Incorporated  issued  to  AMP,  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%, (6.78% at December 31, 1997). No interest
is due until the earlier of: AMP conversion of debt to stock, a public financing
by the Company and AMP elects to call the loan, or maturity.  AMP has the option
to convert the outstanding  loan plus accrued  interest into common stock of the
Company  at  approximately  $1.16 per share in years 1-5 or the per share  price
provided for in the last third party private equity  financing in years 6-10. On
November  27,  1996,  AMP  converted  $3,000 of  principal  and $541 of  accrued
interest  relating to the  original  $5,000 ten year  debenture,  into shares of
common  stock  of the  Company  at the rate of  approximately  $1.16  per  share
(3,058,833 shares) and entered into a multi-year supply agreement. The AMP notes
are  collateralized by the Company's  patents,  patent  applications,  licenses,
rights and royalties resulting from such patents and the equipment of FCJ.

The remaining  principal  balance  remained subject to the terms of the original
debenture  agreement.   The  conversion  agreement  contains  certain  valuation
guarantees of the market value of the Company's common stock. Unless the closing
price  of  the  Company's  common  shares  equals  or  exceeds  $1.7364  for  30
consecutive trading days during the first two (2) years following the closing at
a time when AMP was not restricted  from selling such shares,  then effective on
the second anniversary of the closing, an additional number of shares of Company
common  stock  shall be  issued  to AMP and an  adjustment  shall be made in the
conversion rate for the outstanding balance of the debenture such that the total
number of shares held and convertible by AMP would have a market value (based on
the  average  closing  price of  Company's  shares  during the last  thirty (30)
trading days  preceding the second  anniversary of the closing) equal to $7,500;
provided, however, that not more than 6,478,810 Company shares will be issued or
issuable to AMP as a result of the  conversion of the $5,000  debenture and this
guarantee.

In the  alternative,  the  Company  may  satisfy  this  guarantee  on the second
anniversary of the closing by offering or arranging for its designee to offer to
purchase  from AMP the  converted  shares  and the  outstanding  balance  of the
debenture,  including  accrued  interest,  for $7,500  reduced  prorata  for any
intervening  sales of shares by AMP.  Such offer to  purchase  shall be for cash
only in immediately available funds.

As an additional part of this agreement, on November 27, 1996, AMP 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,  (9.5% at December 31, 1997).  Terms of
the debenture state that interest shall be accrued,  but not paid, for the first
five years of the loan and a portion of the  proceeds are required to be used as
collateral for the German bank loan of approximately $4,280 for the expansion of
its FCJ facility.  The principal will become due before the maturity date if the
major financing is repaid or the collateral is released by the German  financial
institution.   The  loan  agreement  contains  restrictive  covenants  including
financial

                                       42

<PAGE>


                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(9)  LONG-TERM DEBT (CONTINUED):

ratio  covenants.  At  December  31,  1997 the  Company  did not meet one of the
financial ratio  covenants.  AMP has agreed to waive this financial  requirement
for the year ended December 31, 1997.

In conjunction  with the $3,000 note above, AMP was issued five year warrants to
acquire  1,382,648  shares  of the  Company's  stock  at an  exercise  price  of
approximately  $1.45 per share.  The Company has  guaranteed the market value of
their stock.  Unless the closing price of the Company's  common shares equals or
exceeds $2.1697 for a period of thirty (30) consecutive  trading days during the
first two (2) years  following the closing at a time when AMP was not restricted
from  selling  such shares,  then the  exercise  price of the warrants  shall be
adjusted  effective as of the second  anniversary  of the closing by multiplying
$1.4465  per share by a fraction  the  denominator  of which is $2.1697  and the
numerator of which is the average  closing  price of the shares  during the last
thirty (30)  trading  days  preceding  the second  anniversary  of the  closing;
provided,  however,  that the  adjusted  exercise  price  shall not be less than
$0.7232  per share (50% of  $1.4465).  In the  alternative,  the  Company or its
designee  may offer to purchase the  warrants on the second  anniversary  of the
closing for an amount equal to $1,000;  provided,  however,  that AMP shall have
the right not to sell, in which case the guarantee  will no longer be available.
Interest  expense on the AMP notes was $418, $335, and $248, for the years ended
December 31, 1997, 1996 and 1995, respectively.

Also,  during the year ended December 31, 1997, the Company borrowed $220 from a
shareholder  under a note maturing in 2000. The annual interest rate on the note
is the  prime  rate plus 1%  adjustable  quarterly  and  payable  quarterly.  In
conjunction  with the note, the lender was granted  warrants to purchase  69,132
shares of common  stock of the Company at an exercise  price of $1.53 per share.
The  warrants  expire on March 7, 2002.  The  proceeds of the note were used for
working capital. Interest expense on this note was $14 in 1997.

In April 1997,  the Company  borrowed $250 from Techman under a note maturing in
2000. The annual interest rate on the note is the prime rate plus 1%, adjustable
quarterly  and payable  quarterly.  In  conjunction  with the note,  Techman was
granted warrants to purchase 115,220 common shares of the Company at an exercise
price of $0.78 per share.  Dr. M. Mahmud Awan, a former  director of the Company
is the sole  shareholder  of Techman.  Interest  expense on this note was $17 in
1997.

On July 31, 1996, the Company  borrowed $500 under two loan  agreements from the
spouses of Dr. Aslami and Mr. De Luca.  The loans are in the amount of $250 each
and bear interest at the prime rate plus one percent  (currently  9.5%), and are
due on July 31, 1999. In conjunction with

                                       43

<PAGE>

                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(9)  LONG-TERM DEBT (CONTINUED):

the loans each lender  received  warrants to purchase  115,220  shares of Common
Stock at the rate of $1.81 per  share.  The  warrants  expire on July 31,  2001.
Interest expense on these notes was $48 and $17 in 1997 and 1996, respectively.

Scheduled principal  maturities of long-term debt are as follows at December 31,
1997:

         1999...............................           $   500
         2000...............................               470
         2005...............................             2,000
         2006...............................             7,280
                                                       -------
                           Total............           $10,250
                                                       =======

(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 has a monthly rental of $2 and
expires on September 30, 1998. The Company plans to renew this lease.

FCJ conducts its  operations  from premises  under an operating  lease with SICO
Quarzschmelze Jena GmbH ("SICO"). The lease has fixed monthly rental payments of
$30 through its expiration in June, 2000, and contains various renewal options.

Future minimum lease payments under noncancelable operating leases (with minimum
or remaining lease terms in excess of one year) are as follows:

         FISCAL YEAR ENDING DECEMBER 31,               AMOUNT
         -------------------------------               ------

         1998.....................................    $  401
         1999.....................................       381
         2000.....................................       208
         2001.....................................        31
                                                      ------

                  Total...........................    $1,021
                                                      ======

Included in the  statements of operations for the years ended December 31, 1997,
1996  and  1995  is  rent  expense  of  $411,   $456  and  $413,   respectively.
Substantially all lease payments are to a related party, SICO.

