U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
(Mark one)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the quarterly period ended June 30, 1999
[ ] 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 0-24564
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FIBERSTARS, INC.
(Exact name of registrant as specified in its charter)
-----------------
California 94-3021850
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2883 Bayview Drive, Fremont, CA 94538
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (510) 490-0719
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ____
Number of shares of Common Stock outstanding as of June 30, 1999: 3,987,236
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Index to Exhibits is at page 15
Page 1
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<TABLE>
FIBERSTARS, INC.
TABLE OF CONTENTS
<CAPTION>
Page
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Part I - FINANCIAL INFORMATION
<S> <C>
Item 1 Financial Statements:
a. Consolidated Balance Sheets
June 30, 1999 and December 31, 1998.........................................3
b. Consolidated Statements of Operations
Three and six months ended June 30, 1999 and 1998...........................4
c. Consolidated Statements of Comprehensive Operation
Three and six months ended June 30, 1999 and 1998...........................5
d. Consolidated Statements of Cash Flows
Six months ended June 30, 1999 and 1998.....................................6
e. Notes to Financial Statements.............................................7-8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................................9-13
Part II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K................................................14
Signatures......................................................................14
EXHIBITS
Index to Exhibits...............................................................15
</TABLE>
Page 2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FIBERSTARS, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
June 30, December 31,
1999 1998
-------- --------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,757 $ 1,290
Accounts receivable trade, net 5,738 5,210
Notes and other accounts receivables 414 771
Inventories 4,160 4,179
Prepaids and other current assets 506 369
Deferred income taxes 254 507
-------- --------
Total current assets 12,829 12,326
Fixed assets, net 1,575 1,522
Goodwill, net 4,060 4,403
Investment in joint venture 2 18
Other assets 169 566
Deferred income taxes 89 89
-------- --------
Total assets $ 18,724 $ 18,924
======== ========
LIABILITIES
Current Liabilities:
Accounts payable $ 2,046 $ 2,598
Accrued expenses 2,034 2,198
Current portion of long-term debt 114 107
-------- --------
Total current liabilities 4,194 4,903
Long-term debt, less current portion 610 667
-------- --------
Total liabilities 4,804 5,570
-------- --------
SHAREHOLDERS' EQUITY
Common stock 0 0
Additional paid-in capital 13,946 13,930
Note receivable from shareholder (75) (86)
Cumulative translation adjustments (58) 0
Retained earnings (accumulated deficit) 107 (490)
-------- --------
Total shareholders' equity 13,920 13,354
-------- --------
Total liabilities and shareholders' equity $ 18,724 $ 18,924
======== ========
The accompanying notes are an integral
part of these financial statements
Page 3
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<TABLE>
FIBERSTARS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 8,845 $ 6,162 $ 16,027 $ 10,821
Cost of sales 5,106 3,657 9,312 6,801
-------- -------- -------- --------
Gross profit 3,739 2,505 6,715 4,020
-------- -------- -------- --------
Operating expenses:
Research and development 324 344 653 651
Sales and marketing 2,101 1,343 3,959 2,620
General and administrative 609 378 1,152 779
-------- -------- -------- --------
Total operating expenses 3,034 2,065 5,764 4,050
-------- -------- -------- --------
Income from operations 705 440 951 (30)
Other income:
Equity in joint venture's loss (15) (20) (15) (20)
Interest income, net 1 45 5 108
-------- -------- -------- --------
Income before income taxes 691 465 941 58
Provision for income taxes (254) (174) (344) (28)
-------- -------- -------- --------
Net income $ 437 $ 291 $ 597 $ 30
======== ======== ======== ========
Net income per share - basic $ 0.11 $ 0.08 $ 0.15 $ 0.01
======== ======== ======== ========
Shares used in per share calculation - basic 3,983 3,554 3,983 3,534
======== ======== ======== ========
Net income per share - diluted $ 0.11 $ 0.08 $ 0.15 $ 0.01
======== ======== ======== ========
Shares used in per share calculation - diluted 4,053 3,639 4,041 3,637
======== ======== ======== ========
<FN>
The accompanying notes are an integral
part of these financial statements
Page 4
</FN>
</TABLE>
<PAGE>
<TABLE>
FIBERSTARS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATION
(amounts in thousands except per share amounts)
(unaudited)
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net income $ 437 $ 291 $ 597 $ 30
Other comprehensive loss, net of tax:
Foreign currency translation adjustments (30) 0 (58) 0
----- ----- ----- -----
Comprehensive income $ 407 $ 291 $ 539 $ 30
===== ===== ===== =====
<FN>
The accompanying notes are an integral
part of these financial statements
Page 5
</FN>
</TABLE>
<PAGE>
<TABLE>
FIBERSTARS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
<CAPTION>
Six months ended June 30,
1999 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 597 $ 30
------- -------
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 428 235
Provision for doubtful accounts receivable 47 57
Deferred income taxes 254 28
Equity in joint ventures' loss 15 20
Changes in assets & liabilities:
Accounts receivable (574) (1,542)
Notes and other receivable (56) 0
Inventories 18 (159)
Prepaid expenses and other current assets (137) 6
Other assets 397 (90)
Accounts payable (552) 193
Accrued liabilities (163) 673
------- -------
Total adjustments (323) (579)
------- -------
Net cash provided by (used in) operating activities 274 (549)
------- -------
Cash flows from investing activities:
Sale of short-term investments 0 1,527
Repayment of loans made to officers 0 30
Loans made to officers 0 (30)
Repayment of loans made under notes receivable 413 0
Acquisition of fixed assets (278) (249)
------- -------
Net cash provided by investing activities 135 1,278
------- -------
Cash flows from financing activities:
Cash proceeds from sale of common stock 27 182
Repayment of long term debt (49) (10)
------- -------
Net cash provided by (used in) financing activities (22) 172
------- -------
Effect of exchange rate changes on cash 80 0
------- -------
Net increase in cash and cash equivalents 467 901
Cash and cash equivalents, beginning of period 1,290 523
------- -------
Cash and cash equivalents, end of period $ 1,757 $ 1,424
======= =======
<FN>
The accompanying notes are an integral
part of these financial statements
Page 6
</FN>
</TABLE>
<PAGE>
1. Summary of Significant Accounting Policies
Interim Financial Statements (unaudited)
Although unaudited, the interim financial statements in this report reflect all
adjustments, consisting of normal recurring accruals, which are, in the opinion
of management, necessary for a fair statement of financial position, results of
operations and cash flows for the interim periods covered and of the financial
condition of the Company at the interim balance sheet dates. The results of
operations for the interim periods presented are not necessarily indicative of
the results expected for the entire year.
