-----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, R71gOvKpPBMLVoZYSER5VhQf9SF5JpGcCM+Y0kuVDTVKFyv5Pqh9FR/+6JaX6RUd gpIjejMHaY4AABumPQxB5g== 0000950005-97-000924.txt : 19971113 0000950005-97-000924.hdr.sgml : 19971113 ACCESSION NUMBER: 0000950005-97-000924 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 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: SEC FILE NUMBER: 000-24230 FILM NUMBER: 97716182 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 September 30, 1997 [ ] 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) 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 September 30, 1997: 3,489,845 Index to Exhibits is at page 12 Page 1 FIBERSTARS, INC. TABLE OF CONTENTS
Page ---- Part I - FINANCIAL INFORMATION Item 1 Financial Statements: a. Balance Sheets September 30, 1997 and December 31, 1996....................................3 b. Statements of Operations Three and nine months ended September 30, 1997 and 1996.....................4 c. Statements of Cash Flows Nine months ended September 30, 1997 and 1996...............................5 d. Notes to Financial Statements...............................................6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations...........................................7-10 Part II - OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K................................................11 Signatures......................................................................11 EXHIBITS Index to Exhibits...............................................................12
PART I. FINANCIAL INFORMATION Item 1. Financial Statements FIBERSTARS, INC. BALANCE SHEETS (amounts in thousands) -------------------- September 30, December 31, 1997 1996 -------- -------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 2,294 $ 1,520 Short-term investments 3,775 3,315 Accounts receivable trade, net 1,741 2,621 Notes and other accounts receivable 162 91 Inventories 2,929 2,168 Prepaid expenses and other assets 457 181 Deferred income taxes 585 585 -------- -------- Total current assets 11,943 10,481 Fixed assets, net 805 832 Investment in joint ventures 43 52 Other assets 109 144 Deferred income taxes 121 553 -------- -------- Total assets $ 13,021 $ 12,062 ======== ======== LIABILITIES Current Liabilities: Accounts payable $ 891 $ 967 Accrued expenses 1,447 1,122 Current portion of long-term debt 13 13 -------- -------- Total current liabilities 2,351 2,102 Long-term debt, less current portion 19 28 -------- -------- Total liabilities 2,370 2,130 -------- -------- SHAREHOLDERS' EQUITY Common stock 0 0 Additional paid-in capital 11,985 11,903 Note receivable from shareholder (75) (75) Accumulated deficit (1,259) (1,896) -------- -------- Total shareholders' equity 10,651 9,932 -------- -------- Total liabilities and shareholders' equity $ 13,021 $ 12,062 ======== ======== 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 Sept. 30, Nine Months Ended Sept. 30, 1997 1996 1997 1996 -------- -------- -------- -------- Net sales $ 4,001 $ 3,573 $ 14,076 $ 11,635 Cost of sales 2,266 2,101 7,785 6,722 -------- -------- -------- -------- Gross profit 1,735 1,472 6,291 4,913 Operating expenses: Research and development 307 218 896 714 Sales and marketing 922 870 3,419 2,851 General and administrative 344 314 1,069 944 -------- -------- -------- -------- Income from operations 162 70 907 404 Other income (expense): Equity in joint venture income (loss) (10) 9 (10) 2 Interest income and expense 77 69 171 160 -------- -------- -------- -------- Income before income taxes 229 148 1,068 566 Provision for income taxes (95) (56) (431) (229) -------- -------- -------- -------- Net income $ 134 $ 92 $ 637 $ 337 ======== ======== ======== ======== Net income per share $ 0.04 $ 0.03 $ 0.17 $ 0.10 ======== ======== ======== ======== Shares used in per share calculation 3,761 3,554 3,707 3,533 ======== ======== ======== ======== The accompanying notes are an integral part of these financial statements
Page 4 FIBERSTARS INC. STATEMENTS OF CASH FLOWS (amounts in thousands) (unaudited) ----------
Nine Months Ended September 30, 1997 1996 ------- ------- Cash flows from operating activities: Net income $ 637 $ 337 ------- ------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 327 244 Provision for doubtful accounts receivable 56 37 Deferred income taxes 432 231 Equity in joint venture (income) loss 9 (3) Changes in assets & liabilities: Accounts receivable, trade 824 794 Inventories (761) 30 Prepaid expenses and other current assets (276) (103) Other assets 11 187 Accounts payable (76) (424) Accrued expenses 325 158 ------- ------- Total adjustments 871 1,151 ------- ------- Net cash provided by operating activities 1,508 1,488 ------- ------- Cash flows from investing activities: Purchase of short-term investments (460) (1,326) Loans made to officers (47) Sale of equity in joint venture 59 Acquisition of fixed assets (300) (290) ------- ------- Net cash used in investing activities (807) (1,557) ------- ------- Cash flows from financing activities: Proceeds from issuances of common stock 82 36 Repayment of long term debt (9) (9) ------- ------- Net cash provided by financing activities 73 27 ------- ------- Net increase (decrease) in cash and cash equivalents 774 (42) Cash and cash equivalents, beginning of period 1,520 1,756 ------- ------- Cash and cash equivalents, end of period $ 2,294 $ 1,714 ======= ======= Supplemental schedule of non-cash investing and financing activities: Note receivable from sale of investment in joint venture $ 0 $ 239 ======= ======= 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, 1996, contained in the Company's 1996 Annual Report to Shareholders. Net Income Per Share Net income per share is computed using the weighted average number of shares of common stock outstanding and common equivalent shares. Common stock equivalent shares from stock options and warrants are excluded to the extent that their effect is antidilutive. Recent Pronouncements In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," (SFAS 128) which specifies the computation, presentation and disclosure requirements for Earnings per Share. SFAS 128 will become effective for the Company's 1997 fiscal year and will not have a material impact on the Company's financial position, results of operations or cash flows. In June 1997, the Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income." This statement establishes standards for reporting and display of comprehensive income and its components (including revenues, expenses, gains and losses) in a full set of general purpose financial statements. This statement is effective for fiscal years beginning after December 15, 1997, with earlier application permitted. In June 1997, the Financial Accounting Standards Board issued Statement No. 131, "Disclosures About Segments of an Enterprise and Related Information", which supersedes SFAS 14, "Financial Reporting for Segments of a Business Enterprise." SFAS 131 changes current practice under SFAS 14 by establishing a new framework on which to base segment reporting and also requires interim reporting of segment information. SFAS 131 is effective for fiscal years beginning after December 15, 1997, with earlier application encouraged. The statement's interim reporting disclosures would not be required until the first quarter immediately subsequent to the fiscal year in which SFAS 131 is effective. 2. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following (in thousands): September 30, 1997 December 31, 1996 ------------------ ----------------- (unaudited) Raw materials $ 2,127 $ 1,528 Finished Goods 802 640 -------- -------- $ 2,929 $ 2,168 ======== ======== Page 6 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
Q3'97 Q3'96 change YTD'97 YTD'96 change Net Sales ($000) $4,001 $3,573 12% $14,076 $11,635 21%
Net sales increased over the comparable periods of 1996 in both of the Company's major markets Commercial Lighting and Pool & Spa Lighting. Medical product sales, which represent a small portion of total revenue, decreased compared to 1996 for both the quarter and year-to-date periods. Gross Profit
Q3'97 Q3'96 change YTD'97 YTD'96 change Gross Profit ($000) $1,735 $1,472 18% $6,291 $4,913 28% Percentage of net sales 43% 41% 45% 42%
Gross margin has improved throughout 1997 compared to 1996, primarily due to reductions in per unit fiber processing costs. The Company's investment to establish an in-house fiber processing facility in 1996 has enabled the Company to expand fiber production, improve product quality, increase yield and reduce the cost of fiber products. Research and Development
Q3'97 Q3'96 change YTD'97 YTD'96 change Research & Development ($000) $307 $218 41% $896 $714 25% Percentage of net sales 8% 6% 6% 6%
Third quarter Research and Development expenses were 41% greater than a year earlier, increasing to 8% of sales in Q3'97 from 6% of sales a year earlier. For the first nine months of the year, Research and Development spending increased by 25% over the comparable period of 1996. These increases resulted from higher levels of project expenses, including expenditures on personnel. Projects nearing completion include a new commercial illuminator, the Model 405, which is expected to ship beginning in the fourth quarter, and a major new product line for the Pool & Spa market called System 2000(TM), to be introduced in the fourth quarter. The Company expects to continue investing significantly in research and product development; however, dollars and percentages may vary from period to period. Page 7 Selling and Marketing
Q3'97 Q3'96 change YTD'97 YTD'96 change Selling & Marketing ($000) $922 $870 6% $3,419 $2,851 20% Percentage of net sales 23% 24% 24% 25%
Selling and marketing expenses have increased in absolute dollars over the comparable periods of 1996, 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
