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, 1998
                                       OR
            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
              For the transition period from____________to_________

                         COMMISSION FILE NUMBER: 0-21823

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

           Nevada                                              87-0445729
(State or other jurisdiction of                             (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 1, 1999: $5,572,299.

Number of shares outstanding as of March 1, 1999:  36,015,034.

                       DOCUMENTS INCORPORATED BY REFERENCE

None


<PAGE>



                                 FIBERCORE, INC.
                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                          PAGE

<S>                                                                                        <C>
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..........................................................   17
PART II ...............................................................................   18
         ITEM 5.      MARKET FOR REGISTRANT'S COMMON EQUITY AND
                      RELATED STOCKHOLDER MATTERS.......................................  18
         ITEM 6.      SELECTED FINANCIAL DATA...........................................  19
         ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS...............................  20
         ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES
                      ABOUT MARKET RISK.................................................  28
         ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................  29
         ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                      ACCOUNTING AND FINANCIAL DISCLOSURE...............................  54
PART III ...............................................................................  55
         ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE
                      REGISTRANT........................................................  55
         ITEM 11.     EXECUTIVE COMPENSATION............................................  56
         ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                      AND MANAGEMENT....................................................  59
         ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................  61
PART IV ................................................................................  64
         ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
                      ON FORM 8-K.......................................................  64
SIGNATURES..............................................................................  67
</TABLE>


                                       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.  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 competitive  with
other 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  Jena GmbH  ("FCJ"),  which leases 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 provided 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 that 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, manufactures
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.  Due  principally  to the economic and currency
crisis experienced in the Asian/Pacific  region the debt financing  necessary to
construct the manufacturing facility has not, as yet, been obtained. The Company
and the other  partners in FCA are  continuing to seek  financing and additional
equity for FCA. 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.

                                 FIBERCORE, INC.
                               CORPORATE STRUCTURE
                                  HEADQUARTERS
                                      (USA)


<TABLE>
<CAPTION>
<S>                  <C>                 <C>                 <C>                <C>                            <C> 
-----------------------------------------------------------------------------------------------------------------------------
FIBERCORE ASIA     FOI (PVT.) LTD.   FIBERCORE 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.
                                                                                      15% OWNED BY
                                                                                 FIBERCORE MIDEAST LTD.
</TABLE>


         Substantially  all of the  Company's  sales are from optical  fiber and
optical fiber  preforms.  ALT accounted for less than 5% of sales in each of the
last three years.

RECENT DEVELOPMENTS

         In January 1998,  Corning  Incorporated  filed suit against the Company
claiming the Company's  phosphorus  containing  fiber violated a Corning patent.
During 1998 the suit was settled and the Company  agreed not to solicit,  market
or sell  phosphorus  containing  multimode  fiber in the United States until the
Corning  patent  expires in July 1999.  The  Company  also  agreed to conduct an
arbitration process to determine whether the Company's singlemode fiber violates
the Corning patent. In March 1999, the arbitrator  issued an opinion  concluding
that  FiberCore's  singlemode  fiber does not violate the  Corning  patent.  The
Company has not, in the past,  sold any material  quantities of its fiber in the
United States.

         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. 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. The remaining  outstanding
principal  plus  accrued  interest  may be  converted  into Common  Stock of the
Company at $0.66 per share, until maturity, April 17, 2005.


                                       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.  Under this  contract,  the Company  sold fiber  totaling
approximately  $1,801,000 and $1,238,000 in 1998 and 1997,  respectively,  to an
AMP cabling contractor in Europe. The Company expects to begin supplying optical
fiber to AMP in the United  States in 1999.  On November 27,  1996,  the Company
obtained an  additional  $3,000,000  loan at an interest  rate of prime plus 1%,
from AMP to  facilitate  the funding of the expansion of the Jena  Facility.  In
exchange  AMP  received  a  ten-year  note and common  stock  purchase  warrants
exercisable  until  November 27,  2001.  Under the terms of the loan and warrant
agreement,  on  November  27,  1998 the  number of  warrants  was  increased  to
2,765,487 and the warrant  exercise price was adjusted to $0.7232 per share.  In
connection  with the new AMP loan and the  expansion of the Jena  Facility,  the
Company  was  awarded  a grant  from  the  German  Government  of  approximately
$2,700,000 and received a loan from Berliner Bank of  approximately  $4,621,000.
As part of the new  $3,000,000  loan from AMP, Mohd A. Aslami,  Charles De Luca,
Dr. M. Mahmud Awan (a former  director of the  Company)  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.  AMP has  waived the
implementation of this slate of directors.  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
manufactures  and sells  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 initially had a 15% interest in MEFC. MEOFC  contributed  $2,330,000
and held 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 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 February 1999, the equity of
MEFC was restructured to facilitate the investment of a new equity partner. As a
result,  a portion of the Company's  equity has been converted to a loan to MEFC
in the amount of Saudi Rials 800,000 (approximately  $213,000) and the Company's
equity in MEFC was reduced to 8%. MEFC began operations in 1998 and had sales of
approximately SR1,833,000 (U.S. $489,000) for the year ended December 31, 1998.

         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  between the Company and MEFC.  The warrants  expired  without
exercise.



                                       5

<PAGE>



                              BUSINESS (CONTINUED)

         On January 11, 1996,  pursuant to a Share Purchase  Agreement,  Techman
International  Corp.  ("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.  Dr. M. Mahmud Awan, a former director of the Company,
is the President and sole shareholder of Techman. 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.  Due to the
political  and  economic  situation  in Pakistan  this  project has been further
delayed and will be reviewed in 1999.

         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 9.25%) and are
due on July 31, 1999. The Company  expects that these loans will be renewed.  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
matured 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.  The note was  renewed  and the  maturity  date  extended  to
December 31, 1999.

         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 and 1998,
$75,000 of the notes maturing in 1998 were repaid. The remaining note of $50,000
has been renewed and matures in 1999.

         In 1998,  the expansion of the Jena facility was  completed,  more than
doubling the  production  capacity of that plant.  The  expansion  was funded by
German government grants and loans, as described above. The Company  anticipates
that it will outgrow the current  leased  facility and  therefore is planning to
construct a new manufacturing  facility in the Jena area. The Company expects to
finance this new facility under similar  financing  arrangements  to the earlier
expansion, utilizing German Government grants and guaranteed loans and equity.


                                       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 that  transmits  light encased  within a covering layer designed to reduce
signal  loss  through  the side  walls of the  fibers.  Information  transmitted
through optical fibers is converted from electrical impulses into light waves by
a laser or light  emitting  diode.  At point of  reception,  the light waves are
converted back into electrical impulses by a photo-detector.

         Communication  by means of light  waves  guided  through  glass  fibers
offers  a  number  of  advantages  over   conventional   means  of  transmitting
information.  Glass fibers carry  significantly  more  information than metallic
conductors and, unlike metallic  conductors,  are not subject to electromagnetic
or radio  frequency  interference.  Signals of equal strength can be transmitted
over  much  longer  distances  through  optical  fibers  than  through  metallic
conductors and require the use of fewer  repeaters  (devices which  strengthen a
signal).  Further,  fiber-optic  cables,  which  typically  consists of numerous
optical fibers encased in one or more plastic sheaths, are substantially smaller
and lighter than metallic conductor cables of the same capacity,  so they can be
less expensive and more easily  installed,  particularly  in limited  conduit or
duct spaces.

         There are two basic types of  communication  optical fibers:  multimode
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, in which the
Company has an interest,  draws fiber from preforms and manufactures fiber optic
cable.

         The  Company's   patented   technology  can  be  best  described  as  a
"rod-and-tube"  process,  or as a hybrid of the OVD, IVD and the AVD  processes.
The  Company's  process  takes  advantage of available  high quality doped 1 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.
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.




_____________________ 


1  Doping  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.

         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. Talksets 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 is not  actively  marketing  these  products  because  of  lack  of
resources, but is planning to market such products in the future.

RESEARCH AND DEVELOPMENT

         In 1998,  the Company  filed two patents for a production  process that
the Company believes when implemented  will  substantially  reduce the Company's
manufacturing  cost of optical  fiber and  preforms.  The  Company is  currently
installing a pilot machine using this new process in Jena and expects this pilot
machine to be on line in mid 1999.

         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



                                       9

<PAGE>

                              BUSINESS (CONTINUED)

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 $78,063.

         The Company  incurred  costs of  $475,000,  $434,000  and  $420,000 for
research and process  development  for the fiscal years ended December 31, 1998,
1997, and 1996, 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.

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

SALES AND MARKETING

         To capitalize on the growth in fiber  demand,  the Company's  sales and
marketing  objective is to increase market penetration by developing  long-term,
strategic  relationship  supply contracts for both preform and fiber products as
rapidly  as  practical;  expanding  the  Company's  global  sales and  marketing
programs;  and  emphasizing the performance and cost advantages of the Company's
patented technology for its key customers. The Company plans to sell products in
areas where it can  reasonably  expect to avoid  direct  competition  from major
suppliers of fiber,  such as Lucent  Technologies  and  Corning,  and secure its
customer  base  through  strategic  alliances.  Consistent  with this  strategy,
initial  marketing efforts for singlemode fiber and preform have been focused on
establishing  strategic  alliances  in  developing  countries  where  management
believes the demand is growing  more  rapidly  than in Europe and the  Americas.
Multimode fiber is marketed in Europe and the Americas where management believes
market opportunities are the greatest for this product.

         Management believes the telecommunications infrastructure of developing
countries  is in the  early  stages of  evolution  and  competition  is not well
established.  In the past,  developing countries would typically purchase older,
previously deployed communications  technology and equipment.  However, the lack
of a copper  cable  infrastructure  and a desire to become more  technologically
advanced  has driven  some  developing  countries  to choose  fiber  optic cable
networks to develop a sophisticated communications network. These countries must
first install a fiber optic infrastructure of trunk and feeder lines followed by
fiber,  copper or  wireless to the  subscriber  loop.  The Company is  initially
targeting  the large fiber  optic cable  manufacturing  companies  in Asia,  the
Middle East,  the Pacific  Rim, and certain  European  markets.  Four  employees
devote  substantially  all of their time to sales and marketing and are assisted
in this effort by independent sales representatives.

