Cash Used in Investing Activities
There was a net utilization of cash of $717,000 in investing activities in 2003 primarily due to the acquisition of fixed assets compared to $793,000 spent on acquiring fixed assets in 2002.
Cash Provided by Financing Activities
There was a net contribution of $3,447,000 in cash in 2003 from financing activities. This net contribution was primarily due to the proceeds from the sale of the Company’s common stock and warrants in a private placement which closed in two stages in June 2003 and August of 2003, as discussed below, with aggregate net proceeds of $3,812,000, net of fees and expenses. This was offset by the repayment of bank borrowings of $607,000 and a bank overdraft of $691,000.
As a result of the cash provided by operating and financing activities and the cash used in investing activities, there was a net increase in cash in 2003 of $4,023,000 that resulted in an ending cash balance of $4,254,000. This compares to a net increase in cash of $99,000 in 2002 resulting in an ending cash balance of $231,000 for 2002.
The Company has a $5,000,000 Loan and Security Agreement (Accounts Receivable and Inventory) dated December 7, 2001, with Comerica Bank bearing interest equal to prime plus 0.25% per annum computed daily or a fixed rate term option of LIBOR plus 3%. Borrowings under this Loan and Security Agreement are collateralized by the Company’s assets and intellectual property. Specific borrowings are tied to accounts receivable and inventory balances, and the Company must comply with certain covenants with respect to effective net worth and financial ratios. The Company had no borrowings against this facility as of December 31, 2003 and had borrowings of $416,000 as of December 31, 2002. As of December 31, 2003, the Company was not in compliance with the profit covenant, but has received a waiver to this covenant from the bank.
The Company also has a $444,000 (in UK pounds sterling, based
on the exchange rate at December 31, 2003) bank overdraft agreement with
Lloyds Bank Plc through its UK subsidiary. There were no borrowings against
this facility as of December 31, 2003 and December 31, 2002.
As of December 31, 2003, the Company had a total borrowing of $475,000 (in Euros, based on the exchange rate as of December 31, 2003) against a note payable secured by real property owned by its German subsidiary. As of December 31, 2002, the Company had $475,000 borrowed against this note. Additionally, there is a revolving line of credit of $254,000 (in Euros, based on the exchange rate at December 31, 2003) with Sparkasse Neumarkt Bank. As of December 31, 2003, there were no borrowings against this facility and as of December 31, 2002 there was $142,000 against this facility.
Future payments for borrowings by the Company's German subsidiary and minimum lease payments under operating leases as of December 31, 2003, were as follows (in thousands):
|
|
|
Borrowings
By German
Subsidiary |
Non-
Cancelable
Operating
Leases |
| |
|
|
|
|
|
|
2004 |
|
|
— |
|
|
1,061 |
|
|
2005 |
|
|
— |
|
|
1,082 |
|
|
2006 |
|
|
— |
|
|
808 |
|
|
Thereafter |
|
|
475 |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
$ |
475 |
|
$ |
2,951 |
|
As part of the acquisition of Lightly Expressed in 2000, the Company granted the Lightly Expressed shareholders warrants to purchase 100,000 shares that may be exercised in three years if certain operating profits from sales of the products acquired are met. There were 50,000 warrants exercisable as of December 31, 2003.
In a March 2002 private placement, the Company sold 328,633 shares of common stock, for net proceeds of $972,000 (net of fees and expenses). In addition, each purchaser was issued a warrant to purchase a number of shares of the Company's common stock equal to 20% of the number of shares of common stock purchased by such purchaser in the offering. The purchase price of the common stock was $3.00 per share, which was based on an 8.8% discount on the 10-day average price as of March 14, 2003. The purchase price of the common stock for insiders who participated in the offering was $3.35, which was the higher of (1) the price on the closing date or (2) the 10-day average price as of March 14, 2002, plus a $.03 premium because of the issuances of the warrants. The warrants have an initial exercise price of $4.30 per share, with a life of 5 years.
On June 17, 2003, the Company entered into a securities purchase agreement to sell up to 1,350,233 shares of common stock and warrants to purchase 405,069 shares of common stock for an aggregate purchase price of $4,388,250 in a two-stage private placement. The first stage of the private placement, involving the sale of 923,078 shares of common stock and warrants to purchase 276,922 shares of common stock, closed on June 17, 2003 with the Company receiving net proceeds of $2,769,000 (net of fees and expenses). The second stage of the private placement, involving the sale of 427,155 shares of common stock and warrants to purchase 128,147 shares of common stock, closed on August 18, 2003 with the Company receiving net proceeds of $1,043,000 (net of fees and expenses). As required by Nasdaq Marketplace Rules, the issuance and sale of the shares and warrants in the second stage were
subject to shareholder approval because the price was less than the greater of book or market value per share and amounted to 20% or more of the Company’s common stock. The shareholders approved the issuance and sale of the shares and warrants in the second stage at a special meeting of shareholders held on August 12, 2003. For both stages, the purchase price of the common stock was $3.25 per share, which was a 12.5% discount on the 10-day average price as of June 1, 2003. The warrants have an initial exercise price of $4.50 per share and a life of 5 years. The warrants were valued at $641,000 and $297,000 for the first and second stages, respectively, based on a Black-Scholes calculation as of the June 17, 2003 and August 18, 2003 closing dates and under EITF 00-19 were included at those values in long term liabilities at the time of each closing. The balance of the net proceeds was accounted for as additional paid in capital. Under EITF 00-19, the Company marked-to-market the value of the warrants at
the end of each accounting period until the registration statement for the shares and warrants was declared effective by the SEC on September 24, 2003. Once the registration statement for the shares and warrants was declared effective, the warrant value on the effective date was reclassified to equity as additional paid in capital. As a result of the change in value of the warrants issued in the first stage from the closing date to the end of the second quarter on June 30, 2003, the Company realized a benefit of $8,000 that was included in other income in the Condensed Consolidated Statement of Operations in the second quarter of 2003. As a result of the change in value of the first stage warrants from June 30, 2003 and the second stage warrants from the second closing date to September 30, 2003, the Company realized a benefit of $15,000 that was included in other income in the Condensed Consolidated Statement of Operations in the third quarter of 2003. The Company is subject to certain indemnity provisions
included in the stock purchase agreement entered into as part of the financing. In December 2003, the Company also issued warrants to purchase 81,104 shares of common stock to the firm Merriman Curhan and Ford & Co. as compensation as placement agent for the private placement. These warrants have the same terms as the warrants issued in the private placement.
The Company believes that existing cash balances, proceeds from the private placement and funds available through the Company’s bank lines of credit along with 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. However, unforeseen adverse competitive, economic or other factors may damage the Company’s cash position, and thereby affect operations. From time to time the Company may be required to raise additional funds through public or private financing, strategic relationships or other arrangements. There can be no assurance that such funding, if needed, will be available on terms acceptable to the Company, or at all. Furthermore, any additional equity financing may be dilutive to stockholders, and debt
financing, if available, may involve restrictive covenants. Strategic arrangements, if necessary to raise additional funds, may require the Company to relinquish its rights to certain of its technologies or products. Failure to generate sufficient revenues or to raise capital when needed could have an adverse impact on the Company’s business, operating results and financial condition, as well as its ability to achieve its intended business objectives.
Critical Accounting Policies
The preparation of financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingencies and the reported amounts of revenue and expenses in the financial statements. Material differences may result in the amount and timing of revenue and expenses if different judgments or different estimates were utilized. See Note 2 of Notes to Consolidated Financial Statements contains a discussion of the Company's significant accounting policies. Critical accounting policies, judgments and estimates which we believe have the most significant impact on the Company's financial statements are set forth below:
-
Revenue recognition;
-
Allowances for doubtful accounts, returns and discounts;
-
Valuation of inventories; and
-
Accounting for income taxes.
Revenue Recognition
The Company recognizes revenue upon: (1) receipt of a purchase order from the customer or completion of a sales agreement with the customer; (2) shipment of the product has occurred or services have been provided; and (3) the sales price is fixed or determinable and collectibility is reasonably assured. Revenue from product sales is generally recognized upon shipment, and allowances are provided for estimated returns, discounts and warranties. Such allowances are adjusted periodically to reflect actual and anticipated returns, discounts and warranty expenses. Revenue on sales that include services such as design, integration and installation is generally recognized using the percentage-of-completion method. Under the percentage-of-completion method, revenue recognized reflects the portion of the anticipated contract revenue that has been earned, equal to the ratio
of labor costs expended to date to anticipated final labor costs, based on current estimates of labor costs to complete the project. The Company's products are generally subject to warranties, and the Company provides for the estimated future costs of repair, replacement or customer accommodation in costs of sales. Fees for research and development services are determined on a cost-plus basis and are recognized as revenue when performed.
The Company recognizes shipments to pool lighting distributors as revenue upon shipment. Estimated sales returns are recorded upon recognition of revenues from distributors having rights of return, including exchange rights for unsold products. Historically, there have been minimal returns. Shipments made to commercial lighting representatives and distributors are also recognized as revenue upon shipment because in these instances the representative or distributor is acting as a pass-through agent to a specific lighting project for which the Company has an existing contract or purchase order.
Revenue recognition in each period is dependent on our application of these accounting policies. Our application of percentage-of-completion accounting is subject to our estimates of labor costs to complete each project. In the event that actual results differ from these estimates or we adjust these estimates in future periods, our operating results for a particular period could be materially affected.
Allowances for Doubtful Accounts, Returns and Discounts
The Company establishes allowances for doubtful accounts, returns and discounts for specifically identified doubtful accounts, returns and discounts based on credit profiles of our customers, current economic trends, contractual terms and conditions and historical payment, return and discount experience. For each year ended December 31, the allowance for doubtful accounts, returns and discounts was $1,096,000 for 2003, $1,034,000 for 2002 and $1,334,000 for 2001. The amount charged to revenue for returns and discounts was $141,000 in 2003, $956,000 in 2002 and $1,487,000 in 2001. The amount charged to expenses for doubtful accounts was $2,000 in 2003, $78,000 in 2002 and $274,000 in 2001. In the event that actual returns, discounts and bad debts differ from these estimates or we adjust these estimates in future periods, our operating results and financial position could be
materially affected.
Valuation of Inventories
The Company states inventories at the lower of standard cost (which approximates actual cost determined using the first-in-first-out method) or market. The Company establishes provisions for excess and obsolete inventories after evaluation of historical sales, current economic trends, forecasted sales, product lifecycles and current inventory levels. During 2003, $128,000 was charged to cost of sales for excess and obsolete inventories. Adjustments to our estimates, such as forecasted sales and expected product lifecycles, could harm our operating results and financial position could be materially affected.
Accounting for Income Taxes
As part of the process of preparing our consolidated financial statements, we are required to estimate our income tax liability in each of the jurisdictions in which we do business. This process involves estimating our actual current tax expense together with assessing temporary differences resulting form differing treatment of items, such as deferred revenues, for tax and accounting purposes. These differences result in deferred tax assets and assets and liabilities, which are included in our consolidated balance sheet. We must then assess the likelihood that these deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not more likely than not or is unknown, we must establish a valuation allowance.
Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our deferred tax assets. At December 31, 2003, we have recorded a full valuation allowance against our deferred tax assets, due to uncertainties related to our ability to utilize our deferred tax assets, primarily consisting of certain net operating losses carried forward. The valuation allowance is based on our estimates of taxable income by jurisdiction and the period over which our deferred tax assets will be recoverable.
Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS"), No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". Under SFAS No. 141, all business combinations initiated after June 30, 2001 must be accounted for using the purchase method. SFAS No. 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions upon adoption for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles and the testing for impairment of existing goodwill and other intangibles. The Company adopted SFAS No. 142 effective January 1, 2002 (see Note 5 of the Notes to Consolidated Financial Statements).
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement supersedes SFAS No. 121 and the accounting and reporting provisions of Accounting Principles Board, or APB, Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", for the disposal of a segment of a business. The provisions of SFAS No. 144 were adopted by the Company as of January 1, 2002.
In November 2001, the Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue No. 01-09, "Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's Products." EITF No. 01-09 requires recording certain consideration paid to distributors of the Company's products as a reduction of revenue. The provisions of EITF No. 01-09 were adopted by the Company beginning January 1, 2002. The Company has incurred no change as a result of adopting EITF No. 01-09.
In June 2002, FASB issued SFAS No. 146, "Accounting for Exit or Disposal Activities". SFAS 146 addresses significant issues regarding the recognition, measurement and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for under EITF No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The scope of SFAS 146 also includes costs related to terminating a contract that is not a capital lease and termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. The Company adopted the provisions of SFAS 146
effective for exit or disposal activities initiated after December 31, 2002. The provisions of EITF No. 94-3 shall continue to apply for an exit activity initiated under an exit plan that met the criteria of EITF No. 94-3 prior to the adoption of SFAS No. 146. The adoption of SFAS 146 will change on a prospective basis the timing of when restructuring charges are recorded from a commitment date approach to when the liability is incurred.
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN 45 requires that a liability be recorded in the guarantor's balance sheet upon issuance of a guarantee. In addition, FIN 45 requires disclosures about the guarantees that an entity has issued, including a reconciliation of changes in the entity's product warranty liabilities. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor's fiscal year-end. The disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002.. The Company has adopted the disclosure provisions of FIN 45 relating to product warranty effective for the year ended
December 31, 2002.
In November 2002, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2002. The Company has adopted the provisions of EITF Issue No. 00-21.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation, Transition and Disclosure" ("SFAS 148"). SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS 148 also requires that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format. Additionally, SFAS 148 requires disclosure of the pro forma effect in interim financial statements. The transition and annual disclosure requirements of SFAS 148 are effective for fiscal years ended after December 15, 2002. The interim disclosure requirements are effective for interim periods ending after December 15, 2002. The Company has adopted the
disclosure requirements of SFAS 148 as of December 31, 2002.
In January 2002, the FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51." FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2002. For variable interest entities created or acquired prior to February 1, 2002, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2002. The Company has adopted the provisions
of FIN 46. The company is continuing to evaluate the impact of FIN 46-R and its related guidance for its adoption as of March 31, 2004. However, it is not expected to have a material impact on the company’s Consolidated Financial Statements.
