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 SEPTEMBER 30, 1999
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 November 12, 1999, 6,709,971 shares of the registrant's common stock, par
value $.001 per share, were outstanding.
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1999
and December 31, 1998 3
Consolidated Statements of Operations for the three and nine months
ended September 30, 1999 and 1998 4
Consolidated Statement of Changes in Stockholders' Equity
for the nine months ended September 30, 1999 5
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 10
and Results of Operations
Item 3. Market Risk Discussion 16
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8K 17
</TABLE>
2
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 645 $ 1,048
Accounts receivable (less allowance for doubtful accounts of $686 and $424
at September 30, 1999 and December 31, 1998, respectively) 9,664 5,889
Inventories, net 8,044 8,229
Prepaid expenses and other current assets 1,973 759
Deferred income taxes 366 470
-------- --------
TOTAL CURRENT ASSETS 20,692 16,395
Property, equipment and leasehold improvements, net 2,606 2,414
Goodwill and intangible assets, net 19,972 18,740
Other assets 363 198
-------- --------
TOTAL ASSETS $ 43,633 $ 37,747
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Amounts outstanding under revolving credit agreements $ 2,916 $ 2,225
Accounts payable 4,167 2,060
Accrued expenses 3,473 3,634
Income taxes payable 1,164 1,168
-------- --------
TOTAL CURRENT LIABILITIES 11,720 9,087
Advances and notes payable to related parties 206 227
Deferred income taxes 1,081 1,100
Other liabilities 398 278
-------- --------
TOTAL LIABILITIES 13,405 10,692
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock - $.001 par value; 1,000,000 shares authorized; none issued and
outstanding at September 30, 1999 and December 31, 1998
Common stock- $.001 par value; 50,000,000 shares authorized; 6,709,971 and
6,654,471 shares issued and outstanding at September 30, 1999 and
and December 31, 1998, respectively 7 7
Additional paid-in-capital 29,667 29,433
Retained earnings (accumulated deficit) 936 (2,248)
Accumulated other comprehensive loss (382) (137)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 30,228 27,055
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 43,633 $ 37,747
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
3
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 16,045 $ 14,752 $ 42,328 $ 39,386
Cost of goods sold 7,520 7,233 20,293 20,011
----------- ----------- ----------- -----------
Gross profit 8,525 7,519 22,035 19,375
Operating expenses:
Research and development 1,109 753 3,096 2,061
Purchased in-process research and development -- -- -- 2,905
Selling, general and administrative 4,936 4,151 13,606 11,781
Amortization of goodwill and intangible assets 192 166 545 419
----------- ----------- ----------- -----------
Income from operations 2,288 2,449 4,788 2,209
Other (income) expenses:
Interest expense, net 41 96 126 201
Minority interest of consolidated subsidiaries -- -- -- 254
Other expense (income) (8) (32) (5) (132)
----------- ----------- ----------- -----------
Income before provision for income taxes 2,255 2,385 4,667 1,886
Provision for income taxes 677 843 1,483 1,766
----------- ----------- ----------- -----------
Net income 1,578 1,542 3,184 120
Preferred dividends -- -- -- 900
----------- ----------- ----------- -----------
Net income available to common shareholders $ 1,578 $ 1,542 $ 3,184 $ (780)
=========== =========== =========== ===========
Basic net income per common share $ 0.24 $ 0.23 $ 0.48 $ (0.21)
=========== =========== =========== ===========
Diluted net income per common share $ 0.22 $ 0.20 $ 0.41 $ (0.21)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding-Basic 6,709,971 6,653,468 6,690,859 3,777,024
=========== =========== =========== ===========
Weighted average number of common
shares outstanding-Diluted 7,245,594 7,807,177 7,765,915 3,777,024
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
4
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Retained Accumulated
------------------------- Additional Earnings Other
Number of Paid-In (Accumulated Comprehensive
Shares Amount Capital Deficit) Loss Total
------------ ---------- --------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 6,654,471 $ 7 $ 29,433 $ (2,248) $ (137) $ 27,055
Sale of common stock 55,500 -- 234 -- -- 234
Comprehensive income:
Net income -- -- -- 3,184 -- --
Translation adjustments -- -- -- -- (245) --
Comprehensive income -- -- -- -- -- 2,939
--------- --------- --------- --------- --------- ---------
Balance at September 30, 1999 6,709,971 $ 7 $ 29,667 $ 936 $ (382) $ 30,228
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
5
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
1999 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,184 $ 120
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation and amortization 689 703
Amortization of goodwill and intangible assets 545 419
Provisions for doubtful accounts and inventory obsolescence (488) 212
Utilization of pre-acquisition NOL charged to goodwill 34 544
Purchased in-process research and development -- 2,905
Deferred income taxes 105 --
Minority interest -- 254
Change in operating assets and liabilities:
Accounts receivable (3,479) 588
Inventories 546 595
Prepaid expenses and other current assets (1,234) (172)
Payables and accrued expenses 131 (341)
Other (21) (140)
------- -------
Net cash provided by operating activities 12 5,687
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Speech Design minority interest -- (4,790)
Purchase of property, equipment and leasehold improvements (901) (1,006)
------- -------
Net cash used in investing activities (901) (5,796)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Advances under revolving credit agreements 4,303 4,700
Payments under revolving credit agreements (3,946) (4,125)
Proceeds from sale of common stock and warrants 234 862
Payments of advances and notes payable - related parties (1) 118
Acquisition costs of common stock held by Geotek -- (35)
------- -------
Net cash provided by financing activities 590 1,520
------- -------
Effects of foreign exchange rate on cash (104) (74)
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (403) 1,337
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,048 964
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 645 $ 2,301
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 116 $ 212
Cash paid for income taxes 1,208 580
NON CASH FINANCING ACTIVITIES
Preferred stock dividends accrued -- 1,078
Stock issued in purchase of Speech Design -- 4,065
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
6
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars, Except Share and Per Share Amounts)
(Unaudited)
1. Basis of Presentation
The consolidated balance sheet of Bogen Communications International, Inc.
