<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(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 SEPTEMBER 30, 2000
[ ] 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
-------
---------------
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)
44259 NOBEL 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 September 30, 2000: 4,267,209
Index to Exhibits is at page 15
<PAGE>
FIBERSTARS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
PART I - FINANCIAL INFORMATION
<S> <C> <C>
Item 1 Financial Statements:
a. Consolidated Balance Sheets
September 30, 2000 and December 31, 1999....................................3
b. Consolidated Statements of Operations
Three and nine months ended September 30, 2000 and 1999.....................4
c. Consolidated Statements of Comprehensive Operations
Three and nine months ended September 30, 2000 and 1999.....................5
d. Consolidated Statements of Cash Flows
Nine months ended September 30, 2000 and 1999...............................6
e. Notes to Consolidated Financial Statements................................7-9
Item 2 Management's Discussion and Analysis of Results of Operations and Financial
Condition ............................................................10-13
</TABLE>
PART II - OTHER INFORMATION
<TABLE>
<S> <C> <C> <C>
Item 6 Exhibits and Reports on Form 8-K................................................14
Signatures......................................................................14
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Index to Exhibits...............................................................15
</TABLE>
Page 2
<PAGE>
FIBERSTARS, INC.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
FIBERSTARS, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------------- ---------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,517 $ 1,904
Accounts receivable trade, net 5,565 6,533
Notes and other accounts receivables 109 250
Inventories, net 5,686 4,269
Prepaids and other current assets 665 428
Deferred income taxes 662 662
----------------- ------------------
Total current assets 15,204 14,046
Fixed assets, net 2,643 2,242
Goodwill, net 5,263 3,800
Other assets 199 218
Deferred income taxes 326 86
----------------- ---------------
Total assets $ 23,635 $ 20,392
================= ==================
LIABILITIES
Current Liabilities:
Accounts payable $ 2,724 $ 2,572
Accrued expenses 1,849 2,518
Current portion of long-term debt 8 8
----------------- ------------------
Total current liabilities 4,581 5,098
Long-term debt, less current portion 463 626
----------------- ------------------
Total liabilities 5,044 5,724
----------------- ------------------
SHAREHOLDERS' EQUITY
Common stock 1 0
Value of warrants outstanding 2,722 0
Additional paid-in capital 15,476 13,973
Note receivable from shareholder (75) (75)
Cumulative translation adjustments (343) (153)
Retained earnings 810 923
----------------- ------------------
Total shareholders' equity 18,591 14,668
----------------- ------------------
Total liabilities and shareholders' equity $ 23,635 $ 20,392
</TABLE>
The accompanying notes are an integral
part of these financial statements
Page 3
<PAGE>
FIBERSTARS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 2000 1999
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 8,249 $ 8,056 $ 26,866 $ 24,083
Cost of sales 4,955 4,657 15,877 13,969
---------------- ---------------- ---------------- ----------------
Gross profit 3,294 3,399 10,989 10,114
---------------- ---------------- ---------------- ----------------
Operating expenses:
Research and development 413 368 1,258 1,021
Sales and marketing 2,125 1,874 6,658 5,833
General and administrative 740 666 2,250 1,818
Write-off in-process technology acquired 0 0 938 0
---------------- ---------------- ---------------- ----------------
Total operating expenses 3,278 2,908 11,104 8,672
---------------- ---------------- ---------------- ----------------
Income (loss) from operations 16 491 (115) 1,442
Other income (loss):
Equity in joint venture's income (loss) 4 0 4 (15)
Interest income (expense), net (11) 8 (71) 13
---------------- ---------------- ---------------- ----------------
Income (loss) before income taxes 9 499 (182) 1,440
Benefit from (provision for) income taxes 0 (180) 69 (524)
---------------- ---------------- ---------------- ----------------
Net income (loss) $ 9 $ 319 $ (113) $ 916
================ ================ ================ ================
Net income (loss) per share - basic $ 0.00 $ 0.08 $ (0.03) $ 0.23
================ ================ ================ ================
Shares used in per share calculation - basic 4,682 3,987 4,520 3,984
================ ================ ================ ================
Net income (loss) per share - diluted $ 0.00 $ 0.08 $ (0.03) $ 0.23
================ ================ ================ ================
Shares used in per share calculation - diluted 5,336 4,112 4,520 4,064
================ ================ ================ ================
</TABLE>
The accompanying notes are an integral
part of these financial statements
Page 4
<PAGE>
FIBERSTARTS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 2000 1999