Q3'97 Q3'96 change YTD'97 YTD'96 change General & Administrative ($000) $344 $314 10% $1,069 $944 13% Percentage of net sales 9% 9% 8% 8%
General and administrative expenses increased by 10% in the third quarter and 13% year-to-date, compared to the corresponding periods of 1996. The increases represent additional costs to support growth in the business. Other Income (Expense)
Q3'97 Q3'96 change YTD'97 YTD'96 change Other Income (Expense) ($000) $67 $78 -14% $161 $162 -1% Percentage of net sales 2% 2% 1% 1%
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 slightly to $77,000 for the quarter and $171,000 year-to-date, from $69,000 and $160,000 for the comparable periods of 1996. 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 a loss of $10,000 for the quarter, versus income of $9,000 in the third quarter of 1996. On a year to date basis, the loss of $10,000 compares to income of $2,000 a year ago. The Company expects joint venture income or loss to be immaterial for the foreseeable future. Net Income
Q3'97 Q3'96 change YTD'97 YTD'96 change Net Income ($000) $134 $92 46% $637 $337 89% Percentage of net sales 3% 3% 5% 3%
The increase in net income is attributable primarily to the growth in net sales and the improvement in gross margin, partly offset by increases in operating expenses. Page 8 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. In the fourth quarter of 1997, the Company will introduce a major new product line for the Pool & Spa market called System 2000(TM). Certain components within this product line are scheduled to be manufactured beginning in December or later; however the exact timing is partly dependent on the readiness of tooling, which is being created outside the Company. The Company does not expect to fulfill all 1997 orders by year end, anticipating an unusually high backlog of orders at December 31 and lower fourth quarter shipments than originally planned. Any unanticipated delays, such as late delivery of tooling, may increase these effects. Sales in the fourth quarter of 1997 are expected to include a major new product line for the Pool & Spa market called System 2000(TM). Some elements of the System 2000 product line require tooling in order to manufacture them cost-effectively. With tooling scheduled for completion late in the year, those elements will not be available to ship until December or later. This timing is expected to result in lower fourth quarter pool shipments than originally planned and an unusually large backlog of unshipped orders at year end. There can be noThe timing of their initial shipments depends in part upon factors not entirely within the Company's control, including timely completion of the tooling. Furthermore, any unanticipated delays, such as late completion of tooling, could further delay shipments and result in lower than expected revenue and profits in the fourth quarter. Competition is increasing in a number of the Company's markets. The two largest pool equipment supply companies, Hayward Pool Products and Pac-Fab, Inc., now distribute fiber optic lighting products which compete with the Company's pool lighting systems. In addition, a number of companies offer fiber optic lighting products for commercial lighting, some of which compete directly with the Company's products. Some of these companies have substantially greater financial, technical and marketing resources than the Company. The Company anticipates 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 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. Page 9 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. There are many issued patents and pending patent applications in the field of fiber optic technology, and certain of the Company's competitors hold and 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 in the past received communications from third parties asserting rights in the Company's patents or that the Company's technology infringes intellectual property rights held by such third parties. Based on information currently available to it, the Company does not believe that any such claims involving its technology or patents are meritorious; 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 nine months ended September 30, 1997, cash and short term investments increased by $1,234,000. Cash provided by operating activities totaled $1,508,000, which was partly offset by $300,000 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 expire on June 28, 1998. At September 30, 1997, 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 10 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits have been filed with this Report: Exhibit 10.24 - Amendment No.4, dated as of July 30, 1997, to Registration Rights Agreement dated February 6, 1991, between the Registrant and Belfield Services, Inc. Exhibit 10.25 - Investor Agreement, dated as of July 30, 1997, between the Registrant and Advanced Lighting Technologies, Inc. Exhibit 11 - Computation of Net Income Per Share Exhibit 99.1 - Press Release dated August 1, 1997 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: November 12, 1997 By: /s/ William C. Lapworth --------------------------------------- William C. Lapworth, Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Page 11 INDEX TO EXHIBITS