In May 2003, the FASB issued SFAS No.150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. It establishes classification and measurement standards for three types of freestanding financial instruments that have characteristics of both liabilities and equity. Instruments within the scope of SFAS No. 150 must be classified as liabilities within the company’s Consolidated Financial Statements and be reported at settlement date value. The provisions of SFAS No. 150 are effective for (1) instruments entered into or modified after May 31, 2003, and (2) pre-existing instruments as of July 1, 2003. In November 2003, through the issuance of FSP 150-3, the FASB indefinitely deferred the effective date of certain provisions of SFAS No. 150, including mandatorily redeemable instruments as they relate to minority interests
in consolidated finite-lived entities. The adoption of SFAS No. 150, as modified by FSP 150-3, did not have a material effect on the Consolidated Financial Statements.
Factors that May Affect Results
Our operating results are subject to fluctuations caused by many factors that could result in decreased revenues and a drop in the price of our common stock.
Our quarterly operating results can vary significantly depending upon a number of factors. It is difficult to predict the lighting market's acceptance of and demand for our products on a quarterly basis, and the level and timing of orders received can fluctuate substantially. Our sales volumes fluctuate, as does the relative volume of sales of our various products with significantly different product margins. 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. Our product development and marketing expenditures may vary significantly from quarter to quarter and are made well in advance of potential resulting revenue. 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.
Our sales are dependent upon new construction levels and are subject to seasonal and general economic trends.
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 of pools. Sales of commercial lighting products also depend significantly upon the level of new building construction and renovation. 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 revenues and income, have tended to be significantly lower in the first
and the third 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. Recent and continued weakness in the U.S. economy may continue to affect construction and our
business. Additionally, some business segments, such as themed entertainment, remain weak as a result of reduced air travel following the September 11, 2001 tragedy and the outbreak and spread of Severe Acute Respiratory Syndrome, or SARS. Themed entertainment is a key source of revenues for our commercial lighting segment and continued softness of this industry will potentially have a material negative effect on our future commercial lighting sales.
If we are not able to timely and successfully develop, manufacture, market and sell our new products, our operating results will decline.
We expect to introduce additional new products each year in the Pool and Spa Lighting and Commercial Lighting markets. Delivery of these products may cause us to incur additional unexpected research and development expenses. We could have difficulties manufacturing these new products as a result of our inexperience with them or the costs could be higher than expected. Any delays in the introduction of these new products could result in lost sales, loss of customer confidence and loss of market share. Also, it is difficult to predict whether the market will accept these new products. If any of these new products fails to meet expectations, our operating results will be adversely affected.
We operate in markets that are intensely and increasingly competitive.
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. We are also experiencing competition from light emitting diode, LED, products in water lighting and in neon and other lighted signs. Our competitors include some very large and well-established companies such as Philips, Schott, 3M, Bridgestone, Pentair, Mitsubishi and Osram/Siemens. All of these companies have substantially greater financial, technical and marketing resources than we do. We may not be able to adequately respond to fluctuations in competitive pricing. We anticipate that any future growth in fiber optic lighting will be accompanied by continuing increases in competition, which could adversely
affect our operating results if we cannot compete effectively.
We rely on intellectual property and other proprietary information that may not be protected and that may be expensive to protect.
We currently hold 40 patents. There can be no assurance, however, that our issued patents are valid or that any patents applied for will be issued. 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 avail
able 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 and divert the efforts of our technical and management personnel, regardless of the outcome of such litigation.
We rely on distributors for a significant portion of our sales and terms and conditions of sales are subject to change with very little notice.
Most of our products are sold through distributors, and we do not have long-term contracts with
our distributors. Some of these distributors are quite large, particularly in the pool products market. If these distributors significantly change their terms with us or change their historical pattern of ordering products from us, there could be a significant impact on our revenues and profits.
The loss of a key sales representative could have a negative impact on our net sales and operating results.
We rely on key sales representatives for a significant portion of our sales. These sales representatives have unique relationships with our customers and would be difficult to replace. The loss of a key sales representative could interfere with our ability to maintain customer relationships and result in declines in our net sales and operating results.
We depend on key employees in a competitive market for skilled personnel, and the loss of the services of any of our key employees could materially affect our business.
Our future success will depend to a large extent on the continued contributions of certain employees, many of whom would be difficult to replace. Our future success
will also depend on our ability to attract and retain qualified technical, sales, marketing and management personnel, for whom competition is intense. The loss of or failure to attract and retain any such persons could delay product development cycles, disrupt our operations or otherwise harm
our business or results of operations.
We depend on a limited number of suppliers from whom we do not have a guarantee to adequate supplies, increasing the risk that loss of or problems with a single supplier could result in impaired margins, reduced production volumes, strained customer relations and loss of business.
Mitsubishi is the sole supplier of our fiber, other than the large core fiber and think film coatings, we manufacture based on technology acquired in the Unison transaction. We
also rely on a sole source for certain lamps, reflectors, remote control devices and power supplies. The loss of one or more of our suppliers could result in delays in the shipment of products, additional expense associated with redesigning products, impaired margins, reduced production volumes, strained customer relations and loss of business or could otherwise harm
our results of operations.
We depend on ADLT for a number of components for our products. ADLT has recently filed for Chapter 11 bankruptcy, which could result in an interruption of supply and increased costs for these components.
ADLT supplies us with certain lamps, power supplies, reflectors and coatings. We have identified alternative suppliers for these components, but there could be an interruption of supply and increased costs if a transition to a new supplier were required. We could lose current or prospective customers as a result of supply interruptions. Increased costs would negatively impact our gross profit margin and results of operations.
We are becoming increasingly dependent on foreign sources of supply for many of our components and in some cases complete assemblies, which due to distance or political events may result in a lack of timely deliveries.
In order to save costs, we are continually seeking off-shore supply of components and assemblies. This results in longer lead times for deliveries which can mean less responsiveness to sudden changes in market demand for the products involved. Some of the countries where components are sourced may be less stable politically than the U.S., and this could lead to an interruption of the delivery of key components. Delays in the delivery of key components could result in delays in product shipments, additional expenses associated with locating alternative component sources or redesigning products, impaired margins, reduced production volumes, strained customer relations and loss of customers, any of which could harm our results of operations.
We are subject to manufacturing risks, including fluctuations in the costs of purchased components and raw materials due to market demand, shortages and other factors.
We depend on various components and raw materials for use in the manufacturing of our products. We may not be able to successfully manage price fluctuations due to market demand or shortages. In addition to risks associated with sole and foreign suppliers, significant increases in the costs of or sustained interruptions in our receipt of adequate amounts of necessary components and raw materials could harm our margins, result in manufacturing halts and negatively impact our results of operations.
Because we depend on a limited number of significant customers for our net sales, the loss of a significant customer, reduction in order size, or the effects of volume discounts granted to significant customers from time to time could harm our operating results.
Our business is currently dependent on a limited number of significant customers, and we anticipate that we will continue to rely on a limited number of customers. The loss of any significant customer would harm our net sales and operating results. Customer purchase deferrals, cancellations, reduced order volumes or non-renewals from any particular customer could cause our quarterly operating results to fluctuate or decline and harm our business. In addition, volume discounts granted to significant customers from time to time could lead to reduced profit margins, and negatively impact our operating results.
Our components and products could have design, defects or compatibility issues, which could be costly to correct and could result in the rejection of our products and damage to our reputation, as well as lost sales, diverted development resources and increased warranty reserves and manufacturing costs.
We cannot be assured that we will not experience defects or compatibility issues in components or products in the future. Errors or defects in our products may arise in the future, and, if significant or perceived to be significant, could result in rejection of our products, product returns or recalls, damage to our reputation, lost revenues, diverted development resources and increased customer service and support costs and warranty claims. Errors or defects in our products could also result in product liability claims. We estimate warranty and other returns and accrue reserves for such costs at the time of sale. Any estimates, reserves or accruals may be insufficient to cover sharp increases in product returns, and such returns may harm our operating results. In addition, customers may require design changes in our products in order to suit their needs. Losses, delays or
damage to our reputation due to design or defect issues would likely harm our business, financial condition and results of operations.
If we are unable to predict market demand for our products and focus our inventories and development efforts to meet market demand, we could lose sales opportunities and experience a decline in sales.
In order to arrange for the manufacture of sufficient quantities of products and avoid excess inventory we need to accurately predict market demand for each of our products. Significant unanticipated fluctuations in demand could cause problems in our operations. We may not be able to accurately predict market demand in order to properly allocate our manufacturing and distribution resources among our products. As a result we may experience declines in sales and lose, or fail to gain, market share.
We depend on collaboration with third parties, who are not subject to material contractual commitments, to augment our research and development efforts.
Our research and development efforts include collaboration with third parties. Many of these third parties are not bound by any material contractual commitment leaving them free to end their collaborative efforts at will. Loss of these collaborative efforts would adversely affect our research and development efforts and could have a negative effect on our competitive position in the market. In addition, arrangements for joint development efforts may require us to make royalty payments on sales of resultant products or enter into licensing agreements for the technology developed, which could increase our costs and negatively impact our results of operations.
We have experienced negative cash flow from operations and may continue to do so in the future. We may need to raise additional capital in the near future, but our ability to do so may be limited.
While we have historically been able to fund cash needs from operations, from bank lines of credit or from capital markets, due to competitive, economic or other factors there can be no assurance that we will continue to be able to do so. If our capital resources are insufficient to satisfy our liquidity requirements and overall business objectives we may seek to sell additional equity securities or obtain debt financing. Adverse business conditions due to a continued weak economic environment or a weak market for our products have led to and may lead to continued negative cash flow from operations, which may require us to raise additional financing, including equity financing. Any equity financing may be dilutive to shareholders, and debt financing, if available, will increase expenses and may involve restrictive covenants. We may be required to raise additional capital, at times
and in amounts, which are uncertain, especially under the current capital market conditions. Under these circumstances, if we are unable to acquire additional capital or are required to raise it on terms that are less satisfactory than desired, it may have a material adverse effect on our financial condition, which could require us to curtail our operations significantly, sell significant assets, seek arrangements with strategic partners or other parties that may require us to relinquish significant rights to products, technologies or markets, or explore other strategic alternatives including a merger or sale of our company.
Our stock price has been and will likely continue to be volatile and you may be unable to resell your shares at or above the price you paid.
Our stock price has been and is likely to be highly volatile, particularly due to our relatively limited trading volume. Our stock price could fluctuate significantly due to a number of factors, including:
-
variations in our anticipated or actual operating results;
-
sales of substantial amounts of our stock;
-
dilution as a result of additional equity financing by us;
-
announcements about us or about our competitors, including technological innovation or new products or services;
-
conditions in the fiber optic lighting industry;
-
governmental regulation and legislation; and
-
changes in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations.
Many of these factors are beyond our control.
In addition, the stock markets in general, and The Nasdaq National Market and the market for fiber optic lighting and technology companies in particular, have experienced extreme price and volume fluctuations recently. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors may adversely affect the market price of our common stock, regardless of our actual operating performance.
In the past, companies that have experienced volatility in the market prices of their stock have been the object of securities class action litigation. If we were the object of securities class action litigation, it could result in substantial costs and a diversion of management’s attention and resources.
Item 7A. Qualitative or Quantitative Disclosures About Market Risk
At December 31, 2003, the Company had $715,000 in cash held in foreign currencies as translated at period end foreign currency exchange rates. The balances for cash held overseas in foreign currencies is subject to exchange rate risk. The Company has a policy of maintaining cash balances in local currencies unless an amount of cash is occasionally transferred in order to repay intercompany debts.
The Company has certain bank borrowings in foreign currencies. The Company had a total borrowing of $475,000 against a credit facility which totals $731,000 (in Euros) held by its German subsidiary. This borrowing is largely held in order to finance the building of new offices owned by the Company in Berching, Germany. Of the amounts due under this borrowing, $475,000 is due in 2008. In addition, there is a revolving line of credit of $254,000 (in Euros) with Sparkasse Neumarkt Bank. As of December 31, 2003, there were no borrowings against this facility.
Item 8. Consolidated Financial Statements and Supplementary Data.
The Company's Consolidated Financial Statements and related notes thereto required by this item are listed and set forth in this
Report in Item 15(a). The accompanying notes are an integral part of those consolidated financial statements.
Supplementary Financial Information
The following table sets forth selected unaudited financial information for the Company for the eight quarters in the period ended December 31, 2003. This information has been prepared on the same basis as the audited financial statements and, in the opinion of management, contains all adjustments necessary for a fair presentation thereof.
QUARTERLY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
|
|
|
|
|
|
|
|
2003 QUARTERS ENDED |
|
DEC. 31 |
SEP. 30 |
JUN. 30 |
MAR. 31 |
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
7,418 |
|
$ |
6,367 |
|
$ |
7,574 |
|
$ |
5,879 |
|
|
Gross profit |
|
|
3,060 |
|
|
2,360 |
|
|
2,875 |
|
|
2,046 |
|
|
As a percent of net sales |
|
|
41.3 |
% |
|
37.1 |
% |
|
38.0 |
% |
|
34.8 |
% |
|
Net income (loss) |
|
|
110 |
|
|
(181 |
) |
|
85 |
|
|
(622 |
) |
|
As a percent of net sales |
|
|
1.5 |
% |
|
(2.8) |
% |
|
1.1 |
% |
|
(10.6) |
% |
|
Net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.02 |
|
$ |
(0.03 |
) |
$ |
0.02 |
|
$ |
(0.12 |
) |
|
Diluted |
|
$ |
0.02 |
|
$ |
(0.03 |
) |
$ |
0.02 |
|
$ |
(0.12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002 QUARTERS ENDED |
|
DEC. 31 |
SEP. 30 |
JUN. 30 |
MAR. 31 |
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
7,447 |
|
$ |
7,155 |
|
$ |
8,768 |
|
$ |
7,590 |
|
|
Gross profit |
|
|
2,638 |
|
|
2,567 |
|
|
3,383 |
|
|
2,886 |
|
|
As a percent of net sales |
|
|
35.4 |
% |
|
35.9 |
% |
|
38.6 |
% |
|
38.0 |
% |
|
Net income (loss) |
|
|
(478 |
) |
|
(2,974)* |
|
|
3 |
|
|
(70 |
) |
|
As a percent of net sales |
|
|
(6.4) |
% |
|
(41.6) |
% |
|
— |
% |
|
(0.9) |
% |
|
Net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.09 |
) |
$ |
(0.58 |
) |
$ |
— |
|
$ |
(0.01 |
) |
|
Diluted |
|
$ |
(0.09 |
) |
$ |
(0.58 |
) |
$ |
— |
|
$ |
(0.01 |
) |
___________
* Note: Included in these results is a $2,405,000 charge for a valuation allowance for deferred taxes taken in the quarter ended September 30, 2002.