------------ ------------ --------- -----------
<S> <C> <C> <C> <C>
Net income (loss) $ 9 $ 319 $ (113) $ 916
Other comprehensive loss, net of tax:
Foreign currency translation adjustments (155) 12 (544) (46)
Income tax benefit 61 201
-------------- -------------- ----------- -------------
Comprehensive income (loss) $ (85) $ 331 $ (456) $ 870
============== ============== =========== =============
</TABLE>
The accompanying notes are an integral
part of these financial statements
Page 5
<PAGE>
FIBERSTARS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (113) $ 916
----------------- ----------------
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 1,093 622
Write-off in-process technology acquired 938 0
Provision for doubtful accounts receivable 76 56
Deferred income taxes (244) 344
Equity in joint ventures' loss (income) (4) 15
Changes in assets & liabilities:
Accounts receivable 792 108
Notes and other receivable 66 (50)
Inventories (1,415) 162
Prepaid expenses and other current assets (237) (89)
Other assets (172) 393
Accounts payable 134 (246)
Accrued expenses (504) (113)
----------------- ----------------
Total adjustments 523 1,202
----------------- ----------------
Net cash provided by operating activities 410 2,118
----------------- ----------------
Cash flows from investing activities:
Repayment of loan made to officers 74 0
Cash received against loans made under notes receivable 0 620
Acquisition of fixed assets (458) (954)
----------------- ----------------
Net cash used in investing activities (384) (334)
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from sale of common stock 729 27
Proceeds from drawn on line of credit 1,500 0
Repayment of drawn on line of credit (1,500) 0
Repayment of long-term debt (94) (57)
----------------- ----------------
Net cash provided by (used in) financing activities 635 (30)
----------------- ----------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (48) 52
----------------- ----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 613 1,806
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,904 1,290
----------------- ----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,517 $ 3,096
================= ================
NON-CASH INVESTING ACTIVITIES:
Fair value of assets acquired $ 3,497 $ 0
Common stock and warrants for capital stock issued (3,497) 0
================= ================
</TABLE>
The accompanying notes are an integral
part of these financial statements
Page 6
<PAGE>
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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, 1999, contained in the Company's 1999 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):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------- -------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator - Basic and diluted EPS
Net income (loss) $ 9 $ 319 $ (113) $ 916
Denominator - Basic EPS
Weighted average shares outstanding 4,682 3,987 4,520 3,984
--------- -------- --------- --------
Basic earnings (loss) per share $ 0.00 $ 0.08 $ (0.03) $ 0.23
========= ======== ========= ========
Denominator - Diluted EPS
Denominator - Basic EPS 4,682 3,987 4,520 3,984
Effect of dilutive securities:
Stock options 654 125 - 80
--------- -------- --------- --------
5,336 4,112 4,520 4,064
--------- -------- --------- --------
Diluted earnings (loss) per share... $ 0.05 $ 0.08 $ (0.03) $ 0.23
========= ======== ========= =========
</TABLE>
At September 30, 2000, options to purchase 1,718,459 shares were outstanding,
but were not included in the year-to-date calculation of diluted EPS because
their inclusion would have been antidilutive. Options to purchase 1,053,802
shares of common stock were outstanding at September 30, 1999, but were not
included in the calculation of diluted EPS because their inclusion would have
been antidilutive.
Page 7
<PAGE>
FIBERSTARS, INC.
2. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market and
consist of the following (IN THOUSANDS):
<TABLE>
<CAPTION>
September 30, December 31,
------------ ------------
2000 1999
---- ----
(unaudited)
<S> <C> <C>
Raw materials $ 3,522 $ 2,736
Finished Goods 2,164 1,533
-------- --------
$ 5,686 $ 4,269
======== ========
</TABLE>
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
Warrants valued at $2,550,000 and $172,000 were issued as part of the Company's
acquisition of Unison Fiber Optic Systems, LLC and Lightly Expressed Ltd.
respectively. In addition, shares valued at $775,000 were issued as part of the
Company's acquisition of Lightly Expressed Ltd.(see Note 6).
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):
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
2000 1999
---- ----
(unaudited) (unaudited)
<S> <C> <C>
U.S. Domestic $ 18,435 $ 16,817
U.S. Export 3,365 1,726
European subsidiaries 5,066 5,540
--------- ----------
$ 26,866 $ 24,083
========= =========
</TABLE>
Page 8
<PAGE>
FIBERSTARS, INC.
6. ACQUISITIONS
In the 1st quarter of 2000 the Company acquired the selected assets of
Unison Fiber Optic Systems, LLC, and in the 2nd quarter of 2000 the
Company acquired Lightly Expressed, Ltd. Both acquisitions were
accounted for as a purchase.