and its subsidiaries (the "Company") as of December 31, 1998 has been
derived from the audited consolidated balance sheet contained in the
Company's Annual Report on Form 10-K and is presented for comparative
purposes. The consolidated balance sheet as of September 30, 1999, the
consolidated statements of operations and cash flows for the three and
nine months ended September 30, 1999 and 1998 and the consolidated
statement of changes in stockholders' equity for the nine months ended
September 30, 1999 are unaudited. 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
substantially omitted in accordance with the published rules and
regulations of the Securities and Exchange Commission ("SEC"). These
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
2. Principles of Consolidation
The consolidated financial statements of the Company include the accounts
of the Company's 99% owned subsidiary, Bogen Corporation ("Bogen"); Bogen's
wholly-owned subsidiary, Bogen Communications, Inc. ("BCI"); BCI's
wholly-owned subsidiaries, New England Audio Resource Corp. ("NEAR") and
Apogee Sound International, LLC ("Apogee"), which acquired the assets of
Apogee Sound Inc., a California corporation not previously affiliated with
the Company ("Sound Inc.") on August 26, 1999; the Company's wholly-owned
subsidiary, Speech Design GmbH ("Speech Design"), which was a 67% owned
subsidiary through May 19, 1998; Speech Design's 67% owned subsidiary
Satelco AG ("Satelco") and Speech Design's wholly-owned subsidiaries:
Speech Design (Israel), Ltd., Speech Design (UK), Ltd. and Digitronic
Computersysteme GmbH ("Digitronic"). All significant inter-company balances
and transactions have been eliminated in consolidation. The ownership
interest of minority owners in the equity and earnings of the Company's
less than 100 percent-owned consolidated subsidiaries is recorded as
minority interest.
3. Comprehensive Income
Comprehensive income has been calculated in accordance with the Statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income". The Company has determined total comprehensive income to be $1,691
and $2,939 for the three and nine months ended September 30, 1999,
respectively, and total comprehensive income to be $1,668 and $249 for the
three and nine months ended September 30, 1998, respectively. The Company's
total comprehensive income (loss) represents net income (loss) plus the
change in the cumulative translation adjustment equity account for the
periods presented.
7
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(In Thousands of Dollars, Except Share and Per Share Amounts)
(Unaudited)
4. Acquisition
On August 26, 1999, Bogen Communications Inc., through Apogee, a newly
formed Bogen subsidiary, acquired substantially all of the assets of Sound
Inc., a privately owned company headquartered in Petaluma, California.
Consideration for the acquisition was the assumption or payment of
approximately $2.6 million of Sound Inc.'s liabilities.
The acquisition has been accounted for by the purchase method of accounting
and, accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on estimates of fair market values
at the date of acquisition. In connection with the acquisition, the company
recorded a non-cash investment in goodwill of approximately $1.7 million.
5. Segments
The Company operates in two reportable business segments, Bogen (domestic)
and Speech Design (foreign). The domestic segment is primarily engaged in
commercial and engineered sound equipment and telecommunication
peripherals. The foreign segment focuses on digital voice processing
systems for the mid-sized PBX market, targeting the rapidly growing
European voice processing market and in unified messaging.
The following table presents information about the Company by segment area.
Inter-segment revenues and transfers are not considered material:
<TABLE>
<CAPTION>
Three Months Ended September 30, 1999 September 30, 1998
------------------ ------------------
Bogen Speech Design Bogen Speech Design
-------- ------------- ------- -------------
<S> <C> <C> <C> <C>
Revenue from customers $ 10,717 $ 5,451 $ 9,657 $ 5,265
Operating profit 1,813 697 1,720 1,247
<CAPTION>
Nine Months Ended September 30, 1999 September 30, 1998
------------------ ------------------
Bogen Speech Design Bogen Speech Design
-------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Revenue from customers $ 26,619 $ 15,881 $ 24,683 $ 15,119
Operating profit 3,337 1,873 3,084 2,939
</TABLE>
A reconciliation of reportable segment operating profit to the Company's
consolidated totals for the three and nine months ended September 30, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating profit
Total operating profit for reportable segments $ 2,510 $ 2,967 $ 5,210 $ 6,023
Unallocated amounts - Purchased in-process
research and development (2,905)
Other corporate expenses (222) (518) (422) (909)
------- ------- ------- -------
Operating profit $ 2,288 $2,449 $ 4,788 $ 2,209
======= ======= ======== =======
</TABLE>
8
<PAGE>
BOGEN COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(In Thousands of Dollars, Except Share and Per Share Amounts)
(Unaudited)
6. Inventories
Inventories are stated at the lower of cost or market and are valued using
the first-in, first-out method. As of September 30, 1999 and December 31,
1998, inventories are as follows:
September 30, December 31,
1999 1998
------------- ------------
Raw materials and supplies $ 3,142 $ 2,490
Work in progress 710 880
Finished goods 4,192 4,859
------- -------
Total $ 8,044 $ 8,229
======= =======
7. Income Per Share
Income per common share ("EPS") has been computed based upon SFAS No. 128,
"Earnings Per Share". Basic EPS is calculated by dividing net income
available to common shareholders by the weighted-average number of common
shares outstanding for the periods presented. Diluted EPS is calculated by
dividing net income available to common shareholders by the
weighted-average number of common shares outstanding and all potential
common shares, consisting of outstanding warrants and stock options, for
the periods presented.
8. 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 the first nine months of fiscal 1999 and 1998 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. pre-acquisition loss carryforwards for which
the benefit reduces goodwill. In accordance with SFAS No. 109, "Accounting
for Income Taxes", the Company has established a valuation allowance
covering certain of its net deferred tax assets as of September 30, 1999
and December 31, 1998. The valuation allowance was established due to the
uncertainty of the realization of the deferred tax assets. A portion of the
deferred tax assets, which are currently subject to a valuation allowance,
may be allocated to reduce goodwill or other non-current intangible assets
when subsequently recognized.
9. Stockholders' Equity (Subsequent Event)
In connection with the Company's initial public offering of its units (the
"Units"), the Company granted to GKN Securities Corp. and its affiliates
(collectively, "GKN") an option to purchase (the "UPO") an aggregate of
150,000 Units at $6.60 per Unit. Each unit issuable upon exercise of the
UPO would consist of one share of Common Stock and warrants to purchase two
shares of Common Stock at $5.50 per share. The GKN UPO contained certain
anti-dilution provisions which were broader than the anti-dilution
provisions set forth in the publicly held UPOs and its original expiration
date was October 7, 1998. On December 31, 1998, the Company and GKN agreed
to extend the expiration date to October 7, 1999 and to amend the GKN UPO
by narrowing the anti-dilution protection for GKN to that protection
provided in the publicly held UPOs. This had no effect on the Company's
results of operations or stockholder's equity. This GKN UPO expired on
October 7, 1999.