In accordance with SFAS 142 the Company ceased amortizing goodwill as of December 31, 2001. Refer to Note 5 of the Notes to Consolidated Financial Statements.
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
As disclosed in our current report on Form 8-K filed October 2, 2003, we changed independent accountants effective September 29, 2003.
Item 9A. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures,
management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet, and management believes that they meet, reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer have concluded that, subject to the limitations noted above, our disclosure controls and procedures were effective to ensure that material information relating to us, including our consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this Annual Report on Form 10-K was being prepared.
(b) Changes in internal controls. There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation described in Item 9A(a) above that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item regarding directors and nominees is incorporated herein by reference
from the information under the caption "PROPOSAL NO. 1: ELECTION OF DIRECTORS" in the Company's definitive Proxy Statement to be filed with the SEC in connection with the solicitation of proxies for the Company's 2004 Annual Meeting of Shareholders to be held on May 19, 2004 (the "Proxy Statement").
The Company has a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The members of the Audit Committee are John B. Stuppin, David Traversi (Chairperson) and Philip Wolfson. All of such members meet the independence standards established by The Nasdaq Stock Market for serving on an audit committee. SEC regulations require the Company to disclose whether a director qualifying as an “audit committee financial expert” serves on the Company’s Audit Committee. The Company’s Board of Directors has determined that Mr. Traversi qualifies as an “audit committee financial expert” within the meaning of such regulations.
The Company’s Board of Directors adopted a Code of Ethics and Business Conduct for all of its directors, officers and employees on February 25, 2004.
The Company's Code of Ethics and Business Conduct is available free of charge
upon request. To request a copy of the Code of Ethics and Business Conduct, please send a written request to the Secretary of the Company at 44259 Nobel Drive, Fremont, California 94538.
Item 11. Executive Compensation
The information regarding executive compensation required by Item 11 is incorporated herein by reference from the information in the Proxy Statement under the captions "EXECUTIVE COMPENSATION AND OTHER MATTERS," "PROPOSAL NO. 1: ELECTION OF DIRECTORS—Director Compensation" and "PROPOSAL NO. 1: ELECTION OF DIRECTORS—Compensation Committee Interlocks and Insider Participation."
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information regarding security ownership of certain beneficial owners and management required by Item 12 is incorporated herein by reference from the information in the Proxy Statement under the caption "SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT."
Equity Compensation Plan Information
The information regarding equity compensation plans required by Item 12 can be found under Item 5 of this report.
Item 13. Certain Relationships and Related Transactions
The information regarding certain relationships and related transactions required by Item 13 is incorporated herein by reference to the information in the Proxy Statement under the caption "CERTAIN TRANSACTIONS."
Item 14. Principal Accountant Fees and Services
The information regarding principal accountant fees and services and the pre-approval policies and procedures required by Item 14 is incorporated by reference from the information contained in the Proxy Statement under the caption “RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS – Principal Accountant Fees and Services” and “RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS – Pre-Approval Policies and Procedures.”
PART IV
Item 15. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a) (1) Financial Statements
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Fiberstars, Inc.
Fremont, California
We have audited the accompanying consolidated balance sheet of Fiberstars, Inc. as of December 31, 2003, and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Fiberstars, Inc. as of December 31, 2003, and the consolidated results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ Grant Thornton LLP
San Francisco, California
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Fiberstars, Inc.
Fremont, California
In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows present fairly, in all material respects, the financial position of Fiberstars, Inc. and its subsidiaries (the Company) at December 31, 2002 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 5 to the consolidated financial statements, effective January 1, 2002, the Company ceased amortization of its goodwill on adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."
/s/ PricewaterhouseCoopers LLP
February 14, 2003
FIBERSTARS, INC.
CONSOLIDATED BALANCE SHEETS,
December 31, 2003 and 2002
(amounts in thousands except share amounts)
|
|
|
|
|
|
|
|
|
2003 |
|
|
2002 |
|
| |
|
|
|
|
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
4,254 |
|
$ |
231 |
|
|
Accounts receivable, net of allowances for doubtful accounts of $357 in 2003 and $435 in 2002 |
|
|
5,610 |
|
|
5,208 |
|
|
Notes and other receivables |
|
|
143 |
|
|
239 |
|
|
Inventories, net |
|
|
6,618 |
|
|
6,808 |
|
|
Prepaids and other current assets |
|
|
246 |
|
|
343 |
|
|
Total current assets |
|
|
16,871 |
|
|
12,829 |
|
|
Fixed assets, net |
|
|
2,634 |
|
|
2,581 |
|
|
Goodwill, net |
|
|
4,190 |
|
|
4,032 |
|
|
Intangibles, net |
|
|
306 |
|
|
462 |
|
|
Other assets |
|
|
118 |
|
|
197 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
24,119 |
|
$ |
20,101 |
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
2,205 |
|
$ |
2,011 |
|
|
Accruals and other current liabilities |
|
|
2,413 |
|
|
2,117 |
|
|
Bank overdraft |
|
|
--- |
|
|
691 |
|
|
Short-term bank borrowings |
|
|
30 |
|
|
593 |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
4,648 |
|
|
5,412 |
|
|
Long-term bank borrows and liabilities |
|
|
521 |
|
|
449 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
5,169 |
|
|
5,861 |
|
|
Commitments and contingencies (Note 8). |
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY |
|
|
|
Preferred stock, par value $0.0001 per share: |
|
|
|
|
|
|
|
|
Authorized: 2,000,000 shares in 2003 and 2002 |
|
|
|
|
|
|
|
|
Issued and outstanding: no shares in 2003 and 2002 |
|
|
|
|
|
|
|
|
Common stock, par value $0.0001 per share: |
|
|
|
|
|
|
|
|
Authorized: 30,000,000 shares in 2003 and 2002 |
|
|
|
|
|
|
|
|
Issued and outstanding: 6,316,694 shares in 2003 and 4,667,321 shares in 2002 |
|
|
1 |
|
|
1 |
|
|
Additional paid-in capital |
|
|
24,531 |
|
|
19,611 |
|
|
Notes receivable from shareholder |
|
|
(224 |
) |
|
(75 |
) |
|
Accumulated other comprehensive income (loss) |
|
|
428 |
|
|
(119 |
) |
|
Accumulated deficit |
|
|
(5,786 |
) |
|
(5,178 |
) |
|
|
|
|
|
|
|
|
Total shareholders' equity |
|
|
18,950 |
|
|
14,240 |
|
| |
|
|
|
|
|
|
Total liabilities and shareholders' equity |
|
$ |
24,119 |
|
$ |
20,101 |
|
| |
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
FIBERSTARS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2003, 2002 and 2001
(amounts in thousands except per share amounts)
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
| |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
27,238 |
|
$ |
30,960 |
|
$ |
29,053 |
|
|
Cost of sales |
|
|
16,897 |
|
|
19,486 |
|
|
17,606 |
|
| |
|
|
|
|
|
|
|
|
Gross profit |
|
|
10,341 |
|
|
11,474 |
|
|
11,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
1,279 |
|
|
2,290 |
|
|
2,764 |
|
|
Sales and marketing |
|
|
7,188 |
|
|
7,907 |
|
|
8,371 |
|
|
General and administrative |
|
|
2,435 |
|
|
2,709 |
|
|
3,627 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
10,902 |
|
|
12,906 |
|
|
14,762 |
|
|
Loss from operations |
|
|
(561 |
) |
|
(1,432 |
) |
|
(3,315 |
) |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
Equity in joint venture's income |
|
|
6 |
|
|
16 |
|
|
15 |
|
|
Interest and other income |
|
|
80 |
|
|
41 |
|
|
41 |
|
|
Interest expense |
|
|
(119 |
) |
|
(66 |
) |
|
(122 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss before income taxes |
|
|
(594 |
) |
|
(1,441 |
) |
|
(3,381 |
) |
|
Benefit from (provision for) income taxes |
|
|
(14 |
) |
|
(2,078 |
) |
|
1,253 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(608 |
) |
$ |
(3,519 |
) |
$ |
(2,128 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss per share—basic and diluted |
|
$ |
(0.10 |
) |
$ |
(0.70 |
) |
$ |
(0.45 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per share calculation—basic and diluted |
|
|
5,993 |
|
|
5,028 |
|
|
4,756 |
|
The accompanying notes are an integral part of these financial statements.
FIBERSTARS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the years ended December 31, 2003, 2002 and 2001
(amounts in thousands)
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
| |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(608 |
) |
$ |
(3,519 |
) |
$ |
(2,128 |
) |
|
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
870 |
|
|
444 |
|
|
(192 |
) |
|
Income tax benefit (provision) |
|
|
(323 |
) |
|
(164 |
) |
|
71 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
$ |
(61 |
) |
$ |
(3,239 |
) |
$ |
(2,249 |
) |
| |
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
FIBERSTARS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 2003, 2002 and 2001
(amounts in thousands)
|
|
|
Common Stock |
|
Additional
Paid-In |
|
|
Notes
Receivable
From |
|
|
Accumulated
Other
Comprehensive |
|
|
(Accumulated
Deficit)
Retained |
|
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
Earnings |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2000 |
|
|
4,288 |
|
$ |
1 |
|
$ |
18,443 |
|
$ |
(75 |
) |
$ |
(278 |
) |
$ |
469 |
|
$ |
18,560 |
|
|
Exercise of common stock options |
|
|
28 |
|
|
|
|
|
81 |
|
|
|
|
|
|
|
|
|
|
|
81 |
|
|
Issuance of common stock under employee stock purchase plan |
|
|
12 |
|
|
|
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
39 |
|
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(121 |
) |
|
|
|
|
(121 |
) |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,128 |
) |
|
(2,128 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2001 |
|
|
4,328 |
|
|
1 |
|
|
18,563 |
|
|
(75 |
) |
|
(399 |
) |
|
(1,659 |
) |
|
16,431 |
|
|
Issuance of common stock—private placement |
|
|
329 |
|
|
|
|
|
972 |
|
|
|
|
|
|
|
|
|
|
|
972 |
|
|
Non-employee stock-based compensation |
|
|
|
|
|
|
|
|
48 |
|
|
|
|
|
|
|
|
|
|
|
48 |
|
|
Issuance of common stock under employee stock purchase plan |
|
|
10 |
|
|
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
28 |
|
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280 |
|
|
|
|
|
280 |
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,519 |
) |
|
(3,519 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2002 |
|
|
4,667 |
|
|
1 |
|
|
19,611 |
|
|
(75 |
) |
|
(119 |
) |
|
(5,178 |
) |
|
14,240 |
|
|
Issuance of common stock—private placement |
|
|
1,350 |
|
|
|
|
|
3,730 |
|
|
|
|
|
|
|
|
|
|
|
3,730 |
|
|
Non-employee stock-based compensation |
|
|
|
|
|
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
27 |
|
|
Issuance of common stock under employee stock purchase plan |
|
|
8 |
|
|
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
23 |
|
|
Issuance of common stock under employee stock purchase plan |
|
|
292 |
|
|
|
|
|
1,140 |
|
|
(224 |
) |
|
|
|
|
|
|
|
916 |
|
|
Note receivable from shareholder |
|
|
|
|
|
|
|
|
|
|
|
75 |
|
|
|
|
|
|
|
|
75 |
|
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
547 |
|
|
|
|
|
547 |
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(608 |
) |
|
(608 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2003 |
|
|
6,317 |
|
$ |
1 |
|
$ |
24,531 |
|
$ |
(224 |
) |
$ |
428 |
|
$ |
(5,786 |
) |
$ |
18,950 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
FIBERSTARS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2003, 2002 and 2001
(amounts in thousands)
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(608 |
) |
$ |
(3,519 |
) |
$ |
(2,128 |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
961 |
|
|
1,086 |
|
|
1,426 |
|
|
Provision for doubtful accounts receivable |
|
|
(22 |
) |
|
78 |
|
|
274 |
|
|
Non-employee stock-based compensation |
|
|
--- |
|
|
48 |
|
|
— |
|
|
Deferred income taxes |
|
|
--- |
|
|
2,035 |
|
|
(808 |
) |
|
Equity in joint venture |
|
|
6 |
|
|
(16 |
) |
|
(15 |
) |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, trade |
|
|
(238 |
) |
|
(314 |
) |
|
2,210 |
|
|
Inventories |
|
|
398 |
|
|
(1,239 |
) |
|
218 |
|
|
Prepaid and other current assets |
|
|
219 |
|
|
334 |
|
|
(213 |
) |
|
Other assets |
|
|
73 |
|
|
150 |
|
|
(173 |
) |
|
Accounts payable |
|
|
168 |
|
|
(344 |
) |
|
(1,101 |
) |
|
Accruals and other current liabilities |
|
|
(28 |
) |
|
(171 |
) |
|
89 |
|
|
|
|
|
|
|
|
|
|
|
Total adjustments |
|
|
1,537 |
|
|
1,647 |
|
|
1,907 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
929 |
|
|
(1,872 |
) |
|
(221 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of fixed assets |
|
|
(717 |
) |
|
(793 |
) |
|
(530 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(717 |
) |
|
(793 |
) |
|
(530 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuances of common stock |
|
|
4,920 |
|
|
1,000 |
|
|
119 |
|
|
Repayment of loan made to shareholder |
|
|
75 |
|
|
- |
|
|
- |
|
|
Loan made to shareholder |
|
|
(224 |
) |
|
--- |
|
|
--- |
|
|
Proceeds from (repayments of) long-term bank borrowings |
|
|
(26 |
) |
|
30 |
|
|
(38 |
) |
|
Net proceeds from short-term bank borrowings |
|
|
(607 |
) |
|
492 |
|
|
93 |
|
|
Bank overdraft |
|
|
(691 |
) |
|
691 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
3,447 |
|
|
2,213 |
|
|
174 |
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
364 |
|
|
99 |
|
|
(69 |
) |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
4,023 |
|
|
(353 |
) |
|
(646 |
) |
|
Cash and cash equivalents, beginning of year |
|
|
231 |
|
|
584 |
|
|
1,230 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year |
|
$ |
4,254 |
|
$ |
231 |
|
$ |
584 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
119 |
|
$ |
42 |
|
$ |
122 |
|
|
Fully depreciated assets disposed of |
|
$ |
--- |
|
$ |
1,544 |
|
$ |
— |
|
|
Income taxes paid (received) |
|
$ |
--- |
|
$ |
(636 |
) |
$ |
276 |
|
The accompanying notes are an integral part of these financial statements
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
1. Nature of Operations:
Fiberstars, Inc. (the "Company") develops and assembles lighting products using fiber optic technology for commercial lighting and swimming pool and spa lighting applications. The Company markets its products for worldwide distribution primarily through independent sales representatives, distributors and swimming pool builders.
