-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ah9dZI5LYjkUhp5DUNqzpheckSBtWyTUD9R9W4P08X7D/mF5OGioO/t1uT51fUCh oeKrSJlqcdIOh5dRBf0H7g== 0000950005-96-000604.txt : 19960816 0000950005-96-000604.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950005-96-000604 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIBERSTARS INC /CA/ CENTRAL INDEX KEY: 0000924168 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 943021850 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24230 FILM NUMBER: 96611854 BUSINESS ADDRESS: STREET 1: 2883 BAYVIEW DR CITY: FREMONT STATE: CA ZIP: 94538 BUSINESS PHONE: 5104900719 MAIL ADDRESS: STREET 1: 2883 BAYVIEW DR CITY: FREMONT STATE: CA ZIP: 94538 10QSB 1 FORM 10-QSB 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, 1996 -------------- [ ] 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 incorporation or organization) Identification No.) 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, 1996: 3,404,605 Index to Exhibits is at page 14 Page 1 of 15 pages FIBERSTARS, INC. TABLE OF CONTENTS Page ---- Part I - FINANCIAL INFORMATION Item 1 Financial Statements: a. Balance Sheets June 30, 1996 and December 31, 1995......................3 b. Statements of Operations Three and six months ended June 30, 1996 and 1995........4 c. Statements of Cash Flows Six months ended June 30, 1996 and 1995..................5 d. Notes to Financial Statements..........................6-7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations........................8-11 Part II - OTHER INFORMATION Item 4 Submission of Matters to a Vote of Securities Holders........12 Item 6 Exhibits and Reports on Form 8-K.............................12 Signatures...................................................13 EXHIBITS Index to Exhibits............................................14 Exhibit 11 Computation of Net Income (Loss) Per Share...................15 Exhibit 27 Financial Data Schedule Page 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements FIBERSTARS, INC. BALANCE SHEETS (amounts in thousands) --------------- June 30, December 31, 1996 1995 ---- ---- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 1,807 $ 1,756 Short-term investments 2,769 2,446 Accounts receivable, net 2,871 2,614 Inventories 1,967 1,904 Prepaid expenses and other assets 163 176 Deferred income taxes 493 668 ------- ------- Total current assets 10,070 9,564 Fixed assets, net 831 754 Investment in joint ventures 37 342 Other assets 253 21 Deferred income taxes 813 813 ------- ------- Total assets $12,004 $11,494 ======= ======= LIABILITIES Accounts payable $ 1,030 $ 1,098 Accrued expenses 1,284 977 Current portion of long-term debt 13 13 ------- ------- Total current liabilities 2,327 2,088 Long-term debt, less current portion 33 40 ------- ------- Total liabilities 2,360 2,128 ------- ------- SHAREHOLDERS' EQUITY Common stock 0 0 Additional paid-in capital 11,881 11,848 Notes receivable from shareholder (75) (75) Accumulated deficit (2,162) (2,407) ------- ------- Total shareholders' equity 9,644 9,366 ------- ------- Total liabilities and shareholders' equity $12,004 $11,494 ======= ======= The accompanying notes are an integral part of these financial statements Page 3 FIBERSTARS, INC. STATEMENTS OF OPERATIONS (amounts in thousands except per share amounts) (Unaudited) ---------------
Three Months Ended June 30, Six Months Ended June 30, 1996 1995 1996 1995 ---- ---- ---- ---- Net sales 4,316 $2,891 $8,062 $5,580 Cost of sales 2,430 1,617 4,621 3,140 Gross profit 1,886 1,274 3,441 2,440 ------ ------ ------ ------ Operating expenses: Research and development 267 216 496 411 Sales and marketing 1,040 830 1,981 1,657 General and administrative 322 350 629 684 ------ ------ ------ ------ Income (loss) from operations 257 (122) 335 (312) Other income (expense): Equity in joint ventures' income (loss) 0 15 (7) 43 Interest income and expense 43 35 92 76 ------ ------ ------ ------ Income (loss) before income taxes 300 (72) 420 (193) Benefit from (provision for) income taxes (123) 35 (175) 96 ------ ------ ------ ------ Net income (loss) 177 $ (37) $ 245 $ (97) ====== ====== ====== ====== Net income (loss) per share 0.05 $(0.01) $ 0.07 $(0.03) ====== ====== ====== ====== Shares used in per share calculation 3,534 3,369 3,526 3,312 ====== ====== ====== ====== The accompanying notes are an integral part of these financial statements
Page 4 FIBERSTARS INC. STATEMENTS OF CASH FLOWS (amounts in thousands) (unaudited) ---------------