9
<PAGE>
All statements contained herein that are not historical facts, including, but
not limited to, statements regarding Bogen Communications International, Inc.
and its subsidiaries (collectively the "Company"), current business strategy,
projected net sales, sources and uses of cash, and the Company's plans for
future development and operations, are based upon current expectations, are
forward-looking in nature and involve a number of risks and uncertainties Actual
results, business development and events may differ materially, or may be
delayed. Among the factors that could cause future events and results to differ
materially are the following: competitive factors, including greater resources
or name recognition of competitors, changes in technology and the Company's
inability to develop or acquire new or improved products, to upgrade the
Company's existing products, or reengineer products to reduce manufacturing
costs; the ability of the Company to fully integrate and develop Apogee's
business; changes in labor, equipment and capital costs; changes in access to,
and pricing by, suppliers and sub-contractors, currency fluctuations; changes in
government regulations; the ability of the Company to consummate suitable
acquisitions or strategic partnerships; the availability and terms of capital
necessary to finance the Company's business plans; general business and economic
conditions; operating results and strategic plans of the Company's customers and
marketing or strategic partners; the failure or disruption of any of the
Company's internal financial, operating or reporting systems, including
continued difficulty in achieving full performance of the Company's BaaN
Enterprise Resource Planning software, and Year 2000 issues 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 the readers not to place
undue reliance on any such forward-looking statements, which 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)
The following discussion addresses the financial condition of the Company as of
September 30, 1999 and the results of its operations for the three and nine
months ended September 30, 1999, compared to the same period last year. The
discussion should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations for the fiscal year
ended December 31, 1998 included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999, COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1998
Net Sales
Net sales increased by $1,293, or 8.8% to $16,045, for the three months ended
September 30, 1999, as compared to $14,752 for the same period in 1998. The
increase in sales resulted from increased sales of $808 in the Company's
Engineered System product line, increased sales of $696 in the Telco product
line offset by decreased sales of $211 in the Company's Commercial Sound product
line. Net Sales in all three product lines, excluding foreign sales in the Telco
product line, were slowed in the three months ended September 1999, by sales
order processing and shipment delays largely associated with performance issues
of Bogen's new enterprises resource planning ("ERP") system.
Net sales from the Engineered Systems product line increased to $3,386 for the
three months ended September 30, 1999, or 31.3%, from net sales of $2,578 for
the same period in 1998. Net sales from the Telco product line increased to
$9,019 for the three months ended September 30, 1999, or 8.4%, from net sales of
$8,323 for the same period in 1998. Net sales from the Commercial Sound product
line decreased to $3,640 for the three months ended September 30, 1999, or 5.5%,
over net sales of $3,852 for the same period in 1998.
The Telco product line includes foreign sales from Speech Design. Domestic sales
increased to $3,568 for the three months ended September 30, 1999, or 16.7% from
net sales of $3,058 for the three months ended September 30, 1998. Foreign sales
translated into U.S. dollars increased to $5,451 for the three months ended
September 30, 1999, or 3.5% over net sales of $5,265 for the same period in
1998. Foreign sales stated in local currency increased to Deutsche Marks ("DM")
10,163 for the three months ended September 30, 1999, or 9.6% over net sales of
DM 9,269 for the three months ended September 30, 1998.
10
<PAGE>
Gross Profit
Gross profit for the Company, as a percentage of total net sales, increased to
53.1% for the three months ended September 30, 1999, compared to 50.9% for the
same period in 1998.
Bogen's gross profit increased from $4,562, or 47.2% of sales in the third
quarter of 1998, to $5,262, or 49.7% of sales in the third quarter of 1999. The
increase is attributable primarily to cost reduction of direct materials
resulting from successful negotiation of certain purchase agreements in late
1998 and early 1999, which were implemented in the first and second quarter of
1999. Additionally, re-engineering of certain products contributed to further
cost reductions.
Speech Design's gross profit increased from $3,034, or 57.6% of sales in the
third quarter of 1998 to $3,264, or 59.9% of sales in the third quarter of 1999.
The increase is partially attributable to better margins on Speech Design's new
platforms for the Teleserver Pro(TM) and Thor(TM) product lines, offset
partially by declining foreign exchange rates.
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses ("SG&A") increased by $785, or
18.9% for the three months ended September 30, 1999, as compared to the three
months ended September 30, 1998. SG&A was $4,936, or 30.8% of net sales for the
three months ended September 30, 1999, as compared to $4,151, or 28.1% of net
sales for the same period in 1998. The increase is primarily attributable to
expenses incurred as part of the Company's implementation of a new sales and
marketing programs for existing and newly developed product lines for its U.S.
operations and the marketing of Speech Design's new Teleserver Pro and Thor
platforms in Europe. Additionally, sales expenses increased due to the
implementation in the U.S. of Bogen's sales strategy of increasing market share
through increased coverage.
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
$1,109, or 6.9% of net sales for the three months ended September 30, 1999, as
compared to $753, or 5.1% of net sales for the three months ended September 30,
1998. The increase of $356, or 47.3%, primarily attributable to the development
of additional new products in the U.S. and the development of additional
features for the Teleserver Pro and the Thor platforms in Europe.
Interest Expense
Net interest expense was $41, as compared to $96 for the three months ended
September 30, 1998. The decrease primarily relates to the repayment of all of
the amounts borrowed under the Company's acquisition credit line for the Speech
Design acquisition.
Income Taxes
Income tax expense decreased for the three months ended September 30, 1999 to
$677, as compared to $843 for the comparable period in 1998. The decrease of
$166 is primarily as a result of lower foreign profits resulting in a reduction
in foreign income tax expense of $178, offset by an increase in domestic tax
expense of $12 primarily due to higher domestic profits.
NINE MONTHS ENDED SEPTEMBER 30, 1999, COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
Net Sales
Net sales increased by $2,942, or 7.5%, to $42,328 for the nine months ended
September 30, 1999, as compared to $39,386 for the same period in 1998. The
increase in sales resulted from increased sales of $1,526 in the Company's
Engineered System product line, increased sales of $1,818 in the Telco product
line offset by decreased sales of $403 in the Company's Commercial Sound product
line. Net Sales in all three product lines, excluding foreign sales in the Telco
product line, were slowed in the nine months ended September 1999, by sales
order processing and shipment delays largely associated with performance issues
of Bogen's new enterprises resource planning ("ERP") system during the third
quarter.
11
<PAGE>
Net sales from the Engineered Systems product line increased to $7,602 for the
nine months ended September 30, 1999, or 25.1%, from net sales of $6,076 for the
same period in 1998. Net sales from the Telco product line increased to $24,913
for the nine months ended September 30, 1999, or 7.9%, from net sales of $23,095
for the same period in 1998. Net sales from the Commercial Sound product line
decreased to $9,813 for the nine months ended September 30, 1999, or $3.9%, over
net sales of $10,216 for the same period in 1998.
The Telco product line includes foreign sales from Speech Design. Domestic sales
increased to $9,032 for the nine months ended September 30, 1999, or 13.2% from
net sales of $7,976 for the nine months ended September 30, 1998. Foreign sales
translated into U.S. dollars increased to $15,881 for the nine months ended
September 30, 1999, or 5.0% over net sales of $15,119 for the same period in
1998. Foreign sales stated in local currency increased to DM 29,219 for the nine
months ended September 30, 1999, or 7.8% over net sales of DM 27,093 for the
nine months ended September 30, 1998.
