<PAGE> 1
UNITED STATES
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 June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
COMMISSION FILE NUMBER: 0-22046
Bogen Communications International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 38-3114641
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
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 August 11, 1997, 5,758,850 shares of the registrant's common stock, par
value $.001 per share, were outstanding.
<PAGE> 2
BOGEN COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996 (Unaudited) 3
Condensed Consolidated Statements of Operations for the three and six
months ended June 30, 1997 and 1996 (Unaudited) 5
Condensed Consolidated Statement of Changes in Stockholders' Equity
for the six months ended June 30, 1997 (Unaudited) 6
Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and 1996 (Unaudited) 7
Notes to Condensed Consolidated Financial Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8K 16
</TABLE>
2
<PAGE> 3
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 572 $ 885
Accounts receivable (less allowance for doubtful
accounts of $306 and $470 at June 30,
1997 and December 31, 1996, respectively) 6,404 6,517
Inventories, net 6,401 6,519
Prepaid expenses and other current assets 397 780
------- -------
TOTAL CURRENT ASSETS 13,774 14,701
Property and equipment, net 2,102 2,130
Goodwill and intangible assets, net 13,891 14,308
Other assets 186 247
------- -------
TOTAL ASSETS $29,953 $31,386
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Amounts outstanding under revolving credit agreement $ 3,983 $ 4,828
Accounts payable 2,613 3,707
Accrued expenses 2,320 3,026
Income taxes payable 215 --
Advances and notes payable to related parties 870 746
Current maturities of notes payable to non-related parties 3 5
-------- --------
TOTAL CURRENT LIABILITIES 10,004 12,312
Advances and notes payable to related parties 327 361
Notes payable to non-related parties 6 8
Other liabilities 468 536
Minority interest 867 593
-------- --------
TOTAL LIABILITIES 11,672 13,810
-------- --------
Preferred stock - $.001 par value; 1,000,000 shares
authorized; none issued and outstanding at
June 30, 1997 and December 31, 1996 -- --
Common stock - .001 par value; 50,000,000 shares
authorized; 5,758,850 shares issued and outstanding
at June 30, 1997 and December 31, 1996 6 6
Additional paid-in-capital 21,774 21,774
Accumulated deficit (3,204) (4,177)
Currency translation adjustments (295) (27)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 18,281 17,576
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,953 $ 31,386
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AND SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 12,537 $ 10,332 $ 24,045 $ 21,690
Cost of goods sold 6,745 5,545 12,933 12,098
----------- ----------- ----------- -----------
Gross profit 5,792 4,787 11,112 9,592
Operating expenses:
Research and development 689 688 1,375 1,342
Selling, general and administrative 3,698 3,233 7,316 6,484
Amortization of goodwill and intangible assets 112 109 221 220
----------- ----------- ----------- -----------
Income from operations 1,293 757 2,200 1,546
Other (income) expenses:
Interest expense, net 107 149 223 309
Interest expense to related parties 4 21 21 29
Minority interest of consolidated subsidiaries 135 (4) 274 103
Other (income) expense (8) -- (34) --
----------- ----------- ----------- -----------
Income before income taxes 1,055 591 1,716 1,105
Income taxes 407 105 743 505
----------- ----------- ----------- -----------
Net income $ 648 $ 486 $ 973 $ 600
=========== =========== =========== ===========
Net income per common share $ 0.11 $ 0.08 $ 0.17 $ 0.10
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 5,758,850 5,759,103 5,758,850 5,759,226
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
<PAGE> 6
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Currency
Number of Paid-In Accumulated Translation
Shares Amount Capital Deficit Adjustments Total
---------- ------- ---------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $5,758,850 $ 6 $21,774 $(4,177) $ (27) $17,576
Translation adjustments (268) (268)
Net income for the six months ended June 30, 1997 973 973
---------- ----- ------- ------- ----- -------
Balance at June 30, 1997 $5,758,850 $ 6 $21,774 $(3,204) $(295) $18,281
========== ===== ======= ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE> 7
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, June 30,
1997 1996
------- -------
<S> <C> <C>
NET CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 677 $ (759)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and leasehold improvements (637) (383)
Collection of notes receivable -- 15
------- -------
Net cash used in investing activities (637) (368)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Payments to reacquire common stock -- (3)
Amounts (paid) borrowed under notes payable -- (139)
Amounts (paid) borrowed under revolving credit agreements (486) 1,100
Advances and notes payable - related parties 179 (271)
------- -------
Net cash provided by (used in) financing activities (307) 687
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (267) (440)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 885 1,276
Effects of Foreign Exchange Rate on Cash (46) (186)
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 72 $ 650
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
NON CASH FINANCING ACTIVITIES
Restructuring of $3,000 related party note and related interest $ -- $ 2,602
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
7
<PAGE> 8
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1. Basis of Presentation
The condensed consolidated balance sheet of Bogen Communications
International, Inc. and Subsidiaries (the Company) as of December 31,
1996 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.
