SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 FOR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ______.
Commission File Number: 0-22046
Bogen Communications International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 38-3114641
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
50 Spring Street, Ramsey, New Jersey 07446
(Address of principal executive offices (Zip Code)
(201) 934-8500
(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ____
As of April 30, 1996, 5,759,350 shares of the registrant's common stock, par
value $.001 per share, were outstanding.
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1996
and December 31, 1995 (Unaudited) 1
Condensed Consolidated Statements of Operations for the three
months ended March 31, 1996 and 1995 (Unaudited) 3
Condensed Consolidated Statement of Changes in Stockholders' Equity
for the three months ended March 31, 1996 (Unaudited) 4
Condensed Consolidated Statements of Cash Flow for the three months
ended March 31, 1996 and 1995 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION:
Item 6. Exhibits and reports on Form 8K 11
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands of Dollars)
(UNAUDITED)
March 31, December 31,
1996 1995
------- -------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 822 $ 1,276
Accounts receivable (less allowance for doubtful
accounts of $495 and $424 at March 31,
1996 and December 31, 1995, respectively) 5,509 4,992
Inventories 7,089 6,922
Prepaid expenses and other current assets 457 1,042
------- -------
TOTAL CURRENT ASSETS 13,877 14,232
Property and equipment, net 2,042 2,191
Goodwill and intangible assets, net 14,571 14,706
Other assets 214 175
------- -------
TOTAL ASSETS $30,704 $31,304
======= =======
The accompanying notes are an integral part of
these condensed consolidated statements.
1
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands of Dollars Except Share Amounts)
(UNAUDITED)
March 31, December 31,
1996 1995
-------- --------
LIABILITIES
CURRENT LIABILITIES
Amounts outstanding under revolving credit agreement $ 4,842 $ 4,944
Accounts payable 2,673 2,861
Accrued expenses 3,045 3,610
Income taxes payable 1,761 1,353
Advances and notes payable to related parties 404 537
Notes payable to non-related parties 72 174
-------- --------
TOTAL CURRENT LIABILITIES 12,797 13,479
Advances and notes payable to related parties 844 3,458
Other long term liabilities 639 674
Minority interest 656 550
-------- --------
TOTAL LIABILITIES 14,936 18,161
-------- --------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock - .001 par value; 50,000,000 shares
authorized; 5,759,350 shares issued and outstanding
at March 31, 1996 and December 31, 1995 6 6
Additional paid-in capital 21,777 19,175
Accumulated deficit (6,071) (6,185)
Cumulative currency translation adjustments 56 147
-------- --------
TOTAL STOCKHOLDERS' EQUITY 15,768 13,143
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 30,704 $ 31,304
======== ========
The accompanying notes are an integral part of
these condensed consolidated statements.
2
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars, Except Share Amounts)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995
----------- -----------
Net sales $ 11,358 $ 10,847
Cost of goods sold 6,553 6,225
----------- -----------
Gross profit 4,805 4,622
Operating expenses:
Research and development 654 588
Selling, general and administrative 3,252 3,376
Amortization of goodwill and intangible assets 111 117
----------- -----------
Income from operations 788 541
Other expenses and minority interest:
Interest expense, net 160 208
Interest expense to related parties 7 149
Minority interest 107 51
----------- -----------
Income before provision for income taxes 514 133
Provision for income taxes 400 277
----------- -----------
Net income (loss) $ 114 $ (144)
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) $ 0.02 $ (0.07)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,759,350 1,925,000
=========== ===========
The accompanying notes are an integral part of
these condensed consolidated statements.
3
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousand of Dollars, Except Share Amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
------------ CUMULATIVE
FOREIGN
NUMBER ADDITIONAL CURRENCY
OF PAID-IN ACCUMULATED TRANSLATION
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 5,759,350 $ 6 $ 19,175 $ (6,185) $ 147
Restructure of $3,000 related party note
with related interest of $102 2,602
Translation adjustments (91)
Net income for the period 114
--------- ---------- ---------- ---------- ----------
Balance at March 31, 1996 5,759,350 $ 6 $ 21,777 $ (6,071) $ 56
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated statements.
4
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(UNAUDITED)
FOR THE THREE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995
------- -------
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES $ 70 $ 593
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and leasehold
improvements (108) (330)
Collection of notes receivable 9 9
------- -------
NET CASH FLOW USED IN INVESTING ACTIVITIES (99) (321)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Amounts paid under notes payable (102) (1,673)
Amounts paid under revolving credit agreements (102) (89)
Advances and notes payable - related parties (145) 1,554
------- -------
NET CASH USED IN FINANCING ACTIVITIES (349) (208)
------- -------
(DECREASE) INCREASE IN CASH (378) 64
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,276 148
Effects of Exchange Rate on Cash (76) 36
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 822 $ 248
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
NON CASH FINANCING ACTIVITIES:
Restructuring of $3,000 related party note
and related interest $ 2,602 --
The accompanying notes are an integral part of
these condensed consolidated statements.