                                       44


<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(10) COMMITMENTS AND CONTINGENCIES (CONTINUED):

     In January 1998, Corning,  Incorporated ("Corning") filed an action against
the Company  claiming that the Company  infringed a Corning  patent by marketing
and selling certain  optical fiber products in the United States.  In March 1998
the Company and Corning concluded a settlement agreement wherein the Company has
acknowledged  the  validity  of  Corning's  patent  and  agreed,  prior  to  the
expiration  of the  patent,  not to  make,  market,  and  sell or  offer to sell
infringing  optical  fiber or optical  fiber  preforms  in the United  States in
violation of Corning's patent except to certain customers.  In turn, Corning has
agreed not to seek  damages and will dismiss the action.  The Company  maintains
that it has not sold any significant amounts of fiber and preforms in the United
States in violation of Corning's patent which expires in July, 1999.  Management
believes that the result of this action will not have a material  adverse impact
on the Company.

The Company's FiberCore Jena subsidiary,  SICO and SICO's president,  Mr. Walter
Nadrag  (who was  previously  the  Managing  Director  of  FiberCore  Jena)  are
defendants in a lawsuit in Germany brought against them by COIA GmbH ("COIA"), a
former customer,  claiming damages of approximately  $200 arising from FiberCore
Jena's alleged failure to comply with a sales  contract.  The case was dismissed
by the lower court and COIA  appealed this  decision.  On appeal the court found
that although there was a contract,  COIA was not entitled to damages.  COIA may
seek fulfillment of the claimed contract.  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  affect on the financial  position or results of operations of
the Company.

The Company's ALT subsidiary is in a dispute with Norscan,  a Canadian  company,
with respect to Norscan selling FOCMS products, in competition with ALT products
and in  violation  of a  non-competition  agreement  between  ALT  and  Norscan.
Although no litigation  has commenced as of the date of this report with respect
to this dispute,  ALT would be the claimant in any lawsuit brought in connection
with this matter.  Failure by ALT and Norscan to resolve this dispute could have
a material adverse affect on the future sales of ALT Products.

ALT is contingently  liable for debt of a former  subsidiary,  Allied  Controls,
Inc. ("Allied"), approximating $900, details of which are described below.

ALT and two of its key  officers  have issued the  following  guarantees  and/or
security  interests  with  respect  to  certain  loans of its  spun  off  former
subsidiary  Allied.  In a $250 financing of Allied from the State of Connecticut
acting  through the  Department  of Economic  Development  ("DED"),  dated as of
October 9, 1992,  DED  received a  guarantee  and  security  interest in certain
assets from ALT. In a $250  financing  of Allied from the State of  Connecticut,
acting through

                                       45

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(10) COMMITMENTS AND CONTINGENCIES (CONTINUED):

CDA, dated as of June 9, 1992, CDA received a guarantee from two key officers of
ALT.

Under a plan of reorganization, on May 14, 1991, the present Allied acquired the
assets and  assumed  certain  liabilities  of a  corporation  that had filed for
voluntary  protection  under Chapter 11 of the U.S.  Bankruptcy Code. One of the
assumed  liabilities was a $650 SBA loan dated May 29, 1989,  (originally in the
amount of $1,000) from American  National Bank, now Lafayette  American National
Bank  ("Lafayette").  As a condition of the loan  assumption  on March 21, 1991,
Lafayette  obtained  the  guarantees  of ALT and two key  officers  of ALT which
guarantees were in addition to the initial loan guarantees Lafayette already had
from other  persons.  Before  commencing  proceedings  to enforce the guarantees
first against ALT and second against the two key officers,  Lafayette must first
take all reasonable  steps to realize upon the assets of Allied and the security
provided by the initial guarantors. In the event of a deficiency,  Lafayette may
enforce its guarantee  against ALT, provided that at all times it simultaneously
and  diligently  pursues  actions to enforce  its  guarantees  from the  initial
individual loan guarantors.

Allied is  current  with its  payments  under  this loan.  In  addition,  Allied
management  has been in  discussions  with  several  potential  buyers of Allied
which, if successful,  would eliminate the  aforementioned  guarantees that have
been provided by ALT.

The Company is a co-guarantor  with the other joint venture partners for certain
credit  facilities  provided by banks to MEFC. These credit  facilities are also
collateralized  by the assets of MEFC.  At  December  31,  1997 the  Company was
contingently liable for these loans in the amount of $792.

                                       46

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(11) STOCKHOLDERS' EQUITY

The  following  represents  the stock  option  activity  during the years  ended
December 31, 1997, 1996, and 1995:
<TABLE>
<CAPTION>

<S>                   <C>        <C>        <C>       <C>        <C>       <C>       <C>      <C>       <C>       <C>      <C>  
STOCK OPTIONS         $.003      $0.68      $1.09     $1.16      $1.36     $1.43     $1.45    $1.50     $1.51     $1.58    $2.00
-------------         -----      -----      -----     -----      -----     -----     -----    -----     -----     -----    -----

Balance,
Dec. 31, 1994         220,278      --         --         --        --         --       --        --        --       --        --

Granted in 1995        36,713      --     33,042         --        --         --       --        --        --       --        --
Granted in 1995
in connection
with the ALT
acquisition                --      --         --         --        --     67,188       --    41,993   178,679       --        --
                   -----------------------------------------------------------------------------------------------------------------
Balance,
Dec. 31, 1995         256,991      --     33,042         --        --     67,188       --    41,993   178,679       --        --

Granted in 1996        18,357  64,248         --     87,492    55,193         --  148,709        --        --       --    26,542
                   -----------------------------------------------------------------------------------------------------------------
Balance,
Dec. 31, 1996         275,348  64,248     33,042     87,492    55,193     67,188  148,709    41,993   178,679       --    26,542

Granted in 1997        --          --         --         --        --         --       --        --        --  709,500        --
Exercised in 1997    (201,921)(10,000)   (33,042)        --   (55,193)        --       --        --        --       --        --
                   -----------------------------------------------------------------------------------------------------------------

Balance,
December 31, 1997      73,427  54,248          0     87,492         0     67,188  148,709    41,993   178,679  709,500    26,542
                       ======  ======          =     ======         =     ======  =======    ======   =======  =======    ======

Options
exercisable            36,713  54,248          0     87,492         0     67,188  148,709    41,993   178,679  430,500   26,542
                       ======  ======          =     ======         =     ======  =======    ======   =======  =======   ======
</TABLE>

Options  vest at rates stated in each  employees  contract,  principally  at the
grant date or the  anniversary  date of the employee's date of hire. The options
have no expiration dates.