The following table presents the unaudited pro forma results for the
nine months assuming the company had acquired Unison and Lightly
Expressed at the beginning of 1999 and 2000 respectively. Net income
and diluted earnings per share amounts have been adjusted to include
goodwill amortization of $141,300 for the nine months ended September
30, 1999 and 2000. This information may not necessarily be indicative
of the future combined results of the Company.
<TABLE>
<CAPTION>
Nine months Ended September 30,
2000 1999
--------------------- --------------------
<S> <C> <C>
Revenues $ 27,066 $ 25,310
Net income (210) (2,456)
Diluted earnings per share $ (0.05) $ (0.62)
Basic earnings per share $ (0.05) $ (0.62)
</TABLE>
Page 9
<PAGE>
FIBERSTARS, INC.
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 2% to $8,249,000 for the quarter ended September 30, 2000.
The increase was a result of growth in commercial lighting sales, offset by
a decrease in in-ground pool lighting sales, along with a significant drop in
sales to one commercial lighting customer. Net sales for the nine months ended
September 30, 2000 were $26,866,000, a 12% increase over net sales of
$24,083,000 for the same period in the prior year. Sales increased largely due
to higher sales in the pool lighting market.
Gross profit was $3,294,000 in the 3rd quarter of 2000, a 3% decrease over the
same period in the prior year. The gross profit margin was 40% for the quarter,
a two percentage point decrease from the 42% gross margin achieved in the 3rd
quarter of 1999. The decrease in gross margin was primarily a result of higher
operations overhead costs as a percentage of net sales. Gross profit was
$10,989,000 year-to-date as of September 30, 2000, a 9% increase over the
$10,114,000 gross profit achieved for the same period in the prior year. The
gross profit margin was 41% year-to-date in 2000 versus 42% for the same period
in 1999. The 1% point decline in gross profit margin year-to-date was a result
of higher manufacturing overhead as a percentage of sales.
Research and development expenses were $413,000 in the 3rd quarter of 2000, a
12% increase over the 3rd quarter of 1999 due principally to increased costs for
personnel and material for building prototypes. As a percentage of net sales,
research and development expenses were 5% for the 3rd quarter of 2000 versus 5%
in the 3rd quarter of the prior year. Research and development expenses were
$1,258,000 in the first three quarters of 2000 as compared to $1,021,000 for the
first three quarters in the prior year, a 23% increase. The additional research
and development expenses were due to additional personnel and related expenses
for new commercial lighting and pool products for the case lighting, down
lighting and spa markets to be introduced in 2001.
Sales and marketing expenses were $2,125,000 in the 3rd quarter of 2000 as
compared to $1,874,000 for the same period in 1999, an increase of 13%. The
increase was primarily due to additional personnel and marketing expenses
associated with the Company's acquisitions of Unison Fiber Optic Lighting
Systems, LLC ("Unison") and Lightly Expressed Ltd. combined with higher expenses
in marketing for pool lighting sales. Sales and marketing expenses were 26% of
sales in the 3rd quarter of 2000 compared to 23% for the same quarter in 1999.
Sales and Marketing expenses were $6,658,000 year-to-date as of September 30,
2000 as compared to $5,833,000 for the same period in 1999, a 14% increase. The
increase was primarily the result of additional spending by the companies
acquired in 2000 along with higher spending on personnel and marketing material
in the pool and commercial lighting groups.
General and administrative costs were $740,000 in the 3rd quarter of 2000, an
increase of 11% over such costs in the 3rd quarter of 1999. This increase was
largely a result of additional personnel, legal and accounting fees along with
additional amortization from companies acquired in 2000. General and
administrative costs were 9% of net sales in the quarter ended September 30,
2000 versus 8% for the same quarter in 1999. Year-to-date, general and
administrative costs were $2,250,000 in 2000 versus $1,818,000 for the same
period in 1999, an increase of 24%. The year-to-date increase is also a result
of additional personnel costs, additional amortization expenses and higher
miscellaneous expenses.
An additional expense of $938,000 attributable to the write-off of in-process
technology acquired was incurred in the year-to-date expenses of 2000 in
connection with the Unison transaction as compared to no such expense in the
same period of 1999. This expense is for the write-off of the Unison acquisition
costs which are directly
Page 10
<PAGE>
FIBERSTARS, INC.
associated with the valuation of products which were still under development at
the time of the acquisition and for which marketability is not yet proven.
Other income and expense includes income from joint ventures and interest income
and expense. Net interest expense was $11,000 in the 3rd quarter of 2000
compared to net interest income of $8,000 in 1999. The decrease in other income
and expense was due primarily to higher interest expense for overseas operations
in the 3rd quarter of 2000. Year-to-date, net interest expense was $71,000 for
2000 compared to net interest income of $13,000 for the same period in 1999,
with the increase due primarily to a greater utilization of the bank line of
credit in 2000 as compared to 1999.