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, issued a convertible promissory note in the
aggregate principal amount of $3,000, issued 3,700,000 shares of the
Company's common stock and warrants to acquire 200,000 shares of common
stock of the Company. In addition, there was an agreement to pay
contingent consideration of up to $11,000, based upon an earnout
calculation of operating results of Bogen and Speech Design during the
two years after the acquisition. As a result of this transaction,
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.
In May 1996, the Company and Geotek entered into the most recent
amendment to the Stock Purchase Agreement effective January 1, 1996.
Pursuant to such agreement, (i) the $3,000 convertible promissory note
payable by the Company to Geotek, due February 1997, was reduced and
restructured to a $500 non-convertible promissory note due July 1997,
which was paid subsequent to June 30, 1997, (ii) the earnout formula
was revised to reflect an increase in the amount the Company could be
liable to pay Geotek from $11,000 to $13,500 in connection with the
reduction of the principal amount of the promissory note, and (iii)
Geotek was granted an option to purchase, at any time through October
31, 1997, from the Company $3,000 worth of Common Stock with exercise
prices ranging from 100% to 65% of market price, depending on the date
of exercise. Based on management's review of the earnout calculation,
which takes into account Speech Design and Bogen's operating results
for the last two quarters of 1995, all of 1996 and the first two
quarters of 1997, no contingent consideration payment will be paid to
Geotek.
For accounting purposes, the August 21, 1995 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 acquirer 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 prior to the
transaction.
8
<PAGE> 9
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
3. Summary of Significant Accounting Policies.
A. Principles of Consolidation
The condensed 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 June 30, 1997 and December 31, 1996, is as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Raw materials and supplies $1,457 $1,525
Work in progress 959 701
Finished goods 3,985 4,293
------ ------
Total $6,401 $6,519
====== ======
</TABLE>
The inventory balances are net of a reserve for inventory
valuation and obsolescence of $497 and $1,126 at June 30, 1997
and December 31, 1996, respectively.
C. Net Income Per Share
Net income per common share is computed by dividing net income
by the weighted average number of shares of common stock and
common stock equivalents, (unless anti-dilutive) outstanding
during the year.
D. Recently Issued Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board
("FASB") issued Statement 128, Earnings Per Share, effective
for periods ending after December 15, 1997. This statement
establishes standards for computing and presenting earnings
per share ("EPS"), and replaces the current presentation of
primary EPS with basic EPS, which does not include dilutive
effects on earnings. It is calculated by dividing income
available to common stockholders by the weighted-average
number of common shares outstanding. The Company will adopt
this standard in 1997, and is presently analyzing the impact
of this new standard on its financial statements and related
disclosures.
In June 1997, the FASB issued Statement 130, Reporting
Comprehensive Income, effective for fiscal years beginning
after December 15, 1997. This statement establishes standards
for reporting and display of comprehensive income and its
components (revenues, expenses, gains, and losses) in a full
set of general-purpose financial statements. The statement
requires that all items that are required to be recognized
under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed
with the same prominence as other financial statements. The
Company will adopt this standard in 1998, and is presently
analyzing the impact of this new standard on its financial
statements and related disclosures.
9
<PAGE> 10
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
In June 1997, the FASB issued Statement 131, Disclosures about
Segments of an Enterprise and Related Information, effective
for fiscal years beginning after December 15, 1997. This
statement establishes standards for the way that public
business enterprises report information about operating
segments in annual financial statements and requires that
those enterprises report selected information about operating
segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about
products and services, geographic areas, and major customers.
The Company is currently analyzing this statement and will
determine whether to adopt such standard based upon the
results of its analysis.
4. Revolving Credit Agreements
During the first quarter of 1997, Bogen Communications, Inc. ("BCI"), a
wholly owned subsidiary of Bogen, obtained a new revolving senior
credit line with a term of two years. The new credit line has a maximum
line of borrowing of $7,000 and bears an annual interest rate of .5%
over the lender's prime rate, and replaces Bogen's previous line of
$10,000 which had an annual interest rate of 2% to 2.75% over the
lender's prime rate (9.0% and 10.5% at June 30, 1997 and 1996,
respectively). The senior loan is collaterized by all of the accounts
receivable, inventory, property, plant and equipment, and general
intangibles of BCI and is guaranteed by the Company. Under the terms of
this line of credit, BCI cannot, among other things, declare or pay
dividends, return capital to its stockholders or redeem or repurchase
any of its outstanding capital stock.