Exhibit Page Number Number ------ ------ 10.24 Amendment No.4, dated as of July 30, 1997, to Registration Rights Agreement dated February 6, 1991, between the Registrant and Belfield Services, Inc.........................................13-15 10.25 Investor Agreement, dated as of July 30, 1997, between the Registrant and Advanced Lighting Technologies, Inc............................16-20 11 Computation of Net Income per Share............................................ 21 99.1 Press Release dated August 1, 1997............................................22-23 27 Financial Data Schedule
Page 12 EX-10.24 2 AMENDMENT NO. 4 TO REGISTRATION RIGHTS AGREEMENT Exhibit 10.24 FIBERSTARS, INC. AMENDMENT NO. 4 TO REGISTRATION RIGHTS AGREEMENT This Amendment No. 4 (the "Amendment") is made as of July 30, 1997, to the Registration Rights Agreement dated as of October 20, 1990, as amended February 6, 1991, April 30, 1994, and August, 1994 (the "Registration Rights Agreement"), by and among Fiberstars, Inc., a California corporation (the "Company") and the persons and entities listed on Exhibit A thereto (the "Investors"). Unless specifically designated otherwise, the capitalized terms herein shall have the same meanings given them in the Registration Rights Agreement. RECITALS A. The Company and the Investors are parties to the Registration Rights Agreement pursuant to which the Company granted to the Investors certain registration rights with respect to shares of Series B Preferred, Series C Preferred and Series D Preferred Stock and Common Stock issued upon conversion of the Series B Preferred, Series C Preferred or Series D Preferred Stock or exercise of the Warrants to purchase shares of the Company's Preferred Stock. B. The Company and certain Investors holding not less than a majority of the Common Stock issued upon conversion of the Series B, Series C, and Series D Preferred or exercise of the Warrants, wish to amend certain provisions in the Registration Rights Agreement in order to provide for the assignment of the rights under this Registration Rights Agreement by Belfield Services Inc., a successor in interest to Pacific Technology Fund, to Advanced Lighting Technologies, Inc., an Ohio corporation. 1. Section 2, Paragraph 2.9 of the Registration Rights Agreement is hereby amended to read in full as follows: "2.9 Transfer of Registration Rights. The rights to cause the Company to register securities granted under Sections 2.1, 2.2 or 2.8 hereof may be assigned: (i) to a transferee or assignee in connection with the transfer or assignment of not less than 500,000 Shares or Conversion Shares, Warrants to purchase not less than 500,000 Shares, or any combination thereof, (ii) in the case of Warrant Shares, to a transferee or assignee in connection with the transfer or assignment of any Warrant Shares or any warrant exercisable for Warrant Shares, or (iii) upon any distribution of Shares or Conversion Shares by an Investor to its partners, provided that the Company is given notice of any such transfer within thirty (30) days of the date such transfer is effected which notice shall state the name and address of the transferee or assignee, identify the securities with respect to which such registration rights are assigned and provide the written agreement of said transferee or assignee to be bound by the provisions of Section 2 of this Agreement." Except as specifically amended herein, the Registration Rights Agreement shall remain in full force and effect. Page 13 IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 4 to the Registration Rights Agreement as of the day and year above first written. COMPANY: Fiberstars, Inc. By: /s/ David N. Ruckert -------------------------------------------- Title: President, CEO ---------------------------------------- INVESTORS: BELFIELD SERVICES INC. By: /s/ Larry Yung -------------------------------------------- Title: Sole Director ---------------------------------------- Page 14 Exhibit 10.24 Exhibit A LIST OF INVESTORS Belfield Services, Inc. Page 15 EX-10.25 3 INVESTOR AGREEMENT Exhibit 10.25 INVESTOR AGREEMENT This Investor Agreement ("Agreement") is made as of this 30 day of July, 1997 by and between Fiberstars, Inc., a California corporation (the "Company"), and Advanced LightingTechnologies, Inc., an Ohio corporation ("ADLT"). RECITALS WHEREAS, ADLT is, on or about the time of execution of this Agreement, purchasing an aggregate of 630,111 shares of Common Stock of the Company from Belfield Services, Inc. ("Belfield"); and WHEREAS, in connection with the foregoing transaction, ADLT