2. Summary of Significant Accounting Policies:
Basis of Presentation:
The consolidated financial statements include the accounts of Fiberstars, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated.
Certain prior period amounts have been reclassified to conform to the current year's presentation.
Use of Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Estimates include, but are not limited to, the establishment of reserves for accounts receivable, sales returns, and warranty claims; the useful lives for property, equipment, and intangible assets, and stock-based compensation. Actual results could differ from those estimates.
Cash Equivalents:
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Investments in Joint Ventures:
The Company records its investments in joint ventures under the equity method of accounting.
Fair Value of Financial Instruments:
Carrying amounts of certain of the Company's financial instruments including cash and cash equivalents, short-term investments, accounts receivable and accounts payable approximate fair value due to their short maturities. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of long-term debt obligations also approximates fair value.
Revenue Recognition:
The Company recognizes revenue upon: (1) receipt of a purchase order from the customer or completion of a sales agreement with the customer; (2) shipment of the product has occurred or services have been provided; and (3) the sales price is fixed or determinable and collectibility is reasonably assured. Revenue from product sales is generally recognized upon shipment, and allowances are provided for estimated returns, discounts and warranties. Such allowances are adjusted periodically to reflect actual and anticipated returns, discounts and warranty expenses. Revenue on sales that includes services such as design, integration and installation is generally recognized using the percentage-of-completion method. Under the percentage-of-completion method, revenue recognized reflects the portion of the anticipated contract revenue that has been earned, equal to the ratio
of labor costs expended to date to anticipated final labor costs, based on current estimates of labor costs to complete the project. The Company's products are generally subject to warranties, and the Company provides for the estimated future costs of repair, replacement or customer accommodation in costs of sales. Fees for research and development services are determined on a cost-plus basis and are recognized as revenue when performed.
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
The Company recognizes shipments to pool lighting distributors as revenue upon shipment. Estimated sales returns are recorded upon recognition of revenues from distributors having rights of return, including exchange rights for unsold products. Shipments made to commercial lighting representatives and distributors are also recognized as revenue upon shipment because in these instances the representative or distributor is acting as a pass-through agent to a specific lighting project for which the Company has an existing contract or purchase order.
Inventories:
The Company states inventories at the lower of standard cost (which approximates actual cost determined using the first-in-first-out method) or market. The Company establishes provisions for excess and obsolete inventories after evaluation of historical sales, current economic trends, forecasted sales, product lifecycles and current inventory levels. Charges to cost of sales for excess and obsolete inventories amounted to $128,000, $201,000 and $155,000 in 2003, 2002 and 2001, respectively.
Accounts Receivable:
The Company’s customers are currently concentrated in the United States and Europe. In the normal course of business, the Company extends unsecured credit to its customers related to the sale of its products. Typical credit terms require payment within 30 days from the date of delivery or service. The Company evaluates and monitors the creditworthiness of each customer on a case-by-case basis. The Company provides allowances for sales returns and doubtful accounts based on its continuing evaluation of its customers’ ongoing requirements and credit risk. The Company writes-off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. The Company does not require collateral from its customers.
Income Taxes:
As part of the process of preparing its consolidated financial statements, the Company is required to estimate its income tax liability in each of the jurisdictions in which it does business. This process involves estimating the Company’s income tax liability in each of the jurisdictions in which it does business. This process involves estimating the Company’s actual current tax expense together with assessing temporary differences resulting form differing treatment of items, such as deferred revenues, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in the consolidated balance sheet. The Company must then assess the likelihood that these deferred tax assets will be recovered from future taxable income and, to the extent the Company believe that recovery is not more likely than not, or is unknown, the
Company must establish a valuation allowance.
Significant management judgment is required in determining the provision for income taxes, the deferred tax assets and liabilities and any valuation allowance recorded against such deferred tax assets. At December 31, 2003, the Company’s deferred tax assets primarily consist of certain net operating losses carried forward. The Company has recorded a full valuation allowance of $2,596,000 against these deferred tax assets, due to uncertainties related to its ability to utilize those deferred tax assets,. The valuation allowance is based on estimates of taxable income by jurisdiction and the periods over which its deferred tax assets could be recoverable.
Long-lived Assets:
Goodwill represents the excess of acquisition cost over the fair value of tangible and identified intangible net assets of the businesses acquired. Goodwill is not amortized, but is subjected to an annual impairment test. Intangible assets from acquisitions are stated at cost and are amortized on a straight-line basis over the estimated life of the assets acquired, but in no case for a period longer than 10 years. Fixed assets are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the related assets (two to five years). Leasehold improvements are amortized on a straight-line basis over their estimated useful lives or the lease term, whichever is shorter, generally 3 to 7 years. When events or changes in circumstances indicate that assets may be impaired, an evaluation is performed comparing the estimated future
undiscounted cash flows associated with the asset to the asset's carrying amount to determine if a write-down to market value or discounted cash flow is required.
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
Certain Risks and Concentrations:
The Company invests its excess cash in deposits and high-grade short-term securities with two major banks. The Company maintains
cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $100,000. At times the cash balances
could exceed the amounts insured by the FDIC. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk of loss.
The Company sells its products primarily to commercial lighting distributors and residential pool distributors and pool installation contractors in North America, Europe and the Far East. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Although the Company maintains allowances for potential credit losses that it believes to be adequate, a payment default on a significant sale could materially and adversely affect its operating results and financial condition. At December 31, 2003, one customer accounted for 14% of accounts receivable and at December 31, 2002, the same customer accounted for 13% of accounts receivable. The customer also accounted for 11%, 9% and 8% of net sales in 2003, 2002 and 2001, respectively.
The Company currently buys all of its small diameter stranded fiber, the main component of most of its products, from one supplier. There are a limited number of fiber suppliers, and even if an alternative supplier were obtained, a change in suppliers could cause delays in manufacturing and a possible loss of sales which would adversely affect operating results.
The Company also relies on sole source suppliers for certain lamps, reflectors, remote control devices and power supplies. Although the Company cannot predict the effect that the loss of one or more of such suppliers would have on the Company, such loss could result in delays in the shipment of products and additional expenses associated with redesigning products and could have a material adverse effect on the Company's operating results.
Research and Development:
Research and development costs are charged to operations as incurred. In 2000 the Company received a federal grant from the National Institute of Standards and Technology ("NIST") for to $2,000,000 over three years for research and development of
large core fiber for lighting purposes. This award provided the Company with $520,000 in funding for the eleven-month period beginning November 2000 and ended September 2001 and $914,000 for the one-year period ended September 2002, and $566,000 for the one-year period ending September 2003. The Company records the amount of NIST funding for each period as a credit to research and development expense. During the Company's fiscal years ended December 31, 2003, 2002 and 2001, amounts of $507,000, $874,000 and $543,000 were recorded respectively, as a credit to research and development expenses under the NIST grant.
The accounting for the NIST contract is subject to independent audit at the end of the contract for the award year ending September 30, 2003.
In February 2003, DARPA awarded the Company and its partners a research and development contract for the development of next generation light sources, optics, luminaire and integrated illuminated technologies for its High Efficiency Distributed Lighting (“HEDLight”) project. The DARPA contract calls for payments of $6,818,000 to the Company over three years based on achievement of various research and development milestones. On April 10, 2003 the Company announced that it and APL Engineered Materials, a subsidiary of Advanced Lighting Technologies Inc. (“ADLT”), were awarded a further $2.7 million research and development contract from the DARPA to develop a new arc discharge light source. The Company will receive $300,000 of this amount for its portion of this research. APL Engineered Materials will lead the light source project. The contract provided the
company $1,463,000 in funding for the fiscal year 2003, net of subcontractor fees. The Company records the amount of DARPA funding for each period as a credit to research and development expense. The milestones are for work performed in developing fiber optic illuminators and fixtures for installation on ships and aircraft. Funds for the first year have congressional budget approval and funds for subsequent years are subsequent to budget approval for those years.
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
Earnings Per Share:
Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed 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.
A reconciliation of the numerator and denominator of basic and diluted earnings (loss) per share is provided as follows (in thousands, except per share amounts):
| |
| |
|
|
|
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
|
|
|
|
Years Ended December 31, |
| |
|
|
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
| |
|
|
|
|
|
|
|
|
Numerator—Basic and Diluted earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(608 |
) |
$ |
(3,519 |
) |
$ |
(2,128 |
) |
|
Denominator—Basic and Diluted earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
5,993 |
|
|
5,028 |
|
|
4,756 |
|
|
Basic and diluted loss per share |
|
$ |
(0.10 |
) |
$ |
(0.70 |
) |
$ |
(0.45 |
) |
The shares outstanding used for calculating basic and diluted earnings (loss) per share includes 445,000 shares of common stock issuable for no cash consideration upon exercise of certain exchange provisions of warrants held by ADLT.
Options and warrants to purchase 1,989,017 shares, 1,598,076 shares and 1,529,678 shares of common stock were outstanding at December 31, 2003, 2002 and 2001, respectively, but were not included in the calculations of diluted earnings (loss) per share because the Company had a loss for these years.
Stock-Based Compensation:
As of December 31, 2003, the Company has four stock-based employee compensation plans, which are described more fully in Note 9. The Company accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings (loss) per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.
(in thousands, except per share amounts):
|
|
|
Years Ended December 31, |
| |
|
|
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
| |
|
|
|
|
|
|
|
|
Net Loss—as reported |
|
$ |
(608 |
) |
$ |
(3,519 |
) |
$ |
(2,128 |
) |
|
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects |
|
|
— |
|
|
— |
|
|
— |
|
|
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |
|
|
(527 |
) |
|
(699 |
) |
|
(488 |
) |
|
Net Loss—Pro forma |
|
$ |
(1,135 |
) |
$ |
(4,218 |
) |
$ |
(2,616 |
) |
|
Basic and Diluted Loss Per Share—As reported |
|
$ |
(0.10 |
) |
$ |
(0.70 |
) |
$ |
(0.45 |
) |
|
Basic and Diluted Loss Per Share—Pro forma |
|
$ |
(0.19 |
) |
$ |
(0.84 |
) |
$ |
(0.55 |
) |
The fair value of each option grant and stock purchase plan grant combined is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 2003, 2002 and 2001:
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
| |
|
|
|
|
|
|
|
|
Fair value of options issued |
|
$ |
1.65 |
|
$ |
2.53 |
|
$ |
1.89 |
|
|
Exercise price |
|
$ |
5.04 |
|
$ |
4.46 |
|
|
3.69 |
|
|
Expected life of option |
|
|
3.93 years |
|
|
3.90 years |
|
|
3.65 years |
|
|
Risk-free interest rate |
|
|
3.87 |
% |
|
4.19 |
% |
|
4.61 |
% |
|
Expected volatility |
|
|
48 |
% |
|
72 |
% |
|
67 |
% |
Foreign Currency Translation:
The Company's international subsidiaries use their local currencies as their functional currencies. For those subsidiaries, assets and liabilities are translated at exchange rates in effect at the balance sheet date and income and expense accounts at average exchange rates during the year. Resulting translation adjustments are recorded directly to a separate component of shareholders' equity. Foreign currency transaction gains and losses are included as a component of interest income and other. Gains and losses from foreign currency translation are included as a separate component of comprehensive income.
Advertising Expenses:
The Company expenses the costs of advertising as incurred. Advertising expenses were $119,000, $203,000 and $13,000 for the years ended December 31, 2003, 2002 and 2001, respectively.
Product warranties:
The Company warrants finished goods against defects in material and workmanship under normal use and service for periods of one to three years for illuminators and fiber. A liability for the estimated future costs under product warranties is maintained based on estimated future warranty expense for products outstanding under warranty:
|
|
|
Year ended
December 31, 2003 |
| |
|
(in thousands) |
|
|
Balance at the beginning of the year |
|
$ |
260,000 |
|
|
Accruals for warranties issued during the year |
|
|
637,000 |
|
|
Accruals related to pre-existing warranties (including changes in estimates) |
|
|
— |
|
|
Settlements made during the year (in cash or in kind) |
|
|
(567,000 |
) |
|
Balance at the end of the year |
|
$ |
330,000 |
|
Recent Pronouncements:
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS"), No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". Under SFAS No. 141, all business combinations initiated after June 30, 2001 must be accounted for using the purchase method. SFAS No. 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions upon adoption for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles and the testing for impairment of existing goodwill and other intangibles. The Company adopted SFAS No. 142 effective January 1, 2002 (see Note 5 of the Notes to Consolidated Financial Statements).
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement supersedes SFAS No. 121 and the accounting and reporting provisions of Accounting Principles Board, or APB, Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", for the disposal of a segment of a business. The provisions of SFAS No. 144 were adopted by the Company as of January 1, 2002.
In November 2001, the Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue No. 01-09, "Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's Products." EITF No. 01-09 requires recording certain consideration paid to distributors of the Company's products as a reduction of revenue. The provisions of EITF No. 01-09 were adopted by the Company beginning January 1, 2002. The Company has incurred no change as a result of adopting EITF No. 01-09.
In June 2002, FASB issued SFAS No. 146, "Accounting for Exit or Disposal Activities". SFAS 146 addresses significant issues regarding the recognition, measurement and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for under EITF No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The scope of SFAS 146 also includes costs related to terminating a contract that is not a capital lease and termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. The Company adopted the provisions of SFAS 146
effective for exit or disposal activities initiated after December 31, 2002. The provisions of EITF No. 94-3 shall continue to apply for an exit activity initiated under an exit plan that met the criteria of EITF No. 94-3 prior to the adoption of SFAS No. 146. The adoption of SFAS 146 will change on a prospective basis the timing of when restructuring charges are recorded from a commitment date approach to when the liability is incurred.
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN 45 requires that a liability be recorded in the guarantor's balance sheet upon issuance of a guarantee. In addition, FIN 45 requires disclosures about the guarantees that an entity has issued, including a reconciliation of changes in the entity's product warranty liabilities. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor's fiscal year-end. The disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The Company has
adopted the disclosure provisions of FIN 45 relating to product warranty effective for the year ended December 31, 2002.