Gross Profit
Gross profit as a percentage of total net sales increased to 52.1% for the nine
months ended September 30, 1999, compared to 49.2% for the same period in 1998.
The increase in gross profit is attributable to cost reduction measures
primarily through the renegotiations of certain purchase agreements which were
implemented during late 1998 and early 1999.
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses ("SG&A") increased by $1,825, or
15.5% for the nine months ended September 30, 1999, as compared to the nine
months ended September 30, 1998. SG&A was $13,606, or 32.1% of net sales for the
nine months ended September 30, 1999, as compared to $11,781, or 29.9% of net
sales for same period in 1998. The increase is primarily attributable to
expenses incurred as part of the Company's implementation of a new sales and
marketing programs for existing and newly developed product lines for its U.S.
operations and the marketing of Speech Design's new Teleserver Pro and Thor
platforms in Europe. Additionally, sales expenses increased due to the
implementation in the U.S. of Bogen's sales strategy of increasing market share
through increased coverage.
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
$3,096, or 7.3% of net sales for the nine months ended September 30, 1999, as
compared to $2,061, or 5.2% of net sales for the nine months ended September 30,
1998. The increase is primarily attributable to the development of additional
new products in the U.S. and the development of additional features for the
Teleserver Pro and the Thor platforms in Europe.
Purchased in-process research and development
During the nine months ended September 30, 1998, purchased in-process research
and development represents a one-time non-cash charge of $2,905 of in-process
research and development in connection with the acquisition of the remaining 33%
equity interest of Speech Design not previously owned by the Company.
Interest Expense
Net interest expense was $126, as compared to $201 for the nine months ended
September 30, 1998. The decrease of $75, or 37.3%, primarily relates to
repayment of all amounts borrowed under the Company's acquisition credit line
for the Speech Design acquisition.
Income Taxes
Income tax expense decreased for the nine months ended September 30, 1999 to
$1,483, as compared to $1,766 for the comparable period in 1998. The decrease of
$283 is primarily as a result of lower foreign profits resulting in a reduction
in foreign income tax expense of $327, offset by an increase of $44 in domestic
tax expenses primarily due to higher domestic profits.
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Minority Interest & Goodwill Amortization
On May 20, 1998, the Company consummated the acquisition of the remaining 33%
equity interest in Speech Design, held by Mr. Kasimir Arciszewski and Mr. Hans
Meiler, the founders and managing directors of Speech Design. The aggregate
consideration paid by the Company for the 33% equity interest approximated
$8,000 before acquisition costs, consisting of DM 7,570 (approximately $4,300)
in cash and 458,000 restricted shares of the Company's Common Stock. This
transaction added an additional $4,653 to goodwill and other intangible assets
subsequent to the May 20, 1998 acquisition. This transaction eliminated the
minority interest, which was $254 in the first nine months of 1998.
Liquidity and Capital Resources
During the nine months ended September 30, 1999, cash utilization focused on
current working capital requirements, pay-down of assumed liabilities of Sound
Inc., and the purchase of equipment and leasehold improvements.
The Company's operating activities provided $12 of cash. The Company's net
income of $3,184 includes net non-cash charges of $885, which consisted of (i)
depreciation and amortization of $1,234, (ii) a net decrease in inventory
reserves and allowance for doubtful accounts of $488, (iii) utilization of
acquired tax benefits credited to goodwill of $34, and (iv) deferred income
taxes of $105. Further, net changes in operational assets and liabilities
utilized $4,057 in cash, consisting of an accounts receivable increase of
$3,479; inventory decrease of $546; prepaid expenses and other assets increase
of $1,234; accounts payable and accrued expenses decrease of $131 and net
increase in other operating assets and liabilities use of $21 in cash.
Net cash used in investing activities amounted to $901 and was used solely for
the purchase of equipment and other fixed assets.
Net cash provided by financing activities amounted to $590. The Company's net
borrowings were $357 under its short-term credit lines. Net proceeds from
issuance of Common Stock, primarily through exercise of stock options, totaled
$234.
As of September 30, 1999, the Company's total liabilities were $13,405, of which
$11,720 is due and payable within one year.
On April 21, 1998, BCI and the Company entered into a $27,000 credit facility
(the "New Facility") with KeyBank N.A., which matures on April 30, 2001. The New
Facility replaces a previous facility. The New Facility provides, subject to
certain criteria, a $20,000 revolving line for acquisition financing and a
$7,000 working capital line. The New Facility bears interest at either the
bank's prime rate or, at the Company's option, LIBOR plus 125 to 200 basis
points, based on certain financial conditions. At September 30, 1999, $400 was
outstanding under the working capital line of the New Facility, and $1,600 was
outstanding under the acquisition revolving line. The acquisition line was drawn
in order to finance the acquisition by Apogee of Sound Inc.'s assets.
Speech Design has short-term credit lines and overdraft facilities of
approximately DM 6,000, or $3,300, from 3 banks. These lines of credit are
collateralized by all of Speech Design's accounts receivable and inventory. At
September 30, 1999, DM 1,629 (approximately $887) was outstanding under the
short-term credit lines.
Speech Design has also secured a DM 15,000 or $8,200 credit facility for
acquisition financing from D.G. Bank of Frankfurt. The interest rate under the
new credit facility is up to 200 basis points above the German LIBOR rate, which
was 3.65% at September 30, 1999. There were no borrowings under the acquisition
financing line at September 30, 1999.
The Company believes that it has adequate liquidity to finance its normal
business activities and capital expenditures for the near term.
13
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YEAR 2000
The Year 2000 ("Y2K") issue is the result of information technology ("IT")
system programs being written using two digits rather than four digits to define
the application year. Any of the Company's IT systems, products and test
equipment that have date-sensitive software may recognize a date using "00" for
the applicable year as the year 1900 and not the year 2000. This could result in
miscalculations, system failures, or other business disruptions.
The Company has implemented a substantial part of its plan to address Y2K
technology compliance for its Management Information Systems ("MIS"), products
and test equipment. The plan included a review of the Company's suppliers and
customers to assure that they are working toward Y2K compliance. The Company
uses different systems in its U.S. (Bogen) and foreign (Speech Design)
subsidiaries.
BOGEN
MIS
Bogen uses MIS systems in various aspects of its business, including
manufacturing, research and development, distribution and many administrative
functions.
On July 6, 1999, Bogen implemented a new Enterprise Resource Planning (ERP)
system. This system is comprised of both new hardware and software and is Y2K
compliant. Implementation and performance problems of the ERP system has
adversely impacted net sales for the periods ended September 30, 1999, and may
not be fully resolved until after the fourth quarter of the current fiscal year.