5. Income Tax
Domestic and foreign earnings before taxes on income from operations
include income derived from operations in the respective U.S. and
foreign geographic areas, whereas provisions for taxes on income
include all income taxes payable to U.S., foreign and other governments
as applicable, regardless of the sites in which the taxable income is
generated. Income tax expense for 1997 and 1996 differs from the amount
computed by applying the U.S. federal statutory rates due to higher tax
rates in Europe for which no U.S. tax benefit has been provided and the
utilization of U.S. preacquisition loss carryforwards for which the
benefit has been charged to goodwill. In accordance with SFAS No. 109,
the Company has established a valuation allowance of $4,137 as of
December 31, 1996. The valuation allowance was established due to the
uncertainty of the realization of the deferred tax assets. A
significant portion of the deferred tax assets which are currently
subject to a valuation allowance may be allocated to reduce goodwill or
other noncurrent intangible assets when subsequently recognized.
6. Subsequent Events
On July 1, 1997, the Company acquired all the net assets of New England
Audio Resources, Inc. ("NEAR") for approximately $370 in cash,
approximately $200 of which was used to retire NEAR's bank debt. The
acquisition will be accounted for as a purchase in accordance with APB
Opinion 16 and included in the Company's consolidated financial
statements. NEAR is a manufacturer of high performance, weather-proof
speakers. NEAR will be a part of the Company's Commercial Sound unit
and their products will be marketed with the Company's product lines.
Effective July 15, 1997, Zvi Peled, the Company's President and Chief
Executive Officer resigned. Effective July 15, 1997 John J. Egidio was
named acting President and Chief Executive Officer by the Board of
Directors of the Company. Both Messrs. Peled and Egidio were nominated
and elected to the Company's Board of Directors effective July 1, 1997.
10
<PAGE> 11
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
All statements contained herein that are not historical facts,
including, but not limited to statements regarding the Company's current
business strategy, the Company's projected sources and uses of cash, and the
Company's plans for future development and operations, are based upon current
expectations. These statements are forward-looking in nature and involve a
number of risks and uncertainties. Actual results may differ materially. Among
the factors that could cause actual results to differ materially are the
following: competitive factors, including the fact that the Company's
competitors are highly focused and may have greater resources and/or name
recognition than the Company; changes in technology and the Company's ability to
develop or acquire new or improved products and/or modify and upgrade its
existing products; changes in labor, equipment and capital costs; changes in
access to suppliers; currency fluctuations; changes in regulations affecting the
Company's business; future acquisitions or strategic partnerships; the
availability of sufficient capital to finance the Company's business plans on
terms satisfactory to the Company; general business and economic conditions;
political instability in certain regions; and other factors described from time
to time in the Company's reports filed with the Securities and Exchange
Commission. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements which statements are made pursuant to the
Private Litigation Reform Act of 1995 and, as such, speak only as of the date
made.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(ALL AMOUNTS IN THOUSANDS OF DOLLARS)
GENERAL
The financial statements and the following discussion include the accounts of
Bogen Corporation ("Bogen"), the Company's 99% owned subsidiary, and Speech
Design GmbH ("Speech Design"), its 67% owned subsidiary. All significant
intercompany accounts and transactions have been eliminated in consolidation.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1996
Net Sales.
Net sales increased by $2,205 or 21.34% to $12,537 for the three months ended
June 30, 1997 as compared to $10,332 for the same period in 1996. The increase
in sales primarily resulted from increased sales of $2,383 in the Company's core
products, which includes Commercial Sound, Engineered Systems and Telco product
lines. This increase was partially offset by the phase out of the Office
Automated Systems ("OAS") product line which accounted for $178 of net sales for
the three months ended June 30, 1996.