In November 2002, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The provisions of EITF Issue No. 00-21 apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2002. The Company has adopted the provisions of EITF Issue No. 00-21.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation, Transition and Disclosure" ("SFAS 148"). SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS 148 also requires that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format. Additionally, SFAS 148 requires disclosure of the pro forma effect in interim financial statements. The transition and annual disclosure requirements of SFAS 148 are effective for fiscal years ended after December 15, 2002. The interim disclosure requirements are effective for interim periods ending after December 15, 2002. The Company has adopted the
disclosure requirements of SFAS 148 as of December 31, 2002 (see Note 2 of the Notes to Consolidated Financial Statements).
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
In January 2002, the FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51." FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2002. For variable interest entities created or acquired prior to February 1, 2002, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2002. The Company has adopted the provisions
of FIN 46. The company is continuing to evaluate the impact of FIN 46-R and its related guidance for its adoption as of March 31, 2004. However, it is not expected to have a material impact on the company’s Consolidated Financial Statements.
In May 2003, the FASB issued SFAS No.150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. It establishes classification and measurement standards for three types of freestanding financial instruments that have characteristics of both liabilities and equity. Instruments within the scope of SFAS No. 150 must be classified as liabilities within the company’s Consolidated Financial Statements and be reported at settlement date value. The provisions of SFAS No. 150 are effective for (1) instruments entered into or modified after May 31, 2003, and (2) pre-existing instruments as of July 1, 2003. In November 2003, through the issuance of FSP 150-3, the FASB indefinitely deferred the effective date of certain provisions of SFAS No. 150, including mandatorily redeemable instruments as they relate to minority interests
in consolidated finite-lived entities. The adoption of SFAS No. 150, as modified by FSP 150-3, did not have a material effect on the Consolidated Financial Statements.
3. Inventories (in thousands):
|
|
|
December 31, |
| |
|
|
|
|
|
|
2003 |
|
|
2002 |
|
| |
|
|
|
|
|
|
Raw materials |
|
$ |
5,955 |
|
$ |
5,959 |
|
|
Inventory reserve |
|
|
(714 |
) |
|
(653 |
) |
| |
|
|
|
|
|
|
Finished goods |
|
|
1,377 |
|
|
1,502 |
|
| |
|
|
|
|
|
|
|
|
$ |
6,618 |
|
$ |
6,808 |
|
| |
|
|
|
|
|
4. Fixed Assets (in thousands):
|
|
|
December 31, |
| |
|
|
|
|
|
|
2003 |
|
|
2002 |
|
| |
|
|
|
|
|
|
Equipment (useful life 5 years) |
|
$ |
3,602 |
|
$ |
3,258 |
|
|
Tooling (useful life 2 - 5 years) |
|
|
1,668 |
|
|
1,515 |
|
|
Furniture and fixtures (useful life 5 years) |
|
|
213 |
|
|
199 |
|
|
Computer software (useful life 3 years) |
|
|
253 |
|
|
226 |
|
|
Leasehold improvements (the shorter of useful life or lease life) |
|
|
1,824 |
|
|
1,423 |
|
| |
|
|
|
|
|
| |
|
|
7,560 |
|
|
6,621 |
|
| |
|
|
|
|
|
|
Less accumulated depreciation and amortization |
|
|
(4,926 |
) |
|
(4,040 |
) |
| |
|
|
|
|
|
|
|
|
$ |
2,634 |
|
$ |
2,581 |
|
| |
|
|
|
|
|
In 2002, the Company removed fixed assets no longer in service from its balance sheet. This resulted in a decrease in gross fixed asset value of $1,544,000 and a corresponding decrease in accumulated depreciation of $1,544,000.
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
5. Goodwill and Intangibles
The Company adopted the provisions of Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," effective January 1, 2002. The following table summarizes the impact of adopting SFAS 142 on the net loss and net loss per share for all periods reported in the accompanying Condensed Consolidated Financial Statements (in thousands, except per share amounts):
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
| |
|
|
|
|
|
|
|
|
Reported net loss |
|
$ |
(608 |
) |
$ |
(3,519 |
) |
$ |
(2,128 |
) |
|
Add back: goodwill amortization |
|
|
— |
|
|
— |
|
|
220 |
|
| |
|
|
|
|
|
|
|
|
Adjusted net loss |
|
$ |
(608 |
) |
$ |
(3,519 |
) |
$ |
(1,908 |
) |
| |
|
|
|
|
|
|
|
|
Basic and diluted loss per share: |
|
|
|
|
|
|
|
|
|
|
|
Reported net loss per share |
|
$ |
(0.10 |
) |
$ |
(0.70 |
) |
$ |
(0.45 |
) |
|
Goodwill amortization per share |
|
|
— |
|
|
— |
|
|
0.05 |
|
| |
|
|
|
|
|
|
|
|
Adjusted net loss per share |
|
$ |
(0.10 |
) |
$ |
(0.70 |
) |
$ |
(0.40 |
) |
| |
|
|
|
|
|
|
|
As part of adopting SFAS 142 the Company reclassified certain intangibles from goodwill to intangibles. These amounts were based on an analysis of the asset value of the Unison acquisition performed at the time of the Unison acquisition in January 2000. The after-tax add-back of goodwill amortization for 2001 includes a gross amount of additional goodwill amortization of $280,000, calculated at historical rates and partially offset by $60,000, due to a change in the life of certain Unison intangibles from 10 years to 5 years effective January 2002.
In accordance with the provisions of SFAS 142 the Company performed the transitional goodwill impairment test prior to the end of the second quarter of 2002 and the annual impairment test in the fourth quarter of 2002 and 2003. The tests showed no impairment of the Company's goodwill asset. In accordance with SFAS 142, goodwill is subject to an annual impairment test.
The changes in the carrying amounts of goodwill and intangibles for the years ended December 31, 2002 and 2003 were as follows (in thousands):
| |
|
Goodwill |
Intangibles |
| |
|
|
|
|
|
Gross
Carrying
Amount |
Accumulated
Amortization |
Net
Carrying
Amount |
Gross
Carrying
Amount |
Accumulated
Amortization |
Net
Carrying
Amount |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2002 |
|
$ |
6,261 |
|
$ |
(1,724 |
) |
$ |
4,537 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
Reclassification |
|
|
(770 |
) |
|
152 |
|
|
(618 |
) |
|
770 |
|
|
(152 |
) |
|
618 |
|
|
Amortization expense |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(156 |
) |
|
(156 |
) |
|
Exchange rate |
|
|
|
|
|
|
|
|
113 |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2002 |
|
$ |
5,491 |
|
$ |
(1,572 |
) |
$ |
4,032 |
|
$ |
770 |
|
$ |
(308 |
) |
$ |
462 |
|
|
Amortization expense |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(156 |
) |
|
(156 |
) |
|
Exchange rate |
|
|
|
|
|
|
|
|
158 |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2003 |
|
$ |
5,491 |
|
$ |
(1,572 |
) |
$ |
4,190 |
|
$ |
770 |
|
$ |
(464 |
) |
$ |
306 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles at December 31, 2003 include developed and core technology and patents with a gross carrying amount of $399,000 and $371,000, respectively, and accumulated amortization of $241,000 and $223,000, respectively. Intangibles at December 31, 2002 include developed and core technology and patents with a gross carrying amount of $399,000 and $371,000, respectively, and accumulated amortization of $160,000 and $148,000, respectively.
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
The estimated annual amortization expense for intangibles is $157,000 for fiscal 2004 and $50,000 for each of fiscal 2005, 2006 and 2007.
6. Accruals and Other Current Liabilities (in thousands):
|
|
|
December 31, |
| |
|
|
|
|
|
|
2003 |
|
|
2002 |
|
| |
|
|
|
|
|
|
Sales commissions and incentives |
|
$ |
846 |
|
$ |
661 |
|
|
Accrued warranty expense |
|
|
330 |
|
|
260 |
|
|
Accrued legal fees |
|
|
148 |
|
|
169 |
|
|
Accrued employee benefits |
|
|
218 |
|
|
285 |
|
|
Accrued rent |
|
|
187 |
|
|
189 |
|
|
Accrued payables—related parties |
|
|
417 |
|
|
120 |
|
|
Accrued DARPA payables |
|
|
99 |
|
|
-- |
|
|
Others |
|
|
168 |
|
|
433 |
|
|
|
|
|
|
|
|
|
|
|
$ |
2,413 |
|
$ |
2,117 |
|
| |
|
|
|
|
|
7. Bank Borrowings:
The Company has a $5,000,000 Loan and Security Agreement (Accounts Receivable and Inventory) dated December 7, 2001, with Comerica Bank bearing interest equal to prime plus 0.25% per annum computed daily or a fixed rate term option of LIBOR plus 3%. Borrowings under this Loan and Security Agreement are collateralized by the Company’s assets and intellectual property. Specific borrowings are tied to accounts receivable and inventory balances, and the Company must comply with certain covenants with respect to effective net worth and financial ratios. The Company had no borrowings against this facility as of December 31, 2003 and had borrowings of $416,000 as of December 31, 2002. As of December 31, 2003, the Company was not in conformity with the profit covenant, but has received a waiver to this covenant from the bank.
The Company also has a $444,000 (in UK pounds sterling, based on the exchange rate at December 31, 2003) bank overdraft agreement with Lloyds Bank Plc through its UK subsidiary. There were no borrowings against this facility as of December 31, 2003 and December 31, 2002.
As of December 31, 2003, the Company had a total borrowing of $475,000 (in Euros, based on the exchange rate effective as of December 31, 2003) against a note payable secured by real property owned by its German subsidiary. As of December 31, 2002, the Company had $475,000 borrowed against this note. Additionally, there is a revolving line of credit of $254,000 (in Euros, based on the exchange rate at December 31, 2003) with Sparkasse Neumarkt Bank. As of December 31, 2003, there were no borrowings against this facility and as of December 31, 2002 there was $142,000 in borrowings against this facility.
| |
| |
|
|
|
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
|
8. Commitments and Contingencies:
The Company occupies manufacturing and office facilities under non-cancelable operating leases expiring in 2006 under which it is responsible for related maintenance, taxes and insurance. Minimum lease commitments under the leases are as follows (in thousands):
|
Year ending December 31, |
|
|
Minimum lease
commitments |
|
|
|
|
|
|
2004 |
|
$ |
1,061 |
|
|
2005 |
|
|
1,082 |
|
|
2006 |
|
|
808 |
|
| |
|
|
|
|
Total minimum lease payments |
|
$ |
2,951 |
|
These leases included certain escalation clauses and thus rent expense was recorded on a straight-line basis. Rent expense approximated $891,000, $926,000 and $1,014,000 for the years ended December 31, 2003, 2002 and 2001, respectively.
At December 31, 2003, a letter of credit in the amount of $350,000 was held by the Company on behalf of Sparkasse Neumarkt Bank. The letter of credit would be drawn against the Company's line of credit facility with Comerica Bank in the event of a default by the Company's German subsidiary, LBM, on its outstanding loan with Sparkasse Neumarkt Bank.
The Company is not currently a party to any material legal proceedings.
9. Shareholders' Equity:
Common Stock:
The notes receivable from shareholders for common stock bear interest at a rate of 9% and are payable ten years from the date of issuance. The Company does not recognize interest on these notes receivable until it is received.
Under the terms of certain agreements with the Company, the holders of approximately 1,818,000 shares of common stock have certain demand and piggyback registration rights. All registration expenses generally are borne by the Company.
Warrants:
As part of the acquisition of Unison, the Company provided ADLT with warrants to purchase one million shares of the Company's common stock exercisable at one penny per share. These warrants may not be exercised until the price of the Company's common stock reaches certain trading levels on the Nasdaq National Market, as follows: 250,000 will be exercisable when the price of the Company's common stock reaches $6.00; 250,000 when the price of the Company's common stock reaches $8.00; 250,000 when the price of the Company's common stock reaches $10.00; and 250,000 when the price of the Company's common stock reaches $12.00. These prices must be maintained as an average over at least 30 days. In addition, certain sales milestones must be reached on products developed from Unison technology before the warrants can be exercised. At ADLT's option, the warrants may be exchanged by
ADLT, regardless of their exercisability, for up to 445,000 newly issued shares of common stock. The warrants expire in January 2010.
As part of the acquisition of Lightly Expressed, the Company granted the Lightly Expressed shareholders warrants to purchase 100,000 shares which may be exercised in three years if certain operating profits from sales of the products acquired are met. There were 50,000 warrants exercisable as of December 31, 2003.
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
On June 17, 2003, the Company entered into a securities purchase agreement to sell up to 1,350,233 shares of Common Stock and warrants to purchase 405,069 shares of Common Stock for an aggregate purchase price of $4,388,250 in a two-stage private placement. The first stage of the private placement, involving the sale of 923,078 shares of Common Stock and warrants to purchase 276,922 shares of Common Stock, closed on June 17, 2003 with the Company receiving net proceeds of $2,769,000 (net of fees and expenses). The second stage of the private placement, involving the sale of 427,155 shares of Common Stock and warrants to purchase 128,147 shares of Common Stock, closed on August 18, 2003 with the Company receiving net proceeds of $1,043,000 (net of fees and expenses). As required by Nasdaq Marketplace Rules, the issuance and sale of the shares and warrants in the second stage were
subject to shareholder approval because the price was less than the greater of book or market value per share and amounted to 20% or more of the Company’s Common Stock. The shareholders approved the issuance and sale of the shares and warrants in the second stage at a special meeting of shareholders held on August 12, 2003. For both stages, the purchase price of the Common Stock was $3.25 per share, which was a 12.5% discount on the 10-day average price as of June 1, 2003. The warrants have an initial exercise price of $4.50 per share and a life of 5 years. The warrants were valued at $641,000 and $297,000 for the first and second stages, respectively, based on a Black-Scholes calculation as of the June 17, 2003 and August 18, 2003 closing dates and under EITF 00-19 were included at those values in long term liabilities at the time of each closing. The balance of the net proceeds was accounted for as additional paid in capital. Under EITF 00-19, the Company marked-to-market the value of the warrants at
the end of each accounting period until the registration statement for the shares and warrants was declared effective by the Securities and Exchange Commission (“SEC”) on September 24, 2003. Once the registration statement for the shares and warrants was declared effective, the warrant value on the effective date was reclassified to equity as additional paid in capital. As a result of the change in value of the warrants from the first stage from the closing date to the end of the second quarter on June 30, 2003, the Company realized a benefit of $8,000 which was included in other income in the Condensed Consolidated Statement of Operations in the second quarter of 2003. As a result of the change in value of the first stage warrants from June 30, 2003 and the second stage warrants from the second closing date to September 30, 2003, the Company realized a benefit of $15,000 which was included in other income in the Condensed Consolidated Statement of Operations in the third quarter of 2003. The
Company is subject to certain indemnity provisions included in the stock purchase agreement entered into as part of the financing. In December 2003, the Company also issued warrants to purchase 81,104 shares of common stock to the firm Merriman Curhan and Ford & Co. as compensation as placement agent for the private placement. These warrants have the same terms as the warrants issued in the private placement.