                                       47

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(11) STOCKHOLDERS' EQUITY (CONTINUED)

A summary of the status of the  Company's  stock  options and  weighted  average
prices are as follows:
<TABLE>
<CAPTION>

                                     1997                              1996                           1995
                                     ----                              ----                           ----

                                              WEIGHTED                       WEIGHTED                        WEIGHTED
                                              AVERAGE                        AVERAGE                          AVERAGE
                                             EXERCISE                       EXERCISE                         EXERCISE
                             OPTIONS          PRICE         OPTIONS           PRICE           OPTIONS          PRICE
                             -------          -----         -------           -----           -------          -----
   <S>                            <C>              <C>           <C>              <C>             <C>              <C>  
   Balance beginning of
   year                       978,434          $0.98          577,893         $0.81           220,278          $.003

   Exercised                 (300,156)         $0.40              ---         $ ---               ---          $ ---

   Granted                    709,500          $1.58          400,541         $1.22           357,615          $1.30
                             --------                         -------                         -------

   Balance
   end of year              1,387,778          $1.41          978,434         $0.98           577,893          $0.81
                            =========                         =======                         =======

   Exercisable at end
   of year                  1,072,064          $1.42          905,008         $1.06           456,740          $1.02
                            =========                         =======                         =======

<CAPTION>

                                                      WEIGHTED                                       WEIGHTED
                                                      AVERAGE                                        AVERAGE
                    RANGE OF           OPTIONS        EXERCISE      REMAINING         OPTIONS        EXERCISE
                 EXERCISE PRICE      OUTSTANDING       PRICE        YEARS (1)       EXERCISABLE       PRICE
                 --------------      -----------       -----        ---------       -----------       -----
<S>              <C>                 <C>               <C>                              <C>           <C>  
                     $.003              73,427         $.003            --               36,713       $.003
                 $0.68 - $1.16         141,740         $0.98            --              141,740       $0.98
                 $1.43 - $2.00       1,172,611         $1.55            --              893,611       $1.54
                                     ---------          ----                          ---------       -----
                 $.003 - $2.00       1,387,778         $1.41            --            1,072,064       $1.42
                                     =========          ====                          =========       =====
</TABLE>

          (1) Options granted and exercisable have no expiration date.


                                       48

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(11) STOCKHOLDERS' EQUITY (CONTINUED)

The  Company  applies APB Opinion 25 in  accounting  for its stock  compensation
plans.  Compensation  cost  charged to  operations  was $846 in 1996  related to
options granted at an exercise price less than the market price of the shares at
the dates of the grants.  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:

                                    1997            1996            1995
                                    ----            ----            ----
Net loss
--------
  As reported                       $(3,078)        $(4,133)        $(4,009)
                                    =======         =======         =======

  Pro forma                         $(3,174)        $(4,295)        $(4,535)
                                    =======         =======         =======

Basic and diluted loss per share
--------------------------------
  As reported                       $ (0.09)        $ (0.13)        $ (0.15)
                                    =======         =======         =======

  Pro forma                         $ (0.09)        $ (0.14)        $ (0.17)
                                    =======         =======         =======

The weighted  average fair value of options  granted during 1997,  1996 and 1995
was $0.14, $2.52 and $1.48 per share, 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:

                                          Stock
         Assumptions                      Plan
         -----------                      ----
         Dividend yield                   --
         Risk-free interest rate          5.5%
         Expected life                    2 years
         Expected volatility              20% in 1997 and 40% in 1996 and 1995

                                       49

<PAGE>


                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(11) STOCKHOLDERS' EQUITY (CONTINUED)

The  following  warrants to purchase  common  stock have been issued  during the
years ended December 31, 1997, 1996, and 1995, at the exercise prices indicated.
<TABLE>
<CAPTION>

<S>                  <C>      <C>       <C>      <C>       <C>      <C>       <C>       <C>        <C>        <C>        <C>  
WARRANTS             $0.63    $0.69     $0.78    $0.82     $0.95    $1.31     $1.43     $1.45      $1.53      $1.63      $1.81
--------             -----    -----     -----    -----     -----    -----     -----     -----      -----      -----      -----

Balance,
Dec. 31, 1994                                                       479,565

Issued in 1995                                             83,985   118,858    5,511                           550,696
-----------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1995                                          83,985   598,423    5,511                           550,696

Issued in 1996                                                                         1,382,648               697,546   230,440
-----------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1996                                          83,985   598,423    5,511   1,382,648             1,248,242   230,440

Issued in 1997       69,132   117,500  115,220   640,445                                           101,394

Expired in 1997                                                                                               (550,696)

Exercised in 1997                                                  (73,426)
-----------------------------------------------------------------------------------------------------------------------------------

Balance,
December 31, 1997    69,132   117,500  115,220   640,445  83,985    524,997    5,511   1,382,648   101,394     697,546   230,440
                     ======   =======  =======   =======  ======    =======    =====   =========   =======     =======   =======
</TABLE>

The weighted  average fair value of warrants  granted during 1997, 1996 and 1995
was $0.18,  $1.05 and $1.63 based on total warrants of 1,043,691,  2,310,634 and
759,050  granted  in  1997,  1996  and  1995,  respectively.  The  warrants  are
exercisable from the date of the grant and expire at various dates from January,
1998 to September 2002.

(12) INCOME TAXES

The significant components of the net deferred tax asset as of December 31, 1997
and 1996 were as follows:

                                                          1997       1996
                                                          ----       ----

Net operating loss carry forwards                      $ 3,687     $ 2,687
Less valuation allowance                                (3,687)     (2,687)
                                                       -------     -------
Net deferred tax asset                                 $     0     $     0
                                                       =======     =======

The Company has incurred losses in 1995 through 1997, and,  accordingly there is
no income tax provision.

                                       50

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(12) INCOME TAXES (CONTINUED)

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.  Accordingly,  a full  valuation  allowance has
been recorded due to the historical losses of the Company.

The Company has net operating  loss carry  forwards  available of  approximately
$6,802, at December 31, 1997 for federal and state tax purposes. The majority of
the net operating loss carry forward expires in the years 2009 through 2012.

FCJ has net operating loss carry forwards at December 31, 1997 of  approximately
$2,147 for  corporation  tax and trade income tax  purposes  available to offset
future taxable  income.  Under German tax law the losses can be carried  forward
indefinitely.

Because  future  profitability  is  uncertain,  such  benefits  have been  fully
reserved.

In addition, ALT has pre-acquisition net operating loss carry forwards available
of  approximately  $4,278,  at  December  31,  1997 for  federal  and  state tax
purposes. The loss carry forwards expire between the years 2001 through 2010.

(13)     MAJOR CUSTOMERS AND SUPPLIERS

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                    1997                    1996
        --------                    ----                    ----
                               AMOUNT      %          AMOUNT       %
                               ------      -          ------       -

           A                 $  --        --          $ 167        23
           B                    87         9            211        30
           C                    37         4            109        15
           E                   381        39            ---       ---


                                       51

<PAGE>


                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(13) MAJOR CUSTOMERS AND SUPPLIERS (CONTINUED)

The  approximate net product sales by the Company to its major customers and the
related percentages are as follows:

         CUSTOMER            1997                 1996                   1995
         --------            ----                 ----                   ----
                         AMOUNT    %        AMOUNT       %         AMOUNT    %
                         ------    -        ------       -         ------    -

           A            $2,990     42      $4,524       56         $1,855    60
           B             1,238     17       1,217       15            ---    --
           D               ---     --         ---       --            319    10

The Company  purchases  raw materials  from various  suppliers and in some cases
there are a limited number of suppliers for certain materials. In 1997, 1996 and
1995 one supplier accounted for 50%, 46% and 90%, respectively, of the Company's
requirement  of one  particular  item.  Although  the  Company  maintains a good
relationship  with this supplier the loss of this supplier could have a material
impact on the Company's  ability to manufacture  its required volume of product.
The Company has identified  alternative  sources for this material and continues
to seek alternative sources of supply.

