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
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
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
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
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
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
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
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
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
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
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
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
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 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
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