In a private placement in March 2002, the Company sold 328,633 shares of common stock for $972,000, net of fees and expenses of $28,000. In addition, each purchaser was issued a warrant to purchase a number of shares of the Company's common stock equal to 20% of the number of shares of common stock purchased by such purchaser in the offering. The purchase price of the common stock was $3.00 per share, which was based on an 8.8% discount on the 10-day average price as of March 14, 2002. The purchase price of the common stock for insiders who participated in the offering was $3.35, which was the higher of (1) the price on the closing date or (2) the 10-day average price as of March 14, 2002, plus a $.03 premium because of the issuances of the warrants. The warrants have an initial exercise price of $4.30 per share, with a life of 5 years.
| |
| |
|
|
|
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
|
Warrant activity comprised:
|
|
|
|
Shares |
|
|
Warrants
Outstanding
Exercise Price |
|
|
Warrants
Exercisable |
|
|
Amount |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
Balance, December 31, 2000 |
|
|
1,100,000 |
|
$ |
2.00 - $6.00 |
|
|
— |
|
$ |
3,000 |
|
|
Warrants granted |
|
|
— |
|
$ |
2.00 - $6.00 |
|
|
— |
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2001 |
|
|
1,100,000 |
|
$ |
2.00 - $6.00 |
|
|
— |
|
$ |
3,000 |
|
|
Warrants granted |
|
|
65,726 |
|
$ |
4.30 |
|
|
65,726 |
|
$ |
283 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2002 |
|
|
1,165,726 |
|
$ |
2.00 - $6.00 |
|
|
65,726 |
|
$ |
3,283 |
|
|
Warrants granted |
|
|
486,173 |
|
$ |
4.50 |
|
|
276,922 |
|
$ |
1,265 |
|
|
Warrants cancelled |
|
|
(50,000 |
) |
$ |
6.00 |
|
|
50,000 |
|
|
($300 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2003 |
|
|
1,601,899 |
|
$ |
2.00 - $6.00 |
|
|
392,648 |
|
$ |
4,248 |
|
| |
|
|
|
|
|
|
|
|
|
|
1988 Stock Option Plan:
Upon adoption of the 1994 Stock Option Plan (see below), the Company's Board of Directors determined to make no further grants under the 1988 Stock Option Plan (the 1988 Plan). Upon cancellation or expiration of any options granted under the 1988 Plan, the related reserved shares of common stock will become available instead for options granted under the 1994 Stock Option Plan.
1994 Directors' Stock Option Plan:
At December 31, 2003, a total of 400,000 shares of common stock had been reserved for issuance under the 1994 Directors' Stock Option Plan. The plan provides for the granting of nonstatutory stock options to non-employee directors of the Company.
1994 Stock Option Plan:
At December 31, 2003, an aggregate of 1,550,000 shares of the Company's common stock had been reserved for issuance under the 1994 Stock Option Plan to employees, officers, and consultants at prices not lower than the fair market value of the common stock of the Company on the date of grant in the case of incentive stock options, and not lower than 85% of the fair market value on the date of grant in the case of non-statutory stock options. Options granted may be either incentive stock options or nonstatutory stock options. The plan administrator (the Board of Directors or a committee of the Board) determines the terms of options granted under the plan including the number of shares subject to the option, exercise price, term and exercisability. Activity Under the Stock Option Plans: Option activity under all plans comprised:
| |
| |
|
|
|
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
|
|
|
|
Options
Available
For Grant |
Number of Shares
Outstanding |
Weighted
Average Exercise
Price Per Share |
| |
|
|
|
|
|
|
|
| |
|
|
(in thousands) |
|
|
(in thousands) |
|
|
|
|
|
Balance, December 31, 2000 |
|
|
93 |
|
|
1,668 |
|
$ |
4.74 |
|
|
Granted |
|
|
(85 |
) |
|
85 |
|
$ |
3.83 |
|
|
Cancelled |
|
|
195 |
|
|
(195 |
) |
$ |
4.85 |
|
|
Exercised |
|
|
— |
|
|
(28 |
) |
$ |
2.93 |
|
| |
|
|
|
|
|
|
|
|
|
Balance, December 31, 2001 |
|
|
203 |
|
|
1,530 |
|
$ |
4.74 |
|
|
Granted |
|
|
(418 |
) |
|
418 |
|
$ |
4.41 |
|
|
Cancelled |
|
|
516 |
|
|
(516 |
) |
$ |
5.00 |
|
|
Exercised |
|
|
— |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
Balance, December 31, 2002 |
|
|
301 |
|
|
1,432 |
|
$ |
4.57 |
|
|
Granted |
|
|
(369 |
) |
|
369 |
|
$ |
4.41 |
|
|
Cancelled |
|
|
123 |
|
|
(123 |
) |
$ |
3.62 |
|
|
Exercised |
|
|
|
|
|
(291 |
) |
|
— |
|
|
Balance, December 31, 2003 |
|
|
55 |
|
|
1,387 |
|
$ |
4.87 |
|
| |
|
|
|
|
|
|
|
|
At December 31, 2003, 2002 and 2001, options to purchase 1,005,466 shares, 1,100,102 shares and 1,147,007 shares of common stock, respectively, were exercisable at weighted average fair values of $4.86, $4.54 and $4.67, respectively.
|
OPTIONS OUTSTANDING |
OPTIONS CURRENTLY
EXERCISABLE |
|
Range of
Exercise Prices |
|
Number of
Shares
Outstanding |
Weighted
Average
Remaining
Contractual
Life |
Weighted
Average
Exercise Price |
Number Exercisable |
Weighted
Average
Exercise
Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
(in years) |
|
|
|
|
|
(in thousands) |
|
|
|
|
|
$3.00
- $3.95 |
|
|
421 |
|
|
5.1 |
|
$ |
3.65 |
|
|
205 |
|
$ |
3.57 |
|
|
$4.00 - $4.88 |
|
|
417 |
|
|
2.3 |
|
$ |
4.52 |
|
|
360 |
|
$ |
4.51 |
|
|
$5.13 - $5.88 |
|
|
287 |
|
|
4.2 |
|
$ |
5.50 |
|
|
312 |
|
$ |
5.46 |
|
|
$6.25 - $7.23 |
|
|
262 |
|
|
4.7 |
|
$ |
6.91 |
|
|
128 |
|
$ |
6.83 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,387 |
|
|
|
|
|
|
|
|
1,005 |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1994 Employee Stock Purchase Plan:
At December 31, 2003, a total of 100,000 shares of common stock had been reserved for issuance under the 1994 Employee Stock Purchase Plan. The plan permits eligible employees to purchase common stock through payroll deductions at a price equal to the lower of 85% of the fair market value of the Company's common stock at the beginning or end of the offering period. Employees may end their participation at any time during the offering period, and participation ends automatically on termination of employment with the Company. At December 31, 2003,
82,214 shares had been issued under this plan.
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
Shareholder Rights Plan
On September 12, 2001, the Board of Directors of Fiberstars, Inc. declared a dividend distribution of one "Right" for each outstanding share of common stock of the Company to shareholders of record at the close of business on September 26, 2002. One Right will also attach to each share of common stock issued by the Company subsequent to such date and prior to the distribution date defined below. With certain exceptions, each Right, when exercisable, entitles the registered holder to purchase from the Company one one-thousandth of a share of a new series of preferred stock, designated as Series A Participating Preferred Stock, at a price of $30.00 per one one-thousandth of a share, subject to adjustment. The Rights were distributed as a non-taxable dividend and expire ten years from the date of the Rights Plan. In general, the Rights will become exercisable and trade
independently from the common stock on a distribution date that will occur on the earlier of (i) the public announcement of the acquisition by a person or group of 15% or more of the common stock or (ii) ten days after commencement of a tender or exchange offer for the common stock that would result in the acquisition of 15% or more of the common stock. Upon the occurrence of certain other events related to changes in ownership of the common stock, each holder of a Right would be entitled to purchase shares of common stock, or an acquiring corporation's common stock, having a market value of twice the exercise price. Under certain conditions, the Rights may be redeemed at $0.001 per Right by the Board of Directors. The description and terms of the Rights are set forth in a Rights Agreement dated as of September 20, 2002 between the Company and Mellon Investor Services LLC, as rights agent.
10. Income Taxes:
The components of the benefit from (provision for) income taxes are as follows (in thousands):
|
|
|
Years Ended December 31, |
| |
|
|
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
| |
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
--- |
|
$ |
— |
|
$ |
551 |
|
|
Foreign |
|
|
14 |
|
|
(43 |
) |
|
(105 |
) |
|
State |
|
|
--- |
|
|
— |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
(43 |
) |
|
445 |
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
|
|
|
(1,605 |
) |
|
910 |
|
|
|
|
|
|
|
|
(430 |
) |
|
(102 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,035 |
) |
|
808 |
|
| |
|
|
|
|
|
|
|
|
Benefit from (provision for) income taxes |
|
$ |
(14 |
) |
$ |
(2,078 |
) |
$ |
1,253 |
|
| |
|
|
|
|
|
|
|
The following table shows the geographic components of pretax income (loss) between U.S. and foreign subsidiaries:
|
|
|
December 31, |
| |
|
|
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
| |
|
|
|
|
|
|
|
|
U.S. |
|
$ |
(788 |
) |
$ |
(2,021 |
) |
$ |
(3,568 |
) |
|
Foreign subsidiaries |
|
|
194 |
|
|
580 |
|
|
187 |
|
| |
|
|
|
|
|
|
|
|
|
|
$ |
(594 |
) |
$ |
(1,441 |
) |
$ |
(3,381 |
) |
| |
|
|
|
|
|
|
|
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
The principal items accounting for the difference between income taxes computed at the United States statutory rate and the benefit from (provision for) income taxes reflected in the statements of operations are as follows:
|
|
|
December 31,
|
|
|
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
| |
|
|
|
|
|
|
|
|
United States statutory rate |
|
|
34.0 |
% |
|
34.0 |
% |
|
34.0 |
% |
|
State Taxes (net of federal tax benefit) |
|
|
5.5 |
% |
|
5.5 |
% |
|
5.5 |
% |
|
Valuation allowance |
|
|
(39.5 |
) |
|
(181.1) |
% |
|
— |
|
|
Other |
|
|
(2.3) |
% |
|
(2.7) |
% |
|
(2.4) |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
(2.3) |
% |
|
(144.3) |
% |
|
37.1 |
% |
| |
|
|
|
|
|
|
|
The tax effects of temporary differences that give rise to significant portions of the deferred tax asset are as follows (in thousands):
|
|
|
December 31, |
| |
|
|
|
|
|
|
2003 |
|
|
2002 |
|
| |
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
118 |
|
$ |
149 |
|
|
Accrued expenses and other reserves |
|
|
571 |
|
|
989 |
|
|
Tax credits |
|
|
155 |
|
|
235 |
|
|
Net operating loss |
|
|
1,519 |
|
|
836 |
|
|
Other |
|
|
233 |
|
|
— |
|
| |
|
|
|
|
|
|
Total deferred tax asset |
|
|
2,596 |
|
|
2,209 |
|
|
Valuation allowance |
|
|
(2,596 |
) |
|
(2,209 |
) |
| |
|
|
|
|
|
|
Net deferred tax asset |
|
$ |
— |
|
$ |
— |
|
| |
|
|
|
|
|
The deferred tax asset has been fully reserved by management in accordance with FASB 109 since management cannot forecast when the tax loss carryforwards will be realized.
As of December 31, 2003, the Company has net operating loss carryforward of approximately $4.2 million and $1.3 million for federal and state income tax purposes, respectively. If not utilized, these carryforwards will begin to expire in 2020 for federal and 2008 for state purposes.
Under the Internal Revenue Code Section 382, the amounts of and benefits from net operating losses carryforwards may be impaired in certain circumstances. Events which cause limitations in the amount of net operating losses that the Company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50%, as defined, over a three year period.
11. Segments and Geographic Information:
The Company has two primary product lines: the pool and spa lighting product line and the commercial lighting product line, each of which 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.
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
A summary of geographic sales is as follows (in thousands):
|
|
|
Years Ended December 31, |
| |
|
|
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
| |
|
|
|
|
|
|
|
|
U.S. Domestic |
|
$ |
19,171 |
|
$ |
22,978 |
|
$ |
21,298 |
|
|
Other Countries |
|
|
8,067 |
|
|
7,982 |
|
|
7,755 |
|
| |
|
|
|
|
|
|
|
|
|
|
$ |
27,238 |
|
$ |
30,960 |
|
$ |
29,053 |
|
| |
|
|
|
|
|
|
|
A summary of geographic long-lived assets (fixed assets and goodwill) is as follows (in thousands):
|
|
|
December 31, |
| |
|
|
|
|
|
|
2003 |
|
|
2002 |
|
| |
|
|
|
|
|
|
U.S. Domestic |
|
$ |
5,081 |
|
$ |
5,501 |
|
|
Germany |
|
|
1,897 |
|
|
1,418 |
|
|
Other Countries |
|
|
152 |
|
|
156 |
|
| |
|
|
|
|
|
|
|
|
$ |
7,130 |
|
$ |
7,075 |
|
| |
|
|
|
|
|
A summary of sales by product line is as follows (in thousands):
|
|
|
Years Ended December 31, |
| |
|
|
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
| |
|
|
|
|
|
|
|
|
Pool and Spa Lighting |
|
$ |
14,888 |
|
$ |
17,925 |
|
$ |
14,294 |
|
|
Commercial Lighting |
|
|
12,350 |
|
|
13,035 |
|
|
14,759 |
|
| |
|
|
|
|
|
|
|
|
|
|
$ |
27,238 |
|
$ |
30,960 |
|
$ |
29,053 |
|
| |
|
|
|
|
|
|
|
12. Employee Retirement Plan:
The Company maintains a 401(k) profit sharing plan for its employees who meet certain qualifications. The Plan allows eligible employees to defer up to 15% of their earnings, not to exceed the statutory amount per year on a pretax basis through contributions to the Plan. The Plan provides for employer contributions at the discretion of the Board of Directors; however, no such contributions were made in 2003, 2002 or 2001.