The year-end balance sheet information was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles. These financial statements should be read in conjunction
with the Company's audited financial statements and notes thereto for the year
ended December 31, 1998, contained in the Company's 1998 Annual Report to
Shareholders.
Earnings Per Share
The Company presents its earnings per share (EPS) in accordance with SFAS 128
which requires the presentation of basic and diluted EPS. Basic EPS is computed
by dividing income available to shareholders by the weighted average number of
common shares outstanding for the period. Diluted EPS is computed by giving
effect to all dilutive potential common shares that were outstanding during the
period. Dilutive potential common shares consist of incremental shares upon
exercise of stock options and warrants.
In accordance with the disclosure requirements of SFAS 128, a reconciliation of
the numerator and denominator of basic and diluted EPS is provided as follows
(in thousands, except per share amounts):
Three months Six months
ended June 30, ended June 30,
-------------- --------------
1999 1998 1999 1998
------ ------ ------ ------
Numerator - Basic and diluted EPS
Net income $ 437 $ 291 $ 597 $ 30
Denominator - Basic EPS
Weighted average shares outstanding 3,983 3,554 3,983 3,534
------ ------ ------ ------
Basic earnings per share $ 0.11 $ 0.08 $ 0.15 $ 0.01
====== ====== ====== ======
Denominator - Diluted EPS
Denominator - Basic EPS 3,983 3,554 3,983 3,534
Effect of dilutive securities:
Stock options 70 85 58 103
------ ------ ------ ------
4,053 3,639 4,041 3,637
------ ------ ------ ------
Diluted earnings per share $ 0.11 $ 0.08 $ 0.15 $ 0.01
====== ====== ====== ======
Options and warrants to purchase 1,194,848 shares of common stock were
outstanding at June 30, 1999, but were not included in the calculation of
diluted EPS because their inclusion would have been antidilutive. At June 30,
1998, options and warrants to purchase 569,466 were outstanding, but were not
included in the calculation of diluted EPS because their inclusion would have
been antidilutive.
Page 7
<PAGE>
2. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market and
consist of the following (in thousands):
June 30, December 31,
1999 1998
------ ------
(unaudited)
Raw materials $2,864 $2,780
Finished Goods 1,296 1,399
------ ------
$4,160 $4,179
====== ======
3. Comprehensive Income
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," effective January 1, 1998.
This statement requires the disclosure of comprehensive income and its
components in a full set of general purpose financial statements. Comprehensive
income is defined as net income plus net sales, expenses, gains and losses that,
under generally accepted accounting principles, are excluded from net income. A
separate statement of comprehensive income has been presented with this report.
4. Significant Equity Transactions
There were no significant equity transactions during the quarter.
5. Segments and Geographic Sales
The Company operates in a single industry segment that manufactures, markets and
sells fiber optic lighting products. The Company markets its products for
worldwide distribution primarily through independent sales representatives,
distributors and swimming pool builders in North America, Europe and the Far
East.
A summary of geographic sales is as follows (in thousands):
Six months ended June 30,
---------------------------
1999 1998
------- -------
(unaudited) (unaudited)
U.S. Domestic $10,895 $ 9,298
Foreign 5,132 1,523
------- -------
$16,027 $10,821
======= =======
Page 8
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
The following discussion should be read in conjunction with the attached
financial statements and notes thereto.
RESULTS OF OPERATIONS
Net sales increased 44% to $8,845,000 for the quarter ending June 30, 1999. The
increase was a result of growth in the commercial lighting and pools product
sales. Net sales from companies acquired in 1998 also contributed to net sales
growth in the 2nd quarter. For the half-year ending June 30, 1999 net sales were
$16,027,000, a 48% increase over the prior year. Net sales year-to-date grew in
both pools and commercial lighting and was augmented by contributions from
companies acquired in 1998.
Gross profit increased to $3,739,000 in the 2nd quarter of 1999, a 49% increase
over the same period in the prior year. The gross profit margin was 42.3% for
the quarter, an increase from the 40.7% gross margin achieved in the 2nd quarter
of 1998. The increase in gross margin was primarily a result of lower warranty
and freight costs in 1999 versus 1998. Gross profit year-to-date was $6,715,000,
67% above the gross profit for the same period in the prior year. The gross
profit margin year-to-date was 41.9% compared to 37.2% in the prior year. The
improvement was a result of lower costs for components along with lower warranty
expenses.
Research and development expenses were $324,000 in the 2nd quarter of 1999, a 6%
decrease over the 2nd quarter of 1998 due to lower travel and project costs.
Research and development expenses were 4% of sales in the 2nd quarter 1999
versus 6% in 1998. Year-to-date, research and development expenses were $653,000
compared to $651,000 in the prior year. As a percentage of net sales, research
and development were 4% year-to-date versus 6% in the prior year largely as a
result of expenses remaining constant while net sales increased.
Sales and marketing expenses were $2,101,000 in the 2nd quarter of 1999 as
compared to $1,343,000 in 1998, an increase of 56%. The increase was primarily
due to $643,000 in additional expenses for the 2nd quarter of 1999 from the
companies acquired in 1998 for which there were no expenses in the 2nd quarter
of 1998. Sales and marketing expenses were 24% of sales in the 2nd quarter of
1999 compared to 22% in 1998. Year-to-date, sales and marketing expenses were
$3,959,000 compared to $2,620,000, a 51% increase. The increase was largely a
result of $1,223,000 in additional expenses from companies acquired in 1998 for
which there were no expenses in the 1st half of 1998. Sales and marketing
expenses were 25% of net sales year-to-date in 1999 versus 24% for the same
period in the prior year.