(14) RELATED PARTY TRANSACTIONS

On August 19,  1995 and  amended  in January  1996,  a capital  lease  agreement
between SICO and FCJ was revised.  It was agreed that SICO would keep  2,221,141
shares,  originally  held  as  collateral,  of the  Company  as  payment  for an
obligation  under a capital  lease.  The  outstanding  lease  obligation,  which
amounted to $499 on August 19, 1995,  was  canceled.  As a result,  the net book
value of the assets was reduced by $499.  The  managing  director of FCJ was the
controlling  shareholder of SICO. In November 1995,  this officer  resigned from
his position with FCJ.

                                       52

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(14) RELATED PARTY TRANSACTIONS (CONTINUED)

Transactions  with SICO during the years ended December 31, 1997,  1996 and 1995
consist of the following:

                                                     1997        1996    1995
                                                     ----        ----    ----

Rent of premises...................................  $331        $356    $315
Purchase of services and utilities.................   286         611     874
Purchase of materials..............................               ---     351
Interest...........................................   ---         ---      26
Other expenses.....................................    17         ---      22
Purchase price reduction of property and
  equipment under capital lease....................   ---         ---     499
Sales of fibers....................................    49         176     131

In January 1996, the Company reached an agreement with Techman,  whereby Techman
purchased 734,260 shares for $1 million ($1.36 per share).  Techman is a related
party as the president and sole  shareholder of Techman is a former  director of
the Company.  Upon  acceptance of the offer and delivery of the 734,260  shares,
the  Company  delivered  to  Techman  warrants,  granting  Techman  the right to
purchase  550,696 shares of the Company at $1.63 per share  exercisable in whole
or in part within a 2 year period. The warrants expired in January, 1998.

The Company  maintains a consulting  agreement  with Techman under which Techman
provides administration, marketing, technical and personnel advisory services to
the Company.  The  agreement is on a month to month basis at a monthly fee of $4
in 1997 and $3 in 1996 and 1995 and is  terminable  at any time by the  Company.
For the years ended December 31, 1997, 1996 and 1995, the Company incurred costs
of $54, $36 and $21, respectively, for such services.

The Company has a consulting  agreement  with Mr. Steven  Phillips,  a director,
wherein Mr. Phillips  provides services as a senior financial  advisor.  For the
years ended December 31, 1997, 1996 and 1995, the Company incurred costs of $46,
$65, and $26, respectively for such services.

                                       53

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(15) FOREIGN OPERATIONS

The Company has  operations  in three  principal  geographic  areas:  the United
States  (Company and ALT),  Germany (FCJ),  and Malaysia  (FCA).  Following is a
summary of information  by area for the years ended December 31, 1997,  1996 and
1995:
<TABLE>
<CAPTION>

                                                         1997          1996               1995
                                                         ----          ----               ----

Net sales to customers:
 <S>                                                   <C>          <C>                <C>      
  United States..................................... $   231         $    196           $    305
  Germany...........................................   6,847            7,900              2,789
                                                     -------         --------           --------

Net sales as reported in the accompanying
  consolidated statements of operations............. $ 7,078         $  8,096           $  3,094
                                                     =======         ========           ========

Income (loss) from operations:
  United States ....................................  (2,515)        $ (3,893)          $ (1,757)
  Germany...........................................     309               45             (1,833)
                                                     -------         --------           --------
                                                      (2,206)          (3,848)            (3,590)
Interest income.....................................      26                6                148
Interest expense....................................    (664)            (393)              (516)
Other income (expense)..............................    (234)             102                (51)
                                                     -------         --------           --------

Net loss as reported in the accompanying
  consolidated statements of operations............. $(3,078)        $ (4,133)          $ (4,009)
                                                     =======         ========           ========

Identifiable assets:
  United States..................................... $10,508         $  8,441
  Germany...........................................   9,384            9,201
  Malaysia..........................................   6,215              ---
                                                     -------         --------

  Total assets as reported in the accompanying
     consolidated balance sheets ................... $26,107          $17,642
                                                     =======          =======
</TABLE>

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 in 1997.


                                       54
<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)

(16) ACCOUNTING PRONOUNCEMENTS

     In June  1997,  the FASB  issued  SFAS No.  130,  "Reporting  Comprehensive
Income",  which  requires  that  changes in  comprehensive  income be shown in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial  statements.  Also in  June  1997,  the  FASB  issued  SFAS  No.  131,
"Disclosures  About  Segments of an Enterprise and Related  Information",  which
changes  the way public  companies  report  information  about  segments.  These
statements  are  effective  for 1998.  Management  is currently  evaluating  the
effects of these  statements on the  Company's  financial  statements,  however,
these  statements will only effect  disclosure and presentation in the financial
statements.

ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

     None.



                                       55

<PAGE>



                                    PART III
                                    --------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

EXECUTIVE OFFICERS AND DIRECTORS

         The following tables set forth certain information with respect to each
person who was an  executive  officer or  director of the Company as of December
31, 1997.


NAME                      AGE                POSITION

Dr. Mohd A. Aslami         51      Chairman of the Board of Directors, Chief
                                   Executive Officer, President and Director
Charles De Luca            60      Executive Vice President, Secretary and
                                   Director of the Company and General Manager
                                   of the Company's ALT subsidiary
Michael J. Beecher         53      Chief Financial Officer and Treasurer
Hans F.W. Moeller          68      Managing Director of FiberCore Glasfaser Jena
                                   GmbH
Steven Phillips            52      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 and became  President,  Chief
Executive  Officer and a director of ALT in 1986. Dr. Aslami received a Ph.D. in
chemical engineering from the University of Cincinnati (1974).

     Mr. De Luca is a  co-founder,  Executive  Vice  President,  Secretary and a
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.  Beecher became Chief  Financial  Officer of the Company in April 1996.
Mr. Beecher was the Vice  President/Treasurer and Chief Financial Officer at the
University of  Bridgeport  from 1989 through  1995.  Mr.  Beecher is a Certified
Public Accountant and is a member of the American  Institute of Certified Public
Accountants.

     Mr.  Moeller  became  Managing  Director  of  FiberCore  Jena in the fourth
quarter  of 1995 on a part time  basis.  He served as a  director  of  FiberCore
Incorporated  from 1994 through March 1996. As part of a  reorganization  of the
Company, he resigned his position as a director


                                       56

<PAGE>



         DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED):

and agreed to serve as a  director  of the  Company's  newly  formed  subsidiary
InfoGlass.  From 1993 to 1994, he served as Vice Chairman of Schott  Corporation
("Schott"),   a  United   States   subsidiary  of  Schott  A.G.,  a  corporation
specializing in the production of, among other things,  optical glass. From 1989
to 1993, he served as President of Schott. Mr. Moeller was a member of the Board
of Directors of Schott from 1989 to 1994.

     Mr.  Phillips  became a  director  of the  Company in May 1995 and became a
director of ALT in 1989.  Since  co-founding the Winstar  Government  Securities
Company L. P., a registered U.S. Government  securities dealer which specializes
in odd-lot securities  transactions,  Mr. Phillips has served as Chief Financial
Officer,  Secretary,  and a Director. Since August 1987, Mr. Phillips has served
as a director,  Secretary and Chief Financial Officer of James Money Management,
Inc., a private investment company.  Since June 1987, Mr. Phillips has served as
director and President of One Financial Group Incorporated, a financial
consulting company of which he is the majority stockholder.