Six Months Ended June 30, 1996 1995 ---- ---- Cash flows from operating activities: Net income (loss $ 245 $ (97) ------- ------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 149 141 Provision for doubtful accounts receivable 19 24 Equity in joint ventures' (income) loss 7 (43) Changes in assets & liabilities: Decrease (increase) in accounts receivable (277) 834 Increase in inventories (63) (731) Decrease in prepaid expenses and other current assets 13 23 Decrease (increase) in deferred income taxes 175 (97) Decrease in other assets 8 0 Decrease in accounts payable (68) (265) Increase (decrease) in accrued expenses 307 (62) ------- ------- Total adjustments 270 (176) ------- ------- Net cash provided by (used in) operating activities 515 (273) ------- ------- Cash flows from investing activities: Increase in short-term investments (323) 0 Sale of equity in joint venture 59 0 Acquisition of fixed assets (226) (130) ------- ------- Net cash used in investing activities (490) (130) ------- ------- Cash flows from financing activities: Cash proceeds from sale of common stock 33 820 Issuance of long term debt 0 32 Proceeds of short term borrowing 0 8 Repayment of short term debt 0 (90) Repayment of long term debt (7) (28) ------- ------- Net cash provided by financing activities 26 742 ------- ------- Net increase in cash and cash equivalents 51 339 Cash and cash equivalents, beginning of period 1,756 3,489 ------- ------- Cash and cash equivalent, end of period $ 1,807 $ 3,828 ======= ======= Supplemental schedule of non-cash investing and financing activities: Note receivable from sale of investment in joint venture $ 239 $ 0 ======= ======= The accompanying notes are an integral part of these financial statements
Page 5 FIBERSTARS, INC. NOTES TO FINANCIAL STATEMENTS 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, 1995, contained in the Company's 1995 Annual Report to Shareholders. Net Income (Loss) Per Share Net income (loss) per share is computed by dividing net income by the weighted average number of common and common equivalent (when dilutive) shares of common stock outstanding during each period. 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, 1996 1995 ---- ---- (unaudited) Raw materials $ 1,314 $ 1,111 Finished Goods 653 793 -------- -------- $ 1,967 $ 1,904 ======== ======== 3. Lines of Credit As of June 28, 1996, the Company's bank lines of credit were renewed under terms substantially the same as the previous borrowing arrangements. The current arrangements consist of the following: a) A $1.0 million revolving line of credit, bearing interest at prime plus 0.25%. Borrowings under this line are unsecured, and the Company must maintain a zero balance for at least 30 consecutive days during each fiscal year. Page 6 b) A $500,000 term loan commitment to finance equipment purchases. Under this note, the Company may finance up to 80% of the cost of new equipment and 75% of the cost of used equipment. The note is secured by a security interest in all equipment financed with the proceeds. Borrowings bear interest at prime plus 0.75%. Interest only is payable monthly until June 28, 1997, after which the principal plus interest is repayable in 36 monthly installments. These borrowing arrangements require the Company to meet certain financial covenants with respect to net worth, liquidity and profitability. Both expire June 28, 1997. At June 30, 1996, the Company had no borrowings outstanding against either of these lines of credit. Page 7 FIBERSTARS, INC. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the attached financial statements and notes thereto. Net Sales
Q2'96 Q2'95 change YTD'96 YTD'95 change Net Sales ($000) $4,316 $2,891 49% $8,062 $5,580 44%
The increase in revenue over 1995 results primarily from increased unit volume in the swimming pool market and, to a lesser extent, increases in commercial and medical product sales. The increase in pool lighting sales is attributable to an increase in new pool construction compared to 1995, combined with broader market acceptance of the Company's new, lower priced pool lighting systems. Gross Profit
Q2'96 Q2'95 change YTD'96 YTD'95 change Gross Profit ($000) $1,886 $1,274 48% $3,441 $2,440 41% Percentage of net sales 44% 44% 43% 44%
The Company's gross margin of 43.7% in the second quarter was essentially equal to the same period a year ago, but up from 41.5% in the immediately preceding quarter. The Company increased fixed expenses by expanding its fiber production operations during the first half of 1996, taking over certain processes previously subcontracted to outside parties. Additional expansion is planned for the second half of the year. The Company believes that in-house operation of these previously subcontracted processes will result in lower cost of the Company's fiber products. However, the manufacture of fiber products by the Company remains subject to potential disruption or delay as a result of a number of factors, including production difficulties, delays in the delivery of raw materials or components, and acts of nature. Accordingly, no assurance can be given that any potential savings will ultimately be realized. In addition, as the Company phases in its expanded manufacturing operations through the remainder of 1996, incremental costs of such expansion are expected to equal or exceed savings resulting from in-house production. Page 8 Research and Development