The Company continues to work with BaaN, the software provider for such system,
and its reseller to resolve such performance problems and achieve full
implementation of such system. Furthermore, Bogen's PABX (telephone system) is
not Y2K ready and is scheduled for replacements during the fourth quarter of
1999.
At Apogee, Bogen's new subsidiary, the MIS system will be upgraded to a Y2K
ready version during the fourth quarter.
Bogen has prioritized its MIS system into three categories: critical, necessary
or other. Bogen's critical and necessary systems, the loss or failure of which
could result in a serious disruption of revenue or serious processing delay,
respectively, are now Y2K complaint. Bogen currently expects that the remainder
of its MIS systems will be Y2K compliant in the fourth quarter. There can be no
assurance, however, that Bogen's other MIS systems will become Y2K compliant by
the projected time.
Currently, management estimates that Bogen will incur up to $1,200 (including
payments under operating leases) on system upgrade and replacement projects,
which will, among other things, make Bogen's MIS systems Y2K compliant. Most of
these upgrades will be made during 1999. Y2K remediation programs and ongoing
systems upgrade and replacement projects are funded through the Bogen's
operations. In the first nine months ended September 30, 1999, Bogen spent $541
on Y2K related system upgrades and replacements, mainly through operating lease
agreements.
If MIS systems and testing equipment affected by the Y2K issue were not
addressed as Bogen is doing, they could conceivably cause technological failures
throughout Bogen, disrupting normal business operations. These risks are similar
to those faced by other manufacturing companies. Management does not believe
that Bogen's business will be materially affected by Y2K issues. Nevertheless,
Bogen expects to have contingency plans that address the most reasonably likely
worst case Y2K scenarios.
PRODUCTS
Less than 5% of Bogen's products include embedded technology such as
micro-controllers. All of Bogen's current products are believed to be Y2K ready.
Bogen has notified its customers via its website of some discontinued products
which may not be Y2K ready. These products may not be supported by Bogen.
Material third party vendors have been contacted and asked to attest to Y2K
compliance. Responses have been received and are being evaluated. Alternate
vendors will be evaluated as potential replacements for non-compliant or
non-responsive vendors.
14
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If products affected by the Y2K issue were not addressed as Bogen is doing, they
could disrupt normal business operations. These theoretical consequences are
generally shared with other manufacturing companies. Nevertheless, Bogen expects
to have contingency plans that address the most reasonably likely worst case Y2K
scenarios.
Bogen has contacted its key suppliers and vendors to assess the potential impact
on Bogen's operations if those third parties fail to become Y2K compliant in a
timely manner. While certain Bogen suppliers and vendors have provided it
written certification that IT systems used by such third parties will be Y2K
compliant prior to the Year 2000, Bogen is currently in the process of
identifying the potential risks of external business relationships with those
third parties who have not certified their Y2K compliance status. Action steps
and contingency plans related to significant third party relationships are
expected to be completed during the fourth quarter of 1999.
TEST EQUIPMENT AND OTHER NON-MIS SYSTEMS
Bogen's testing equipment and other non-MIS systems contain embedded technology
such as micro-controllers included in test equipment, office equipment,
environmental control equipment and time clocks. All of Bogen's test equipment
and non-MIS equipment, except time clocks, are believed to be Y2K ready. All
time clocks are scheduled for an upgrade in the early part of the 4th quarter
1999.
If testing equipment and other non-MIS equipment affected by the Y2K were not
addressed as Bogen is doing, they could disrupt normal business operations.
These theoretical consequences are generally shared with other manufacturing
companies.
SPEECH DESIGN
Speech Design has implemented a substantial part of its plan to address Y2K
technology compliance for its Management Information Systems ("MIS"), products
and test equipment. The plan included a review of the Speech Design's suppliers
and customers to assure that they are working toward Y2K compliance.
MIS
Speech Design uses MIS systems in various aspects of its business, including
manufacturing, research and development, distribution and many administrative
functions.
Speech Design's MIS systems are sourced from 2 IT vendors, who certified that
the software installed is Y2K ready. Speech Design does not expect any material
cost associated with its MIS systems Y2K compliance.
PRODUCTS
All of Speech Design's current products are believed to be Y2K ready. Some older
installed products are supported by Y2K-updates made available to customers.
Material third party vendors have been contacted and asked to attest to Y2K
compliance. Responses have been received and are being evaluated. Alternate
vendors will be evaluated as potential replacements for non-compliant or
non-responsive vendors.
If products affected by the Y2K were not addressed as Speech Design is doing,
they could disrupt normal business operations. These theoretical consequences
are generally shared with other manufacturing companies. Nevertheless, Speech
Design expects to have contingency plans that address the most reasonably likely
worst case Y2K scenarios.
Speech Design has contacted its key suppliers and vendors to assess the
potential impact on Speech Design's operations if those third parties fail to
become Y2K compliant in a timely manner. While certain of Speech Design's
suppliers and vendors have provided Speech Design with written certification
that the IT systems used by such third parties will be Y2K compliant prior to
the Year 2000, Speech Design is currently in the process of identifying the
potential risks of external business relationships with those third parties who
have not certified to Speech Design as to the status of their Y2K compliance.
Action steps and contingency plans related to significant third party
relationships are expected to be completed during the fourth quarter of 1999.
15
<PAGE>
TEST EQUIPMENT AND OTHER NON-MIS SYSTEMS
Speech Design's testing equipment and other non-MIS systems contain embedded
technology such as micro-controllers included in test equipment, office
equipment, environmental control equipment and time clocks. All of Speech
Design's test equipment and non-MIS equipment, except time clocks, are believed
to be Y2K ready. All time clocks are scheduled for an upgrade in the early part
of the fourth quarter 1999.
If testing equipment and other non-MIS equipment affected by the Y2K were not
addressed as Speech Design is doing, they could disrupt normal business
operations. These theoretical consequences are generally shared with other
manufacturing companies.
ITEM 3. MARKET RISK DISCUSSION
Since the Company operates on a global basis, it is exposed to various foreign
currency risks, primarily from the operations of the Company's German
subsidiary, Speech Design. The Company's consolidated financial statements are
denominated in U.S. dollars, whereas Speech Design and its subsidiaries are
denominated in different foreign currencies, as follows: Speech Design's
currency is the Deutsche Mark ("DM"), Satelco's currency is the Swiss Franc,
Speech Design U.K.'s currency is the British Pound and Speech Design Israel's
currency is the Israeli Shekel. All Speech Design subsidiaries' financial
statements are first translated into DM, and then Speech Design's consolidated
financial statements are translated into the U.S. dollar.