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.
<TABLE>
<CAPTION>

                           SUMMARY COMPENSATION TABLE
   -----------------------------------------------------------------------------------------------------------------------
                                                   ANNUAL COMPENSATION                                AWARDS
-----------------------------------------------------------------------------------------------------------------------------
Name and Principal Position                Fiscal     Salary     Bonus         Other          Restricted     Securities
                                            Year        $          $           Annual           Stock        Underlying
                                                                            Compensation       Award(s)       Options/
                                                                                                  $            SARs(#)
<S>                                          <C>       <C>        <C>           <C>                               <C>    
----------------------------------------- --------- ----------- --------- ----------------- --------------- --------------
Dr. Mohd Aslami                             1997       146,500     --            --                               359,752
  Chairman, Chief Executive                 1996       146,500     --            --                                60,913
  Officer & President                       1995       146,500     --            --                                    --
----------------------------------------- --------- ----------- --------- ----------------- --------------- --------------
Charles De Luca (1)                         1997        98,398     --            --                               189,502
  Executive Vice President                  1996        98,398     --            --                                46,050
  & Secretary                               1995        28,699     --            --                                    --
----------------------------------------- --------- ----------- --------- ----------------- --------------- --------------
Michael J. Beecher (2)                      1997        85,000     --            --                               120,000
  Chief Financial Officer                   1996        53,708     --            --                                64,248
  & Treasurer                               1995            --     --            --                                    --
----------------------------------------- --------- ----------- --------- ----------------- --------------- --------------
Hans Moeller (3)                            1997       120,000     --            --                               300,000
  Managing Director,                        1996        98,596     --            --                                55,193
  FiberCore Glasfaser Jena GmbH             1995         7,227     --            --                                33,042
----------------------------------------- --------- ----------- --------- ----------------- --------------- --------------
</TABLE>

(1) From September 18, 1995 with the acquisition of ALT.
(2) Started employment on April 15, 1996.
(3) Started employment on October 1, 1995.



                                       57

<PAGE>



                       EXECUTIVE COMPENSATION (CONTINUED):

OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
<TABLE>
<CAPTION>

The following table lists the options  granted to the executive  officers during
the year ended December 31, 1997.

        ----------------------------------------------------------------------------------------------------------------
                                                   INDIVIDUAL GRANTS

        ----------------------------------------------------------------------------------------------------------------
                Name            Number of     % of Total     Exercise     Expiration       Potential        Potential
                ----           Securities      Options/       or base        Date       realized values     realized
                               Underlying    SARs Granted      price         ----         at assumed        values at
                                Options/     to Employees    ($/Share)                  annual rates of      assumed
                                  SARs         in Fiscal     ---------                    stock price     annual rates
                                 Granted         Year                                     apprec. for       of stock
                                   (#)           ----                                     option term         price
                                   ---                                                    -----------      apprec. for
                                                                                             5%($)         option term
                                                                                                             10% ($)
        ----------------------------------------------------------------------------------------------------------------
        <S>                         <C>                <C>        <C>            <C>          <C>             <C>      
        Dr. Mohd Aslami (b)         359,752            29%        $0.82          2002         $    6,191      $  84,924
        --------------------- -------------- -------------- ------------ ------------- ------------------ --------------
        Charles De Luca (b)         189,502            15%        $0.82          2002         $    3,262      $  44,735
        --------------------- -------------- -------------- ------------ ------------- ------------------ --------------
        Michael Beecher (a,         120,000            10%        $1.58           ---         $   21,752      $  77,100
        c)
        --------------------- -------------- -------------- ------------ ------------- ------------------ --------------
        Hans Moeller                300,000            24%        $1.58           ---         $   54,381       $192,751
        (a, c)
        --------------------- -------------- -------------- ------------ ------------- ------------------ --------------
</TABLE>

Table
-----

a.   The term of options used in the potential  realized  value  calculation  is
     five years.

b.   The market value per share at the date of grant was $0.66.

c.   The market value per share at the date of grant was $1.38.


                                       58

<PAGE>



                       EXECUTIVE COMPENSATION (CONTINUED):

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, 1997.

<TABLE>
<CAPTION>

------------------------- ------------------- -------------- -------------------------------- --------------------------------
                                                                                              Value of unexercised
                                                                  Number of Securities            in-the-money
                                                                 underlying unexercised          options/SARs at
                           Shares acquired        Value        options/SARs at FY-end (#)         FY-end ($)
          Name             on exercise (#)    realized ($)      Exercisable/Unexercisable    Exercisable/Unexercisable
          ----             ---------------    ------------      -------------------------    -------------------------
-----------------------------------------------------------------------------------------------------------------------------
<S>                             <C>              <C>                  <C>                                <C>
Dr. Mohd Aslami                  ---               ---                  420,665/0                        (Note 1)
-----------------------------------------------------------------------------------------------------------------------------
Charles De Luca                  ---               ---                  235,552/0                        (Note 1)
------------------------------------------------------------------------------------------------------------------------------
Michael J. Beecher              10,000           $34,440              94,248/80,000                      (Note 1)
------------------------------------------------------------------------------------------------------------------------------
Hans Moeller                    88,235           $(6,299)            200,000/100,000                     (Note 1)
------------------------------------------------------------------------------------------------------------------------------
  Note 1 - At December 31, 1997 the fair value was less than the exercise price.
</TABLE>

COMPENSATION OF DIRECTORS
-------------------------

     The Company does not maintain any  standard  compensation  arrangements  or
plans for directors.

     The Company,  however,  maintains a consulting agreement with Techman under
which  Techman  provides  administration,  marketing,  technical  and  personnel
advisory  services to the Company.  Dr. M. Mahmud Awan, a former director of the
Company, is the President and sole shareholder of Techman. The agreement is on a
month to month basis at a monthly fee of $4,500 and is terminable at any time by
the Company.  For the year ended December 31, 1997, Techman was paid $54,000 for
such services.

     The Company has a consulting agreement with Mr. Phillips, a director of the
Company,  wherein Mr. Phillips provides services as a senior financial  advisor.
Mr.  Phillips  receives  a  retainer  of  $60,000  per year  payable  in monthly
installments  of $5,000,  based on an hourly rate of $185 per hour. The retainer
is adjusted quarterly based on actual hours of service. The agreement is for one
year from  January 1, 1997 and is  automatically  renewed  for one year  periods
unless  terminated  by written  notice 90 days prior to the  expiration  of each
renewal  period.  For the year ended  December 31, 1997,  Mr.  Phillips' fee was
$45,665.