Net sales from the Commercial Sound products increased to $2,866 for the three
months ended June 30, 1997 or 28.81% over net sales of $2,225 for the same
period in 1996. Net sales from the Engineered Systems products increased to
$2,795 for the three months ended June 30, 1997 or 50.84% over net sales of
$1,853 for the same period in 1996. Net sales from the Telco product increased
to $6,875 for the three months ended June 30, 1997 or 13.13% over net sales of
$6,077 for the same period in 1996. The Telco product line includes foreign
sales from Speech Design. Domestic sales increased to $2,396 for the three
months ended June 30, 1997 or 31% over net sales of $1,829 for the three months
ended June 30, 1996. Foreign sales translated into U.S. dollars increased to
$4,479 for the three months ended June 30, 1997 or 5.44% over net sales of
$4,248 for the same period in 1996. However, foreign net sales stated in local
currency increased to 7,675 Deutche Marks ("DM") for the three months ended June
30, 1997 or 33.13% over net sales of 5,765 DM for the three months ended June
30, 1996.
11
<PAGE> 12
Gross Profit
Gross profit as a percentage of total net sales remained constant for the three
months ended June 30, 1997 and 1996 at 46%. The gross profits remained constant
as a result of increased sales and incremental increased direct cost.
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses ("SG&A") increased by $465 for the
three months ended June 30, 1997 as compared to the three months ended June 30,
1996. However SG&A decreased as a percentage of net sales by 1.8% for the same
periods. SG&A was $3,698, or 29.5% of net sales for the three months ended June
30, 1997 as compared to $3,233 or 31.3% of net sales for same period in 1996.
The increase is a result of increased personnel and professional services which
is directly attributable to the Company's increased net sales.
Research and Development
The Company's Research and Development ("R&D") programs are designed to
efficiently introduce innovative products in a timely manner. R&D expense was
$689 or 5.5% of net sales for the three months ended June 30, 1997 as compared
to $688 or 6.7% of net sales for the three months ended June 30, 1996.
Interest Expense
Interest expense was $111, or 0.9% of net sales for the three months ended June
30, 1997 as compared to $170, or 1.6% of net sales for the three months ended
June 30, 1996. The decrease of $59, or 34.7% primarily relates to the new
revolving credit line the Company entered into in February 1997 which decreased
the Company's borrowing rate by 1.5 percentage points to 9% at June 30, 1997
compared to 10.5% at June 30, 1996.
Income Taxes
Income tax expense increased for the three months ended June 30, 1997 to $407 as
compared to $105 for the comparable period in 1996. The increase of $302 is due
to increased profits both domestic and foreign. Foreign taxes increased by $211
which is directly attributable to increased profits. Domestic taxes increased by
$91 as a result of the implementation of FASB 109, where taxes are booked, but
not paid due to the utilization of U.S. preacquisition loss carryforwards for
which the benefit has been charged to goodwill instead of offsetting taxes.
12
<PAGE> 13
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Net sales
Net sales increased by $2,355 or 10.86% to $24,045 for the six months ended June
30, 1997 as compared to $21,690 for the same period in 1996. The increase in
sales primarily resulted from increased sales of $3,589 in the Company's core
products, which includes Commercial Sound, Engineered Systems and Telco product
lines. This increase was partially offset by the phase out of the Office
Automated Systems ("OAS") product line which accounted for $1,234 of net sales
for the six months ended June 30, 1996.
Net sales from the Commercial Sound products increased to $4,921 for the six
months ended June 30, 1997 or 16.9% over net sales of $4,210 for the same period
in 1996. Net sales from the Engineered Systems products increased to $3,964 for
the six months ended June 30, 1997 or 32.18% above net sales of $2,999 for the
same period in 1996. Net sales from the Telco product increased to $15,159 for
the six months ended June 30, 1997 or 14.42% above net sales of $13,248 for the
same period in 1996. The Telco product line includes foreign sales from Speech
Design. Domestic sales increased to $6,195 for the six months ended June 30,
1997 or 4.1% above net sales of $5,951 for the six months ended June 30, 1996.
Foreign sales translated into U.S. dollars increased to $8,964 for the six
months ended June 30, 1997 or 22.85% over net sales of $7,297 for the same
period in 1996. Foreign net sales stated in local currency increased to 15,134
Deutche Marks ("DM") for the six months ended June 30, 1997 or 34.23% over net
sales of 11,275 DM for the six months ended June 30, 1996.
Gross Profit
Gross profit for the six months ended June 30, 1997 was $11,112 or 46.2% of net
sales, an increase of $1,520, as compared to $9,592, or 44.2% of net sales for
the same period in 1996. The increase in gross profit is primarily attributable
to the renegotiation of certain supply agreements during 1996 which had a
positive effect on 1997 cost of sales.