is desirous of obtaining a seat on the Company's Board of Directors (the "ADLT Board Seat"); and WHEREAS, the Company currently has a single vacancy on its Board of Directors and is desirous of adding a representative of ADLT to the Board effective as of the date of this Agreement; and WHEREAS, the parties hereto wish to set forth their agreements relative to transactions in the Company's securities by ADLT, among other things; NOW THEREFORE in consideration of the mutual promises and covenants set forth herein, the Company and ADLT agree as follows: Ownership and Control Restrictions 1. Standstill Agreement. Notwithstanding any other provisions of this Agreement, without the written consent of the Company and the majority of Company's Directors not nominated by ADLT or its affiliates, successors in interest, nominees or assignees, neither ADLT nor its affiliated entities will acquire beneficial ownership (which term shall include for the purposes of this Agreement, without limitation, direct or indirect ability to influence voting) of any securities of the Company entitled to vote with respect to the election of any directors of the Company ("Voting Securities"), any security convertible into, exchangeable for, exercisable for or that may become any Voting Securities or any other right to acquire Voting Securities, if after such acquisition the Voting Securities then beneficially owned by ADLT and/or its affiliated entities, together with the Voting Securities with respect to which ADLT and/or such entities have the right or future right to acquire such beneficial ownership, represent (or will represent when outstanding) voting power greater than Thirty Percent (30%) of the voting power of all then outstanding Voting Securities (as determined if all outstanding Voting Securities were voting together). Page 16 a) Voting Trust, etc. Neither ADLT nor any affiliated entity shall deposit any Voting Securities in a voting trust, or, except as otherwise provided herein, subject any Voting Securities to any arrangement or agreement with respect to the voting of such Voting Securities. b) Solicitation of Proxies. Without the Company's prior written consent, neither ADLT nor any affiliated entity shall solicit proxies with respect to any Voting Securities, nor shall any of them become, with respect to the election or removal of any of the Company's directors, a "participant" within the meaning of Rule 14a-11 of Regulation 14A under the Exchange Act; provided, however, that ADLT shall not be deemed to be a "participant" under such role by reason of the membership of its designee on the Company's Board of Directors. c) Acts in Concert with Others. Neither ADLT nor any affiliated entity shall join a partnership, limited partnership, syndicate or other group, or otherwise act in concert with any third person, for the purpose of acquiring, holding, voting or disposing of Voting Securities. The foregoing prohibition shall not prevent ADLT from joining a partnership, limited partnership, syndicate or other group not formed or perpetuated for any such purpose which acquires, holds or disposes of Voting Securities, provided that neither ADLT nor any affiliated entity is able, either directly or indirectly, to vote such Voting Securities. 2. Notice of Voting Securities Purchases and Sales. ADLT shall advise the management of the Company as to its and its affiliated entities' plans to acquire or dispose of beneficial ownership of any Voting Securities, or rights thereto, reasonably in advance of any such action. All purchases of Voting Securities of the Company by ADLT and its affiliated entities shall be made in compliance with applicable laws and regulations. 3. Voting; Appointment of Director. Unless the Company otherwise consents in writing, ADLT shall take such action as may be required so that all such Voting Securities are voted with management on all matters, other than the election of directors, to be voted on by holders of Voting Securities in not less than the same proportion as the votes cast by the other holders of Voting Securities with respect to such matters. ADLT and its affiliated entities, as holders of shares of Voting Securities, shall be present, in person or by proxy, at all meetings of stockholders of the Company so that all shares of Voting Securities beneficially owned by ADLT and/or its affiliated entities may be counted for the purposes of determining the presence of a quorum at such meetings. Effective upon the closing of the transactions described in that certain Stock Purchase Agreement of even date herewith among the Company, ADLT and Belfield Services, Inc., the Company agrees to appoint a nominee of ADLT (the "ADLT Nominee") reasonably acceptable to the Company's Board of Directors, to hold office until the next annual meeting of the Company's shareholders and until his successor is duly elected and qualified. The Company agrees to take such action as is reasonably necessary to cause the election of the ADLT Nominee to the Company's Board of Directors. Once elected, the ADLT Nominee may not be removed from the Board other than for cause. Any vacancy created on the Board as a result of the resignation, death, disability or removal of the ADLT Nominee shall be filled by the nomination of a replacement director by ADLT reasonably acceptable to the Company and the prompt Page 17 appointment of such nominee by the remaining directors to fill such vacancy. Notwithstanding the foregoing, the Company's obligations under this Section 3 shall terminate if the percentage of Voting Securities of the Company owned beneficially and of record by ADLT becomes less than Fifteen Percent (15%). 