                                       59

<PAGE>



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL SECURITY HOLDERS

     The following table sets forth certain information  regarding the ownership
of the Common Stock as of March 12, 1998,  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                                       SHARES                %
       ADDRESS(1)                                   OWNED               OWNED
      ----------                                    -----               -----
                                                                         
Mohd Aslami................................       7,789,948   (2), (9)   17.6
Charles De Luca............................       4,765,778   (3), (9)   10.8
Steven Phillips............................         964,090   (4)         2.2
Hans F.W. Moeller..........................         388,235   (5)         0.9
Michael J. Beecher.........................         174,248   (6)         0.4
AMP Incorporated...........................       6,169,154   (7),(9)    14.0
Techman International Corporation..........       2,469,308   (8), (9)    5.6
All directors and executive officers
  as a group (5 persons)...................      14,082,299              31.9%

----------------------------


(1)  The  addresses  of the  persons  and  entities  named in this  table are as
     follows:  Messrs.  Aslami, De Luca,  Phillips,  Moeller,  and Beecher,  c/o
     FiberCore,  Inc., P. O. Box 180, 253 Worcester Road, Charlton, MA 01507; M.
     Mahmud Awan, 240 Sturbridge Road, Charlton, MA 01507; AMP Incorporated, 470
     Friendship Road, Harrisburg, PA 17105.

(2)  Includes 117,482 shares and Warrants to purchase 115,220 shares held by Dr.
     Aslami's wife,  723,473 shares held by Dr.  Aslami's  children,  1,587,569,
     104,296  and  608,914  shares  held   respectively  by  the  Ariana  Trust,
     Children's  Trust, and the Kabul  Foundation,  trusts of which Dr. Aslami's
     wife and/or Dr. Aslami are trustees and of which Dr. Aslami's  children are
     beneficiaries,  and 284,860 shares held by the Raja Foundation,  a trust of
     which Dr.  Aslami's  wife and Mr. De Luca's wife are  trustees and of which
     various  organizations  and family  members are  beneficiaries.  Dr. Aslami
     disclaims  beneficial  ownership of all such shares.  Also includes 483,165
     currently  exercisable  options  and  warrants  to  purchase  shares of the
     Company.

                                       60

<PAGE>



   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (CONTINUED):

(3)  Includes  1,395,097  shares and Warrants to purchase 115,220 shares held by
     Elizabeth De Luca, Mr. De Luca's wife, 357,715 shares held by Mr. De Luca's
     children, 608,914 shares held by the Dawn Foundation, a trust of which Mrs.
     De Luca is trustee and of which Mr. De Luca's  children are  beneficiaries,
     and  174,053  shares  held by the Raja  Foundation,  a trust  of which  Dr.
     Aslami's  wife and Mr. De Luca's  wife are  trustees  and of which  various
     organizations and family members are  beneficiaries.  Mr. De Luca disclaims
     beneficial  ownership  of  all  shares.  Also  includes  235,552  currently
     exercisable options.

(4)  Includes 132,937 currently  exercisable  options and warrants issued to One
     Financial Group, Incorporated and 27,500 warrants issued to Income Partners
     LP. Mr. Phillips is a principal of these Companies

(5)  Includes 300,000 options.

(6)  Includes 174,248 options.

(7)  Includes  shares into which the AMP Note is  convertible at $1.16 per share
     and Warrants to purchase 1,382,648 shares.

(8)  The shares  are owned by Techman  International  Corporation  and  includes
     shares  issuable  to Techman or its  designee  upon  exercise  of  Warrants
     (550,696),  and shares  (1,000,000)  to be issued ratably as commissions on
     Company sales up to $200  million.  Dr. M. Mahmud Awan is the president and
     sole shareholder of Techman, and a former director of the Company.

(9)  Under the AMP loan, the Company, Mohd A. Aslami, Charles De Luca, M. Mahmud
     Awan and AMP entered into a Voting Agreement  pursuant to which they agreed
     to vote together to elect a slate of directors to the Board of Directors of
     the Company.  Such slate of directors initially consists of Mohd A. Aslami,
     Charles  De Luca,  Hans  Moeller,  one  nominee  of AMP and  three  outside
     directors.


                                       61

<PAGE>




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

DEALINGS WITH SICO

     Since June  1994,  FiberCore  Jena has leased its office and  manufacturing
facility  in  Germany  from SICO  Quarzschmelze  Jena GmbH  ("SICO").  The lease
payment is fixed for the initial  term of the lease  (which  expires on June 30,
2000) at DM 50,205 per month  (approximately  $27,909).  In 1995, SICO accounted
for  approximately  10% and in 1996 and 1997  less  than  1%,  respectively,  of
Company total sales.

DEALINGS WITH TECHMAN

     Since 1995, the Company has maintained a working relationship with Techman,
a technology  management company  headquartered in Massachusetts since 1982. Dr.
M. Mahmud Awan,  the  President  and sole  shareholder  of Techman,  is a former
director of the Company.  Techman  specializes  in sales of fiber optic products
and telecommunication systems.

     On November 1, 1995, the Company entered into an International  Distributor
Agreement  with  Techman to market the  Company's  products  worldwide.  Techman
agreed  to  receive   customary  sales  commissions  in  the  form  of  Warrants
exercisable  into  1,000,000  shares of Common Stock to be issued to Techman for
sales of the Company's  products up to $200,000,000.  Such shares will be issued
upon receipt of the proceeds of any such sales.

     Pursuant to the Techman Share  Purchase  Agreement  dated January 11, 1996,
Techman purchased  734,260 shares of Common Stock for $1,000,000  (approximately
$1.36 per share) and was granted  Warrants  exercisable  into 550,696  shares of
Common Stock at $1.63 per share. Additionally,  the Company issued an additional
312,061  shares of Common Stock to Techman on (i) the  formation of FOI (a joint
venture),  in which the Company  holds a 30%  ownership  interest,  and (ii) the
completion  of a  supply  agreement  between  FOI and  the  Company.  Under  the
agreement,  $500,000 of the  $1,000,000  share  purchase  price was  invested by
Techman for the Company in FOI as an additional capital  contribution.  Due to a
delay  in the  construction  of the  manufacturing  plant,  in 1997  the  supply
agreement was canceled and the 312,061 shares were canceled.

     FOI, a company  incorporated in Islamabad  under the laws of Pakistan,  was
formed to manufacture optical fiber products in Pakistan,  and is in the process
of raising capital to fund the construction of a manufacturing  facility.  Since
its inception in June 1995,  FOI has been funded  primarily by Techman.  FOI has
contracted  with First  Capital  Securities  Corporation  Limited to arrange for
listing of FOI on the Karachi Stock Exchange.

                                       62


<PAGE>


     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED):

     In September 1997, the Company borrowed $150,000 from Techman International
Corporation.  The note bears  interest  at prime plus 1% per year and matures on
September 17, 1998. In conjunction  with the note,  Techman was granted warrants
to purchase  69,132 common shares of the Company at an exercise  price of $0.625
per share.

     In April 1997,  the Company  borrowed  $250,000  from Techman  under a note
maturing in 2000.  The annual  interest  rate on the note is the prime rate plus
1%, adjustable  quarterly and payable  quarterly.  In conjunction with the note,
Techman was granted warrants to purchase 115,220 common shares of the Company at
an exercise price of $0.78 per share.

     The Company  maintains a  consulting  agreement  with  Techman  under which
Techman provides  administration,  marketing,  technical and personnel  advisory
services to the Company. The agreement is on a month to month basis at a current
monthly  fee of $4,500 and is  terminable  at any time by the  Company.  For the
years ended December 31, 1997, 1996 and 1995, Techman was paid $54,000,  $36,000
and $21,000, respectively, for such services.