General and administrative costs were $609,000 in the 2nd quarter 1999, an
increase of 61% over 1998 costs. This increase was largely a result of
additional general and administrative costs in the second quarter of 1999 from
companies acquired in 1998 for which there were no expenses in the 2nd quarter
of 1998. General and administrative costs were 7% of net sales in the quarter
ending June 30, 1999 versus 6% for the same quarter in 1998. Year-to-date,
general and administrative expenses were $1,152,000 in 1999 compared to $779,000
for the same period in the prior year. Increases were largely due to additional
costs from companies acquired at the end of 1998. General and administrative
costs were 7% of net sales year-to-date in 1999 versus 7% for the same period in
the prior year.
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<PAGE>
Total operating expenses were 34% of net sales in the 2nd quarter of 1999, the
same percentage as that achieved in 1998. Year-to-date, total operating expenses
were 36% of net sales in 1999 compared to 37% for the same period in the prior
year.
Other income and expense includes income from joint ventures and interest income
and expense. The Company incurred losses from its joint venture with its
Australian distributor of $15,000 in the 2nd quarter of 1999 compared to a loss
of $20,000 for the same period in 1998. The Company is working with its
Australian distributor to decrease these losses. Net interest income was $1,000
in the 2nd quarter of 1999 compared to $45,000 in 1998. The decrease was due
primarily to a use of cash in 1998 to acquire three companies, along with a
general decrease in interest rates since the 2nd quarter of 1998. Similarly,
year-to-date, the losses from the Company's joint venture were $15,000 compared
to $20,000 in the prior year. Net interest income year-to-date was $5,000 in
1999 versus $108,000 for the same period in 1998, largely as a result of a
decrease in the cash position from 1998 to 1999 due to the usage of cash for
acquisitions.
The income tax rate in the 2nd quarter 1999 was 37%, the same rate recorded in
1998. The tax rate is lower than historical rates due to the recognition of
certain tax benefits accumulated over prior years. Year-to-date, the income tax
rate was 37%.
As a result of the increase in sales in the 2nd quarter of 1999 over the same
quarter in 1998 and the improvement in gross margin, the Company's net income
increased to $437,000 in the 2nd quarter of 1999 as compared to net income of
$291,000 for the same period in 1998. Year-to-date, net income was $597,000
compared to $30,000 in for the same period in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
For the period ended June 30, 1999, cash and cash equivalents when combined with
short-term investments were $1,757,000 as compared to $1,290,000 for the year
ended December 31, 1998. During the 1st half of 1999, net income contributed
$597,000 to cash, some of which was utilized to increase working capital,
primarily for increases in accounts receivable. Cash utilized to acquire fixed
assets was partially offset by cash received against loans outstanding for a
divestiture made in fiscal 1998, resulting in a net cash provided of $135,000
from investing activities. There was a net use of $22,000 in cash for financing
activities, primarily for paying down long term debt of subsidiaries. As a
result of the cash provided from operating activities and investing activities
combined with exchange rate effects, there was a net provision of cash in the
1st half of $467,000 which resulted in an ending cash balance of $1,757,000.
The Company has a $2.5 million unsecured line of credit for working capital
purposes and a term loan commitment of $500,000 for equipment purchases. There
are renewed on an annual basis, with the most recent renewal in August 1999,
subsequent renewals will also be in August. As of June 30, 1999 the Company had
no borrowings outstanding against either of these lines of credit.
The Company also had a total borrowing of $724,000 against a credit facility
held by its German subsidiary. This borrowing is largely held in order to
finance the building of new offices owned by the Company in Berching, Germany.
The Company believes that existing cash balances, together with the Company's
bank lines of credit and funds that may be generated from operations, will be
sufficient to finance the Company's currently anticipated working capital
requirements and capital expenditure requirements for at least the next twelve
months.
Page 10
<PAGE>
OTHER FACTORS
This Report on Form 10QSB contains forward-looking statements. Such statements
generally concern future operating results, capital expenditures, product
development and enhancements, liquidity and strategy. Specific forward-looking
statements in this report include, without limitation, statements regarding
improvements in the Company's cash position. We may not update these forward
looking statements, and the occurrence of the events predicted in these
statements is subject to a number of risks and uncertainties, including those
discussed in this report. These risks and uncertainties could cause our actual
results to differ materially from the results predicted in our forward looking
statements. You are encouraged to consider all the information in this report
along with our other periodic reports on file with the SEC, prior to investing
in our stock.
BUSINESS RISKS AND UNCERTAINTIES
Our quarterly operating results can vary significantly depending upon a number
of factors. It is difficult to predict the lighting market's acceptance of our
products on a quarterly basis, and the level and timing of orders received can
fluctuate substantially. Our sales volumes also fluctuate. Historically we have
shipped a substantial portion of our quarterly sales in the last month of each
of the second and fourth quarters of the year. Significant portions of our
expenses are relatively fixed in advance based upon our forecasts of future
sales. If sales fall below our expectations in any given quarter, we will not be
able to make any significant adjustment in our operating expenses and our
operating results will be adversely affected. In addition, our product
development and marketing expenditures may vary significantly from quarter to
quarter and are made well in advance of potential resulting net sales.
Sales of our pool and spa lighting products, which currently are available only
with newly constructed pools and spas, depend substantially upon the level of
new construction. Sales of commercial lighting products also depend
significantly upon the level of new building construction and the renovation of
existing buildings. Construction levels are affected by housing market trends,
interest rates, and the weather. Because of the seasonality of construction, our
sales of swimming pool and commercial lighting products, and thus our overall
net sales and income, have tended to be significantly lower in the first quarter
of each year. Various economic and other trends may alter these seasonal trends
from year to year, and we cannot predict the extent to which these seasonal
trends will continue. We believe our business has been favorably impacted by
recent strength in the overall U.S. economy. If the U.S. economy softens, our
operating results will probably suffer.
Competition is increasing in a number of our markets. A number of companies
offer directly competitive products, including fiber optic lighting products for
downlighting, display case and water lighting, and neon and other lighted signs.