JOINT MANUFACTURING AND 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
and FCA joint ventures.  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.



                                       10
<PAGE>


                              BUSINESS (CONTINUED)

Discussions  regarding  similar joint ventures  and/or  strategic  alliances are
underway, 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.

CUSTOMERS REPRESENTING OVER 10% OF SALES

         The following  table is based on the total sales of the Company for all
periods presented.

                                                              % OF SALES
                         1998
                           Customer A                             23%
                           Customer B                             22%
                           Customer C                             13%
                           Customer D                             10%

                         1997
                           Customer A                             42%
                           Customer B                             17%
                           Customer C                             Less than 10%
                           Customer D                             Less than 10%

                         1996
                           Customer A                             56%
                           Customer B                             15%
                           Customer C                             Less than 10%
                           Customer D                             Less than 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, 1998 the Company had a backlog of orders  approximating
$3.9 million  ($4.1  million at December  31,  1997).  During 1998,  four of the
Company's  employees were engaged in sales activities,  and the Company utilized
manufacturers' sales representatives in certain geographic markets. In 1998, the
Company employed a full-time international  marketing/sales manager and one full
time sales person for the European market.  Also in 1999, the Company intends to
expand its independent sales


                                       11

<PAGE>

                              BUSINESS (CONTINUED)

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.

         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 and visits to  potential  customers,  distribution  of
product brochures through sales representatives and exhibiting at industry trade
shows.

COMPETITION

         Due to the  high  demand  for the  Company's  fiber,  the  Company  has
initially  concentrated on manufacturing and selling fiber and has increased its
fiber manufacturing  capability in Jena, Germany,  and plans to further increase
capacity  through  building a new  facility  in Jena and a planned  facility  in
Malaysia. However, because competition in the production of preforms is somewhat
limited,  the Company  plans to increase its  emphasis on marketing  preforms to
that segment of the market outside the U.S. and Europe.

     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  singlemode
preforms on a  worldwide  basis is limited to two United  States  manufacturers,
SpecTran and Alcatel. SpecTran's product sales are for unique fiber applications
and Alcatel is directly  marketing  singlemode  preforms.  Additionally,  Lycom,
Alcatel and Nokia,  in Europe,  Shin-Etsu  from Japan and DaeWoo from Korea have
begun marketing singlemode 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 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 Company's  customers are not
vertically integrated, and require preforms that are in limited supply.

     FIBER

         The  competition  in  multimode  fiber  products  is  limited  to a few
manufacturers  in North America and Europe.  They include Corning  Incorporated,
Lucent  Technologies,  Alcatel,  SpecTran and Plasma Optical  Fiber.  Management
believes that Corning,  Lucent  Technologies,  and Alcatel  generally supply the
bulk of their  production  to their  own  cablers  or  joint  venture  partners.
Therefore,  in the US,  multimode  fiber will be the primary  product due to the
Company's unique  technological  and cost advantage,  coupled with the fact that
the other three large US producers do not focus on the multimode  fiber as their
primary  business.  Furthermore,  FiberCore  plans  to  offer  several  types of
multimode fibers for specific  applications  and performance  advantages such as
different  glass  composition  for  radiation  resistant  fiber  for  Government
applications,   and  special  coatings  for  high  performance   cable  designs.
Additionally,


                                       12

<PAGE>

                              BUSINESS (CONTINUED)

because of the Company's manufacturing flexibility, the Company is positioned to
respond quickly to special customer requirements and applications.

         The  competition in the singlemode  fiber market is much more extensive
than  in  the  preform  market  or  the  multimode  fiber  market.  Most  of the
competition for fiber comes from Corning and Lucent Technologies. Competition in
the fiber  market is  primarily  based on  availability  and  quality,  and more
recently price. In the past, with some exceptions,  the Company's fiber has been
generally  priced at  comparable  levels  to fiber  manufactured  by the  larger
producers.  In the future,  FiberCore will concentrate on marketing its new line
of high  performance  products to support  emerging  protocols,  such as Gigabit
Ethernet,  as well our ValuGrade  and  EconoGrade  line of products,  which have
excellent price/performance characteristics.

ALT PRODUCTS

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




                                       13



<PAGE>

                              BUSINESS (CONTINUED)

         In 1997 and 1998, the Company filed two patent applications in the U.S.
for a process which the Company believes will improve the cost and efficiency of
producing  optical  fiber  preforms.  The Company is currently in the process of
preparing additional patent applications for the production of optical fiber and
preforms that are expected to be filed in 1999.

         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 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 compared to the rest of the European Union,  the United States
and Japan.  FCA, the Company's joint venture 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,  the Middle
East and Asia in  general.  These  risks  include,  but are not  limited to, the
threat of regional conflict. In 1998, 1997 and 1996, FCJ accounted for 99%, 97%,
and 98% 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  "ValuGrade"  for products it
introduced in the market 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.

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 1998, 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, 1998,  the Company  employed 80 persons,  of whom 4 are
executives,  9 are  engaged  in sales  and  administration,  62 are  engaged  in
manufacturing  and  5 are  engaged  principally  in  research  and  development.
Seventy-three (73) 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
rental agreement is on a monthly basis.

         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.  In
1999,  the term of the lease was  extended to December 31, 2001 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  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  multimode  optical  fiber or optical  fiber  preforms  in the United
States in violation of Corning's  patent except to certain  customers.  In turn,
Corning  agreed not to seek damages and dismissed  the action.  The Company also
agreed to conduct an  arbitration  process to  determine  whether the  Company's
singlemode  fiber  violates the Corning  patent.  In March 1999,  the arbitrator
issued his opinion concluding that FiberCore's singlemode fiber does not violate
the Corning patent.  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 has filed an appeal to this decision with Germany's appeals court.
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.



                                       16



<PAGE>



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

         At the Company's  Annual Meeting of  Shareholders  ("Annual  Meeting"),
held on November 17, 1998, 28,817,717 shares of Common Stock were represented in
person or by proxy,  constituting a quorum of the total of 35,849,035  shares of
Common Stock outstanding and entitled to vote at the Annual Meeting.

         At  the  Annual  Meeting,  the  election  of  Deloitte  &  Touche  LLP,
independent  certified  public  accountants,  as auditors of the Company for the
fiscal year ended December 31, 1998, was ratified by a vote of 28,769,817 shares
(80.3% of the outstanding Common Stock).  Holders of 19,400 shares voted against
the  proposal  and  holders  of 28,500  shares  abstained.  There were no broker
non-votes on this proposal.





             ( The remainder of this page intentionally left blank.)



                                       17




<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 226  holders of record and  approximately  1,500  beneficial
owners of Common  Stock as of March 1, 1999.  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                   Low
     ------                    ----                   ---

    1998
      1st quarter              $0.75                 $0.29
      2nd quarter              $0.50                 $0.25
      3rd quarter              $0.44                 $0.14
      4th quarter              $0.19                 $0.11
   
    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.


                                       18



<PAGE>



ITEM 6. SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL DATA

         The following  selected  financial  data of the Company for each of the
years 1998,  1997,  1996,  1995,  and 1994,  has been  derived  from the audited
financial statements and notes thereto of the Company and its predecessors.  The
information  set forth below is qualified by reference to, and should be read in
conjunction  with,  the  consolidated  financial  statements  and related  notes
thereto and  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations".

                                             YEARS ENDED DECEMBER 31,
                                     (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                                 1998(1)       1997(1)       1996(1)    1995(1)       1994(2)(3)
<S>                                          <C>            <C>           <C>           <C>      <C>        
Operating Data:
  Net sales................................. $     8,201    $    7,078    $   8,096     $3,094   $       231
  Costs and expenses:
  Cost of sales.............................       6,534         5,702        7,200      4,509         1,064
  Research and development..................         475           434          420         75            90
  Selling, general, and administrative......       2,981         3,148        4,324      2,100           700
  Interest expense, net.....................         746           638          387        368             7
  Other income (expense), net...............         193          (234)         102        (51)            5
                                             -----------    ----------    ---------    -------    ---------- 
  Loss before provision for income taxes....      (2,342)       (3,078)      (4,133)    (4,009)       (1,625)
  Provision for income taxes................        ---           ---          ---        ---           --- 
  Net loss.................................. $    (2,342)   $   (3,078)   $  (4,133)   $(4,009)   $   (1,625)
                                             -----------    ----------    ---------    -------    ---------- 
Basic and diluted loss per share............ $     (0.07)   $    (0.09)   $   (0.13)   $ (0.15)   $    (0.07)
                                             ===========    ==========    =========    =======    ========== 
Weighted average shares
  outstanding...............................  35,833,501    35,744,182   31,695,693  26,584,630   22,873,322
                                             ===========    ==========    =========    =======    ========== 
Balance Sheet Data:
  Working capital (deficit)................. $     6,337    $    8,091    $     191    $  (277)   $     (519)
  Total assets..............................      25,768        26,107       17,642     14,783         4,270
  Long-term obligations.....................      10,204         9,851        4,587      5,000           456
  Total liabilities.........................      14,864        13,351        7,618      8,415         1,687
  Minority interest.........................       3,263         3,217         ---        ---           ---
  Accumulated deficit.......................     (15,192)      (12,850)      (9,772)    (5,638)       (1,628)
  Stockholders' equity......................       7,641         9,539       10,024      6,368         2,583
</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.

                                              19
<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,  price
reductions 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  corporate  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, 1998, 1997 and 1996.

RESULTS OF OPERATIONS

         Year Ended December 31, 1998

         Net sales for the year ended  December  31,  1998 were  $1,123  greater
(15.9%) than net sales



                                       20


<PAGE>



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF

            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

in 1997. The increase was principally due to a 20% increase in volume shipped to
new and existing  customers in 1998 over 1997,  offset by lower average  selling
prices. Average selling prices decreased in 1998 compared to 1997, primarily due
to an increase in the available supply of fiber in the market. Substantially all
of the Company's sales are through its German subsidiary, FiberCore Jena.