Accordingly, changes in exchange rates between the applicable foreign currency
and the DM, and changes in the exchange rates between the DM and the U.S. dollar
will affect the translation of each foreign subsidiary's financial results into
U.S. dollars for the purposes of reporting the Company's consolidated financial
results.
In general, the Company does not use derivative instruments or hedging to manage
its exposure and does not currently hold any material risk sensitive instruments
for trading purpose at September 30, 1999. During the quarter ending September
30, 1999, the Company has no material changes of its market risk assessment.
The above discussion should be read in conjunction with Management's discussion
of market risk as reported on Form 10-K for the year ended December 31, 1998,
filed with the Securities and Exchange Commission on March 31, 1999.
16
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 19, 1999, a complaint was filed in Landericht Dusseldorf Court (4th
Civil Chamber) claiming patent infringement and unfair competition by Speech
Design and its managing directors. Since the second quarter of 1998, Speech
Design has been contesting the plaintiffs' patent, which is the subject of the
complaint, in the German Patent Office. The case entitled Wolfgang Beyer KG and
COM Electronic GmbH v. Speech Design GmbH, Hans Mieler and Kasimir Arciszewski,
4-0-87/99.
On September 8, 1999, this case was settled. In the settlement agreement, Speech
Design GmbH agreed to pay DM 175,000 (or approximately $94,300) to Wolfgang
Beyer KG. This payment covered all past and future use of the technology claimed
by the patent.
The Company is not aware of any other material pending or threatened legal
proceedings to which it is a party or of which any of.
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:
10.33 Agreement dated August 31, 1999, between Bogen
Communications International, Inc. and Helix Capital Services,
Inc. terminating and replacing Amended and Restated Mergers and
Acquisition Engagement Agreement dated October 1, 1998.
10.34 Agreement dated September 1, 1999, between Speech Design
GmbH, and Helix Capital Services, Inc. terminating and replacing
Mergers and Acquisition Engagement Agreement dated October 1,
1998.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
17
<PAGE>
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. Description
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 Bogen Communications, International, Inc. 1996 Incentive Stock Option
Plan. (5)
4.6 Amendment to Unit Purchase Option Granted to GKN Securities Corp.
10.1 Form of Agency Agreement, dated as of June 28, 1993, between the
Company and GKN Securities Corp. (without schedules) (1)
10.2 Form of Indemnification Agreement between the Company and its
officers, directors and advisors. (4)
10.3 Summary of Agreement for Business Credit between Speech Design GmbH
and Statelparkasse Munchen. (6)
10.4 Asset Purchase Agreement, dated as of July 1, 1997, between Bogen
Communications International, Inc. Bog-Comm Acquisition Corporation,
New England Audio Resource, Inc., Mr. William Kieltyka and Mr. Lee
Lareau. (9)
10.5 Stock Purchase Agreement, dated November 26, 1997, between the Company
and Geotek. (7)
10.6 Convertible Preferred Stock Purchase Agreement, dated November 26,
1997, between the Company and the Investors. (7)
10.7 Employment Agreement, dated November 26, 1997, between the Company and
Mr. Jonathan Guss. (7)
10.8 Employment Agreement, dated November 26, 1997, between the Company and
Mr. Michael Fleischer. (7)
10.9 Option Agreement, dated November 26, 1997, between the Company and Mr.
Jonathan Guss. (7)
18
<PAGE>
10.10 Option Agreement, dated November 26, 1997, between the Company and Mr.
Michael Fleischer. (7)
10.11 Common Stock and Warrant Purchase Agreement, dated November 26, 1997
between the Company and D&S Capital, LLC. (7)
10.12 Warrant, dated November 26, 1997, issued by the Company to D&S
Capital, LLC. (7)
10.14 Warrant Purchase Agreement, dated as of November 28, 1997, between
Helix Capital II, LLC and Bogen Communications International, Inc. (8)
10.15 Warrant, dated November 28, 1997, issued by Bogen Communications
International, Inc. to Helix Capital II, LLC. (8)
10.16 Share Transfer Agreement, dated May 20, 1998, by and among Bogen
Communications International, Inc., Kasimir Arciszewski and Hans
Meiler. (10)
10.17 Management Agreement, dated May 20, 1998, between Speech Design GmbH
and Kasimir Arciszewski. (10)
10.18 Management Agreement, dated May 20, 1998, between Speech Design GmbH d
Hans Meiler.
10.19 Credit Agreement, dated as of April 21, 1998, among Bogen
Communications International, Inc., Bogen Communications, Inc.,
various financial institutions and KeyBank National Association. (10)
10.20 Guaranty of Payment and Performance, dated April 21, 1998, by Bogen
Corporation. (10)
10.21 Guaranty of Payment and Performance, dated April 21, 1998, by New
England Audio Resource Corp. (10)
10.22 Security Agreement, dated April 21, 1998, by Bogen Communications
International, Inc. in favor of KeyBank National Association. (10)
10.23 Security Agreement, dated April 21, 1998, by Bogen Communications,
Inc. in favor of KeyBank National Association. (10)
10.24 Security Agreement, dated April 21, 1998, by Bogen Corporation in
favor of KeyBank National Association. (10)
10.25 Security Agreement, dated April 21, 1998, by New England Audio
Resource Corp. in favor of KeyBank National Association. (10)
10.26 Borrower Pledge Agreement, dated April 21, 1998, by and between Bogen
Communications International, Inc. and KeyBank National Association.
(10)
10.27 Borrower Pledge Agreement, dated April 21, 1998, by and between Bogen
Communications International, Inc. and KeyBank National Association.
(10)
10.28 Guarantor Pledge Agreement, dated April 21, 1998, by and between Bogen
Corporation and KeyBank National Association. (10)
10.29 Guarantor Pledge Agreement, dated April 21, 1998, by and between Bogen
Communications, Inc. and KeyBank National Association. (10)
10.30 Term Sheet for Acquisition Line, dated September 18, 1998, between
Speech Design GmbH and DG Bank. (11)
19
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10.31 Amended and Restated Mergers and Acquisition Engagement Agreement,
dated as of October 1, 1998, between Helix Capital Services, Inc. and
Bogen Communications International, Inc. (11)
10.32 Mergers and Acquisition Engagement Agreement, dated as of October 1,
1998, between Speech Design GmbH and Helix Capital Services, Inc. (11)
*10.33 Agreement dated August 31, 1999, between Bogen Communications
International, Inc. and Helix Capital Services, Inc. terminating and
replacing Amended and Restated Mergers and Acquisition Engagement
Agreement dated October 1, 1998.
*10.34 Agreement dated September 1, 1999, between Speech Design GmbH, and
Helix Capital Services, Inc. terminating and replacing Mergers and
Acquisition Engagement Agreement dated October 1, 1998.