Our competitors include some very large and well established companies such as
Philips, Schott, 3M, Bridgestone, Mitsubishi, Osram/Siemens and Rohm &
Haas/Advanced Lighting Technologies. All of these companies have substantially
greater financial, technical and marketing resources than we do. We anticipate
that any future growth in fiber optic lighting will be accompanied by continuing
increases in competition, which could accelerate growth in the market for fiber
optic lighting, but which could also adversely affect our operating results to
the extent we do not compete effectively.
We believe the success of our business depends primarily on our continued
technical innovation, marketing abilities and responsiveness to customer
requirements, rather than on patents, trade
Page 11
<PAGE>
secrets, trademarks, copyrights and other intellectual property rights.
Nevertheless, we have a policy of seeking to protect our intellectual property
through, among other things, the prosecution of patents with respect to certain
of our technologies. There are many issued patents and pending patent
applications in the field of fiber optic technology, and certain of our
competitors hold and have applied for patents related to fiber optic lighting.
Although to date we have not been involved in litigation challenging our
intellectual property rights or asserting intellectual property rights of
others, we have in the past received communications from third parties asserting
rights in our patents or that our technology infringes intellectual property
rights held by such third parties. Based on information currently available to
us we do not believe that any such claims involving our technology or patents
are meritorious. However, we may be required to engage in litigation to protect
our patent rights or to defend against the claims of others. In the event of
litigation to determine the validity of any third party claims or claims by us
against such third party, such litigation, whether or not determined in our
favor, could result in significant expense.
Our business is subject to additional risks that could materially and adversely
affect our future business, including:
o manufacturing risks, including the risks of shortages in materials or
components necessary to our manufacturing and assembly operations, and
the risks of increases in the prices of raw materials and components;
o sales and distribution risks, such as risks of changes in product mix
or distribution channels that result in lower margins;
o risks of the loss of a significant distributor or sales
representative;
o risks of the loss of a significant customer or swimming pool builder;
o risks of the effects of volume discounts that we grant from time to
time to our larger customers, including reduced profit margins;
o risks of product returns and exchanges; in this regard, as noted
above, we have increased our warranty reserve in the fourth quarter of
1998 in response to evidence of defective lamps in certain of our
products. We cannot assure you we will not experience similar
component problems in the future that could also require increased
warranty reserves and manufacturing costs;
o risks associated with product development and introduction problems,
such as increased research, development and marketing expenses
associated with new product introductions; and
o risks associated with delays in the introduction of new products and
technologies, including lost sales and loss of market share.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are not capable
of distinguishing 20th century dates from 21st century dates. As a result,
within the next year, computers systems and/or software used by many companies
in a very wide variety of applications will experience operating difficulties
unless they are modified or upgraded to adequately process information
involving, related to or dependent upon the century change. Significant
uncertainty exists in the software and information services industries
concerning the scope and magnitude of problems associated with the century
change. In light of the potentially broad effects of the year 2000 on a wide
range of business systems, the Company's products and services may be affected.
Page 12
<PAGE>
The Company utilizes and is dependent upon data processing computer hardware and
software to conduct its business, and in 1998 completed an upgrade of hardware
and software at an approximate cost of $30,000. The Company has completed its
assessment of its own computer systems and based upon this assessment, the
Company believes its computer systems are "Year 2000 compliant;" that is,
capable of adequately distinguishing 21st century dates from 20th century dates.
However, there can be no assurance that the Company has timely identified or
will timely identify and remediate all significant Year 2000 problems in its own
computer systems, that remedial efforts subsequently made will not involve
significant time and expense, or that such problems will not have a material
adverse effect on the Company's business, operating results and financial
condition. If unforeseen internal disruptions occur, the Company believes that
its existing disaster recovery program, which includes the manual processing of
certain key transactions, would significantly mitigate the impact.
The Company has made efforts to determine the extent of and minimize the risk
that the computer systems of the Company's suppliers or customers are not Year
2000 compliant, or will not become compliant on a timely basis. The Company
expects that the process of making inquiries with these customers and suppliers
will be ongoing through the end of 1999. As of this report, the Company has had
responses from a portion of these customers and suppliers. Of those responding,
the majority are compliant, with the rest indicating they will be compliant by
year end 1999. If Year 2000 problems prevent any of the Company's suppliers from
timely delivery of products or services required by the Company, the Company's
operating results could be materially adversely affected. However, the Company
currently estimates that its costs to address Year 2000 issues relating to its
suppliers will not be material, and that these costs will be funded from its
operating cash flows. The Company has identified and will continue to identify
alternative suppliers in the event its preferred suppliers become incapable of
timely delivering products or services required by the Company. The Company's
suppliers are generally locally or regionally based, which tends to lessen the
Company's exposure from the lack of readiness of any single supplier.
The Company may also face delays in receipt of payments from customers with
unresolved Year 2000 problems, and such delays could materially adversely affect
the Company's operating results. To the extent any such delays are significant
or protracted, the Company's quarterly results would be adversely affected. The
Company intends to continually reassess this risk as it receives communications
about the status of its customers with regard to Year 2000 issues, and if
necessary, adjust its account sales and policies accordingly.
Year 2000 costs relating to the Company's own computer systems including
consulting fees and costs to remediate or replace hardware and software as well
as non-incremental costs resulting from redeployment of internal resources are
estimated to be immaterial . The Company is not able to accurately estimate
potential costs associated with the Year 2000 issues of its customers and
suppliers, and is in the process of verifying that these companies will be year
2000 compliant by the end of 1999. There can be no assurance that the estimated
costs for remediating the Company's own systems as well as estimated costs
associated with the potential non-compliance of its customers and suppliers are
correct, and actual results could differ materially from these estimates.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer costs, and similar
uncertainties.
Page 13
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits have been filed with this Report:
Exhibit 10.30 - Extension - Term Commitment Note of the
Registrant dated as of June 28, 1999, to
Wells Fargo Bank.
Exhibit 10.31 - Extension - Revolving Line of Credit Note of
the Registrant dated as of June 28, 1999, to
Wells Fargo Bank.
Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed by the Company during the
period covered by this report.
Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIBERSTARS, INC.
Date: August 13, 1999 By: /s/ Robert A.Connors
-------------------------------
Robert A.Connors
Chief Financial Officer
(Principal Financial and Accounting Officer)
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<PAGE>
<TABLE>
INDEX TO EXHIBITS
<CAPTION>
Exhibit Page
Number Number
------ ------
<S> <C>
10.30 Extension - Term Commitment Note of the Registrant dated as of
June 28, 1999, to Wells Fargo Bank. 16
10.31 Extension - Revolving Line of Credit Note of the Registrant dated
as of June 28, 1999, to Wells Fargo Bank. 21
27 Financial Data Schedule
</TABLE>
Page 15
Exhibit 10.30
Commercial Banking Group
Santa Clara Valley Region
121 Park Center Plaza, 3rd Floor
P.O. Box 720010
San Jose, CA 95172
WELLS
FARGO
June 28, 1999
Fiberstars, Inc.
2883 Bayview Drive
Fremont, CA 94538
Gentlemen:
This letter is to confirm that Wells Fargo Bank, National Association
("Bank") has agreed to extend the maturity date of that certain credit
accommodation granted by Bank to Fiberstars, Inc. ("Borrower") in the maximum
principal amount of Five Hundred Thousand Dollars ($500,000.00), as evidenced by
that certain promissory note dated as of June 28, 1998, executed by Borrower and
payable to the order of Bank (the "Note"), a copy of which is attached hereto as
Exhibit A.
The maturity date of said credit accommodation is hereby extended
until August 12, 1999. The Note shall be deemed modified as of the date this
letter is acknowledged by Borrower to reflect said new maturity date. All other
terms and conditions of the Note remain in full force and effect, without waiver
or modification.
Borrower acknowledges that Bank has not committed to make any
renewal or further extension of the maturity date of the above-described credit
accommodation beyond the new maturity date specified herein, and that any such
renewal or further extension remains in the sole discretion of Bank. This letter
constitutes the entire agreement between Bank and Borrower with respect to the
maturity date extension for the above-described credit accommodation, and
supercedes all prior negotiations, discussions and correspondence concerning
said extension.
Page 16
<PAGE>
Fiberstars, Inc.
June 28, 1999
Page 2
WELLS
FARGO
Please acknowledge your acceptance of the terms and conditions
contained herein by dating and signing one copy below and returning it to my
attention at the above address on or before July 6, 1999.
Very truly yours,
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By: /S/ LAURA ZARAGOZA
------------------------------
Laura Zaragoza
Assistant Vice President
Acknowledged and accepted as of June 29, 1999:
FIBERSTARS, INC.
By: /S/ ROBERT A. CONNORS
---------------------------------------
Title: Chief Financial Officer
---------------------------------------
Page 17
<PAGE>
WELLS FARGO BANK TERM COMMITMENT NOTE
- --------------------------------------------------------------------------------
$500,000.00 San Jose, California
June 28, 1998
FOR VALUE RECEIVED, the undersigned FIBERSTARS, INC. ("Borrower") promises to
pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its
office at Santa Clara Valley RCBO, 121 Park Center Plaza 3rd Flr, San Jose, CA
95115, or at such other place as the holder hereof may designate, in lawful
money of the United States of America and in immediately available funds, the
principal sum of $500,000.00, or so much thereof as may be advanced and be
outstanding, with interest thereon, to be computed on each advance from the date
of its disbursement as set forth herein.
INTEREST/FEES:
(a) Interest. The outstanding principal balance of this Note shall bear
interest at a rate per annum (computed on the basis of a 360-day year, actual
days elapsed) .50000% above the Prime Rate in effect from time to time. The
"Prime Rate" is a base rate that Bank from time to time establishes and which
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto. Each change in the rate of interest
hereunder shall become effective on the date each Prime Rate change is announced
within Bank.
(b) Payment of Interest. Interest accrued on this Note shall be payable on the
28th day of each month, commencing July 28,1998.
(c) Default Interest. From and after the maturity date of this Note, or such
earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to 4% above the rate of
interest from time to time applicable to this Note.
(d) Commitment Fee. Prior to the initial extension of credit under this Note,
Borrower shall pay to Bank a non-refundable commitment fee of $500.00.
(e) Collection of Payments. Borrower authorizes Bank to collect all interest
and fees due hereunder by charging Borrower's demand deposit account number
4124-053885 with Bank, or any other demand deposit account maintained by any
Borrower with Bank, for the full amount thereof. Should there be insufficient
funds in any such demand deposit account to pay all such sums when due, the full
amount of such deficiency shall be immediately due and payable by Borrower.
BORROWING AND REPAYMENT:
(a) Use of Proceeds; Limitation on Borrowings. Each advance under this Note
shall be available solely to finance Borrower's purchase of new and/or used
equipment to be used in Borrower's business. Each advance shall be available to
a maximum of 80.0% of the cost or appraised value (as required by Bank) of the
new equipment purchased with the proceeds thereof, and 75.0% of the cost or
appraised value (as required by Bank) of the used equipment purchased with the
proceeds thereof, as evidenced by copies of invoices and/or appraisals
acceptable to Bank.
Page 18
<PAGE>
(b) Borrowing and Repayment. Borrower may from time to time during the term of
this Note borrow and partially or wholly repay its outstanding borrowings,
subject to all of the limitations, terms and conditions of this Note and of any
document executed in connection with, or at any time as a supplement to, this
Note; provided however, that amounts repaid may not be reborrowed; and provided
further, that the total borrowings under this Note shall not exceed the
principal amount stated above. The unpaid principal balance of this obligation
at any time shall be the total amounts advanced hereunder by the holder hereof
less the amount of any principal payments made hereon by or for any Borrower,
which balance may be endorsed hereon from time to time by the holder. The
outstanding principal balance of this Note shall be due and payable in full on
June 28, 1999, unless said balance is refinanced by Bank pursuant to the
provisions of (d) below.