         Cost of sales increased by $832 or 15% over 1997 due to the increase in
volume shipped, offset by a decrease in costs per unit of production. This lower
per unit cost is primarily due to upgrades to the production equipment, improved
production  efficiencies and improved  production  yields resulting from process
improvements.

         Gross  profit  improved to 20.3% of net sales in 1998 from 19.4% of net
sales in 1997.  This  improvement  resulted from the production  improvements as
discussed above, offset by the lower average selling prices.

         Selling,  general and administrative expenses decreased by $167 or 5.3%
in 1998 compared to 1997. This decrease was due to lower administrative costs at
the parent company and FiberCore Jena,  offset by an increase in sales costs due
to the  addition of  personnel in the second half of 1998 and an increase in the
provision for doubtful accounts receivable at ALT.

         Research and development costs increased $41 or 9.4% in 1998 over 1997.
The increase is principally  attributable to an increase in research and process
development activities at FiberCore Jena.

         Interest  income  increased  $39 in 1998  compared  to 1997  due to the
increase in income from the  investments of the DM 3,850  security  deposit with
the Berliner Bank.

         Interest  expense  increased  22% to $811 in 1998  compared  to $664 in
1997. This increase is attributable to the higher average balance of outstanding
loans used for  working  capital in 1998 at the  parent  company  and the higher
average  outstanding balance in 1998 of the loan from the Berliner Bank used for
the expansion of the Jena  facility.  Interest of $132 on the Berliner Bank loan
was capitalized during the year for the expansion of the German plant.

         Other  income-net  was $193 in 1998  compared to net expense of $234 in
1997. This change was principally due to the foreign  currency  exchange gain of
$170 on the German mark deposit with the Berliner  Bank that is security for the
loan, compared to a foreign currency exchange loss on this deposit in 1997.

         The net loss for the year 1998 was $2,342  compared to $3,078 for 1997,
a decrease of $736 or 23.9%.  The primary cause of the decrease was the increase
in gross profit and the decrease in administrative costs, offset by the increase
in interest expense and the change in other income as discussed above.


                                       21



<PAGE>



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF

            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

         Year Ended December 31, 1997

         Net sales for the year ended  December  31,  1997 were  $7,078 or 12.6%
lower than net sales 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 German 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-net 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.

LIQUIDITY AND CAPITAL RESOURCES

         GENERAL

         The Company  anticipates  that the results of  operations  will improve
significantly  in 1999 compared to the losses  experienced in prior years.  This
expectation is based on a projected increase in sales both in dollar amounts and
volume, and the projected continuing improvement in manufacturing




                                       22


<PAGE>

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

costs.  The major  expansion and upgrading of the Jena facility was completed in
1998,  thus  providing  an  increase  in  capacity  and  substantially  improved
efficiencies in production.  This  improvement  will be moderately  offset by an
anticipated  weakening  in market  prices of the  Company's  products due to the
excess capacity in the market,  although the Company believes that market prices
will decline at a slower rate in 1999 compared to 1998.

         This expected increase in sales and improved  profitability is expected
to have a positive  impact on the  Company's  cash flow,  such that the  Company
projects  that it will have a positive cash flow from  operations  in 1999.  The
Company  will  continue  to utilize  short-term  borrowings  to fund its working
capital requirements.  In this regard, the Company expects to increase the lines
of credit  currently  available  totaling  approximately  $1,200  at its  German
subsidiary.  There is no assurance,  however,  that the increase in these credit
lines will be obtained.

         Further, the Company is planning to build a new manufacturing  facility
in Germany to replace the existing  leased  facility and to increase  production
capacity.   The  current  facility  has  limited  space  for  expansion  of  the
manufacturing  operation, and the Company expects to operate at full capacity of
this  facility in 1999 to meet its sales  projections.  The Company is currently
seeking to raise approximately  $21,000 to construct this new plant, and expects
that this financing will be provided from new equity of $1,500 and a combination
of German government grants and guaranteed loans,  similar to the financing used
to fund the recently  completed  expansion.  Although  management is optimistic,
there can be no assurance that such financing will be obtained.

         Additionally,  the Company, through its Malaysian subsidiary FCA, is in
the process of raising  approximately  $25,000 in debt and equity  financing  to
finance the construction of the FCA  manufacturing  plant. The plan to construct
the facility in Malaysia is considered part of the Company's long-term strategy.
Notwithstanding  the current  economic  situation in the Pacific Rim, 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 to the Asia and Pacific Rim region.

         The Company is not relying on the conversion of Warrants and Options to
fund its  operations;  however,  if the Warrants and Options are exercised,  the
total proceeds that the Company would receive upon the exercise is approximately
$6,040.  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 $1,356 in 1999,
including  interest).  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
paid  quarterly.  The Company may seek to refinance  certain of the notes due in
1999, although there can be no assurance that such refinancing will be obtained.
Certain notes are due to officers and directors of the Company.



                                       23


<PAGE>

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


         The Company currently has a backlog of orders aggregating approximately
$3,900,  which is scheduled  to be shipped in 1999.  The backlog at December 31,
1997 and 1996 was approximately $4,100 and $7,400,  respectively.  Additionally,
the Company has entered into, or is negotiating,  long-term  supply  agreements.
These include  supply  agreements  with MEFC,  AMP, and others.  Pursuant 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.  Shipments to
MEFC  began  in  the  fourth  quarter  1997  and  shipments  to an  AMP  cabling
subcontractor began in 1996.  Shipments to AMP in the U.S. are expected to begin
in 1999.

         The following changes in balance sheet amounts are net of the effect of
the change in the currency exchange rates from December 31, 1997 to December 31,
1998.

         Year Ended December 31, 1998

         For the year ended  December  31, 1998,  the Company used $607,  net of
depreciation and amortization, for operations before changes in working capital.
This was a substantial  improvement over the $1,724 used for operations in 1997.
This  significant  improvement  was due  primarily  to the increase in sales and
gross profit,  higher  depreciation  costs and other  non-cash costs incurred in
1998.

         Inventory increased by $1,187 principally due to an increase in work in
process at  year-end to provide for  planned  shipments  in January  1999 and an
increase in raw  materials at year end. The build-up of raw material at year end
was in  anticipation  of price  increases on certain  materials  expected at the
beginning  of  1999.  Accounts  payable  decreased  by $114  in 1998  due to the
repayment  of an  advance  of  funds  to FCA  received  in 1997  from one of the
partners,  offset by an  increase  in  accounts  payable at the parent  company.
Accrued  liabilities  increased  $102 in 1998 over 1997,  principally  due to an
increase in accrued interest on outstanding notes payable.

         During 1998 the Company  invested  $1,895 in fixed assets,  principally
for new  equipment  at the Jena  facility.  This was  funded  in part by $929 in
grants from the German government. Additionally, other assets increased by $205,
principally  due to an  increase  in  deferred  costs  related to the design and
development of the FCA facility.

         Notes payable increased by $597 in 1998 over 1997,  principally  due to
borrowings under the lines of credit at FCJ, used for working capital. Long-term
interest  payable  increased  by $416 due to the  increase  in accrued  interest
payable on the AMP loans wherein the interest is payable at maturity in 2005 and
2006.

         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.  The lower  shipments  were due to
MEFC not having  completed the installation of their draw tower. The increase in
other receivables of $202 was due to an outstanding




                                       24

<PAGE>

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

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.

         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. Sales of ALT products in
1998 were not significant, principally because the Company focused its available
resources  on  developing  the optical  fiber  business.  The  Company  recently
completed a revised  business  plan for ALT that  provides  for  developing  and
enhancing ALT's products and allocating  certain  resources to ALT for marketing
the products. The Company will seek to raise funds to implement this plan and is
also in  discussions  with  potential  partners  that have  interest  in the ALT
product  lines and have  expressed  an  interest  in forming a joint  venture to
manufacture  and market its  products.  The Company's  management  believes that
there is significant potential for sales of ALT's products.  This will, however,
require  funding to implement  the plan and there can be no assurance  that such
funding  will be  obtained or that a joint  venture  with new  partners  will be
consummated.

         YEAR 2000 COMPLIANCE

         The Year 2000 issue is the result of computer  programs  being  written
using two digits rather than four digits to define the  applicable  year. Any of
the Company's internal use computer programs and hardware,  both  administrative
and technical ( " embedded"  systems such as process  control  computers ), that
are date  sensitive 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  or engage in normal  business  activities for both the
Company and its customers who rely on its products.

         The  Company is  actively  engaged,  and has  substantially  completed,
reviewing,  correcting and testing all of the Year 2000 compliance  issues.  The
Company has modified or replaced some of its internal use software and hardware,
where necessary,  and installed modified third-party software,  where necessary,
so that they will function properly,  as a system,  with respect to dates in the
Year 2000 and thereafter.




                                       25


<PAGE>


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

         The  Company  presently  believes  that with the  modifications  to its
third-party  software and the  replacement of certain  internal use software and
non-compatible   hardware,  the  Year  2000  issue  will  not  pose  significant
operational  problems  for  the  Company  or its  customers.

         With regard to internal use software and hardware for both  information
technology  and  non-information  technology  systems,  the Company has reviewed
substantially  all such systems.  The Company has determined that a small amount
of older computer  equipment  must be replaced,  but the type and amount are not
significant and will be replaced in the ordinary course as systems are upgraded.
With regard to third-party  software,  it has been determined that some software
is not  compliant  and will need to be  upgraded  as vendors  provide  Year 2000
compliant  versions.  New  administrative   software  at  the  Company's  German
subsidiary was installed in 1998, and, based on communication with the supplier,
this  software  is Year  2000  compliant.  The  administrative  software  at the
Company's  headquarters will require upgrading and the supplier of this software
has  advised the Company  that they have and are  prepared to install  Year 2000
compliant upgrades. The Company also utilizes third-party vendors for processing
data and payments, e.g. payroll services,  shareholder records, etc. The Company
has initiated  communications  with its vendors to determine the status of their
systems.  Should these vendors not be compliant in a timely manner,  the Company
may be required to process transactions  manually or delay processing until such
time as the  vendors are Year 2000  compliant.  The Company is in the process of
developing  contingency  plans to reduce the risks of vendors' systems impacting
the Company's operations.