5
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars)
(UNAUDITED)
1. Basis of Presentation
The consolidated balance sheet of Bogen Communications International, Inc.
and Subsidiaries (the "Company") as of December 31, 1995 has been derived
from the audited consolidated balance sheet contained in the Company's Form
10-K and is presented for comparative purposes. In the opinion of
management, all significant adjustments including normal recurring
adjustments necessary to present fairly the financial position, results of
operations and cash flows for all periods presented have been made. The
results of operations for interim periods are not necessarily indicative of
the operating results for the full year. Certain 1995 amounts have been
reclassified to conform with the 1996 presentation.
Footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
in accordance with the published rules and regulations of the Securities
and Exchange Commission. These condensed consolidated financial statements
should be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-K for the most recent fiscal
year.
2. The Company
On August 21, 1995, the Company acquired a 99% interest in Bogen
Corporation ("Bogen") and a 67% interest in Speech Design GmbH ("Speech
Design") from Geotek Communications, Inc. ("Geotek"). The Company paid
Geotek $7,000 in cash, a convertible promissory note in the aggregate
principal amount of $3,000, 3,700,000 shares of the Company's common stock
and warrants to acquire 200,000 shares of common stock of the Company. As a
result, Geotek acquired approximately 64% of the stock of the Company,
thereby giving it a controlling interest in the Company. Geotek, in
addition, contributed approximately $7,155 of intercompany indebtedness
from Bogen to equity as part of the transaction. Further, as contingent
consideration, the Company could be liable to pay Geotek an amount up to
$11,000 or receive up to $2,500 from Geotek, based upon a calculation using
the operating results of Bogen and Speech Design during the two years after
the acquisition.
For accounting purposes, the acquisition is being treated as a joint
acquisition of the Company by Bogen and Speech Design, companies under the
common control of Geotek. The transaction is considered a reverse
acquisition with Geotek as the acquiror for accounting purposes. The
historical financial statements reflect the combination of Bogen and Speech
Design in a manner similar to a pooling of interests. Accordingly, the
historical financial statements reflect the combined operations of Bogen
and Speech Design.
3. Summary of Significant Accounting Policies.
A. Principles of Consolidation
The consolidated financial statements include the accounts of Bogen
Communications International, Inc., Bogen and Speech Design. All
significant intercompany balances and transactions have been
eliminated in consolidation.
B. Inventory, at lower of cost (first in, first out) or market, as of
March 31, 1996 and December 31, 1995, is as follows:
1996 1995
------ ------
Raw materials and supplies $2,558 $1,864
Work in progress 1,345 1,155
Finished goods 3,186 3,903
------ ------
Total $7,089 $6,922
====== ======
6
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars)
(UNAUDITED)
C. Recently Issued Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" which is effective
for fiscal years beginning after December 31, 1995. The Company will
adopt this standard later in 1996 and is presently analyzing the
impact of this new standard on its financial position and results of
operations.
4. Income Tax
Income tax expense for 1996 and 1995 differs from the amount computed by
applying the federal statutory rates due to losses in the U.S. for which no
benefit has been provided, offset by foreign taxable income at taxable
rates different than the U.S. federal statutory rate.
5. Amendment to Stock Purchase Agreement
The Company and Geotek have agreed in principle to amend the Stock Purchase
Agreement dated April 6, 1995, whereby the initial $3,000 convertible
promissory note will be restructured to a $500 note bearing interest as
stated in the initial agreement. Additionally, the adjusted base amount
will be measured against an initial base amount of $7,500 rather than
$10,000 for purposes of determining future payment obligations of the
Company under the Stock Purchase Agreement. As part of the agreement,
Geotek will retain its option, which expires in October 1997, to purchase
shares of the Company equal to $3,000 under the same terms as those
contained in the Stock Purchase Agreement. The effect of the restructuring
of the Promissory Note has been recorded as an adjustment to additional
paid in capital as of January 1, 1996.