(c) Advances. Advances hereunder, to the total amount of the principal sum
available hereunder, may be made by the holder at the oral or written request of
(i) DAVID N. RUCKERT or ROLAND DENNIS, any one acting alone, who are authorized
to request advances and direct the disposition of any advances until written
notice of the revocation of such authority is received by the holder at the
office designated above, or (ii) any person, with respect to advances deposited
to the credit of any account of any Borrower with the holder, which advances,
when so deposited, shall be conclusively presumed to have been made to or for
the benefit of each Borrower regardless of the fact that persons other than
those authorized to request advances may have authority to draw against such
account. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by any Borrower.
(d) Refinancing. So long as Borrower is in compliance with all terms and
conditions contained herein and in any loan agreement or other loan documents in
effect between Borrower and Bank on the maturity date set forth above (or on
such earlier date as may be requested by Borrower), and Borrower executes a new
promissory note and such other documents as Bank shall require, all in form and
substance satisfactory to Bank, Bank agrees to refinance the then outstanding
principal balance of this Note on the following terms and conditions:
(i) The outstanding principal balance of this Note shall be amortized over 3
years and shall be repaid in 36 monthly installments over said term, as set
forth in the promissory note executed by Borrower to evidence such refinancing.
(ii) The outstanding principal balance so refinanced shall bear interest at
a rate per annum (computed on the basis of a 360-day year, actual days elapsed)
0.500% above Bank's Prime Rate in effect from time to time.
COLLATERAL:
As security for the payment and performance of all obligations of Borrower
under this Note, Borrower grants to Bank security interests of first priority
(except as agreed otherwise by Bank in writing) in the following property of
Borrower, now owned or at any time hereafter acquired: all equipment financed
with the proceeds of this note, together with security interests in all other
personal property of Borrower now or at any time hereafter pledged to Bank as
collateral for any other commercial credit accommodation granted by Bank to
Borrower. All of the foregoing shall be evidenced by and subject to the terms of
such security agreements, financing statements and other documents as Bank shall
reasonably require, all in form and substance satisfactory to Bank. Borrower
shall reimburse Bank immediately upon demand for all costs and expenses incurred
by
Page 19
<PAGE>
Bank in connection with any of the foregoing security, including without
limitation, filing fees and allocated costs of collateral audits.
EVENTS OF DEFAULT:
Any default in the payment or performance of any obligation under this Note,
or any defined event of default under any loan agreement now or at any time
hereafter in effect between Borrower and Bank (whether executed prior to,
concurrently with or at any time after this Note), shall constitute an "Event of
Default" under this Note.
MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default, the holder of this
Note, at the holder's option, may declare all sums of principal, interest, fees
and charges outstanding hereunder to be immediately due and payable without
presentment, demand, protest or notice of dishonor, all of which are expressly
waived by each Borrower, and the obligation, if any, of the holder to extend any
further credit hereunder shall immediately cease and terminate. Each Borrower
shall pay to the holder immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys' fees (to
include outside counsel fees and all allocated costs of the holder's in-house
counsel), incurred by the holder in connection with the enforcement of the
holder's rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief, and including any of the foregoing incurred in connection with any
bankruptcy proceeding relating to any Borrower.
(b) Obligations Joint and Several. Should more than one person or entity sign
this Note as a Borrower, the obligations of each such Borrower shall be joint
and several.
(c) Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of California.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
FIBERSTARS, INC.
By: /s/ David N. Ruckert
--------------------------
Title: President, CEO
--------------------------
Page 20
Exhibit 10.31
Commercial Banking Group
Santa Clara Valley Region
121 Park Center Plaza, 3rd Floor
P.O. Box 720010
San Jose, CA 95172
WELLS
FARGO
June 28, 1999
Fiberstars, Inc.
2883 Bayview Drive
Fremont, CA 94538
Gentlemen:
This letter is to confirm that Wells Fargo Bank, National Association
("Bank") has agreed to extend the maturity date of that certain credit
accommodation granted by Bank to Fiberstars, Inc. ("Borrower") in the maximum
principal amount of Two Million Dollars ($2,000,000.00), as evidenced by that
certain promissory note dated as of February 2, 1999, executed by Borrower and
payable to the order of Bank (the "Note"), a copy of which is attached hereto as
Exhibit A.
The maturity date of said credit accommodation, and the last day of
which Bank will issue letters of credit under the subfeature relating thereto,
as described in the Noted, is hereby extended until August 12, 1999. The Note
shall be deemed modified as of the date this letter is acknowledged by Borrower
to reflect said new maturity date. All other terms and conditions of the Note
remain in full force and effect, without waiver or modification.
Borrower acknowledges that Bank has not committed to make any
renewal or further extension of the maturity date of the above-described credit
accommodation beyond the new maturity date specified herein, and that any such
renewal or further extension remains in the sole discretion of Bank. This letter
constitutes the entire agreement between Bank and Borrower with respect to the
maturity date extension for the above-described credit accommodation, and
supercedes all prior negotiations, discussions and correspondence concerning
said extension.
Page 21
<PAGE>
Fiberstars, Inc.
June 28, 1999
Page 2
WELLS
FARGO
Please acknowledge your acceptance of the terms and conditions
contained herein by dating and signing one copy below and returning it to my
attention at the above address on or before July 6, 1999.
Very truly yours,
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By: /S/ LAURA ZARAGOZA
--------------------------------
Laura Zaragoza
Assistant Vice President
Acknowledged and accepted as of June 29, 1999:
FIBERSTARS, INC.
By: /S/ ROBERT A . CONNORS
-----------------------------------------
Title: Chief Financial Officer
-----------------------------------------
Page 22
<PAGE>
EXHIBIT A
WELLS FARGO BANK REVOLVING LINE OF CREDIT NOTE
- --------------------------------------------------------------------------------
$2,000,000.00 San Jose, California
February 2, 1999
FOR VALUE RECEIVED, the undersigned FIBERSTARS, INC. ("Borrower")
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank")
at its office at Santa Clara Valley RCBO, 121 Park Center Plaza, 3rd Floor, San
Jose, CA 95115, or at such other place as the holder hereof may designate, in
lawful money of the United States of America and in immediately available funds,
the principal sum of $2,000,000.00, or so much thereof as may be advanced and be
outstanding, with interest thereon, to be computed on each advance from the date
of its disbursement as set forth herein.