*27.1 Financial Data Schedule
*Filed Herewith
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 Registration
Statement on Form S-8 (File No. 333-21245) dated February 4, 1997.
6. Incorporated by reference to the Exhibits to the Company's Annual report
on Form 10-K for the year ended December 31, 1996.
7. Incorporated by reference to the Exhibits to the Company's Current Report
on Form 8-K, dated November 25, 1997.
8. Incorporated by reference to the Exhibits to the Company's Current Report
on Form 8-K, dated December 12, 1997.
9. Incorporated by reference to the Exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 1997.
10. Incorporated by reference to the Exhibits to the Company's Current
Registration Form 8-K, dated May 20, 1998.
11. Incorporated by reference to the Exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 1998.
20
<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.
BOGEN COMMUNICATIONS INTERNATIONAL, INC.
(Registrant)
Date: November 16, 1999 By: /s/ Michael P. Fleischer
-----------------------------
Name: Michael P. Fleischer
Title: President
Date: November 16, 1999 By: /s/ Yoav M. Cohen
------------------------------
Name: Yoav M. Cohen
Title: Chief Financial Officer
(Principal Financial and
Accounting Officer)
21
Exhibit 10.33
LIMITED ENGAGEMENT AGREEMENT
LIMITED ENGAGEMENT AGREEMENT, effective as of August 31, 1999, by and
between Bogen Communications International, Inc., a Delaware corporation
(together with all its domestic subsidiaries, the "Company"), and Helix Capital
Services Inc. ("Helix"), successor by merger to Helix Capital Services LLC.
W I T N E S S E T H :
WHEREAS, the Company and Helix entered into the Amended and Restated
Mergers and Acquisition Engagement Agreement effective October 1, 1998 (the
"Amended M&A Agreement"); and
WHEREAS, the Company and Helix wish to terminate the Amended M&A Agreement
in its entirety and enter into a Limited Engagement Agreement which covers all
continuing obligations between the parties relating to merger and acquisition
activity.
NOW, THEREFORE, in consideration of the mutual premises contained herein,
the parties hereby agree as follows:
1. TERMINATION OF AMENDED AND RESTATED MERGERS AND ACQUISITION AGREEMENT.
1.1 Termination.
Effective as of August 31, 1999, the Amended M&A Agreement shall be
terminated and of no force and effect and the parties shall have no
remaining liabilities thereunder other than as stated in Section 1.2 below
and other than the obligations set forth in Sections 2.5 (Confidentiality)
and 2.6 (Indemnification) of the Amended M&A Agreement, which shall survive
the termination thereof.
1.2 Remaining Obligations.
Notwithstanding the termination of the Amended M&A Agreement, the
Company shall make the following payments to Helix:
1.2.1 $100,000 for services rendered in connection with the Company's
acquisition of substantially all of the assets of Apogee Sound
Incorporated; and
1.2.2 a fee equal to the amount that would otherwise be payable pursuant to
the Amended M&A Agreement, if, on or prior to December 31, 1999, the
Company acquires substantially all of the assets or stock of, or
merges with, any of the companies listed on Schedule 1 hereto.
<PAGE>
2. LIMITED SERVICES
2.1 Brokers Services. If Helix introduces the Company during the term of
this Agreement to any potential acquisition target, and the Company
has not prior to the time of such introduction been in discussions
with, or otherwise transacted business with such acquisition target,
and an M&A Transaction is consummated within six (6) months of such
introduction, then the Company shall pay Helix a Success Fee at the
time of the consummation of such M&A Transaction.
2.2 Financial Services.
If the Company requests any time during the term of this Agreement
Helix's Financial Services in connection with a potential M&A
Transaction and (1) Helix provides such Financial Services and (2)
such M&A Transaction is consummated within 6 months of the Company's
initial request, the Company shall pay Helix a Success Fee at the time
of the consummation of such M&A Transaction.
2.3 Success Fee. For purposes of Sections 2.1 and 2.2 hereof, "Success
Fee" shall mean 3% of the Consideration Paid. The Success Fee will be
paid in cash, or in other negotiable securities and financial
instruments as specifically agreed in writing by Helix and the
Company, but in any case, if agreement is not reached, the success fee
will be paid in the same consideration as paid or received by the
Company in the M&A Transaction.
2.4 Transaction Timing. An M&A Transaction shall be deemed to have
consummated when Consideration Paid for an M&A Transaction has been
sent to the receiving party, provided that if Consideration Paid shall
be paid in installments, the full amount shall be construed to have
been received upon receipt of the first installment exchanged between
parties to an M&A Transaction.
2.5 Definitions. As used herein, the following terms shall have the
following meanings
2.5.1 The term "Consideration Paid" shall mean all the cash
consideration (including amounts paid in escrow) plus the fair
market value of non-cash consideration paid by the Company,
plus the amount of debt and other interest bearing obligations
assumed or refinanced by the Company, in connection with the
M&A Transaction. The fair market value of any non-cash
consideration delivered in an M&A Transaction will be the
value agreed upon by the Company and Helix prior to the
consummation of the M&A Transaction.
2
<PAGE>
2.5.2 The term "Financial Services" shall include -
2.5.2.1 Assisting the Company in its determination of
appropriate values to be realized in an M&A Transaction;
2.5.2.2 Advising the Company in the negotiations as to the
form and structure of an M&A Transaction;
2.5.2.3 Advising and assisting the Company's management in
making presentations to the Company's Board of Directors
regarding the M&A Transaction;
2.5.2.4 Other services normally provided by investment banks
in connection with M&A Transaction.
2.5.3 The term "M&A Transaction" shall mean any transaction or
series of transactions (other than the purchase or sale of
assets in the ordinary course of business) whereby, directly
or indirectly, the Company acquires or merges with or into
another entity, or any other similar business transaction or
arrangement between the Company or any of its domestic
subsidiaries and affiliates and a third party, including,
without limitation, a merger, combination or consolidation,
regardless of the accounting or tax treatment of such
transaction.
3. CONFIDENTIALITY. During the term of this Agreement, the Company, on the
one hand, and Helix, on the other hand, may have access to and become
acquainted with advice, data, materials, contacts or other information
provided by one party to the other, including the existence of this
Agreement (collectively, the "Confidential Information"). Each party
hereto agrees to treat the Confidential Information of the other party
confidentially and agrees not to disclose Confidential Information of
the other third party other than (i) to its employees, attorneys,
affiliates, representatives and agents to whom disclosure is necessary
in order to carry out the terms of the engagement, and (ii) if, in the
reasonable opinion of legal counsel, such disclosure is legally
required. Both parties shall take all precautions reasonably necessary
to maintain the confidentiality of the Confidential Information of the
other party, it being understood, however, that a copy of this Agreement
may be filed with the U.S. Securities and Exchange Commission and its
terms be described in the Company's public filings.