         The  Company  does not have  significant  interface  applications  with
customers,  suppliers and others. However, the Company has communicated 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.

         At this time,  the Company  believes its most  reasonably  likely worst
case  scenario  is that key  suppliers  could  experience  disruptions  in their
ability to deliver key raw materials  and/or services due to their own Year 2000
issues.  In the event that this scenario does occur, the Company does not expect
that it would have a material adverse affect on the Company's financial position
and results of operations,  as there are  alternative  sources of supply for the
Company's principal materials.

         The Company  will  utilize  both  internal  and  external  resources to
reprogram,  or replace and test its software  products to complete the Year 2000
modifications.  The Company anticipates completing the Year 2000 project as soon
as practical,  but not later than June 1999,  which is prior to any  anticipated
impact. The Company incurred approximately $6 through December 31, 1998 for Year
2000  modifications  to  its  software  and  hardware,   and  expects  to  incur
approximately  $5 for such costs in 1999. The requirements for the correction of
Year 2000  issues and that date on which the Company  believes it will  complete
the Year 2000  modifications  are based on management's  current best estimates,
which were derived utilizing numerous assumptions of future events including the
continued availability of certain resources,  third-party modification plans and
other factors.  However,  there can be no guarantee that these estimates will be
achieved and actual  results  could differ  materially  from those  anticipated.
Specific factors that may cause such material  differences  include, but are not
limited to the  availability  of personnel  trained in this area, the ability to
locate and collect all relevant computer codes and similar uncertainties.  Based
upon the current best  estimate  for  remediation  of the Year 2000 issues,  the
Company  believes  the risk is minimal  that the  Company  will not comply  with
current commitments and internal processing needs.




                                       26


<PAGE>

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

         ACCOUNTING PRONOUNCEMENTS

         In June 1998, the FASB issued SFAS No. 133,  "Accounting for Derivative
Instruments and Hedging Activities", which requires that an entity recognize all
derivatives as either assets or liabilities in the  consolidated  balance sheets
and measure those  instruments at fair value. The accounting for changes in fair
value of a  derivative  depends on the intended  use of the  derivative  and its
resulting  designation.  The Company is evaluating  the effect this new standard
will have on the  Company's  financial  statements.  The  Company is required to
adopt this standard by January 1, 2000.

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                                       27

<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is exposed to market risks from changes in foreign currency
exchange rates and interest rates. The Company's principal operating subsidiary,
FiberCore  Jena,  is located  in  Germany  and its  functional  currency  is the
Deutsche Mark ("DM").

FOREIGN  CURRENCY  RISK.  FiberCore  Jena  may,  from  time  to  time,  purchase
short-term  forward exchange  contracts to hedge payments and/or receipts due in
currencies  other  than the DM. At  December  31,  1998,  FiberCore  Jena had no
outstanding forward exchange contracts.

         At December 31, 1998, the Company had a long-term  loan  denominated in
DM totaling DM7,700,000. The principal of the loan is due at maturity, September
2006.  Interest on the loan is payable  quarterly at the fixed rate of 6.25% per
annum. A 10% change in the DM exchange rate to the U.S. dollar could increase or
decrease the cash flow requirements of the Company by approximately  $29,000 for
each of the years 1999 through 2005, and by approximately $22,000 in 2006.

         Substantially  all  of  the  Company's  sales  are  through  it  German
subsidiary.  Additionally,  at December 31, 1998,  42% and 21% of the  Company's
assets are at its German and Malaysian subsidiaries,  respectively. The Company,
therefore,  is  subject  to  foreign  currency  translation  gains or  losses in
reporting its consolidated financial position and results of operations.

INTEREST  RATE RISK.  At December 31, 1998,  the Company had short and long term
loans with  interest  rates based on the prime rate and LIBOR which are adjusted
quarterly  based on the  prevailing  market rates.  A 10% change in the interest
rates on these loans would have increased or decreased the 1998 interest expense
by approximately $56,000.






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                                       28

<PAGE>



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
<S>                                                                             <C>
                                                                                   PAGE
                                                                                   ----

Independent Auditors' Report....................................................    30
Consolidated Balance Sheets at December 31, 1998 and 1997......................     31
Consolidated Statements of Operations for the Years Ended
     December 31, 1998, 1997 and 1996       ....................................    32
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended
     December 31, 1998, 1997 and 1996       ....................................    33
Consolidated Statements of Changes in Stockholders' Equity for the Years
     Ended December 31, 1998, 1997 and 1996 ....................................    34
Consolidated Statements of Cash Flows for the Years Ended
     December 31, 1998, 1997 and 1996...........................................    35
Notes to Consolidated Financial Statements for the Years Ended
     December 31, 1998, 1997 and 1996       ....................................    36


</TABLE>





                                       29


<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, 1998 and 1997, and the related  consolidated
statements of operations,  comprehensive income (loss), changes in stockholders'
equity and cash flows for each of the three years in the period  ended  December
31, 1998.  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, 1998 and 1997,  and the  results of their  operations  and cash
flows for each of the three  years in the  period  ended  December  31,  1998 in
conformity with generally accepted accounting principles.


DELOITTE & TOUCHE LLP
Hartford, Connecticut
March 24, 1999







                                       30


<PAGE>


                        FIBERCORE, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
(Dollars in thousands except share data)                                      1998            1997
                                                                              ----            ----
<S>                                                                          <C>             <C> 
                                        ASSETS
Current assets:
     Cash.........................................................           $   150       $  2,128
     Accounts receivable, less allowance for doubtful accounts
         of $200 in 1998 and $33 in 1997...............................          863            937
     Notes receivable from joint venture partners.......................       4,912          4,883
     Other receivables..................................................         579            564
     Inventories........................................................       4,480          3,057
     Prepaid and other current assets...................................          13             22
                                                                             -------        -------
         Total current assets...........................................      10,997         11,591
                                                                             -------        -------
Property and equipment..................................................       7,603          6,559
Less accumulated depreciation...........................................       2,373          1,751
                                                                             -------        -------
         Property and equipment - net...................................       5,230          4,808
                                                                             -------        -------
Other assets:
     Restricted cash....................................................       2,310          2,140
     Patents, less accumulated amortization of $2,179 in 1998
       and $1,520 in 1997...............................................       5,375          6,014
     Investments in joint ventures......................................       1,425          1,425
     Other..............................................................         431            129
                                                                             -------        -------
        Total other assets..............................................       9,541          9,708
                                                                             -------        -------
         Total assets...................................................     $25,768        $26,107
                                                                             =======        =======
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Notes payable.......................................................    $ 1,665        $   594
     Accounts payable....................................................      1,724          1,778
     Accrued expenses....................................................      1,271          1,128
                                                                             -------        -------
         Total current liabilities.......................................      4,660          3,500
Long-term interest payable...............................................        876            460
Long-term debt...........................................................      9,328          9,391
                                                                             -------        -------
         Total liabilities...............................................     14,864         13,351
                                                                             -------        -------
Minority interest .......................................................      3,263          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:  35,936,463 in 1998 and 35,774,822 in 1997..       36             36
     Additional paid in capital............................................   23,337         23,221
     Accumulated deficit...................................................  (15,192)       (12,850)
     Accumulated other comprehensive loss:                                                 
        Accumulated translation adjustment.................................     (540)          (868)
                                                                             -------        -------
         Total stockholders' equity........................................    7,641          9,539
                                                                             -------        -------
         Total liabilities and stockholders' equity........................  $25,768        $26,107
                                                                             =======        =======
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       31




<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

(Dollars in thousands except share data)
<TABLE>
<CAPTION>
<S>                                                        <C>                  <C>                <C> 

                                                                      1998             1997            1996
                                                                      ----             ----            ----
    Net sales.............................................. $         8,201    $         7,078   $         8,096
    Cost of sales..........................................           6,534              5,702             7,200
                                                             --------------     --------------    --------------
         Gross profit .....................................           1,667              1,376               896
    Operating expenses:
      Selling, general and administrative expenses.........           2,981              3,148             4,324
      Research and development.............................             475                434               420
                                                             ---------------   ---------------   ---------------
         Loss from operations..............................          (1,789)            (2,206)           (3,848)

    Interest income........................................              65                 26                 6
    Interest expense.......................................            (811)              (664)             (393)
    Other income (expense) - net...........................             193               (234)              102
                                                            ---------------    ---------------   ---------------
         Net loss.......................................... $        (2,342)   $        (3,078)  $        (4,133)
                                                            ===============    ===============   =============== 
    Basic and diluted loss per share of common stock....... $         (0.07)   $         (0.09)  $         (0.13)
                                                            ===============    ===============   =============== 
    Weighted average shares outstanding....................      35,833,501         35,744,182        31,695,693
                                                            ===============    ===============   =============== 


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



                                       32



<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

(Dollars in thousands except share data)

<TABLE>
<CAPTION>
<S>                                                           <C>         <C>     <C>   


                                                                1998       1997       1996
                                                                ----       ----       ----

    Net loss...............................................    $(2,342)   $(3,078)   $(4,133)
    Other comprehensive income (loss):
      Foreign currency translation adjustments.............        328     (1,084)         1
                                                                -------     ------   ---------
    Comprehensive loss.....................................    $(2,014)   $(4,162)   $(4,132)
                                                                =======    =======    ======= 
                                                                
</TABLE>

          See accompanying notes to consolidated financial statements.