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses ("SG&A") increased by $832 for the
six months ended June 30, 1997 as compared to the six months ended June 30,
1996. SG&A was $7,316, or 30.43% of net sales for the six months ended June 30,
1997 as compared to $6,484 or 29.89% of net sales for the same period in 1996.
The increase is a result of increased personnel and professional services which
is directly attributable to the Company's increased net sales.
Research and Development
The Company's Research and Development ("R&D") programs are designed to
efficiently introduce innovative products in a timely manner. R&D expense was
$1,375 or 5.7% of net sales for the six months ended June 30, 1997 as compared
to $1,342 or 6.2% of net sales for the six months ended June 30, 1996. R&D
expenses increased by $33, or 2.46% for the six months ended June 30, 1997 as
compared to the same period in 1996. The increase primarily relates to salary
adjustments.
13
<PAGE> 14
Interest Expense
Interest expense was $244, or 1.0% of net sales for the six months ended June
30, 1997 as compared to $338, or 1.6% of net sales for the six months ended June
30, 1996. The decrease of $94, or 27.8% primarily relates to the new revolving
credit line the Company entered into in February 1997 which decreased the
Company's borrowing rate by 1.5% to 9% at June 30, 1997 compared to 10.5% as
June 30, 1996.
Income Taxes
Income tax expense increased for the six months ended June 30, 1997 to $743
compared to $505 for the comparable period in 1996. The increase of $238 is due
to increased profits both domestic and foreign. Foreign taxes increased by $119
which is directly attributable to increased profits. Domestic taxes increased by
$119 as a result of the implementation of FASB 109, where taxes are booked, but
not paid due to the utilization of U.S. preacquisition loss carryforwards for
which the benefit has been charged to goodwill instead of offsetting taxes.
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 June 30, 1997 to the
Company's financial and cash position as of December 31, 1996.
During the six months ended June 30, 1997, the Company focused its efforts on
long-term growth by strengthening its profitable product lines. Cash utilization
focused on current working capital requirements, the paydown of related party
debt and subordinated notes, and the purchase of equipment and leasehold
improvements.
The Company's operating activities provided $677 of operating capital. The
Company's net income of $973 includes net non-cash charges of $342, which
principally consisted of (i) depreciation and amortization of $743, (ii) a
reduction of inventory reserves of $630 (iii) minority interest of consolidated
subsidiaries of $274, (iv) a $164 decrease in reserves for bad debt and a $119
utilization of pre-acquisition NOL charged to goodwill. Further, net changes in
operational assets and liabilities used $637 in cash. Additionally, accounts
receivable decreased by $265, inventory decreased by $353, prepaid expenses and
other assets decreased by $379, accounts payable decreased by $1,030, accrued
liabilities decreased by $576 and net changes in other operating assets and
liabilities used $28 in cash.
Net cash used in investing activities amounted to $637. During the first quarter
of 1997 the Company purchased equipment and other fixed assets of $636. Other
investing activities used $1 in cash.
Net cash used in financing activities amounted to $307. Notes payable increased
$177, of which $77 were from related parties. Net repayments of $484 were made
under revolving credit agreements.
As of June 30, 1997, the Company's total liabilities were $11,672, of which
$10,004 is due and payable within one year. Such indebtedness included loans
from third parties and loans and advances from Geotek.
During the first quarter of 1997, Bogen Communications, Inc., a wholly owned
subsidiary of Bogen, obtained from Summit Bank a new $7,000 revolving credit
line of two years. This new line is collateralized by the accounts receivable,
inventory and general intangibles of Bogen Communications, Inc. This line is
guaranteed by the Company. This new line, which meets Bogen's needs, is lower
than the previous line and has a lower annual interest rate than the previous
line, while substantially decreasing the associated fees to be paid on an annual
basis. In addition, Bogen has an established working capital line of credit
14
<PAGE> 15
with Geotek in the aggregate amount of $2,000. At June 30, 1997, Bogen had no
borrowings outstanding under the working capital line with Geotek.
Speech Design, has credit lines and overdraft facilities of approximately 6
million DM. At June 30, 1997 borrowing and availability under these lines
amounted to $2.2 million and $1.7 million, respectively. These lines are
collateralized by all of Speech Design's accounts receivable and inventory.
The Company believes that it has adequate liquidity to finance its ongoing
activities and capital expenditures for the near term but may be required to
seek additional capital in the event it wishes to expand its operations through
acquisitions or otherwise.
15
<PAGE> 16
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
16
<PAGE> 17
EXHIBIT INDEX
The following exhibits are filed as part of this report (Exhibit numbers
correspond to the exhibits required by Item 601 of Regulation S-K for an Annual
Report on Form 10-K):
Exhibit No.