7
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This report contains "forward-looking" statements. The Company desires to
take advantage of the new "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 and is including this statement for the express
purpose of availing itself of the protections of such safe harbor with respect
to all of such forward-looking statements. Examples of forward-looking
statements include, but are not limited to (a) projections of revenues, income
or loss, earnings or loss per share, capital expenditures, dividends, capital
structure and other financial items, (b) statements of plans and objectives of
the Company or its management or Boa
rd of Directors, including the introduction
of new products, or estimates or predictions of actions by customers, suppliers,
competitors or regulating authorities, (c) statements of future economic
performance and (d) statements of assumptions underlying other statements and
statements about the Company or its business.
The Company's ability to predict projected results or to predict the effect
of any legislation or other pending events on the Company's operating results is
inherently uncertain. Therefore, the Company wishes to caution each reader of
this report to carefully consider specific factors, including price competition,
the decisions of customers, the actions of competitors, the effects of
government regulations, possible delays in the introduction of new products,
customer acceptance of products and services and other factors discussed herein,
because such factors in some cases have affected, and in the future (together
with other factors) could affect, the ability of the Company to achieve its
projected results and may cause actual results to differ materially from those
expressed herein.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
The financial statements and the following discussion include the accounts of
Bogen, the Company's 99% owned subsidiary, and Speech Design, its 67% owned
subsidiary. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Results of Operations
Three Months Ended March 31, 1996 Compared to the Three Months Ended March 31,
1995
Net Sales.
Net sales of $11,358,000 for the first quarter of 1996 increased $511,000 or
4.7% from net sales of $10,847,000 in the first quarter of 1995. The increase in
net sales is principally due to an aggregate increase of $1,096,000 in net sales
of the Company's core products, which includes Commercial Sound, Engineered
Systems and Telco Product Lines. The increase in net sales of core product was
partially offset by a decrease of $585,000 in net sales of the Company's OAS
products. See "Phase-Out of OAS Product Line", below.
Net sales for Commercial Sound products amounted to $1,985,000 for the first
quarter of 1996 compared to $2,109,000 for the same period of 1995, resulting in
a decrease of $124,000 or 5.9%. Net sales of the Engineered System line of
products increased to $1,146,000 for the quarter ended March 31, 1996, an 11.2%
increase from net sales of $1,030,000 for the quarter ended March 31,1995.
Telco net sales for the first quarter of 1996 amounted to $7,171,000 compared to
$6,067,000 for the first quarter of 1995, an increase of $1,104,000 or 18.2%,
which is attributable to the release of new products as well as increased volume
to existing and new customers. The Telco product line is the only product line
distributed by both Bogen and Speech Design.
Net sales for the OAS product line for the first three months of 1996 were
$1,056,000, a decrease of $585,000, or 36% from sales of $1,641,000 for the
comparable period of 1995. See "Phase-Out of OAS Product Line", below.
8
<PAGE>
Gross Profit.
Gross profit as a percentage of total net sales for the first quarter ended
March 31, 1996 and 1995 remained consistent at approximately 42%.
Selling, General and Administrative Expenses.
Selling, General and Administrative expenses (SG&A) decreased in absolute
dollars and as a percentage of sales for the first quarter of 1996 as compared
to the respective period of 1995. SG&A was $3,252,000 or 28.6% of net sales for
the first quarter of 1996 as compared to $3,376,000 or 31.1% for the first
quarter of 1995. The decrease of $124,000 is attributed to the reduction in
marketing and payroll expense related to the OAS product line.
Research and Development.
Research and Development expense ("R&D") was $654,000 or 5.8% of net sales for
quarter one 1996, compared to $588,000 or 5.4% of net sales for the respective
period of 1995. This represents a $66,000 increase from 1995. The Company's R&D
programs are designed to efficiently introduce innovative products in a timely
manner. The Company anticipates introducing, in mid-1996, additional products to
the Telco and Engineered System product lines. The Engineered System line will
introduce the Multicom DCS, an innovative product that integrates the Company's
paging and intercom systems with Digital telephone PABX systems.
Income from Operations.
Operating income for the first quarter of 1996 amounted to $788,000, an increase
of $247,000 from the first quarter of 1995. The increase is primarily
attributable to the increase in net sales for the current period. See "Net
Sales."
Interest Expense
Interest expense in 1996 was $167,000 or 1.4% of net sales compared to $357,000
or 3.2 % of sales in 1995. The $190,000 decrease is primarily attributed to a
reduction in notes payable to Geotek that were contributed to equity in August
of 1995 in connection with the Company's acquisition of Bogen.
Taxes on Income.
The Company's German subsidiary incurred approximately $400,000 in foreign taxes
at an effective tax rate of 57%, a $123,000 increase from $277,000 in the first
quarter of 1995. This increase is attributed to the utilization of loss
carryforwards in 1995, which offset a portion of taxable income from that year.