                                       33

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

(Dollars in thousands except share data)

<TABLE>
<CAPTION>
<S>                                                                <C>               <C>         <C>  

                                                                             1998       1997         1996 
                                                                             ----       ----         ---- 
Common Stock:
  Balance, beginning of year.....................................      $     36       $    35     $     30
  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            36           35
                                                                         --------      -------     -------
Additional Paid in Capital:
  Balance, beginning of year.....................................        23,221         19,545      11,761
  Sale of stock for cash.........................................                                    1,498
  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...............            41            328
  Contribution of capital in Malaysia joint venture (FCA)........            75          3,348
  Stock canceled on cancellation of supply agreement with FOI....                         (425)
                                                                         ------       --------      ------
  Balance, end of year...........................................        23,337         23,221      19,545
                                                                         ------       --------      ------

Accumulated Other Comprehensive Income (Loss):
  Balance, beginning of year.....................................          (868)           216         215
  Foreign currency translation adjustments.......................           328         (1,084)          1
                                                                         ---------    --------     --------
  Balance, end of year...........................................          (540)          (868)        216
                                                                         ---------     ---------   --------
Accumulated Deficit:
  Balance, beginning of year.....................................       (12,850)        (9,772)     (5,639)
  Loss for the year..............................................        (2,342)        (3,078)     (4,133)
                                                                        --------       --------     -------
  Balance, end of year...........................................       (15,192)       (12,850)     (9,772)
                                                                         -------        -------     -------
Total stockholder's equity.......................................      $  7,641      $   9,539    $ 10,024
                                                                        ========       ========     =======

</TABLE>


           See accompanying notes to consolidated financial statements


                                       34

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996

<TABLE>
<CAPTION>
<S>                                                                  <C>           <C>       <C> 


(Dollars in thousands except share data)                                  1998         1997       1996
                                                                          ----         ----       ----

Cash flows from operating activities:
  Net loss....................................................          $(2,342)     $(3,078)     $(4,133)
Adjustments to reconcile net loss to net cash used in
  operating activities:
  Depreciation and amortization...............................            1,735        1,354        1,226
  Compensation cost for stock options.........................             ---          ---           846
  Foreign currency translation loss and other.................               20          319          105
Changes in assets and liabilities:
  Accounts receivable.........................................              (31)        (354)         (93)
  Other receivables...........................................               30         (202)        (132)
  Inventories.................................................           (1,187)      (1,398)        (514)
  Prepaid and other current assets............................               90           (6)          11
  Accounts payable............................................             (114)         260         (159)
  Accrued expenses............................................              102           37          829
                                                                         -------     --------      -------
      Net cash used in operating activities...................           (1,697)      (3,068)      (2,014)
                                                                          ------      --------     -------
Cash flows from investing activities:
  Purchases of property and equipment.........................           (1,895)      (4,211)      (1,161)
  Reimbursement from government grant.........................              929        1,775          960
  Investments in joint ventures...............................             ---           (50)        (950)
  Other.......................................................             (205)         (65)           1
                                                                         -------      --------     -------
      Net cash used in investing activities...................           (1,171)      (2,551)      (1,150)
                                                                          ------      --------     -------
Cash flows from financing activities:
  Cash contribution by minority shareholders
      in FCA..................................................             ---         1,683         ---
  Proceeds from issuance of common stock on
      exercise of options.....................................               41          328        1,500
  Proceeds from long-term debt................................             ---         4,750        3,500
  Restricted long-term cash deposits..........................             ---          ---        (2,498)
  Proceeds from notes payable.................................              597          394          200
  Repayment of notes payable..................................              (37)        ---          (200)
  Increase in long-term interest payable......................              416          418           42
  Other.......................................................              ---         ---           (23)
                                                                       ---------     ---------    --------
      Net cash provided by financing activities...............            1,017        7,573        2,521
                                                                        --------     ---------    --------
Effect of foreign exchange rate change on cash................             (127)         (16)        ---
                                                                        --------     ---------    --------
Increase (decrease) in cash...................................           (1,978)       1,938         (643)
Cash, beginning of year.......................................            2,128          190          833
                                                                        --------     ---------    --------
Cash, end of year.............................................         $    150      $ 2,128      $   190
                                                                       =========     =========    =======
Supplemental disclosure:
      Cash paid during the year for interest..................         $    274      $   222      $    18
      Shares issued for investment in joint venture...........         $    ---      $   425      $   ---

</TABLE>



          See accompanying notes to consolidated financial statements.


                                       35

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    (AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a) Incorporation and nature of operations

FiberCore,  Inc.  (the  "Company")  is  involved in the  research,  development,
production  and  sales of  optical  fiber and  optical  fiber  preforms  for the
telecommunications   industry.   FiberCore  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.  The Company
reports as a single segment enterprise.

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 of 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.


                                       36



<PAGE>



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

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

In 1998, 1997, and 1996 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.  $2,310),  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.

     (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



                                       37



<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (AMOUNTS 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) Research and Development

Research and development costs are expensed as incurred.

     (m) 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.

     (n) 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.

     (o) Stock based compensation

FASB Statement No. 123 "Accounting for Stock-Based  Compensation" defines a fair
value based method of accounting  for an employee stock option or similar equity
instrument.  However, the Company will continue to measure compensation cost for
employee stock compensation  transactions using the intrinsic value based method
of accounting  prescribed by APB Opinion No. 25 "Accounting  for Stock Issued to
Employees" as permitted under FASB 123.

     (p) Reclassifications

Certain amounts in the prior year financial statements have been reclassified to
conform to the 1998 presentation.

(2) EARNINGS PER SHARE

Basic  earnings  per share  ("EPS") is based on the weighted  average  number of
common  shares  outstanding,  excluding  common stock  equivalents.  Diluted EPS
reflects the  potential  dilution of EPS that could occur if securities or other
contracts to issue common shares were exercised or converted. At




                                       38



<PAGE>



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

(2) EARNINGS PER SHARE (CONTINUED):

December 31, 1998,  1997 and 1996,  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.


<TABLE>
<CAPTION>
<S>                                                       <C>            <C>          <C> 
                                                          1998           1997         1996
                                                          ----           ----         ----

         Employee stock options                         2,020,225     1,387,778     978,434
         Warrants to acquire common stock               4,903,185     4,968,818   4,549,249
         Common stock to be issued for
             convertible debt                           4,927,232     2,060,308   1,881,446
                                                        ---------     ---------   ---------
                Total                                  11,850,642     8,416,904   7,409,129
                                                       ==========     =========   =========
</TABLE>

(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. Due to
the  current  economic  situation  in  Malaysia  and the  Pacific  Rim the  debt
financing  required for the project has not, as yet, been obtained.  The Company
and the other  shareholders in FCA are continuing to seek alternative  financing
and additional equity partners for FCA.

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



                                       39



<PAGE>



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

(3) ACQUISITIONS AND STRATEGIC INVESTMENTS (CONTINUED):

began  operations in 1998.  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,
1998 the Company was contingently  liable for these loans in the amount of $792.
Subsequent  to  December  31,  1998,  in order to provide  additional  operating
capital to MEFC,  the  capital of MEFC was  restructured  and a new  shareholder
acquired a 14% interest in MEFC. As a result of this restructuring the Company's
equity in MEFC was reduced  from 15% to 8% and 800 Saudi  Rials,  (approximately
$213), of the Company's equity was converted to a long-term loan to MEFC.

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, 1997 or 1998. 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. Due to the political and economic situation in Pakistan this
project has been further delayed and will be reviewed in 1999.

(4) RECEIVABLES

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

                                              1998        1997      1996
                                              ----        ----      ----

Balance at beginning of period............... $  33       $36        $39
Additions charged to expense.................   167        --          1
Deductions...................................    --        (3)        (4)
                                              -----       -----     ------
Balance at end of period.....................  $200       $33        $36
                                               ====       ===        ===
                                                
Other receivables consist of the following at December 31:

                                                   1998            1997
                                                   ----            ----

German government grants..................         $419             $423
Value added tax...........................           99              112
Other.....................................           61               29
                                                   ----             ---- 
          Total...........................         $579             $564
                                                   ====             ====
                                                    
Notes  receivable  of  $4,912 at  December  31,  1998 are due from the  minority
shareholders in FCA for the balance of their capital contribution and are due in
1999.


                                       40


<PAGE>



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

(5) INVENTORIES

Inventories consist of the following at December 31:

                                                 1998    1997
                                                 ----    ----

Raw materials............................      $1,545   $   997
Work-in-process..........................       1,161       315
Finished goods...........................       1,774     1,745
                                                -----     -----
    Total................................      $4,480    $3,057
                                                =====     =====

(6) PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31:

                                         ESTIMATED
                                         USEFUL LIVES    1998              1997
                                         ------------    ----              ----

Office equipment......................   2-5 years     $    315         $   243
Machinery and equipment...............   2-12 years       9,899           5,619
Furniture and fixtures................   5-7 years           21              21
Leasehold improvements................   3-10 years         395               7
Construction in progress..............                      706           3,267
                                                        -------           -----
                                                         11,336           9,157
Less grant proceeds received..........                   (3,733)         (2,598)
                                                        -------           -----
         Total........................                  $ 7,603          $6,559
                                                         ======           =====

Depreciation on property and equipment charged to expense was $928 in 1998, $560
in 1997, and $548 in 1996. During 1998 and 1997 the Company capitalized interest
costs of $132 and $178,  respectively,  on the  expansion  project at  FiberCore
Jena.

(7) ACCRUED EXPENSES

Accrued expenses consist of the following at December 31:

                                                  1998              1997
                                                  ----              ----
Accrued wages, benefits & taxes............... $   457           $   547
Accrued interest..............................     218               116
Accrued legal and audit.......................      39                80
Other    .....................................     557               385
                                                 ------            ------
         Total................................  $1,271           $ 1,128
                                                 =====             =====
                                 






                                       41

<PAGE>

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

(8) NOTES PAYABLE

Notes payable consist of the following at December 31:


<TABLE>
<CAPTION>
<S>                                                                               <C>        <C> 
                                                                                  1998       1997
                                                                                  ----       ----

Notes payable to the spouses of officers of the Company, with interest
at prime plus 1% (9.25% at December 31, 1998), due July 31, 1999.                $   500       --

Convertible  note payable to a director,  interest at the prime rate plus
1% (9.25%,  at December 31, 1998) with  principal and interest due September 30,
1999, all principal and accrued interest, if any, convertible
into common stock of the Company at approximately $.1875 per share.                   249     $218

Note payable to Techman International Corporation with interest at
prime plus 1% due December 31, 1999.                                                  150      150

Note payable to an officer of the Company, interest at prime plus 1%,
due September 17, 1999.                                                                50       50

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
Amounts outstanding under revolving lines of credit from banks with
interest at 8.0%.                                                                     716      139
                                                                                    ------     ---
                  Total                                                            $1,665      594
                                                                                    =====      ===
</TABLE>


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 9.25%), 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. Interest expense on these notes was
$49 and $48 in 1998 and 1997, respectively.