Q2'96 Q2'95 change YTD'96 YTD'95 change Research & Development ($000) $267 $216 24% $496 $411 21% Percentage of net sales 6% 7% 6% 7%
Research and Development expenses have increased in absolute dollars, primarily due to increases in personnel and project related expenses. Because of increased revenue, the expenses as a percentage of sales have decreased. The Company expects to continue investing significantly in research and product development; however, dollars and percentages may vary from period to period. Selling and Marketing
Q2'96 Q2'95 change YTD'96 YTD'95 change Selling & Marketing ($000) $1,040 $830 25% $1,981 $1, 657 20% Percentage of net sales 24% 29% 25% 30%
Selling and marketing expenses have increased in absolute dollars over the comparable periods of 1995, primarily due to increases in commissions and certain promotional expenses that are directly related to sales volume. Total selling and marketing expenses increased less rapidly than revenue, and thus have decreased as a percentage of sales. General and Administrative
Q2'96 Q2'95 change YTD'96 YTD'95 change General & Administrative ($000) $322 $350 -8% $629 $684 -8% Percentage of net sales 8% 12% 8% 12%
General and administrative expenses have decreased by 8% vs. the comparable periods of 1995, primarily due to a reduction in legal fees, resulting from reduced activities associated with ongoing litigation. Other Income (Expense)
Q2'96 Q2'95 change YTD'96 YTD'95 change Other Income (Expense) ($000) $43 $50 -14% $85 $119 -29% Percentage of net sales 1% 2% 1% 2%
Other income is primarily comprised of net interest income, which varies from quarter to quarter based on fluctuations in interest rates and in the Company's cash balances. Net interest income increased to $43,000 for the quarter and $92,000 year-to-date, from $35,000 and $76,000 for the comparable periods of 1995. The increase is primarily attributable to higher cash balances. Other income also includes the Company's equity interest in the income or loss of joint ventures, which decreased to $0 for the quarter and ($7,000) year-to-date, from $15,000 and $43,000 for the comparable periods of 1995, primarily because early in 1996 the Company sold its interest in Fiber Optic Medical Products, which accounted for most of the joint venture income in 1995. The Company expects joint venture income to be immaterial for the foreseeable future. Page 9 Net Income (loss)
Q2'96 Q2'95 change YTD'96 YTD'95 change Net Income ($000) $177 ($37) ++ $245 ($97) ++ Percentage of net sales 4% (1%) 3% (2%)
The improvement in net income is attributable primarily to increases in net sales, partly offset by increases in cost of goods sold and operating expenses. Certain Factors Affecting Future Performance This Report contains forward looking statements, including without limitation those set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company's actual performance may vary from such statements as a result of a variety of risk and other factors, including those set forth in this Report. The Company's operating results are subject to significant seasonal variations, especially in the pool and spa market. In general, the Company's sales tend to be strongest in the second and fourth quarters of the year. However, the variable impact of weather conditions and other factors makes revenue and profit levels difficult to predict. In addition, a wide variety of factors influence the Company's quarterly and annual operating results, any of which could materially affect revenues and profitability. These include, among others, business factors such as increases in competition and related pricing pressure, shortages or increases in prices of materials, manufacturing constraints, changes in distribution channels, variations in product mix, and potential problems and delays in new product development and introduction; as well as national economic and other factors, such as construction trends and interest rates. Competition is increasing in a number of the Company's markets, including, for example, fiber optic swimming pool lighting products introduced by competitors in late 1995. The Company anticipates that any future growth in the fiber optic lighting market will be accompanied by increasing competition, which could adversely affect the Company's operating results. The Company believes that the success of its business depends primarily on its technical innovation, marketing abilities and responsiveness to customer requirements, rather than on patents, trade secrets, trademarks, copyrights and other intellectual property rights. Nevertheless, the Company has a policy of seeking to protect its intellectual property through, among other things, the prosecution of patents with respect to certain of