INTEREST/FEES:
(a) Interest. The outstanding principal balance of this Note shall
bear interest (computed on the basis of a 360-day year, actual
days elapsed) at a rate per annum .12500% above the Price Rate
in effect from time to time. The "Prime Rate" is a base rate
that Bank from time to time establishes and which serves as
the basis upon which effective rates of interest are
calculated for those loans making reference thereto. Each
change in the rate of interest hereunder shall become
effective on the date each Prime Rate change is announced
within Bank.
(b) Payment of Interest. Interest accrued on this Note shall be
payable on the 28th day of each month, commencing March 28,
1999.
(c) Default Interest. From and after the maturity date of this
Note, or such earlier date as all principal owing hereunder
becomes due and payable by acceleration or otherwise, the
outstanding principal balance of this Note shall bear interest
until paid in full at an increased rate per annum (computed on
the basis of a 360-day year, actual day elapsed) equal to 4%
above the rate of interest form time to time applicable to
this Note.
(d) Commitment Fee. Prior to the initial extension of credit under
this Note, Borrower shall pay to Bank a non-refundable
commitment fee of $833.33.
(e) Collection of Payments. Borrower authorizes Bank to collect
all interest and fees due hereunder by charging Borrower's
demand deposit account number 4124-053885 with Bank, or any
other demand deposit account maintained by any Borrower with
Bank, for the full amount thereof. Should there be
insufficient funds in any such demand deposit account to pay
all such sums when due, the full amount of such deficiency
shall be immediately due and payable by Borrower.
Page 23
<PAGE>
SIGHT AND USANCE COMMERCIAL AND STANDBY LETTER OF CREDIT SUBFEATURE:
(a) Letter of Credit Subfeature. As a substitute under this Note,
Bank agrees from time to time during the term hereof to issue
standby letters of credit for the account of Borrower to
finance to guarantee renal payments and/or sight commercial
and usance commercial letters of credit for the account of
Borrower to finance Borrower's inventory purchases (each, a
"Letter of Credit" and collectively, "Letters of Credit");
provided however, that the form and substance of each Letter
of Credit shall be subject to approval by Bank, in its sole
discretion; and provided further, that the aggregate undrawn
amount of all outstanding Letters of Credit shall not at any
time exceed $400,000.00. Each standby Letter of Credit shall
be issued for a term not to exceed 365 days, and each
commercial Letter of Credit shall be issued for a term not to
exceed 180 days, as designated by Borrower; provided however,
that no standby Letter of Credit shall have an expiration date
subsequent to the maturity date of this Note, and no
commercial Letter of Credit shall have an expiration date of
more than 90 days beyond the maturity date of this Note. The
undrawn amount of all Letters of Credit shall be reserved
under this Note and shall not be available for borrowings
hereunder. Each Letter of Credit shall be subject to the
additional terms and conditions of the Letter of Credit
Agreement and related documents, if any, required by Bank in
connection with the issuance thereof. Each draft paid by Bank
under a Letter of Credit shall be deemed an advance under this
Note and shall be repaid by Borrower in accordance with the
terms and conditions of this Note; provided however, that if
advances hereunder are not available, for any reason, at the
time any draft is paid by Bank, then Borrower shall
immediately pay to Bank the full amount of such draft,
together with interest thereon form the date such amount is
paid by Bank to the date such amount is fully repaid by
Borrower, at the rate of interest applicable to advances
hereunder. In such event Borrower agrees that Bank, in its
sole discretion, may debit any demand deposit account
maintained by Borrower with Bank for the amount of any such
draft. Notwithstanding the foregoing, usance commercial
Letters of Credit shall be issued only to finance Borrower's
importation of goods into the United States, and shall contain
such provisions and be issued in such manner as to satisfy
Bank that any bankers' acceptance created by Bank's acceptance
of a draft thereunder shall be eligible for discount by a
Federal Reserve Bank, will not result in a liability of Bank
subject to reserve requirements under any law, regulation or
administrative order, and will not cause Bank to violate any
lending limit imposed upon Bank by any law, regulation or
administrative order. Usance commercial Letters of Credit
shall provide for drafts thereunder with terms which do not
exceed the lesser of 180 days or such other period of time as
may be necessary for the acceptance created thereunder to be
eligible for discount and otherwise comply with the terms and
conditions of this Note; provided however, that no usance
commercial Letter of Credit shall provide for drafts with
terms that extend more than 90 days beyond the maturity date
of this Note. The amount of each draft accepted by Bank under
a usance commercial Letter of Credit shall be paid by Borrower
in accordance with the terms and conditions of this Note
applicable to Acceptance.
(b) Letter of Credit Fees. Borrower shall pay to Bank (i) fees
upon the issuance of each standby Letter of Credit equal to
1.000% per annum (computed on the basis
Page 24
<PAGE>
of a 360-day year, actual days elapsed) of the face amount
thereof, and (ii) fees upon the issuance of each commercial
Letter of Credit, upon the payment or negotiation by Bank of
each draft under any Letter of Credit and upon the occurrence
of any other activity with respect to any Letter of Credit
(including without limitation, the transfer, amendment or
cancellation of any Letter of Credit) determined in accordance
with Bank's standard fees and charges then in effect for such
activity.