In  September  1997,  the  Company  borrowed  $150  from  Techman  International
Corporation.  The note bears  interest  at prime plus 1% per year and matured 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 1998 and 1997, the Company incurred interest
expense  of $14 and $4 on this note,  respectively.  On January 1, 1999 the note
was renewed and is payable on December 31, 1999.




                                       42

<PAGE>

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

(8) NOTES PAYABLE (CONTINUED):

Also, in 1997 the Company  borrowed $50 from the  President of the Company.  The
interest rate is prime plus 1%. The note was renewed and is due on September 17,
1999. 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 $4 and $1 in 1998 and 1997, respectively.

In September and November 1997 the Company also borrowed $75 under various notes
with interest at prime plus 1%. 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.  The notes have been  repaid.  Interest  expense on
these notes was $2 in 1997.

The Company's  subsidiary,  FiberCore Jena,  maintains two lines of credit of DM
1,000 (approximately US $601) each with German banks. The notes bear interest at
8% per year.  Interest  expense in 1998 was $29 on  amounts  drawn  under  these
notes.  One of the  lines  of  credit  is  collateralized  by the  inventory  of
FiberCore Jena.

All of the proceeds of the notes were used for working capital.




                      (this space intentionally left blank)



                                       43

<PAGE>



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

(9) LONG-TERM DEBT
<TABLE>
<CAPTION>
<S>                                                                               <C>             <C>

Long-term debt consists of the following at December 31:                               1998           1997
                                                                                       ----           ----

Note payable to Berliner Bank, interest at 6.25%, due September 30, 2006.            $4,621          $4,280

Convertible  note  payable  to AMP  Incorporated,  interest  at  3-month  London
Interbank Offered Rate plus one percent (6.31% at December 31,
 1998), due April 17, 2005.                                                           2,000           2,000

Note payable to AMP, interest at prime plus one percent (9.25% at December
31, 1998), due November 27, 2006.                                                     3,000           3,000

Discount attributable to warrants issued in conjunction with the $3,000
note above.                                                                            (763)           (859)

Note payable to shareholder with interest at prime
plus 1% (9.25% at December 31, 1998) due March 6, 2000.                                 220             220

Note payable to Techman International Corporation with interest at prime
plus 1% (9.25% at December 31, 1998), due April 16, 2000.                               250             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
                                                                                     --------         ------
                  Total                                                              $9,328           $9,391
                                                                                     ========        =======
</TABLE>


During the year ended  December  31,  1997,  the Company  drew down 7,700 German
marks (approximately  $4,621) 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 $2,310.

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%, (6.31% at December 31, 1998). 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.  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). 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


 


                                       44

<PAGE>

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

(9) LONG-TERM DEBT (CONTINUED):

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.  On  November  27,  1998,  as a result of the  valuation  guarantee,  the
conversion price was adjusted to $0.66 per share.

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,  (9.25% at December 31, 1998). 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 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.  

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.

On November 27, 1998, as a result of the valuation guarantee, the exercise price
of the  warrants  was  reduced  to  $0.7232  per share and the  number of shares
issuable on exercise was  increased to  2,765,487.  Interest  expense on the AMP
notes was $416,  $418, and $335, for the years ended December 31, 1998, 1997 and
1996, respectively.



                                       45


<PAGE>

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


(9) LONG-TERM DEBT (CONTINUED):

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 $21 and $14 in 1998 and 1997,
respectively.

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 $24 and
$17 in 1998 and 1997, respectively.

Scheduled  principal  maturities of long-term debt,  excluding $763 of discounts
attributable to warrants, are as follows at December 31, 1998:

         2000...............................         $     470
         2005...............................             2,000
         2006...............................             7,621
                                                       -------
                           Total............           $10,091
                                                        ======

(10) COMMITMENTS AND CONTINGENCIES

The Company and its subsidiaries have entered into various leases for its office
and  production  space.  The  Company's  office lease is on a monthly basis at a
monthly rental of $2.

FCJ conducts its  operations  from premises  under an operating  lease with SICO
Quarzschmelze  Jena GmbH  ("SICO").  The lease provides for fixed monthly rental
payments of $34 through its  expiration  in December 31, 2001,  and is renewable
for up to 25 years.




                                       46

<PAGE>



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

(10) COMMITMENTS AND CONTINGENCIES (CONTINUED):

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

         1999..................................    $   414
         2000..................................        416
         2001..................................        403
         2002..................................         16
         2003 .................................         16           
         Thereafter ...........................         16
                                                     ------
                  Total........................    $ 1,281
                                                     ======

Included in the  statements of operations for the years ended December 31, 1998,
1997 and 1996 is rent expense of $372, $411 and $456, respectively.

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  multimode  optical  fiber or optical  fiber  preforms  in the United
States in violation of Corning's patent,  except to certain customers.  In turn,
Corning  agreed not to seek damages and has  dismissed  the action.  The Company
also agreed to conduct an arbitration process to determine whether the Company's
singlemode  fiber  violates the Corning  patent.  In March 1999,  the arbitrator
issued an opinion concluding that FiberCore's  singlemode fiber does not violate
the Corning patent.  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 has
appealed this decision to Germany's highest court. 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.


                                       47


<PAGE>



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

(10) COMMITMENTS AND CONTINGENCIES (CONTINUED):

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  certain  debt of a former  subsidiary,  Allied
Controls, Inc. ("Allied"), approximating $733.

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,  1998 the  Company was
contingently liable for these loans in the amount of $792.

(11) STOCKHOLDERS' EQUITY

The  following  represents  the stock  option  activity  during the years  ended
December 31, 1998, 1997, and 1996:

<TABLE>
<CAPTION>
STOCK OPTIONS       $.003     $0.1875 $0.68      $1.09     $1.16   1.36     $1.43    $1.45    $1.50    $1.51     $1.58    $2.00
-------------       -----     ------- -----      -----     -----   ----     -----    -----    -----    -----     -----    -----
<S>                 <C>         <C>   <C>        <C>                       <C>               <C>      <C>                   
Balance,
December 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,
December 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       --         --      --       --      300,000  --         --        --       --       --     409,500     --

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

Balance,
December 31, 1997     73,427     --    54,248          0  387,492       0   67,188   148,709  41,993   178,679   409,500   26,542

Granted in 1998       --       695,703   --           --       --      --     --        --       --       --        --       --
 
Exercised in 1998   (36,714)     --      --           --       --      --     --        --       --       --        --     (26,542)
                     ------      --      --           --       --      --     --        --       --       --        --     --------

Balance,
December 31, 1998     36,713   695,703 54,248          0  387,492       0   67,188   148,709  41,993   178,679   409,500       0
                      ======   ======= ======          -  =======       =   ======   =======  ======   =======   =======  ========
Options
Exercisable           36,713         0 54,248          0  387,492       0   67,188   148,709  41,993   178,679   367,000       0
                      ======   ======= ======          -  =======       =   ======   =======  ======   =======   =======  ========
</TABLE>


Options vest at rates stated in each  employee's  contract,  principally  at the
grant date or the  anniversary  date of the employee's date of hire. The options
granted in 1998 expire ten (10) years from the grant date. Options granted prior
to 1998 have no expiration date.



                                       48

<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (AMOUNTS 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>
                                     1998                              1997                            1996
                                     ----                              ----                            ----

                                              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                         1,387,778         $1.32            978,434         $0.98           577,893          $0.81

Exercised                      (63,256)        $0.84           (300,156)        $0.40             ---             ---

Granted                        695,703        $0.1875           709,500         $1.40           400,541          $1.22
                            ----------                           -------                        -------

Balance
end of year                  2,020,225         $0.95          1,387,778         $1.32           978,434          $0.98
                             =========                        =========                         =======

Exercisable at end of
year                         1,282,022         $1.34          1,072,064         $1.34           905,008          $1.06
                             =========                        =========                         =======
</TABLE>




<TABLE>
<CAPTION>
                                                      WEIGHTED                                       WEIGHTED
                                                      AVERAGE                                        AVERAGE
                   RANGE OF            OPTIONS        EXERCISE      REMAINING         OPTIONS        EXERCISE
                EXERCISE PRICE       OUTSTANDING       PRICE          YEARS         EXERCISABLE       PRICE
                --------------       -----------       -----          -----         -----------       -----

<S>             <C>                    <C>            <C>            <C>               <C>          <C>  
                $0.003                   36,713        $0.003             *              36,713       $.003
                $0.1875                 695,703        $0.1875           10                --           --
                $0.68 - $1.16           441,740        $1.10              *             441,740       $1.10
                $1.43 - $1.58           846,069        $1.52              *             803,569       $1.53
                                      ----------        ----                         ----------       -----
                $.003 - $1.58         2,020,225        $0.95              *           1,282,022       $1.34
                                      =========         ====                         ==========       =====
</TABLE>

           * Options granted and exercisable have no expiration date.