4. Restrictions on Transfer of Voting Securities. Neither ADLT nor any affiliated entity shall dispose of beneficial ownership or voting control of Voting Securities or any right thereto except (i) to the Company or any person or group approved by the Company; (ii) to a corporation or other entity of which ADLT owns not less than 50% of the voting power entitled to be cast in the election of directors or managers, as the case may be (a "Controlled Enterprise"), so long as such Controlled Enterprise agrees to hold such Voting Stock subject to all the provisions of this Agreement, including this Section 4, and agrees to transfer such Voting Securities to ADLT or another Controlled Enterprise of ADLT if it ceases to be a Controlled Enterprise of ADLT; (iii) pursuant to a bona fide public offering registered under the Securities Act of either Voting Securities or securities exchangeable or exercisable for Securities (in which ADLT obtains more than 10% of the offering and ADLT does not have the ability to select the purchasers); (iv) pursuant to Rule 144 under the Securities Act (provided that if Rule 144(k) is available, such transfer nevertheless is within the volume limits and manner of sale requirements applicable to non-144(k) transfers under Rule 144); (v) in transaction not described in (i), (ii), (iii), (iv) or (vi) hereof so long as such transactions do not, directly or indirectly, result in any person or group owning or having the right to acquire or intent to acquire beneficial ownership of Voting Securities with aggregate voting power of five percent (5%) or more of the aggregate voting power of all outstanding Voting Securities (as determined if all Voting Securities were voting together); or (vi) in response to an offer to purchase or exchange for cash or other consideration any Voting Securities that (a) is made by or on behalf of the Company, or (b) is made by another person or group and is not opposed by the Board of Directors of the Company within the time such Board is required, pursuant to regulations under the Exchange Act, to advise Company stockholders of such Board's position on such offer. ADLT's obligations pursuant to this Section 4 shall terminate effective upon termination of the Company's obligations pursuant to Section 3 hereof. 5. Right to Maintain. If the percentage interest of the Purchaser in the Total Voting Power (as defined below) of the Company is reduced as a result of an issuance by the Company of Common Stock or of any other voting security of the Company (including any issuance following conversion of any security convertible into or exchangeable for Common Stock or any other voting security of the Company or upon exercise of any option, warrant or other right to acquire any Common Stock or any other voting security of the Company), the Company shall so notify the Purchaser by written dated notice within 10 calendar days after such issuance and shall offer to sell to the Purchaser, and if such offer is accepted within 10 calendar days of receipt of such offer, shall sell to the Purchaser, at a purchase price per share equal to the Average Market Price per share on the date of the Company's notice given pursuant to this Section 5, that number of shares of Common Stock which, if purchased by the Purchaser, would result in the Purchaser's retaining the percentage interest in the Total Voting Power of the Company in effect prior to such reduction of its interest, up to a percentage interest of Twenty-Five Percent (25%). For purposes of this Agreement, the Average Market Price of any security at any date shall be the Page 18 average of the closing prices for a share of such security on the 10 consecutive trading days ending on the trading date last preceding the date of determination of such price, as reported on the Nasdaq National Market System ("NMS") or, if such closing prices shall not be reported on the NMS, the average of the mean between the closing bid and asked prices of a share of such security on such 10 consecutive trading days as so reported or, if such prices shall not be so reported, as the same shall be reported by the Nasdaq Over-the-Counter Market or, in all other cases, the value set in good faith by