- -----------
3.1 Certificate of Incorporation (1)
3.2 By-Laws(1)
3.3 Certificate of Correction to the Certificate of Incorporation,
dated March 8, 1995 and filed with the Secretary of State of the
State of Delaware on March 10, 1995 (2)
3.4 Certificate of Amendment to the Certificate of Incorporation,
dated August 21, 1995 and filed with the Secretary of State of
the State of Delaware on August 21, 1995 (3)
4.1 Form of Common Stock Certificate (1)
4.2 Form of Warrant Certificate (1)
4.3 Unit Purchase Option Granted to GKN Securities Corp. (1)
4.4 Warrant Agreement between Continental Stock Transfer & Trust
Company and the Company (1)
4.5 Voting Agreement, dated August 21, 1995, by and among Geotek
Communications, Inc. Yoav Stern, Joram D. Rosenfeld and David Jan
Mitchell (4)
4.6 Bogen Communications International, Inc. 1996 Incentive Stock
Option Plan (7)
10.1 Form of Agency Agreement, dated as of June 28, 1993, between the
Company and GKN Securities Corp. (without schedules) (1)
10.2 Letter Agreement among each of the Stockholders of the Company,
the Company and GKN Securities Corp. (without schedules).(1)
10.3 Form of Investment Management Trust Agreement between United
States Trust Company of New York and the Company.(1)
10.4 Form of Share Escrow Agreement between the Company and
Continental Stock Transfer & Trust Company.(1)
10.5 Form of Indemnification Agreement between the Company and its
officers, directors and advisors.(4)
10.6 Stock Purchase Agreement, dated April 6, 1995, by and between
Geotek Communications, Inc. and European Gateway Acquisition
Corp.(2)
10.7 Letter Amendment, dated May 10, 1995, to the Stock Purchase
Agreement.(5)
10.8 Side Letter Agreement, dated May 10, 1995, between Geotek
Communications, Inc. and European Gateway Acquisition Corp.
regarding the issuance of certain stock warrants.(6)
10.9 Letter Amendment, dated May 30, 1995, to the Stock Purchase
Agreement.(5)
10.10 Letter Amendment, dated June 27, 1995, to the Stock Purchase
Agreement.(5)
10.11 Letter Amendment, dated August 21, 1995, to the Stock Purchase
Agreement.(4)
10.12 Letter Agreement, dated August 21, 1995, to the Stock Purchase
Agreement.(4)
10.13 Letter Agreement, dated May 8, 1996, to the Stock Purchase
Agreement.
10.14 Summary of Agreement for Business Credit between Speech Design
GmbH and Statelparkasse Munchen (8)
10.15 Secured Revolving Promissory Note dated February 6, 1997 between
Summit Bank and Bogen Communications, Inc. (8)
10.16 Loan and Security Agreement dated February 6, 1997 between Summit
Bank and Bogen Communications, Inc. (8)
10.17 Corporate Guaranty of Bogen Communications International, Inc.
(8)
10.18 Corporate Guaranty of Bogen Corporation. (8)
*27.1 Financial Data Schedule
----------------
*Filed Herewith:
17
<PAGE> 18
1. Incorporated by reference to the Exhibits to the
Company's Registration Statement on Form S-1 (File
No. 33-65294), dated October 7, 1993.
2. Incorporated by reference to the Exhibits to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994.
3. Incorporated by reference to the Exhibits to the
Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1995.
4. Incorporated by reference to the Exhibits to the
Company's Current Report on form 8-K dated August 21,
1995.
5. Incorporated by reference to the Exhibits to the
Company's Proxy Statement, dated July 12, 1995, for a
Special Meeting of Stockholders, as amended by
addendum, dated July 18, 1995.
6. Incorporated by reference to the Exhibits to the
Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1995.
7. Incorporated by reference to the Exhibits to the
Company's Registration Statement on Form S-8 (File
No. 333-21245), dated February 4, 1997.
8. Incorporated by reference to the exhibits to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996.
18
<PAGE> 19
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.
BOGEN COMMUNICATIONS INTERNATIONAL, INC.
(Registrant)
Date: August 14, 1997 By: /s/ John J. Egidio
----------------------------
Name: John J. Egidio
Title: Acting President/CEO
Date: August 14, 1997 By: /s/ Yoav M. Cohen
-----------------------------
Name: Yoav M. Cohen
Title:Chief Financial Officer
19
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