                                       49
<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (AMOUNTS 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:

<TABLE>
<CAPTION>
                                                                1998                       1997                     1996
                                                                ----                       ----                     ----
 

Net loss
--------
<S>                                                           <C>                       <C>                       <C>     
  As reported                                                 $(2,342)                  $(3,078)                  $(4,133)
                                                               ======                    ======                    ======

  Pro forma                                                   $(2,391)                  $(3,174)                  $(4,295)
                                                               ======                    ======                    ======

Basic and diluted loss per share
--------------------------------
  As reported                                                 $ (0.07)                  $ (0.09)                  $ (0.13)
                                                               ======                    ======                    ======

  Pro forma                                                   $ (0.07)                  $ (0.09)                  $ (0.14)
                                                               ======                    ======                    ======
</TABLE>


The weighted  average fair value of options  granted during 1998,  1997 and 1996
was $0.07, $0.14 and $2.52 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:

<TABLE>
<CAPTION>
                                                     Stock
         Assumptions                                 Plan
         -----------                                 ----
<S>                                                 <C>
         Dividend yield                              --
         Risk-free interest rate                     5.5%
         Expected life                               10 years in 1998 and 2 years in 1997 and 1996
         Expected volatility                         50% in 1998, 20% in 1997 and 40% in 1996
</TABLE>


                                       50
<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (AMOUNTS 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, 1998, 1997, and 1996, at the exercise prices indicated.

<TABLE>
<CAPTION>
WARRANTS           $0.19   $0.63   $0.69    $0.72     $0.78   $0.82   $0.95     $1.31  $1.43   $1.45     $1.53    $1.63     $1.81
--------           -----   -----   -----    -----     -----   -----   -----     -----  -----   -----     -----    -----     -----
<S>                <C>     <C>     <C>      <C>       <C>     <C>     <C>       <C>    <C>    <C>       <C>      <C>       <C>  
Balance,
  Dec. 31, 1995                                                        83,985  598,423  5,511                      550,696

Issued in 1996                                                                                 1,382,648           697,546   230,440
                  ------------------------------------------------------------------------------------------------------------------
Balance,
  Dec. 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,
  Dec. 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

Granted in 1998   249,074                  2,765,487

Expired/
  Canceled 1998                                                                               (1,382,648)        (697,546)
                  ------------------------------------------------------------------------------------------------------------------
Balance
  Dec. 31, 1998   249,074  69,132 117,500  2,765,487  115,220 640,445  83,985  524,997  5,511      0     101,394    0       230,440
                  =======  ====== =======  =========  ======= =======  ======  =======  =====      =     =======    =       =======
</TABLE>


The weighted  average fair value of warrants  granted during 1998, 1997 and 1996
was $0.01, $0.18 and $1.05 based on total warrants of 3,014,561,  1,043,691, and
2,310,634  granted  in 1998,  1997 and  1996,  respectively.  The  warrants  are
exercisable  from the date of the grant and expire at  various  dates to October
2003.

(12)     INCOME TAXES

The significant components of the net deferred tax asset as of December 31, 1998
and 1997 were as follows:

<TABLE>
<CAPTION>
                                                          1998              1997
                                                          ----              ----
<S>                                                    <C>                <C>    
Net operating loss carry forwards                      $ 4,456            $ 3,687
Less valuation allowance                                (4,456)            (3,687)
                                                        ------             ------
Net deferred tax asset                               $     0           $    0    
                                                      ========          =========
</TABLE>


The Company has incurred losses in 1995 through 1998, and,  accordingly there is
no income tax provision.

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.




                                       51
<PAGE>



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

(12)     INCOME TAXES (CONTINUED)

The Company has net operating  loss carry  forwards  available of  approximately
$8,967, at December 31, 1998 for federal and state tax purposes. The majority of
the net operating loss carry forwards expire in the years 2009 through 2013.

FCJ has net operating loss carry forwards at December 31, 1998 of  approximately
$1,932 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,  1998 for  federal  and  state tax
purposes. The loss carry forwards expire between the years 2001 and 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          1998                 1997
                           --------          ----                 ----

                                              AMOUNT       %   AMOUNT      %
                                              ------       -   ------      -

                              B              $ 120         14    $ 87       9
                              C                212         25     ---     ---
                              E                381         44     381      39

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

<TABLE>
<CAPTION>
         CUSTOMER                        1998                      1997                     1996
         --------                        ----                      ----                     ----

                                          AMOUNT     %     AMOUNT        %        AMOUNT     %
                                          ------     -     ------        -        ------     -

<S>                                      <C>         <C>   <C>          <C>     <C>          <C>
                A                        $1,859      23    $2,990       42      $4,524       56
                B                         1,801      22     1,238       17       1,217       15
                C                         1,107      13       ---       --        ---       ---
                D                           832      10       ---       --        ---       ---
</TABLE>

The Company  purchases  raw materials  from various  suppliers and in some cases
there are a limited number of suppliers for certain materials. In 1998, 1997 and
1996 one supplier accounted for 90%, 50%,




                                       52
<PAGE>



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

(13)     MAJOR CUSTOMERS AND SUPPLIERS (CONTINUED):

and 46%,  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

The former  managing  director of FCJ was the  controlling  shareholder of SICO.
Transactions  with SICO during the years ended December 31, 1998,  1997 and 1996
consist of the following:

<TABLE>
<CAPTION>
                                                                                1998         1997             1996
                                                                                ----         ----             ----
<S>                                                                            <C>          <C>               <C> 
Rent of premises.......................................................        $354          $331             $356
Purchase of services and utilities.....................................         318           286              611
Other expenses.........................................................         ---            17              ---
Sales of fibers........................................................          25            49              176
</TABLE>

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  maintained a consulting  agreement with Techman under which Techman
provided administration, marketing, technical and personnel advisory services to
the Company.  The agreement was terminated in 1997. For the years ended December
31, 1997 and 1996, the Company incurred costs of $54 and $36, 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, 1998, 1997 and 1996, the Company incurred costs of $46,
$46, and $65, respectively for such services.


                                       53
<PAGE>



                        FIBERCORE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                    (AMOUNTS 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, 1998,  1997 and
1996:

<TABLE>
<CAPTION>
                                                                            1998             1997                 1996
                                                                            ----             ----                 ----
<S>                                                                     <C>              <C>                 <C>      
Net sales to customers in:
  United States...............................................          $     135        $     128           $     263
  Germany.....................................................              5,015            4,859               6,315
  United Kingdom..............................................              1,801            1,234               1,126
  Other.......................................................              1,250              857                 392
                                                                          -------           ------             -------

Net sales as reported in the accompanying
  consolidated statements of operations.......................           $  8,201         $  7,078            $  8,096
                                                                           ======           ======             =======


Long-lived assets:
  United States...............................................            $ 9,499          $ 9,936            $  8,214
  Germany.....................................................              4,885            4,580               6,205
  Malaysia....................................................                387                0                   0
                                                                           ------           ------            --------

  Total long-lived assets   ..................................            $14,771          $14,516             $14,419
                                                                           ======           ======              ======
</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 1998 and 1997.

(16)     ACCOUNTING PRONOUNCEMENTS

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging Activities", which requires that an entity recognize all
derivatives as either assets or liabilities in the  consolidated  balance sheets
and measure those  instruments at fair value. The accounting for changes in fair
value of a  derivative  depends on the intended  use of the  derivative  and its
resulting  designation.  The Company is evaluating  the effect this new standard
will have on the  Company's  financial  statements.  The  Company is required to
adopt this standard by January 1, 2000.

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

         None.



                                       54
<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, 1998.

<TABLE>
<CAPTION>
            NAME           AGE                         POSITION

<S>                        <C>     <C>                                      
Dr. Mohd A. Aslami         52      Chairman of the Board of Directors, Chief
                                   Executive Officer, President and Director
Charles De Luca            61      Executive Vice President, Secretary and Director
                                   of the Company and General Manager of the Company's
                                   ALT subsidiary
Michael J. Beecher         54      Chief Financial Officer and Treasurer
Hans F.W. Moeller          69      Managing Director of FiberCore Jena GmbH
Steven Phillips            53      Director
Hedayat Amin-Arsala        57      Director  (appointed in January 1999)
William T. Hanley          51      Director  (appointed in January 1999)
</TABLE>

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  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.


                                       55
<PAGE>


         DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED):

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 that 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.

Mr.  Amin-Arsala held various senior positions with the World Bank for 18 years.
He was in charge of World Bank  operations  in countries of East and South Asia,
retiring in 1987.  He served as the  Minister of Finance for the Afghan  Interim
Government  from 1989 to 1992, and Minister of Foreign  Affairs for  Afghanistan
from 1993 to 1996. Since 1996, Mr. Amin-Arsala has acted in an advisory capacity
to the United Nations and the United States Agency for International Development
and has  served a  number  of  governmental  and  non-governmental  humanitarian
organizations.

Mr.  Hanley  has  been  affiliated  with  Galileo  Corporation   ("Galileo")  of
Sturbridge,  Massachusetts  for over 16 years.  He joined Galileo in May 1982 as
Vice  President of  Manufacturing.  He became Vice  President  of  Manufacturing
Operations in April 1983 and was named Executive Vice President, Chief Operating
Officer and a Director on January 1, 1984. He was appointed  President and Chief
Executive officer on August 1, 1984 and served in that position through November
17, 1998.  Mr. Hanley is currently a consultant  to Galileo.  In 1993 Mr. Hanley
co-founded the Center for Advanced Fiberoptic  Applications (CAFA) and was named
the Worcester Business Journal's Business Leader of the Year in 1994, as well as
one of the five most influential business people of Central Massachusetts. He is
currently a business  consultant and a member of several Boards of Directors and
Advisory  Boards for companies in Central  Massachusetts.  Mr. Hanley has a B.S.
degree in Glass  Science from Alfred  University,  Alfred New York and graduated
with distinction from Corning Community College, Corning, New York.

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 Year    Salary$    Bonus$      Other Annual     Restricted Stock       Securities
                                                                              Compensation         Award(s)$          Underlying
                                                                                                                    Options/SARs(#)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>          <C>      <C>         <C>                    <C>             <C>             
Dr. Mohd Aslami                            1998         156,583     ---            ---                                  184,911
  Chairman, Chief Executive                1997         146,500     ---            ---                                  359,752
  Officer & President                      1996         146,500     ---            ---                                   60,913
------------------------------------------------------------------------------------------------------------------------------------
Charles De Luca                            1998          97,116     ---            ---                                  106,324
  Executive Vice President                 1997          98,398     ---            ---                                  189,502
  & Secretary                              1996          98,398     ---            ---                                   46,050
------------------------------------------------------------------------------------------------------------------------------------
Michael J. Beecher (1)                     1998         100,000     ---            ---                                      ---
  Chief Financial Officer                  1997          85,000     ---            ---                                  120,000
  & Treasurer                              1996          53,708     ---            ---                                   64,248
------------------------------------------------------------------------------------------------------------------------------------
Hans Moeller                               1998         120,000     ---            ---                                      ---
  Managing Director,                       1997         120,000     ---            ---                                  300,000
  FiberCore Jena GmbH                      1996          98,596     ---            ---                                   55,193
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Started employment on April 15, 1996.


