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Unassociated Document

Fiberstars,
Inc.

44259
Nobel Drive

Fremont,
California 94538

Tel.
510.490.0719

May 26,
2005

VIA
EDGAR AND FACSIMILE

Division
of Corporation Finance

United
States Securities and Exchange Commission

450 Fifth
Street, N.W.

Washington,
D.C. 20549-0306

Attn:
Dennis C. Hult

Re:  Fiberstars,
Inc.

Form 10-K
for the fiscal year ended December 31, 2004

File No.
0-24230

Ladies
and Gentlemen:

On behalf
of Fiberstars, Inc. (the “Company”), this letter is in response to comments
received from the staff (the “Staff”) of the Securities and Exchange Commission
(the “Commission”) in their letter dated May 20, 2005. The number of the
responses and headings set forth below correspond to the numbered comments and
headings on the letter from the Staff. A copy of the Staff’s letter is enclosed
for the convenience of the Staff.

Form
10-K for the period ending December 31, 2004

Item
9A Controls and Procedures - Page 24

    1.

      We
      note your statement that the chief executive officer and the chief
      financial officer have concluded that because of the material weakness in
      your internal controls discussed in Item 9A(b), the company’s disclosure
      controls and procedures “were not fully
      effective” (emphasis added). Given the exceptions noted, it remains
      unclear whether your chief executive officer and chief financial officer
      have concluded that your disclosure controls and procedures are not
      effective. In future filings, revise your disclosure to state, in clear
      and unqualified language, the conclusions reached by your chief executive
      officer and your chief financial officer on the effectiveness of your
      disclosure controls and procedures. For example, if true, you can state
      that given the identified matters, your disclosure controls and procedures
      are not effective. You should not, however, state the conclusion in your
      current disclosure, which appears to state that your disclosure controls
      and procedure are not effective except to the extent they are effective
      (we note the disclosure that “Our disclosure controls and procedures have
      been designed to meet, and management
      believes that they meet, reasonable
      assurance standards, subject to the deficiencies and weaknesses identified
      and discussed below.”). Refer to Item 307 of Regulation
    S-K.

RESPONSE:
The Company has noted the Staff’s comment and will revise its disclosure in the
Company’s future filings.

Securities
and Exchange Commission

May 26,
2005

Page
2

Footnotes
to Financial Statements - Page F-8

Stock
-Based Compensation - Page F-12

    2.

      We
      refer to your Current Report Form 8-K dated March 15, 2005, filed March
      16, wherein you say that you adjusted the year end net loss of $213,000 as
      earlier reported to a net loss of $341,000, indicating the amount was
      adjusted to reflect a $120,000 non-cash charge for a change in accounting
      for options granted to one of your directors. You also indicate that in
      the prior earnings release “the options had been valued under the
      intrinsic method, and are now
      re-valued under the fair
      value method”
      (emphasis added). Supplementally, please tell us why the change in
      accounting was appropriate and compliant with U.S. generally accepted
      accounting principles. Also, confirm that the accuracy of your policy
      footnote disclosures which indicate that you account for the stock
      compensation plans under the recognition and measurement principles of APB
      Opinion No. 25. We may have further comments after reviewing your
      response.

RESPONSE:
Initially the Company believed that the options in question were granted for
work being performed by a director for services as a director. As such, as is
its policy for employee stock options, the Company determined to use the
intrinsic method of accounting. However, the grant was subject to finalizing the
terms of a consulting agreement with the director, terms which also involved
cash compensation. When the terms of the agreement were finalized, the options
were awarded as fully vested. Prior to that time, the draft option award was
based of a four-year vesting period. The Company believed that the options had
been earned while the individual was performing director duties. However, upon
further review with the Company’s auditors during the audit of results for the
year ended December 31, 2004, it was determined that 1) the options grant was
included as part of the consulting agreement and 2) although fully vested when
awarded, the work performed to earn the options could be construed as being
outside the scope of normal director duties and therefore more appropriate for
consulting work. Based on this fact pattern, we concluded that these options
should be accounted for as non-employee stock options. We revised the accounting
for the options and performed a valuation based on the fair value method, which
is to be used for options granted to non-employees. The Company believes that
the method of accounting used conforms to the accounting methods for
non-employee grants under the recognition and measurement principles of SFAS No.
123 and related interpretations. In the future, the Company will confirm the
proper application of the relevant accounting principles with its accounting
experts at the time the terms of a transaction are completed, rather than only
at the inception of the transaction.

Our
footnote disclosure for Stock-Based Compensation states that the “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.” The
Company confirms that this statement accurately discloses our accounting methods
for employee stock-based compensation. The Company accounts for equity
instruments issued to non-employees in accordance with the provisions of SFAS
No. 123 and related interpretations.

Securities
and Exchange Commission

May 26,
2005

Page
3

    3.

      To
      this regard, we do not believe it is sufficient to explain your accounting
      policy by referring only to the authoritative announcement. The average
      reader will not know the accounting as prescribed by APB Opinion No. 25.
      In future filings please expand your policy note disclosures to explain in
      detail your accounting policy for equity instruments issuances to both
      employees and non-employees.

RESPONSE:
The Company has noted the Staff’s comment and will expand its policy note
disclosures in the Company’s future filings.

The
Company acknowledges that:

    •

      it
      is responsible for the adequacy and accuracy of the disclosure in the
      filings;

    •

      Staff
      comments or changes to disclosure in response to Staff comments in the
      filings reviewed by the Staff do not foreclose the Commission from taking
      any action with respect to the filing; and

    •

      the
      Company may not assert Staff comments as a defense in any proceeding
      initiated by the Commission or any person under the federal securities
      laws of the United States.

* *
*

Questions
or comments regarding any matters with respect to these responses may be
directed to the undersigned at (510) 490-0719 Ext. 124 or David Ruckert,
the Company’s Chief Executive Officer, at (510) 490-0719 Ext.
112.

Sincerely,

/s/
Robert A. Connors

Robert A.
Connors

Chief
Financial Officer

cc:   David
Ruckert

Jay Webb,
Reviewing Accountant

Ralph
Nefdt

Richard
S. Bebb