DEALINGS WITH AMP

     In  April  1995,  the  Company  issued  the AMP  Note,  which is a ten year
$5,000,000 convertible note, to AMP,  Incorporated,  a company listed on the New
York Stock  Exchange and a  manufacturer  of electrical  and optical  connection
devices,  systems and other equipment including fiber optic cable.  Principal of
the AMP Note plus  accrued  interest  at a rate of LIBOR plus one percent may be
converted  into Common Stock through April 17, 2005.  Until April 17, 2000,  the
conversion price is $1.16 per share; thereafter the conversion price is equal to
the price per share paid by a third party investor in the private sale of Common
Stock  immediately  prior  to such  conversion.  The  AMP  Note  is  subject  to
prepayment  on demand in the event the Company is the issuer of securities to be
sold by the Company under an effective registration statement.

     In July 1996,  AMP entered into a five year supply  contract  (renewable at
AMP's option for an  additional  five year period) with the Company  whereby the
Company will supply AMP with at least 50% of AMP's future  glass  optical  fiber
needs. On November 27, 1996 the Company  obtained an additional  $3,000,000 loan
at an interest rate of prime plus 1%,  adjustable  on the first  business day of
each calendar quarter,  from AMP to fund the expansion of the Jena Facility,  in
exchange for a ten year note and  $2,000,000 of common stock  purchase  warrants
exercisable for up to 1,382,648  shares of Common Stock at $1.45 and expiring on
November 27, 2001. AMP also  converted  $3,000,000 of principal plus $540,985 of
accrued  interest  on the AMP Note into  3,058,833  shares of Common  Stock.  In
connection  with the new  loan  from  AMP,  the  Company  agreed  to  issue  AMP
additional  shares of Common Stock in the event the  Company's  share price does
not exceed $2.17 for 30  consecutive  trading  days by November  27,  1998.  The
issuance  of  additional  shares  under the new AMP loan  would  have a dilutive
effect on the Company's other shareholders and could adversely affect the market
price of the Common Stock.

                                       63

<PAGE>


     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED):

LOANS

     On July 31, 1996, the Company  borrowed  $500,000 under two loan agreements
from the spouses of Dr.  Aslami and Mr. De Luca.  The loans are in the amount of
$250,000  each and bear  interest at the prime rate plus one percent  (currently
9.5%),  and are due on July 31, 1999. In conjunction  with the loans each lender
received  warrants to  purchase  115,220  shares of Common  Stock at the rate of
$1.81 per share. The warrants expire on July 31, 2001.

     Also,  during the year the Company  borrowed  $50,000 from Dr. Aslami.  The
interest  rate is prime plus 1% and the note matures on September  17, 1998.  In
conjunction  with the note the lender was issued  warrants  to  purchase  62,500
common shares of the Company at an exercise price of $0.6875 per share.

     In September and November,  1997 the Company also borrowed  $37,500 under a
note with  interest  at prime  plus 1%. The note  matures on the  earlier of the
receipt of proceeds from any new financing  received by the Company or September
30,  1998.  In  conjunction  with the notes the lender was  granted  warrants to
purchase 27,500 common shares of the Company at an exercise price of $0.6875 per
share.  Mr. Steve  Phillips,  a director of the  Company,  is a principal of the
lender. In December, 1997 the Company repaid $12,500 of these notes.

CONSULTING

     The Company has a consulting agreement with Mr. Phillips, a director of the
Company,  wherein Mr. Phillips provides services as a senior financial  advisor.
Mr.  Phillips  receives  a  retainer  of  $60,000  per year  payable  in monthly
installments  of $5,000,  based on an hourly rate of $185 per hour. The retainer
is adjusted quarterly based on actual hours of service. The agreement is for one
year from  January 1, 1997 and is  automatically  renewed  for one year  periods
unless  terminated  by written  notice 90 days prior to the  expiration  of each
renewal  period.  For the year ended  December 31, 1997,  Mr.  Phillips' fee was
$45,665.

                                       64


<PAGE>


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      1.    FINANCIAL STATEMENTS
               --------------------

               See Item 8 of this Report

         2.    FINANCIAL STATEMENT SCHEDULES
               The required  disclosures  are  included in the  footnotes to the
               Financial Statements

         3.    EXHIBITS
               (+ 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)
               (x denotes filed herewith)

EXHIBIT

NUMBER

     +2.1      Agreement  and Plan of  Reorganization  dated as of July 18, 1995
               between Venturecap, Inc. and FiberCore Incorporated.
     +2.2      Agreement of Merger dated as of July 18, 1995 between Venturecap,
               Inc. and FiberCore Incorporated.
     +2.3      Agreement  and Plan of  Reorganization  dated as of September 18,
               1995 between the  FiberCore,  Inc. Alt Merger Co., and  Automated
               Light Technologies, Inc. ("ALT").
     +2.4      Agreement  dated  February 13, 1987 between  Norscan  Instruments
               Ltd. and ALT.
     +3.1      Certificate of Incorporation of FiberCore, Inc.
     +3.2      By-Laws of FiberCore, Inc.
     +10.1     Loan Agreement  dated August 2, 1990 between ALT and  Connecticut
               Innovations, Inc. ("CII").
     +10.2     Promissory Note issued by ALT to CII.
     +10.3     Security Agreement dated as of August 1990 between ALT and CII.
     +10.4     Subordination  executed  August 2, 1990 between CII, Mohd Aslami,
               and Charles De Luca.
     +10.5     Collateral Assignment and Security Agreement dated August 2, 1990
               between ALT and CII.
     +10.6     Loan  Agreement  dated  December  5,  1990  between  ALT  and the
               Connecticut Development Authority
                ("CDA").
     +10.7     Promissory Note dated December 5, 1990 issued by ALT to CDA.
     +10.8     Guaranty  dated December 5, 1990 issued to CDA by Mohd Aslami and
               Charles De Luca.
     +10.9     Collateral  Assignment and Security  Agreement  dated December 5,
               1990 between ALT and CDA.
    +10.10     Security  Agreement  dated as of December 5, 1990 between ALT and
               CDA.
    +10.11     Subordination dated November 5, 1990 between CDA, Mohd Aslami and
               Charles De Luca.
    +10.12     Form of Warrant issued by ALT to CDA.
    +10.13     Form of Warrant  issued by Agreement  between ALT to  Connecticut
               Innovations Incorporated.
    +10.14     Form of Warrant issued by ALT.
    +10.15     Form of FiberCore Incorporated Warrant.
    +10.16     Assignment  dated  November 8, 1993 by Gregory Perry to FiberCore
               Incorporated of U.S. Patent No. 4,596,589.
    +10.17     Lease  executed  January 31, 1994  between  Cobra  Realty  Trust,
               FiberCore Incorporated, Mohd Aslami and Charles De Luca.