the Company's Board of Directors. The purchase and sale of any shares of Common Stock pursuant to any offer made under this Section 5 that is accepted by the Purchaser shall take place at 10:00 a.m. on the business day following the expiration or early termination of all waiting periods imposed on such purchase and sale by the Hart-Scott-Rodino Antitrust Improvements Act ("HSR Act") or, if no waiting period is imposed on such purchase and sale by the HSR Act, on the business day following the Purchaser's acceptance of such offer at the offices of the Company, or at such other time and place as the Company and the Purchaser may agree. The Company and the Purchaser will use their best efforts to comply with all federal and state laws and regulations and stock exchange listing requirements applicable to any purchase and sale of shares of Common Stock under this Section 5. The issuance of such shares shall be subject to compliance with applicable stock exchange or Nasdaq requirements and there shall not then be in effect any order enjoining or restraining such exercise on issuance. Notwithstanding the foregoing, if any issuance of securities or rights to acquire securities requiring the Company to make an offer under this Section 5 shall be for a number of securities representing less than 3% of the Total Voting Power of this Company in effect immediately following such issuance, the Company shall have the right to delay giving the notice otherwise required by this Section 5 until the earlier of (i) the next issuance which, together with all issuances after which notice was delayed pursuant to this sentence, shall represent an aggregate of 3% or more of the Total Voting Power of the Company then in effect or (ii) the 45th calendar day next preceding the last day of the Company's then fiscal year for accounting purpose and, thereupon, the Company shall give such notice with respect to all shares of Common Stock which it shall be obligated to offer to sell to the Purchaser and which shall not have been the subject of a previous notice pursuant to this Section 5. The right of delay set forth in this paragraph shall not apply to any insurance by the Company that results in the percentage of the Total Voting Power of the Company held by ADLT declining below twenty-two percent (22%). As used in this Agreement, the term "Total Voting Power of the Company" means the total number of votes which may be cast in the election of directors of the Company at any meeting of shareholders of the Company if all securities entitled to vote in the election of directors of the Company were present and voted at such meeting, other than votes that may be cast only upon the happening of a contingency. 6. Governing Law. This Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within California. Page 19 7. Amendment of Registration Rights; Consent to Assignment. The Company hereby consents to the assignment to ADLT of all of the rights, preferences and privileges afforded Belfield Services, Inc. and its predecessor in interest, Pacific Technology Fund ("PTF"), pursuant to that certain Registration Rights Agreement among the Company and the Holders (as defined therein) dated June 27, 1990, as amended through and including Amendment No. 3 thereto dated as of August, 1994 (the "RRA"). The Company represents and warrants that (i) as of the date hereof there has been no exercise of any demand registration right pursuant to Section 2.1 of the RRA; and (ii) upon due execution of Amendment No. 4 to the RRA of even date herewith by the Company and Belfield (the successor in interest to PTF) the rights and preferences of Belfield under the RRA may be validly assigned to ADLT. 8. Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Investor Agreement effective as of the date and year first above written. FIBERSTARS, INC. ADVANCED LIGHTING TECHNOLOGIES, INC. By: /s/ David N. Ruckert By: /s/ Louis S. Fisi --------------------------- ---------------------------- Title: President, CEO Title: Executive Vice President --------------------------- ---------------------------- Page 20 EX-11 4 COMPUTATION OF NET INCOME PER SHARE Exhibit 11 FIBERSTARS INC. COMPUTATION OF NET INCOME PER SHARE (in thousands, except per share amounts) (Unaudited)
Three Months Ended Nine Months Ended 9/30/97 9/30/96 9/30/97 9/30/96 -------------------------- ------------------------ Primary and Fully Diluted: Weighted average common shares outstanding for the period 3,451 3,405 3,428 3,394 Common equivalent shares assuming conversion of stock options and warrants under the treasury stock method 310 149 279 139 ------ ------ ------ ------ Shares used in per share calculations 3,761 3,554 3,707 3,533 ====== ====== ====== ====== Net income $ 134 $ 92 $ 637 $ 337 Net income per share: $ 0.04 $ 0.03 $ 0.17 $ 0.10 Calculated in accordance with the guidelines of item 601 of Regulation S-B. Primary and fully diluted calculations are substantially the same.