CLEAN AND DOCUMENTARY ACCEPTANCE SUBFEATURE:
(a) Acceptance Subfeature. As a subfeature under this Note, Bank
agrees from time to time during the term hereof to create
bankers' acceptance (each, an "Acceptance" and collectively,
"Acceptances") for the account of Borrower (i) by accepting
drafts drawn on Bank by Borrower for the purpose of financing
Borrower's importation of goods in the United States and (ii)
by accepting time drafts presented under usance commercial
Letters of Credit issued by Bank for the account of Borrower
under this Note; provided however, that the form and substance
of each Acceptance shall be subject to approval by Bank, in
its sole discretion; and provided further, that the aggregate
amount of all outstanding Acceptances shall not at any time
exceed $400,000.00. Each Acceptance created by Bank's
acceptance of a draft drawn on Bank by Borrower shall be in
the minimum amount of $5,000.00. Each Acceptance shall be
subject to the additional terms and conditions of an
Acceptance Agreement in form and substance satisfactory to
Bank. Each Acceptance shall be created for a term not to
exceed the lesser of 365 days, as designated by Borrower, or
such period of time as may be necessary to comply with the
terms of the Acceptance Agreement; provided however, that no
Acceptance shall mature more than 90 days beyond the maturity
date of this Note. The outstanding amount of all Acceptances
shall be reserved under this Note and shall not be available
for borrowings hereunder. The amount of each Acceptance which
matures shall be deemed an advance under this Note and shall
be repaid by Borrower in accordance with the terms and
conditions of this Note; provided however, that if advances
hereunder are not available, for any reason, at the time any
Acceptance matures, then Borrower shall immediately pay to
Bank the full amount of such matured Acceptance, together with
interest thereon form the date such Acceptance matures to the
date such amount if fully repaid by Borrower, at the rate of
interest applicable to advances hereunder. In such event
Borrower agrees that Bank, in its sole discretion, may debit
any demand deposit account maintained by Borrower with Bank
for the amount of any such Acceptance. All Acceptances created
by Bank's acceptance of drafts drawn on Bank by Borrower shall
be discounted with Bank. Bank shall not be obligated to
discount Acceptances created by Bank's acceptance of time
drafts presented under usance commercial Letters of Credit.
(b) Acceptance Fees. For each Acceptance created hereunder,
Borrower shall pay to Bank on the date such Acceptance is
created an acceptance fee determined in accordance with Bank's
standard fees and charges then in effect for the creation of
Acceptances.
Page 25
<PAGE>
BORROWING AND REPAYMENT:
(a) Use of Proceeds. Advances under this Note shall be available
solely to finance working capital requirements.
(b) Borrowing and Repayment. Borrower may from time to time during
the term of this Note borrow, partially or wholly repay its
outstanding borrowings, and reborrow, subject to all of the
limitations, terms and conditions of this Note and of any
document executed in connection with, or at any time as a
supplement to, this Note; provided however, that the total
outstanding borrowings under this Note shall not at any time
exceed the principal amount stated above; and provided
further, that Borrower shall maintain a zero balance on
advances under this Note for a period of at least 30
consecutive days during each fiscal year. The unpaid principal
balance of this obligation at any time shall be the total
amounts advanced hereunder by the holder hereof less the
amount of any principal payments made hereon by or for any
Borrower, which balance may be endorsed hereon from time to
time by the holder. The outstanding principal balance of this
Note shall be due and payable in full on June 28, 1999; except
with respect to any draft paid by Bank under a commercial
Letter of Credit and any Acceptance which matures subsequent
to said date, the full amount of which shall be due and
payable by Borrower immediately upon payment by Bank or at
such maturity as applicable.
(c) Advances. Advances hereunder, to the total amount of the
principal sum available hereunder, may be made by the holder
at the oral or written request of (i) David N. Ruckert or
Roland Dennis or Bob Connors, any one acting alone, who are
authorized to request advances and direct the disposition of
any advances until written notice of the revocation of such
authority is received by the holder at the office designated
above, or (ii) any person, with respect to advances deposited
to the credit of any account of any Borrower with the holder,
which advances, when so deposited, shall be conclusively
presumed to have been made to or for the benefit of each
Borrower regardless of the fact that persons other than those
authorized to request advances may have authority to draw
against such account. The holder shall have no obligation to
determine whether any person requesting an advance is or has
been authorized by any Borrower.
EVENTS OF DEFAULT:
Any default in the payment or performance of any obligation under this Note, or
any defined event of default under any loan agreement now or at an time
hereafter in effect between Borrower and Bank (whether executed prior to,
concurrently with or at any time after this Note), shall constitute an "Event of
Default" under this Note.
MISCELLANEOUS:
a) Remedies. Upon the occurrence of any Event of Default, the
holder of this Note, at the holder's option, may declare all
sums of principal, interest, fees and charges outstanding
hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of
protest, protest or notice of dishonor, all of which are
expressly waived be each Borrower, and the obligation, if any,
of the holder to extend any further credit hereunder shall
Page 26
<PAGE>
immediately cease and terminate. Each Borrower shall pay to
the holder immediately upon demand the full amount of all
payments, advances, charges, costs and expenses, including
reasonable attorneys' fees (to include outside counsel fees
and all allocated costs of the holder's in-house counsel),
expanded or incurred by the holder in connection with the
enforcement of the holder's rights and/or the collection of
any amounts which become due to the holder under this Note,
and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action
for declaratory relief, whether incurred at the trial or
appellate level, in an arbitration proceeding or otherwise,
and including any of the foregoing incurred in connection with
any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by
Bank or any other person) relating to any Borrower or any
other person or entity.
b) Obligations Joint and Several. Should more than one person or
entity sign this Note as a Borrower, the obligations of each
such Borrower shall be joint and several.
c) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
FIBERSTARS, INC.
By: /s/ David N. Ruckert
---------------------------------------
David N. Ruckert, President/Chief
Executive Officer
Page 27
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,757
<SECURITIES> 0
<RECEIVABLES> 5,785
<ALLOWANCES> 47
<INVENTORY> 4,160
<CURRENT-ASSETS> 12,829
<PP&E> 4,339
<DEPRECIATION> 2,764
<TOTAL-ASSETS> 18,724
<CURRENT-LIABILITIES> 4,194
<BONDS> 0
<COMMON> 13,946
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18,724
<SALES> 16,027
<TOTAL-REVENUES> 16,017
<CGS> 9,312
<TOTAL-COSTS> 9,312
<OTHER-EXPENSES> 5,764
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 941
<INCOME-TAX> 344
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 597
<EPS-BASIC> 0.15
<EPS-DILUTED> 0.15
</TABLE>