13. Related Party Transactions:
In previous years, the Company advanced amounts to certain officers by way of promissory notes. The notes are collateralized by certain issued or potentially issuable shares of the Company's common stock. The notes bear interest at rates ranging from 6% to 8% per annum and are repayable at various dates through 2004. At December 31, 2003 and 2002, $16,000 and $62,000 was outstanding under the notes, respectively. At December 31, 2003, $4,000 was included in other assets and $12,000 was included in notes receivable and other assets. At December 31, 2002, $34,000 was included in other assets and $28,000 was included in notes receivable and other assets.
In the second quarter of 2003, the Company took a charge of $27,000 in
relation to renewing options held by a certain director that had expired.
FIBERSTARS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
As of December 31, 2003, ADLT was a holder of approximately 20% of the Company's outstanding Common Stock. In January 2000, the Company executed the Mutual Supply Agreement with ADLT under which the Company buys certain lamps and components for its illuminators and through which the Company sells its finished products to ADLT. The terms of this agreement provide for specified pricing on products purchased from and sold to ADLT. The Company has purchased, and continues to purchase, components from ADLT under the terms of this agreement. Also, in January 2000, the Company entered into a Development Agreement with Unison, a wholly owned subsidiary of ADLT, under which the Company provided development services for which it received $2 million in fees from October 1999 through January 2001. In exchange, the Company pays royalties on the sales of products these t
echnologies produce at a rate of 3% for the first five years, 2% for the next two years and 1% for the next three years, after which the Company assumes exclusive royalty-free rights to
these products.
The Company had sales to ADLT under terms of the Mutual Supply Agreement and prior supply agreements of $156,000 during 2003, $345,000 during 2002 and $484,000 during 2001. Purchases were made from ADLT under these agreements with the Company along with royalties paid amounted to $657,000 in 2003, $1,207,000 in 2002 and $904,000 in 2001. Accounts receivable from ADLT were $39,000 and $79,000 at December 31, 2003 and 2002, respectively. Accounts payable due to ADLT were $117,000 and $105,000 at December 31, 2003 and 2002, respectively.
Item 15 (continued)
(a) (continued)
(2) Financial Statement Schedules
The following Financial Statement Schedule of Fiberstars, Inc. is filed as part of this Form 10-K included in Item 15(d) below:
Schedule II—Valuation and Qualifying Accounts.
All other schedules are omitted either because they are not applicable or the required information is shown in the financial statements or the notes thereto.
(3) Exhibits
See Item 15 (c) below.
Each management contract or compensatory plan or arrangement required to be filed has been identified.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K on October 2, 2003 reporting under Item 4 the Company’s dismissal of PricewaterhouseCoopers LLP as its independent accountants and announcing the appointment Grant Thornton LLP as its independent accountant effective September 29, 2003.
The Company furnished a Current Report on Form 8-K on October 22, 2003 furnishing under item 12 the Company’s press release and related conference call transcript relating to its financial results for the quarter ended September 30, 2003.
(c) Exhibits
|
Exhibit
Number |
Description of Documents |
|
3(i).1 |
Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000). |
| |
|
|
3(i).2 |
Certificate of Determination of Series A Participating Preferred Stock of the Registrant (incorporated by reference to Exhibit 3(i) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001). |
| |
|
|
3(ii) |
Bylaws of the Registrant, as amended (composite copy). |
| |
|
|
4.1 |
Form of Warrant issued to the Underwriters in the Company's initial public offering (incorporated by reference to Exhibit 1.1 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
4.2 |
Rights Agreement dated as of September 20, 2001 between the Registrant and Mellon Investor Services (incorporated by reference to Exhibit 4.1 to the Registrant's Form 8-A filed on September 21, 2001). |
| |
|
|
4.3 |
Amendment No. 1 to Rights Agreement dated as of March 26, 2002, between the Registrant and Mellon Investor Services, LLC, as rights agent (incorporated by reference to Exhibit 4.2 to the Registrant's Amendment No. 1 to Form 8-A filed on April 17, 2002). |
| |
|
|
4.4 |
Form of Warrant for the purchase of shares of Common Stock (incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002). |
| |
|
|
4.5 |
Amendment No. 2 to Rights Agreement dated as of June 17, 2003, between the Registrant and Mellon Investor Services, LLC, as rights agent (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on June 19, 2003). |
| |
|
|
4.6 |
Amendment No. 3 to Rights Agreement dated as of December 8, 2003, between the Registrant and Mellon Investor Services, LLC, as rights agent (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on February 10, 2004). |
| |
|
|
10.1† |
Form of Indemnification Agreement for directors and officers of the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
10.2† |
1988 Stock Option Plan, as amended, and forms of stock option agreement (incorporated by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
10.3† |
1994 Stock Option Plan, amended as of May 24, 2000, (incorporated by reference to Exhibit 99.1 to the Registrant's Registration Statement on Form S-8 (Commission File No. 333-52042) filed on December 18, 2000). |
| |
|
|
10.4† |
1994 Employee Stock Purchase Plan, amended as of December 7, 2000, (incorporated by reference to Exhibit 99.3 to the Registrant's Registration Statement on Form S-8 (Commission File No. 333-52042) filed on December 18, 2000). |
| |
|
|
10.5† |
1994 Directors' Stock Option Plan, amended as of May 23, 2001, (incorporated by reference to Exhibit 99.1 to the Registrant's Registration Statement on Form S-8 (Commission File No. 333-68844) filed on August 31, 2001). |
| |
|
|
10.6 |
Registration Rights Agreement dated as of June 27, 1990, between the Registrant and certain holders of the Registrant's capital stock, as amended by Amendment No. 1 dated as of February 6, 1991 and Amendment No. 2 dated as of April 30, 1994 (incorporated by reference to Exhibit 10.10 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
10.7 |
Amendment No. 3 to Registration Rights Agreement to include Warrant shares as Registerable Securities (incorporated by reference to Exhibit 1.2 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
|
10.8† |
Stock Purchase Agreement and related Promissory Note between David N. Ruckert and the Registrant dated as of December 9, 1987, as amended (incorporated by reference to Exhibit 10.14 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
10.9† |
Common Stock Purchase Warrant dated as of June 27, 1988 issued by the Registrant to Philip Wolfson (incorporated by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
10.10 |
Lease Agreement dated December 20, 1993, between the Registrant and Bayside Spinnaker Partners IV (incorporated by reference to Exhibit 10.19 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
10.11 |
Form of Agreement between the Registrant and independent sales representatives (incorporated by reference to Exhibit 10.20 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
10.12† |
Consulting Agreement dated August 25, 1994, between the Registrant and Philip Wolfson, M.D. (incorporated by reference to Exhibit 10.17 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1994). |
| |
|
|
10.13* |
Distribution Agreement dated March 21, 1995, between the Registrant and Mitsubishi International Corporation (incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1994). |
| |
|
|
10.14 |
Stock Purchase Agreement dated March 21, 1995, among the Registrant, Mitsubishi International Corporation and Mitsubishi Corporation (incorporated by reference to Exhibit 10.20 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1994). |
| |
|
|
10.15 |
Promissory Note dated as of October 7, 1996, issued in favor of the Registrant by Steve Keplinger (incorporated by reference to Exhibit 10.22 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1996). |
| |
|
|
10.16 |
Promissory Note dated as of March 25, 1997, issued in favor of the Registrant by Barry Greenwald (incorporated by reference to Exhibit 10.23 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1996). |
| |
|
|
10.17 |
Promissory Note dated as of March 15, 1998, issued in favor of the Registrant by Barry Greenwald (incorporated by reference to Exhibit 10.25 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1997). |
| |
|
|
10.18* |
Asset Purchase Agreement dated August 31, 1998, by and among Fibre Optics International, Inc., Douglas S. Carver, Dave M. Carver, and the Registrant (incorporated by reference to Exhibit 10.32 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998). |
| |
|
|
10.19 |
Asset Purchase Agreement dated as of November 19, 1998, by and among the Registrant, Hillgate (4) Limited, Crescent Lighting Limited, Michael Beverly Morrison and Corinne Bertrand (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on December 4, 1998). |
|
10.20* |
Purchase and Take-over Agreement between Frau Claudia Mann, acting for LBM Lichtleit-Fasertechnik and Fiberstars Deutschland GmbH, represented by its Managing Director Herr Bernhard Mann (incorporated by reference to Exhibit 10.34 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998). |
| |
|
|
10.21* |
Asset Purchase Agreement dated as of December 30, 1998, between Respironics, Inc. and the Registrant (incorporated by reference to Exhibit 10.35 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998). |
| |
|
|
10.22 |
Multi-tenant Industrial Triple Net Lease last executed December 1, 1998, between the Registrant and Catellus Development Corporation (incorporated by reference to Exhibit 10.36 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998). |
| |
|
|
10.23 |
Multi-tenant Industrial Lease Agreement (Modified Gross) dated September 15, 1998, between the Registrant and Harsch Investment Corp., as Agent for MacArthur/Broadway Center, Inc. (incorporated by reference to Exhibit 10.37 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998), as amended by First Amendment to Lease dated December 13, 1999 (incorporated by reference to Exhibit 10.37 to the Registrant's Amended Annual Report on Form 10-K 405/A for the year ended December 31, 1999). |
| |
|
|
10.24 |
Amended and Restated Promissory Note dated March 25, 1999, between the Registrant and J. Steven Keplinger (incorporated by reference to Exhibit 10.40 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998). |
| |
|
|
10.25 |
Asset Purchase Agreement dated as of January 14, 2000, among the Registrant and Unison Fiber Optic Lighting Systems, LLC (incorporated by reference to Exhibit 7(c) to Advanced Lighting Technologies, Inc.'s Amendment No. 3 to Schedule 13D filed on March 9, 2000). |
| |
|
|
10.26 |
Agreement and Plan of Reorganization dated April 18, 2000, between the Registrant and Lightly Expressed, Ltd. (VA), Lightly Expressed, Ltd. (CA), William Leaman and Michael Weber (incorporated by reference to Exhibit 2.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000). |
| |
|
|
10.27 |
Loan Agreement dated September 1, 2000, between the Registrant and Wells Fargo Bank (incorporated by reference to Exhibit 10.32 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000). |
| |
|
|
10.28 |
Term Commitment Note of the Registrant dated as of September 1, 2000, to Wells Fargo Bank (incorporated by reference to Exhibit 10.30 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000). |
| |
|
|
10.29 |
Revolving Line of Credit Note of the Registrant dated as of September 1, 2000, to Wells Fargo Bank (incorporated by reference to Exhibit 10.31 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000). |
| |
|
|
10.30* |
Three (3) Year Supply Agreement dated November 30, 2000, between the Registrant and Mitsubishi International Corporation (incorporated by reference to Exhibit 10.30 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000). |
|
10.31 |
Second Amended and Restated Investor Agreement dated March 18, 2004 by and among the Registrant, Advanced Lighting Technologies, Inc.,
ADLT Class 7 Liquidating Trust; w/a/d January, 2004, and Unison Fiber Optic
Lighting Systems, LLC. |
| |
|
|
10.32* |
Exclusive Marketing and Distribution Agreement between the Registrant and Laars, Inc. effective July 31, 2000 (incorporated by reference to the exhibit of the same number to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000). |
| |
|
|
10.33 |
Extension—Loan Agreement between the Registrant and Wells Fargo Bank, National Association dated March 23, 2001 (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001). |
| |
|
|
10.34 |
Extension—Revolving Line of Credit Note by the Registrant dated as of March 23, 2001, to Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001). |
| |
|
|
10.35 |
Continuing Security Agreement, Rights to Payment and Inventory by the Registrant dated as of March 23, 2001, to Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001). |
| |
|
|
10.36 |
Extension—Revolving Line of Credit Note of the Registrant dated as of August 10, 2001, to Wells Fargo Bank (incorporated by reference to Exhibit 10.30 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001). |
| |
|
|
10.37 |
Consulting Agreement effective as of October 18, 2001, between the Company and John B. Stuppin (incorporated by reference to Exhibit 10.37 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001). |
| |
|
|
10.38 |
Loan and Security Agreement (Accounts and Inventory) as dated December 7, 2001, between Comerica Bank-California, a California banking corporation and the Company (incorporated by reference to Exhibit 10.38 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001). |
| |
|
|
10.39 |
Common Stock and Warrant Purchase Agreement, dated March 29, 2002, by and among the Registrant and the investors named therein (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002). |
| |
|
|
10.40 |
Securities Purchase Agreement dated June 17, 2003, by and among the Registrants and the investors named therein (incorporated by reference to Exhibit 99.2 to the Registrant's Current Report on Form 8-K filed on June 19, 2003). |
|
10.41 |
Form of Warrant by and between the Registrants and each of the investors party to the Securities Purchase Agreement dated June 17, 2003 (incorporated by reference to Exhibit 99.3 to the Registrant's Current Report on Form 8-K filed on June 19, 2003). |
| |
|
|
10.42† |
Form of Indemnification Agreement for officers of the Registrant. |
| |
|
|
10.43† |
Form of Indemnification Agreement for directors of the Registrant. |
| |
|
|
10.44 |
Production Share Agreement dated October 9, 2003, by and
among the Registrant, North American Production Sharing, Inc. and Industrias Unidas de B.C., S.A. de C.V. |
| |
|
|
21.1 |
Significant subsidiaries of the Registrant (incorporated by reference to the exhibit of the same number to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001). |
| |
|
|
23.1 |
Consent of Independent Accountants. |
| |
|
|
23.2 |
Consent of Independent Accountants. |
| |
|
|
31.1 |
Certification by Chief Executive Officer pursuant to 13a-14(a). |
| |
|
|
31.2 |
Certification by Chief Financial Officer pursuant to 13a-14(a). |
| |
|
|
32.1 |
Statement of Chief Executive Officer under 18 U.S.C. § 1350. |
| |
|
|
32.2 |
Statement of Chief Financial Officer under 18 U.S.C. § 1350. |
___________
* Confidential treatment has been granted with respect to certain portions of this agreement.
† Indicates management contracts or compensatory plan or arrangement.
(d) Financial Statement Schedules
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of Fiberstars, Inc.
Fremont, California
Our audit of the consolidated financial statements referred to in our report dated February 27, 2004, appearing in Item 15(a)1 of this Form 10-K also included an audit of the financial statement schedule
for the year ended December 31, 2003 listed in Item 15(a)(2) of this
Form 10-K. In our opinion, this financial statement schedule presents fairly,
in all material respects, the information set forth therein for the year ended
December 31, 2003 when read in conjunction with the related consolidated
financial statements.