Page 21 EX-99.1 5 PRESS RELEASE DATED AUGUST 1, 1997 Exhibit 99.1 Press Release ADVANCED LIGHTING TECHNOLOGIES ACQUIRES EQUITY POSITION, STRATEGIC PARTNERSHIP WITH FIBERSTARS FREMONT, CA, August 1 - Fiberstars, Inc. (FBST:Nasdaq) announced today that Advanced Lighting Technologies, Inc. (ADLT:Nasdaq) has acquired an equity position in Fiberstars to create a strategic partnership which will develop and market next generation fiber optic lighting systems. Advanced Lighting Technologies acquired the Fiberstars shares formerly held by Pacific Technology Partners, a venture capital fund that is in the process of dissolving. These shares represent approximately 18% of Fiberstars shares outstanding. Wayne Hellman, Chairman and CEO of Advanced Lighting Technologies, will join the Fiberstars Board of Directors. "Fiber optic lighting is a developing market. Current products are aimed at niche segments," said Advanced Lighting Technologies' Wayne Hellman. "Next generation systems will be designed to compete in the general lighting market, which offers much greater volume potential. ADLT demonstrated a prototype of a new technology fiber optic illuminator at the Light Fair trade show in New York this year. We look forward to working with Fiberstars to further develop and market new high performance systems." Fiberstars President, CEO David Ruckert noted, "Advanced Lighting Technologies has superior metal halide lamp technology. The opportunity to design lamps and power supplies expressly for fiber optic lighting systems has the potential to deliver a significant increase in the performance of Fiberstars products at pricing which is roughly competitive to conventional electric lighting products." Fiberstars also has a fiber technology partnership with Mitsubishi, the world's leading plastic optical fiber manufacturer. Mitsubishi took a minority equity position (3.6%) in Fiberstars in 1995. Advanced Lighting Technologies is an innovation-driven designer, manufacturer and marketer of metal halide lighting products. The Company has operations and affiliates in North America, Europe, the Pacific Rim and Australia. Page 22 ADVANCED LIGHTING TECH., FIBERSTARS...2 Fiberstars is the world's leading supplier of fiber optic lighting systems. The Company develops and manufactures products for commercial lighting, pool & spa and medical markets. Forward going statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act. of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainties including, but not limited to, the potential expansion of the market for fiber optic lighting, and the ability of cooperative efforts between Fiberstars and Advanced Lighting Technologies to develop products which are successful in the market. Actual results may differ materially from the results predicted. For more information about potential factors which could affect Fiberstars financial results, please refer to the Fiberstars Annual Report on Form 10-KSB for the year ended December 31, 1996, and the Fiberstars Quarterly Report on Form 10-QSB for the period March 31, 1997, which are on file with the Securities and Exchange Commission. Page 23 EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1997 JUL-01-1997 SEP-30-1997 2,294 3,775 2,011 270 2,929 11,943 2,370 1,565 13,021 2,351 0 0 0 0 10,651 13,021 4,001 4,068 2,266 2,266 1,573 0 1 229 95 0 0 0 0 134 0.04 0.04
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