                                       65
<PAGE>


    +10.18     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.
    +10.19     Agreement  dated  August  19,  1995  between  Sico and  FiberCore
               Glasfaser  Jena  GmbH,  with  supplemental  agreement  by  Walter
               Nadrag.
    +10.20     Cooperation  Agreement  dated  December 19, 1995 between Sico and
               FiberCore, Inc.
    +10.21     Lease dated August 19, 1995 between Sico and FiberCore  Glasfaser
               Jena GmbH.
    +10.22     Agreement  dated  January  25,  1996  between  FiberCore,   Inc.,
               FiberCore Glasfaser, Jena and Sico.
    +10.23     Share   Purchase   Agreement   dated  January  11,  1996  between
               FiberCore, Inc. and Techman International, Corp. ("Techman").
    +10.24     Escrow  Agreement  dated as of April 13, 1995  between  FiberCore
               Incorporated,  Middle East  Specialized  Cables Co.  ("MESC") and
               Shawmut Bank, N.A.
    +10.25     Escrow  Amending  Agreement  dated  September  15,  1995  between
               FiberCore,  Inc., Middle East Specialized Cables Co. ("MESC") and
               Shawmut Bank, N.A.
    +10.26     Share  Purchase  Agreement  dated as of April  13,  1995  between
               FiberCore Incorporated and MESC.
    +10.27     Share  Purchase  Amending  Agreement  dated  September  15,  1995
               between the Registrant and MESC.
    +10.28      onvertible  Debenture Purchase  Agreement  effective as of April
               17, 1995 between AMP  Incorporated  and  FiberCore  Incorporated,
               with form of Convertible Debenture Attached, as Exhibit A.
    +10.29     Cooperation  Agreement  dated June 17, 1994  between John Royle &
               Sons and FiberCore Incorporated, with Amendment No. 1 executed on
               the same date.
    +10.30     Warrant  issued by  FiberCore,  Inc. to Techman to purchase up to
               550,696 shares of Common Stock.
    +10.31     Agreement dated July 1, 1994 between  FiberCore  Incorporated and
               FiberCore Glasfaser Jena GmbH.
    +10.32     Joint Venture  Agreement  dated  January 31, 1996 between  Middle
               East  Optic  Fiber  Company  ("MEOFC"),  Royle Mid East Ltd.  and
               FiberCore Mid East Ltd.
    +10.33     Convertible  Note Purchase  Agreement and Convertible  Promissory
               Note  between  FiberCore,  Inc.  and Hedayat  Amin-Arsala  in the
               amount of $200,000, each dated March 15, 1996.
    +10.34     Joint Venture  Agreement  dated May 21, 1995 between the Company,
               Techman and the other parties named therein.
    +10.35     International  Distributor  Agreement  between  Techman  and  the
               Company, dated November 1, 1995.
    +10.36     Term Loan  Agreement by and between  FiberCore,  Inc. as borrower
               and AMP Incorporated a lender dated November 27, 1996.
    +10.37     Term  Promissory  Note in the  original  principal  amount  of $3
               million dated November 27, 1996.
    +10.38     Amendment  No.  1 to  Convertible  Debenture  Purchase  Agreement
               between  FiberCore,  Inc.,  as borrower and AMP  Incorporated  as
               Lender dated November 27, 1996.
    +10.39     Subsidiary  Guarantee between  FiberCore  Glasfaser Jena GmbH and
               AMP Incorporated dated November 27, 1996.
    +10.40     Security Interest Agreement between FiberCore Glasfaser Jena GmbH
               and AMP Incorporated dated November 27, 1996.
    +10.41     Patent  Security  Agreement  between  FiberCore,   Inc.  and  AMP
               Incorporated dated November 27, 1996.
    +10.42     Warrant issued to AMP  Incorporated  to purchase shares of Common
               Stock of FiberCore, Inc. November 27, 1996.
    +10.43     Amended and Restated Convertible Debenture dated April 17, 1995.
    +10.44     Voting Agreement between FiberCore, Inc., AMP Incorporated,  Mohd
               Aslami, Charles De Luca and Dr. M. Mahmud Awan dated November 27,
               1996.
    +10.46     Supply  contract  between AMP  Incorporated  and FiberCore,  Inc.
               dated July 29, 1996.
    +10.47     Loan Agreement between  FiberCore,  Inc. and Berliner Bank AG for
               the amount of DM 7,700,000 dated September 6, 1996.
    +10.48     Grants Agreements  between FiberCore  Glasfaser Jena GmbH and the
               Ministry of Economics and

                                       66
<PAGE>


               Infrastructure  in the amount of DM 2,300,000 dated June 12, 1996
               and December 30, 1995.
    +10.49     Intercompany Loan Agreement between FiberCore, Inc. and FiberCore
               Glasfaser  Jena GmbH in  connection  with the loan from  Berliner
               Bank AG dated July 10, 1996.
    +10.50     Form of Warrant issued by FiberCore,  Inc. to Techman to exercise
               up  to  1,000,000   shares  of  Common  Stock   pursuant  to  the
               International Distributor Agreement dated November 1, 1995.
    +10.51     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.
    +10.52     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.
    +10.53     Forbearance  Agreement between ALT and CDA Authority and granting
               of Warrants dated August 27, 1996.
    +10.54     Forbearance  Agreement  between  ALT  and  CII  and  granting  of
               Warrants dated July 31, 1996.
    +10.55     Long Term Preform Supply Agreement  between  FiberCore,  Inc. and
               Fiber Optic Industries (Pvt.) Limited dated July 25, 1996.
    +10.56     Long-term supply  agreement  between  FiberCore,  Inc. and Middle
               East Optical Fiber Cable Co. (MEFC) dated November 1, 1996.
    x10.57     Joint  Venture   Agreement   dated   November  17,  1997  between
               FiberCore, Inc., Federal Power Sdn. Bhd., and PNB Equity Resource
               Corporation Sdn. Bhd.
    x10.58     Put Option  Agreement dated November 17, 1997 between  FiberCore,
               Inc., Federal Power Sdn. Bhd. and PNB Equity Resource Corporation
               Sdn. Bhd.
    x10.59     Note Purchase and Warrant Agreement dated September 17, 1997
               between FiberCore, Inc. and Income Partners LP.
    x10.60     Note  Purchase and Warrant  Agreement  dated  September  17, 1997
               between FiberCore, Inc. And Techman International Corporation.
    x10.61     Note Purchase and Warrant  Agreement dated April 16, 1997 between
               FiberCore, Inc. and Techman International Corporation.
    x10.62     Note  Purchase and Warrant  Agreement  dated  September  17, 1997
               between FiberCore, Inc. and Mohd A. Aslami.
    x10.63     Consulting  Agreement dated January 1, 1997 between One Financial
               Group Incorporated and FiberCore, Inc.
    +14.0      Copy of patents purchased from Sico.
    x22        List of subsidiaries of FiberCore, Inc.
    x27        Financial Data Schedule,  which is submitted electronically to
               the  Securities  and  Exchange   Commission  for   information
               purposes only.

(b)  REPORTS ON FORM 8-K

     None.

                                       67

<PAGE>



                                   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 26, 1998
            Dr. Mohd A. Aslami
            Chairman, Chief Executive Officer
            and President (Principal Executive Officer) 

            By:  /s/  Michael J. Beecher       
                 ---------------------------------------      March 26, 1998
            Michael J. Beecher                                
            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 26, 1998
-------------------           President                    
Dr. Mohd A. Aslami            Chief Executive Officer,     
                              Director                     
                              (Principal Executive Officer)


/s/  Charles De Luca          Executive Vice President            March 26, 1998
--------------------          Secretary and Director
Charles De Luca

/s/  Steven Phillips          Director 
--------------------
Steven Phillips                                                   March 26, 1998

                                       68