                                       56
<PAGE>


                       EXECUTIVE COMPENSATION (CONTINUED):

OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table lists the options  granted to the executive  officers during
the year ended December 31, 1998.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                              INDIVIDUAL GRANTS
------------------------------------------------------------------------------------------------------------------------------
         Name             Number of      % of Total     Exercise       Expiration         Potential       Potential realized
         ----             Securities      Options/       or base          Date         realized values    values at assumed
                          Underlying    SARs Granted      price           ---            at assumed        annual rates of  
                           Options/     to Employees    ($/Share)                      annual rates of   stock price apprec.
                             SARs         in Fiscal                                     stock price       for option term
                           Granted          Year                                        apprec. For           -----------
                             (#)            ----                                       option term            10% ($)
                             ---                                                       -----------
                             ---                                                          5%($)   
--------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>                <C>      <C>         <C>                    <C>                   <C>    
Dr. Mohd Aslami (a)            184,911            27%      $0.1875     Dec. 31, 2008            $ 1,473               $22,883
------------------------------------------------------------------------------------------------------------------------------
Charles De Luca (a)            106,324            15%      $0.1875     Dec. 31, 2008            $   847               $13,157
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
a. The market value per share at the date of grant was $0.12.

             (The remainder of this page intentionally left blank.)


                                       57
<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, 1998.
<TABLE>
<CAPTION>
-------------------------- ------------------- -------------- --------------------------------- -------------------------------
                                                                    Number of Securities             Value of unexercised    
                                                                   underlying unexercised        In-the-money 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                   ---               ---               420,665/184,911                      (Note 1)
-------------------------- ------------------- -------------- --------------------------------- -------------------------------
Charles De Luca                   ---               ---               235,552/106,324                      (Note 1)
-------------------------- ------------------- -------------- --------------------------------- -------------------------------
Michael J. Beecher                ---               ---                134,248/40,000                      (Note 1)
-------------------------- ------------------- -------------- --------------------------------- -------------------------------
Hans Moeller                      ---               ---                  300,000/0                         (Note 1)
-------------------------- ------------------- -------------- --------------------------------- -------------------------------
</TABLE>

  Note 1 - At December 31, 1998 the fair value was less than the exercise price.

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

The Company maintains a compensation plan for outside directors,  (directors who
are not employees of the  Company),  wherein each outside  director  receives an
initial  award of 10,000  non-qualified  stock  options and a fee of $10,000 per
year,  payable  quarterly,  and $250 for each  Board  of  Directors  meeting  or
Committee of the Board meeting attended. No directors received compensation as a
director in 1998.

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, 1998,  Mr.  Phillips' fee was
$45,860.


                                       58
<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 1, 1999,  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.
<TABLE>
<CAPTION>

          NAME
           AND                                                     SHARES                              %
        ADDRESS(1)                                                  OWNED                            OWNED
        ----------                                                  -----                            -----

<S>                                                               <C>           <C>        <C> 
Mohd Aslami..........................................             7,760,578     (2), (10)             16.2
Charles De Luca......................................             4,872,101     (3), (10)             10.2
Steven Phillips......................................             1,250,795     (4)                    2.6
Hans F.W. Moeller....................................               388,235     (5)                    0.8
Michael J. Beecher...................................               174,248     (6)                    0.4
Hedayat Amin-Arsala..................................             2,358,424     (7)                    4.9
William T. Hanley....................................                10,000     (8)           less than .1
AMP Incorporated.....................................             9,244,297     (9),(10)              19.4
All directors and executive officers
  as a group (7 persons).............................            16,814,381                            35.1%
</TABLE>

------------------------------------
(1)      The  addresses of the persons and  entities  named in this table are as
         follows:   Messrs.  Aslami,  De  Luca,  Phillips,   Moeller,   Beecher,
         Amin-Arsala  and  Hanley,  c/o  FiberCore,  Inc.,  P. O. Box  180,  253
         Worcester 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,  1,009,188  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  668,076 options and warrants to purchase shares
         of the Company.

(3)      Includes  1,395,096 shares and Warrants to purchase 115,220 shares held
         by Elizabeth De Luca, Mr. De Luca's wife, 507,715 shares held by Mr. De
         Luca's children, 458,914 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
         341,876 options.


                                       59
<PAGE>




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

(4)      Includes  433,392 options and Warrants  issued to One Financial  Group,
         Incorporated, a Company controlled by Mr. Phillips and 13,750 Warrants.

(5)      Includes 300,000 options.

(6)      Includes 174,248 options.

(7)      Includes 10,499 shares held by Mr. Amin-Arsala's wife, 1,328,393 shares
         into which the note held by Mr. Amin-Arsala is convertible, Warrants to
         purchase  249,074  shares and  options to acquire  10,000  shares to be
         issued to Mr. Amin-Arsala for his appointment as a director.

(8)      Includes  options to acquire  10,000  shares to be issued to Mr. Hanley
         for his appointment as a director.

(9)      Includes  3,419,977  shares into which the AMP Note is  convertible  at
         $0.6641 per share and Warrants to purchase 2,765,487 shares.

(10)     Under the AMP loan,  the Company,  Mohd A. Aslami,  Charles De Luca, M.
         Mahmud Awan (a former director) 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 remainder of this page is intentionally left blank)


                                       60
<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  term was
amended to extend the current  lease term to December 31, 2001 at a monthly rent
of DM  50,000  (approximately  $30,000)  with an option to renew the lease for a
period up to 25 years.

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.  The Agreement may be terminated
on 30 days notice and no commissions  have been earned by Techman as of December
31, 1998.

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.  FOI,  a company  incorporated  in
Islamabad  under the laws of Pakistan,  was formed to manufacture  optical fiber
products in Pakistan.  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.

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 September  1997,  the Company  borrowed  $150,000 from Techman  International
Corporation.  The note bears  interest  at prime plus 1% per year and matured 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. The note was renewed in 1999 and matures on December 31, 1999.


                                       61
<PAGE>




           CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED):

The Company  maintained a consulting  agreement with Techman under which Techman
provided administration, marketing, technical and personnel advisory services to
the Company. The agreement has been terminated. For the years ended December 31,
1997 and 1996,  Techman was paid  $54,000 and  $36,000,  respectively,  for such
services.

DEALINGS WITH AMP

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.  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.  The  remaining  outstanding
principal  plus  accrued  interest  may be  converted  into Common  Stock of the
Company at $0.66 per share, until maturity, April 17, 2005.

         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.  Under this  contract,  the Company  sold fiber  totaling
approximately  $1,801,000 and $1,238,000 in 1998 and 1997,  respectively,  to an
AMP cabling contractor in Europe. The Company expects to begin supplying optical
fiber to AMP in the United  States in 1999.  On November 27,  1996,  the Company
obtained an  additional  $3,000,000  loan at an interest  rate of prime plus 1%,
from AMP to  facilitate  the funding of the expansion of the Jena  Facility.  In
exchange  AMP  received  a 10 year  note  and  common  stock  purchase  warrants
exercisable  until  November 27,  2001.  Under the terms of the loan and warrant
agreement,  on  November  27,  1998 the  number of  warrants  was  increased  to
2,765,487 and the warrant  exercise price was adjusted to $0.7232 per share.  In
connection  with the new AMP loan and the  expansion of the Jena  Facility,  the
Company  was  awarded  a grant  from  the  German  Government  of  approximately
$2,700,000 and received a loan from Berliner Bank of  approximately  $4,621,000.
As part of the new $3,000,000 loan from AMP, Mohd A. Aslami, Charles De Luca, M.
Mahmud Awan (a former  director of the  Company)  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.  AMP  has  waived  the
implementation of this slate of directors.  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.

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
9.25%),  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.



                                       62
<PAGE>


           CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED):

         Also,  in 1997,  the Company  borrowed  $50,000  from Dr.  Aslami.  The
interest  rate is prime plus 1% and the note matured 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. The note
was renewed in 1998.

         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. The note was repaid in 1998.

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, 1998,  Mr.  Phillips' fee was
$45,860.

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                                       63
<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  incorporated  herein by  reference  to the Annual
                   Report on Form 10-K for the year  ended  December  31,  1997,
                   filed with the Commission on March 26, 1998)
                   (xx denotes filed herewith)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
<S>           <C>  
 +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.
 +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.
</TABLE>

                                       64
<PAGE>



<TABLE>
<S>         <C>
 +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       Convertible   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  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.
</TABLE>

                                       65
<PAGE>

<TABLE>
<S>         <C>
 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.
 xx27         Financial Data Schedule,  which is submitted electronically to
              the  Securities  and  Exchange   Commission  for   information
              purposes only.
</TABLE>

(B)      REPORTS ON FORM 8-K

         None.


                                       66
<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, 1999
                      -------------------------------
                 Dr. Mohd A. Aslami
                 Chairman, Chief Executive Officer
                 and President (Principal Executive Officer)

                 By:  /s/  Michael J. Beecher                   March 26, 1999
                      -------------------------------
                 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.

<TABLE>
<S>                                     <C>                                               <C> 
/s/  Mohd A. Aslami                      Chairman of the Board,                            March 26, 1999
-------------------                      President                    
Dr. Mohd A. Aslami                       Chief Executive Officer,     
                                         Director                     

                                         

/s/  Charles De Luca                     Executive Vice President                          March 26, 1999
--------------------                     Secretary and Director
Charles De Luca                          

/s/  Steven Phillips
--------------------
Steven Phillips                          Director                                          March 26, 1999
</TABLE>


                                       67