/s/ Grant Thornton LLP
San Francisco, California
February 27, 2004
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Fiberstars, Inc.
Fremont, California
Our audits of the consolidated financial statements referred to in our report dated February 14, 2003, appearing in Item 15(a)1 of this Form 10-K also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
San Jose, California
February 14, 2003
SCHEDULE II
FIBERSTARS, INC.
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
|
Description |
|
Balance at
Beginning of
Year |
Charges
To Revenue |
Charges
To Expenses |
Deductions |
Balance at
End of Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands) |
|
Year Ended December 31, 2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts and returns |
|
$ |
604 |
|
$ |
|
|
$ |
1 |
|
$ |
141 |
|
$ |
465 |
|
|
Valuation allowance for deferred tax assets |
|
|
2,035 |
|
|
— |
|
|
400 |
|
|
— |
|
|
2,435 |
|
|
Year Ended December 31, 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts and returns |
|
|
585 |
|
|
|
|
|
78 |
|
|
59 |
|
|
604 |
|
|
Valuation allowance for deferred tax Assets |
|
|
|
|
|
|
|
|
2,035 |
|
|
|
|
|
2,035 |
|
|
Year Ended December 31, 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts and returns |
|
|
1,526 |
|
|
740 |
|
|
274 |
|
|
1,955 |
|
|
585 |
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereto duly authorized, on the 30th day of March 2004.
|
|
Fiberstars, Inc. |
|
|
|
|
|
|
By: |
/s/ David N. Ruckert |
|
|
David N. Ruckert
Chief Executive Officer
(Principal Executive Officer) |
In accordance with the Securities Exchange Act of 1934, this Report has been signed by the following persons in the capacities and on the dates indicated.
|
Signature |
Title |
Date |
|
|
|
|
|
/s/ DAVID N. RUCKERT |
Chief Executive Officer and Director |
|
DAVID N. RUCKERT |
(Principal Executive Officer) |
|
|
|
|
|
|
/s/ ROBERT A. CONNORS |
Chief Financial Officer |
|
ROBERT A. CONNORS |
(Principal Financial and Accounting Officer) |
|
|
|
|
|
|
/s/ JOHN B. STUPPIN |
|
|
JOHN B. STUPPIN |
|
|
|
|
|
|
|
/s/ THEODORE L. ELLIOT, JR. |
|
|
THEODORE L. ELLIOT, JR. |
|
|
|
|
|
|
|
/s/ JEFFREY BRITE. |
|
|
JEFFREY BRITE. |
|
|
|
|
|
|
|
/s/ SABU KRISHNAN |
|
|
SABU KRISHNAN |
|
|
|
|
|
|
|
/s/ WAYNE R. HELLMAN |
|
|
WAYNE R. HELLMAN |
|
|
|
|
|
|
|
/s/ DAVID TRAVERSI |
|
|
DAVID TRAVERSI |
|
|
|
|
|
|
|
/s/ PHILIP WOLFSON |
|
|
PHILIP WOLFSON |
|
|
|
Exhibit
Number |
Description of Documents |
|
|
|
|
3(i).1 |
Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000). |
| |
|
|
3(i).2 |
Certificate of Determination of Series A Participating Preferred Stock of the Registrant (incorporated by reference to Exhibit 3(i) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001). |
| |
|
|
3(ii) |
Bylaws of the Registrant, as amended (composite copy). |
|
4.1 |
Form of Warrant issued to the Underwriters in the Company's initial public offering (incorporated by reference to Exhibit 1.1 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
4.2 |
Rights Agreement dated as of September 20, 2001 between the Registrant and Mellon Investor Services (incorporated by reference to Exhibit 4.1 to the Registrant's Form 8-A filed on September 21, 2001). |
| |
|
|
4.3 |
Amendment No. 1 to Rights Agreement dated as of March 26, 2002, between the Registrant and Mellon Investor Services, LLC, as rights agent (incorporated by reference to Exhibit 4.2 to the Registrant's Amendment No. 1 to Form 8-A filed on April 17, 2002). |
| |
|
|
4.4 |
Form of Warrant for the purchase of shares of Common Stock (incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002). |
| |
|
|
4.5 |
Amendment No. 2 to Rights Agreement dated as of June 17, 2003, between the Registrant and Mellon Investor Services, LLC, as rights agent (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on June 19, 2003). |
| |
|
|
4.6 |
Amendment No. 3 to Rights Agreement dated as of December 8, 2003, between the Registrant and Mellon Investor Services, LLC, as rights agent (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on February 10, 2004). |
| |
|
|
10.1† |
Form of Indemnification Agreement for directors and officers of the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
10.2† |
1988 Stock Option Plan, as amended, and forms of stock option agreement (incorporated by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
10.3† |
1994 Stock Option Plan, amended as of May 24, 2000, (incorporated by reference to Exhibit 99.1 to the Registrant's Registration Statement on Form S-8 (Commission File No. 333-52042) filed on December 18, 2000). |
| |
|
|
10.4† |
1994 Employee Stock Purchase Plan, amended as of December 7, 2000, (incorporated by reference to Exhibit 99.3 to the Registrant's Registration Statement on Form S-8 (Commission File No. 333-52042) filed on December 18, 2000). |
|
10.5† |
1994 Directors' Stock Option Plan, amended as of May 23, 2001, (incorporated by reference to Exhibit 99.1 to the Registrant's Registration Statement on Form S-8 (Commission File No. 333-68844) filed on August 31, 2001). |
| |
|
|
10.6 |
Registration Rights Agreement dated as of June 27, 1990, between the Registrant and certain holders of the Registrant's capital stock, as amended by Amendment No. 1 dated as of February 6, 1991 and Amendment No. 2 dated as of April 30, 1994 (incorporated by reference to Exhibit 10.10 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
10.7 |
Amendment No. 3 to Registration Rights Agreement to include Warrant shares as Registerable Securities (incorporated by reference to Exhibit 1.2 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
10.8† |
Stock Purchase Agreement and related Promissory Note between David N. Ruckert and the Registrant dated as of December 9, 1987, as amended (incorporated by reference to Exhibit 10.14 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
10.9† |
Common Stock Purchase Warrant dated as of June 27, 1988 issued by the Registrant to Philip Wolfson (incorporated by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
10.10 |
Lease Agreement dated December 20, 1993, between the Registrant and Bayside Spinnaker Partners IV (incorporated by reference to Exhibit 10.19 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
10.11 |
Form of Agreement between the Registrant and independent sales representatives (incorporated by reference to Exhibit 10.20 to the Registrant's Registration Statement on Form SB-2 (Commission File No. 33-79116-LA)). |
| |
|
|
10.12† |
Consulting Agreement dated August 25, 1994, between the Registrant and Philip Wolfson, M.D. (incorporated by reference to Exhibit 10.17 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1994). |
| |
|
|
10.13* |
Distribution Agreement dated March 21, 1995, between the Registrant and Mitsubishi International Corporation (incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1994). |
| |
|
|
10.14 |
Stock Purchase Agreement dated March 21, 1995, among the Registrant, Mitsubishi International Corporation and Mitsubishi Corporation (incorporated by reference to Exhibit 10.20 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1994). |
| |
|
|
10.15 |
Promissory Note dated as of October 7, 1996, issued in favor of the Registrant by Steve Keplinger (incorporated by reference to Exhibit 10.22 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1996). |
| |
|
|
10.16 |
Promissory Note dated as of March 25, 1997, issued in favor of the Registrant by Barry Greenwald (incorporated by reference to Exhibit 10.23 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1996). |
|
10.17 |
Promissory Note dated as of March 15, 1998, issued in favor of the Registrant by Barry Greenwald (incorporated by reference to Exhibit 10.25 to the Registrant's Annual Report on Form 10-KSB for the year ended December 31, 1997). |
| |
|
|
10.18* |
Asset Purchase Agreement dated August 31, 1998, by and among Fibre Optics International, Inc., Douglas S. Carver, Dave M. Carver, and the Registrant (incorporated by reference to Exhibit 10.32 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998). |
| |
|
|
10.19 |
Asset Purchase Agreement dated as of November 19, 1998, by and among the Registrant, Hillgate (4) Limited, Crescent Lighting Limited, Michael Beverly Morrison and Corinne Bertrand (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on December 4, 1998). |
| |
|
|
10.20* |
Purchase and Take-over Agreement between Frau Claudia Mann, acting for LBM Lichtleit-Fasertechnik and Fiberstars Deutschland GmbH, represented by its Managing Director Herr Bernhard Mann (incorporated by reference to Exhibit 10.34 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998). |
| |
|
|
10.21* |
Asset Purchase Agreement dated as of December 30, 1998, between Respironics, Inc. and the Registrant (incorporated by reference to Exhibit 10.35 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998). |
| |
|
|
10.22 |
Multi-tenant Industrial Triple Net Lease last executed December 1, 1998, between the Registrant and Catellus Development Corporation (incorporated by reference to Exhibit 10.36 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998). |
| |
|
|
10.23 |
Multi-tenant Industrial Lease Agreement (Modified Gross) dated September 15, 1998, between the Registrant and Harsch Investment Corp., as Agent for MacArthur/Broadway Center, Inc. (incorporated by reference to Exhibit 10.37 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998), as amended by First Amendment to Lease dated December 13, 1999 (incorporated by reference to Exhibit 10.37 to the Registrant's Amended Annual Report on Form 10-K 405/A for the year ended December 31, 1999). |
| |
|
|
10.24 |
Amended and Restated Promissory Note dated March 25, 1999, between the Registrant and J. Steven Keplinger (incorporated by reference to Exhibit 10.40 to the Registrant's Amended Annual Report on Form 10-KSB/A for the year ended December 31, 1998). |
| |
|
|
10.25 |
Asset Purchase Agreement dated as of January 14, 2000, among the Registrant and Unison Fiber Optic Lighting Systems, LLC (incorporated by reference to Exhibit 7(c) to Advanced Lighting Technologies, Inc.'s Amendment No. 3 to Schedule 13D filed on March 9, 2000). |
| |
|
|
10.26 |
Agreement and Plan of Reorganization dated April 18, 2000, between the Registrant and Lightly Expressed, Ltd. (VA), Lightly Expressed, Ltd. (CA), William Leaman and Michael Weber (incorporated by reference to Exhibit 2.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000). |
| |
|
|
10.27 |
Loan Agreement dated September 1, 2000, between the Registrant and Wells Fargo Bank (incorporated by reference to Exhibit 10.32 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000). |
|
10.28 |
Term Commitment Note of the Registrant dated as of September 1, 2000, to Wells Fargo Bank (incorporated by reference to Exhibit 10.30 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000). |
| |
|
|
10.29 |
Revolving Line of Credit Note of the Registrant dated as of September 1, 2000, to Wells Fargo Bank (incorporated by reference to Exhibit 10.31 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000). |
| |
|
|
10.30* |
Three (3) Year Supply Agreement dated November 30, 2000, between the Registrant and Mitsubishi International Corporation (incorporated by reference to Exhibit 10.30 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000). |
| |
|
|
10.31 |
Second Amended and Restated Investor Agreement dated March 18, 2004, by and among the Registrant, Advanced Lighting Technologies, Inc.,
ADLT Class 7 Liquidating Trust; u/a/d January, 2004 and Unison Fiber Optic Lighting Systems, LLC. |
| |
|
|
10.32* |
Exclusive Marketing and Distribution Agreement between the Registrant and Laars, Inc. effective July 31, 2000 (incorporated by reference to the exhibit of the same number to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000). |
| |
|
|
10.33 |
Extension—Loan Agreement between the Registrant and Wells Fargo Bank, National Association dated March 23, 2001 (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001). |
| |
|
|
10.34 |
Extension—Revolving Line of Credit Note by the Registrant dated as of March 23, 2001, to Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001). |
| |
|
|
10.35 |
Continuing Security Agreement, Rights to Payment and Inventory by the Registrant dated as of March 23, 2001, to Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001). |
| |
|
|
10.36 |
Extension—Revolving Line of Credit Note of the Registrant dated as of August 10, 2001, to Wells Fargo Bank (incorporated by reference to Exhibit 10.30 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001). |
| |
|
|
10.37 |
Consulting Agreement effective as of October 18, 2001, between the Company and John B. Stuppin (incorporated by reference to Exhibit 10.37 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001). |
| |
|
|
10.38 |
Loan and Security Agreement (Accounts and Inventory) as dated December 7, 2001, between Comerica Bank-California, a California banking corporation and the Company (incorporated by reference to Exhibit 10.38 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001). |
| |
|
|
10.39 |
Common Stock and Warrant Purchase Agreement, dated March 29, 2002, by and among the Registrant and the investors named therein (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002). |
| |
|
|
10.40 |
Securities Purchase Agreement dated June 17, 2003, by and among the Registrants and the investors named therein (incorporated by reference to Exhibit 99.2 to the Registrant's Current Report on Form 8-K filed on June 19, 2003). |
| |
|
|
10.41 |
Form of Warrant by and between the Registrants and each of the investors party to the Securities Purchase Agreement dated June 17, 2003 (incorporated by reference to Exhibit 99.3 to the Registrant's Current Report on Form 8-K filed on June 19, 2003). |
| |
|
|
10.42† |
Form of Indemnification Agreement for officers of the Registrant. |
| |
|
|
10.43† |
Form of Indemnification Agreement for directors of the Registrant. |
| |
|
|
10.44 |
Production Share Agreement dated October 9, 2003, by and
among the Registrant, and North American Production Sharing, Inc. and
Industrias Unidas
de B.C., S.A. de C.V. |
| |
|
|
21.1 |
Significant subsidiaries of the Registrant (incorporated by reference to the exhibit of the same number to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001). |
| |
|
|
23.1 |
Consent of Independent Accountants. |
| |
|
|
23.2 |
Consent of Independent Accountants. |
| |
|
|
31.1 |
Certification by Chief Executive Officer pursuant to 13a-14(a). |
| |
|
|
31.2 |
Certification by Chief Financial Officer pursuant to 13a-14(a). |
| |
|
|
32.1 |
Statement of Chief Executive Officer under 18 U.S.C. § 1350. |
| |
|
|
32.2 |
Statement of Chief Financial Officer under 18 U.S.C. § 1350. |
___________
* Confidential treatment has been granted with respect to certain portions of this agreement.
† Indicates management contracts or compensatory plan or arrangement.