There was no income tax expense in the 3rd quarter 2000.
The Company recorded net income of $9,000 in the 3rd quarter of 2000 as compared
to a higher net income of $319,000 in the 3rd quarter of 1999, substantially as
a result of the sales increase being less than the overall increase in operating
expenses and a decrease in profit margin. Year to date, the company experienced
a loss of $113,000 in 2000 versus net income of $916,000 for the same period in
1999, largely due to higher expenses in 2000 from sales and marketing and from
the one time write-off of in-process technology acquired, partially offset by
additional gross profit from the increase in sales year-to-date in 2000 over the
same period in 1999. Excluding the one-time write-off, the Company would have
recorded net income of $488,000 year-to-date, a 47% decrease over 1999.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, cash and cash equivalents when combined with short-term
investments were $2,517,000 as compared to $1,904,000 at December 31, 1999.
During the first nine months of 2000 there was a net loss of $113,000
compared to a $916,000 contribution to cash from net income for the same
period in 1999. After adjusting for depreciation, amortization and the
write-off of in-process technology acquired, there was $1,918,000 in cash
contributed from the nine month period ended September 30, 2000 as compared
to a total contribution for the same period in 1999 of $1,538,000. However,
after accounting for cash utilized to fund working capital there was a
contribution of $410,000 in cash for operating activities in 2000 compared to
a contribution of $2,118,000 in the first nine months of 1999. The additional
cash used in 2000 was for funding additions to fiber inventories which are
being utilized in the 2nd half of 2000 as well as for the purchase of
inventories as part of the Unison transaction.
There was a net contribution of $635,000 in cash in the first nine months of
2000 from financing activities, primarily from the sale of common stock
associated with the exercise of stock options. This compares to a net use of
cash of $30,000 from financing activities for the first nine months of 1999.
As a result of the cash utililized by operating activities and the cash
contributed by financing activities there was a net contribution of cash in the
first nine months of 2000 of $613,000 which resulted in an ending cash balance
of $2,517,000. This compares to a net contribution of $1,806,000 in cash for the
same period in 1999, resulting in an ending cash balance of $3,096,000 for that
period.
The Company has a $5.0 million unsecured line of credit for working capital
purposes and a term loan commitment of $500,000 for equipment purchases. These
are renewed on an annual basis, with the most recent renewal September 1, 2000.
As of September 30, 2000 the Company had no borrowings outstanding against its
line of credit.
Page 11
<PAGE>
FIBERSTARS, INC.
The Company also had a total borrowing of $563,000 against a credit facility
held by its German subsidiary. This borrowing is primarily for the purpose of
financing 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.
OTHER FACTORS
This Report on Form 10-Q 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, and Osram/Siemens. 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.
Page 12
<PAGE>
FIBERSTARS, INC.
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 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:
- 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;
- sales and distribution risks, such as risks of changes in
product mix or distribution channels that result in lower
margins;
- risks of the loss of a significant distributor or sales
representative;
- risks of the loss of a significant customer or swimming pool
builder;
- risks of the effects of volume discounts that we grant from
time to time to our larger customers, including reduced
profit margins;
- risks of product returns and exchanges; in the past we have
experienced 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 and manufacturing costs;
- risks associated with product development and introduction
problems, such as increased research, development and
marketing expenses associated with new product
introductions;
- risks associated with delays in the introduction of new
products and technologies, including lost sales and loss of
market share; and
- risks associated with or arising from companies acquired by
the Company.
Page 13
<PAGE>
Page 19
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 September 1, 2000, to Wells Fargo
Bank.
Exhibit 10.31 - Extension - Revolving Line of Credit Note of
the Registrant dated as of September 1, 2000, to Wells Fargo
Bank.
Exhibit 10.32 - Extension - Loan Agreement of the
Registrant dated as of September 1, 2000 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 14, 2000 By: /s/ Robert A. Connors
-------------------------------
Robert A. Connors
Chief Financial Officer
(Principal Financial and Accounting Officer)
Page 14
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
Number Number
------- ------
<S> <C>
10.30 Extension - Term Commitment Note of the Registrant dated as of
September 1, 2000, to Wells Fargo Bank.
10.31 Extension - Revolving Line of Credit Note of the Registrant
dated as of September 1, 2000, to Wells Fargo Bank.
10.32 Extension - Loan Agreement of the Registrant dated as of
September 1, 2000, to Wells Fargo Bank.
27 Financial Data Schedule
</TABLE>
Page 15