Net Income (Loss).
After deducting its minority interest in the earnings of its subsidiaries of
$107,000, the Company's net income for the first quarter increased by $258,000
to $114,000 in 1996 as compared to a loss of $144,000 in 1995.
Phase-Out of OAS Product Line.
In December 1995 the Company's management decided to phase-out the OAS product
line. This decision was based on the intense competition that the Company faced
from local telephone companies and answering service companies, both of which
offer central voice mail services. The Company's OAS product line competed with
products that were frequently offered at a lower retail price than the Company's
products. In addition, competitors' products benefitted from better brand
recognition in the marketplace, which is dominated by AT&T, Panasonic and
PhoneMate. The Company anticipates the phase-out will be complete by the
beginning of the third quarter.
Liquidity and Capital Resources
The following discussion of liquidity and capital resources, among other things,
compares the Company's financial and cash position as of March 31, 1996 to the
Company's financial cash position as of December 31, 1995
During the first quarter of 1996, the Company focused its efforts on long term
growth by strengthening profitable product lines while continuing the phase-out
of the OAS product line. Cash utilization focused on the paydown of debt and the
purchase of equipment and leasehold improvements.
9
<PAGE>
The Company's operating activities provided $70,000 of cash. The Company's net
income of $114,000 included non-cash charges of $51,000, which consists of
depreciation and amortization of $359,000 and a reduction of inventory reserves
of $623,000, of which $613,000 relates to sales of the OAS product line's units
on hand. Additional non-cash charges include $107,000 in minority interest and a
$106,000 increase in reserves for bad debt. Changes in operational assets and
liabilities amounted to $7,000.
Cash flows used in investing activities was $99,000 principally for the purchase
of equipment and leasehold improvements.
Financing activities include cash used as a result of repayment of related
parties advances and notes $145,000, notes payable $102,000 and net amounts
borrowed and repaid under revolving credit agreements $102,000, for a net usage
of $349,000.
As of March 31, 1996, the Company's total liabilities were $14,936,000 of which
$12,797,000 was due and payable within one year of March 31, 1996. Such
indebtedness included loans from third parties and loans and advances from
Geotek. In August 1995, Bogen extended for a two year term through August 1997,
its $10 million senior credit agreement. The line is secured by substantially
all assets of Bogen and is guaranteed by Geotek. Advances to Bogen are made
based on a percentage of accounts receivable and inventory. As of March 31,
1996, Bogen had borrowings of $3,490,000. The unutilized credit line
availability was $538,000 at March 31, 1996. As of March 31, 1996, Speech Design
had short term lines of credit and over draft facilities available of $3,336,000
of which short term borrowing amounted to $1,352,000. The unutilized credit line
availability was $1,984,000 at March 31, 1996. In addition to the $10 million
revolving credit line, in August 1995, Bogen established a two year working
capital line of credit with Geotek, in the aggregate amount of $2 million. At
March 31, 1996 Bogen had no borrowings outstanding under the working capital
line.
The Company has agreed in principle to amend the Stock Purchase Agreement dated
April 6, 1995, whereby the initial $3,000,000 convertible note will be
restructured to a $500,000 note bearing interest as stated in the initial
agreement as more fully described in footnote 6 to the accompanying financial
statements.
The Company believes that it has adequate liquidity to finance its ongoing
activities.
10
<PAGE>
EXHIBITS
Item 6. EXHIBITS AND REPORTS ON FORM 8K
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter ended March 31, 1996.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 15, 1996 BOGEN COMMUNICATIONS INTERNATIONAL, INC.
(Registrant)
By: /s/ Zvi Peled
------------------------------------
Name: Zvi Peled
Title: President/CEO
Date: May 15, 1996 By: /s/ Dov Gal
------------------------------------
Name: Dov Gal
Title: Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 822
<SECURITIES> 0
<RECEIVABLES> 6,004
<ALLOWANCES> 495
<INVENTORY> 7,089
<CURRENT-ASSETS> 13,877
<PP&E> 2,042
<DEPRECIATION> 3,505
<TOTAL-ASSETS> 30,704
<CURRENT-LIABILITIES> 12,797
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 15,762
<TOTAL-LIABILITY-AND-EQUITY> 30,704
<SALES> 11,358
<TOTAL-REVENUES> 11,358
<CGS> 6,553
<TOTAL-COSTS> 4,017
<OTHER-EXPENSES> 107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 167
<INCOME-PRETAX> 514
<INCOME-TAX> 400
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 114
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0
</TABLE>