the Company's technologies. The Company is aware that there are a large number of issued patents and pending patent applications in the field of fiber optic technology, and the Company believes that one or more of its competitors hold and may have applied for patents related to fiber optic lighting. Although to date the Company has not been involved in litigation challenging its intellectual property rights or asserting intellectual property rights of others, the Company has recently received from one of its competitors correspondence wherein such competitor alleges that the Company is manufacturing and selling product which infringes patent rights held by such competitor. The Company has begun an investigation into the validity of such claims and, while no determination has yet been made as to the merits of such claims, the Company intends to vigorously defend itself against any allegation by such competitor of infringement by, among Page 10 other things, asserting the Company's own patent rights. In addition, based upon the investigation to date, the Company believes that replacement of any components potentially affected by the asserted patent would not be difficult and would not have a material impact on the Company's business. However, there can be no assurance that the Company will not be required to engage in litigation to protect its patent rights or to defend the claims of others. In the event of litigation to determine the validity of any third party claims or claims by the Company against such third party, such litigation, whether or not determined in favor of the Company, could result in significant expense to the Company. Liquidity and Capital Resources For the six months ended June 30, 1996, cash and short term investments increased by $374,000. Cash provided by operating activities totaled $515,000, which was partly offset by $226,000 used for acquisition of fixed assets. The Company has a $1 million unsecured line of credit for working capital purposes and a $500,000 term loan commitment to finance equipment purchases. Both lines were renewed in June 1996 and expire on June 28, 1997. At June 30, 1996, the Company had no borrowings outstanding against either of these lines of credit. 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 11 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Securities Holders At the Company's Annual Meeting of Stockholders held on May 22, 1996, the shareholders elected the following persons to serve as directors in the ensuing year: VOTES VOTES BROKER NAME FOR WITHHELD NON-VOTES ---- ----- -------- --------- John B. Stuppin 2,730,818 14,668 - David N. Ruckert 2,730,818 14,668 - Theodore L. Eliot, Jr. 2,729,818 15,668 - Michael D. Ernst 2,730,200 15,286 - Michael Feuer, Ph.D. 2,730,818 14,668 - B. J. Garet 2,730,818 14,668 - Paul P. Wang, Ph.D. 2,730,818 14,668 - Philip E. Wolfson, M.D. 2,729,818 15,668 - The shareholders also ratified the appointment of Coopers & Lybrand L.L.P. as the Corporation's independent auditors for fiscal 1996 (with 2,708,954 affirmative votes, 3,200 negative votes, 33,332 abstentions and zero broker non-votes). Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits have been filed with this Report: Exhibit 11 - Computation of Net Income (Loss) Per Share 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 and 5 are not applicable and have been omitted. Page 12 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, 1996 By: /s/ William C. Lapworth ----------------------------------------- William C. Lapworth, Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Page 13 INDEX TO EXHIBITS Exhibit Page Number Number ------ ------ 11 Computation of Net Income (Loss) per Share 15 27 Financial Data Schedule Page 14 EX-11 2 EXHIBIT 11 Exhibit 11 FIBERSTARS INC. COMPUTATION OF NET INCOME (LOSS) PER SHARE (in thousands, except per share amounts) (Unaudited)
Three Months Ended Six Months Ended 6/30/96 6/30/95 6/30/96 6/30/95 ------- ------- ------- ------- Primary and Fully Diluted: Weighted average common shares outstanding for the period 3,392 3,369 3,389 3,312 Common equivalent shares assuming conversion of stock options and warrants under the treasury stock method 142 -- 137 -- ------- ------ ------- ------ Shares used in per share calculations 3,534 3,369 3,526 3,312 ======= ====== ======= ====== Net income (loss) $ 177 ($37) $ 245 ($97) Net income (loss) per share: $ 0.05 ($0.01) $ 0.07 ($0.03) Calculated in accordance with the guidelines of item 601 of Regulation S-B. Primary and fully diluted calculations are substantially the same.
Page 15 EX-27 3 FINANCIAL DATA SCHEDULE
5 0000924168 Fiberstars, Inc. 1,000 6-MOS DEC-31-1996 APR-01-1996 JUN-30-1996 1,807 2,769 3,031 160 1,967 10,070 1,869 1,038 12,004 2,327 0 11,806 0 0 (2,162) 12,004 4,316 4,359 2,430 2,430 1,629 0 0 300 123 0 0 0 0 177 0.05 0.05
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