3.1 Notwithstanding the foregoing, the following shall not be
Confidential Information: (a) information generally available to
the public, or which is published or becomes public; (b)
information which a party can show was in its possession at the
time it was disclosed and which was not acquired directly or
indirectly from the disclosing party, and (c) information
rightfully acquired from others who did not obtain it under a
pledge of confidentiality to a party hereto.
3
<PAGE>
3.2 Each party hereto covenants and agrees that is shall not misuse or
misappropriate any of the Confidential Information of the other
party. Each party acknowledges and agrees that Confidential
Information of each party constitutes trade secrets and that the
other party will obtain no ownership interest therein. Upon
termination of Helix's engagement with the Company, or whenever
requested by the other party, each of the Company and Helix shall
immediately deliver to the other all property in its possession or
under its control belonging to the other party or containing any
Confidential Information of the other party.
3.3 The parties acknowledge and agree that the restrictions contained
in this Agreement, in view of the nature of the respective
businesses of the parties hereto, are reasonable and necessary in
order to protect their legitimate interests and that any violation
thereof would result in irreparable injuries to the other parties.
The parties agree that in addition to any other rights or remedies
which the other party may be entitled to at law or in equity, the
other party shall be entitled to obtain injunctive relief from any
court of competent jurisdiction and reimbursement of any costs and
expenses, including, without limitation, attorneys' fees and
expenses, incurred in connection with the enforcement of this
Section 3.
4. INDEMNIFICATION. The Company agrees to indemnify and hold Helix harmless
from and against any and all losses, claims, damages and liabilities (or
actions including security holder actions in respect thereof) related to
or arising out of Helix's engagement hereunder or its role in connection
herewith, and will reimburse Helix for all reasonable expenses
(including reasonable counsel fees and expenses) as they are incurred by
Helix in connection with investigating, preparing for or defending any
such action or claim, whether or not in connection with pending or
threatened litigation in which Helix is a party and whether or not
initiated by or on behalf of the Company. The Company will not, however,
be responsible for any claims, liabilities, losses, damages or expenses
that have resulted from the willful misconduct or gross negligence of
Helix. The Company also agrees that Helix shall not have any liability
to the Company for or in connection with Helix's engagement, except for
liability for losses, claims, damages, liabilities or expenses incurred
by the Company that result from the willful misconduct or gross
negligence of Helix.
4.1 In the event that the foregoing indemnity is unavailable, then the
Company shall contribute to amounts paid or payable by Helix in
respect of its losses, claims, damages and liabilities:
4.1.1 in such proportion as appropriately reflects the relative
benefits received by, the Company and Helix in connection with
the matters as to which such losses, claims, damages or
liabilities relate, or
4
<PAGE>
4.1.2 if (but only if) the allocation provided for in Section 4.1.1
is for any reason held to unenforceable, in such proportion as
is appropriate to reflect not only the relative benefits
referred to in Section 4.1.1 but also the relative fault of
the Company and Helix, as well as any other relevant equitable
considerations;
4.1.3 provided, however, that in no event shall the amount to be
contributed by Helix exceed the amount of the fee actually
received by Helix. The foregoing shall be in addition to any
rights that Helix may have at common law or otherwise and
shall extend upon the same terms to and inure to the benefit
of Helix and its affiliates and their respective directors,
officers, employees, agents or controlling persons of Helix.
4.1.4 The Company agrees that, without Helix's prior written
consent, it will not settle, compromise or consent to the
entry of any judgment in any pending or threatened claim,
action, or proceeding in respect of which indemnification
could be sought under the indemnification provisions of this
Agreement (whether or not Helix or any other party is an
actual or potential party to such claim, action or
proceeding), unless such settlement, compromise or consent
includes an unconditional release of each indemnified party
from all liability arising out of such claim, action or
proceeding.
5. TERM. This Agreement shall have a term ending December 31, 1999, except
with respect to the payment of Success Fees earned pursuant to Section 2
of this Agreement and except for Sections 3 and 4 of this Agreement,
which will survive any termination of this Agreement.
6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT GIVING
EFFECT TO CONFLICTS OF LAWS. ANY CONTROVERSY OR CLAIM ARISING OUT OF OR
RELATING TO THIS LETTER AGREEMENT, OTHER THAN AS PROVIDED FOR IN SECTION
3 HEREIN, SHALL BE SETTLED BY ARBITRATION IN ACCORDANCE WITH THE RULES
OF THE AMERICAN ARBITRATION ASSOCIATION, AND JUDGMENT UPON AN AWARD
ARISING IN CONNECTION THEREWITH MAY BE ENTERED IN ANY COURT OF COMPETENT
JURISDICTION.
7. SEVERABILITY. In the event that any provision herein is determined to be
enforceable under the current law at the time of execution of this
Agreement, or unenforceable under a law that may supersede that law in
place at the time of execution, all other provisions and the intent of
this Agreement shall survive such findings.
8. INDEPENDENT CONTRACTOR. The Company acknowledges and agrees that Helix
has been retained solely as a mergers and acquisitions and financial
advisor to the Company. In such capacity, Helix shall act as an
independent contractor.
5
<PAGE>
9. WAIVER OF RIGHTS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to
in writing by the party against whom the same is sought to be enforced
and no failure by either party to enforce any of this rights hereunder
shall, except as aforesaid, be deemed to be a waiver of such right. No
waiver by either party hereto at any time of any breach by the other
party hereof of, or compliance with, any provision of this Agreement to
be performed by such other party shall be deemed to be a waiver of a
similar or dissimilar provision hereof at the same or any prior or
subsequent time.
10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be properly given if delivered
personally, mailed prepaid registered mail, overnight courier, or sent
by telecopy (as long as the telecopy is followed by a hard copy)
addressed as follows:
In the case of Helix:
Helix Capital Services LLC
98 Battery Street, Suite 600
San Francisco, CA 94104
Att: Mr. Y. Stern
In the case of the Company:
Bogen Communications International, Inc.
50 Spring Street
Ramsey, NJ 07446
Attn: Mr. Yoav M. Cohen
Fax: (201) 760-8771
or to such other address as the parties shall from time to time specify
by notice given in accordance herewith. Any notice so given shall be
conclusively deemed to have been given or made on the day of delivery,
if delivered, if mailed by registered mail, upon the date shown on the
postal return receipt as the date upon which the envelope containing
such notice was actually received by the addressee, if delivered by
overnight courier, two (2) days after deposit with the overnight
courier, and if by telecopy, upon transmission thereof, as long as the
telecopy is followed by delivery of a hard copy.
11. ENTIRE AGREEMENT. This mutually signed Agreement and attached Schedules
constitute the entire agreement between the parties with respect to the
engagement of Helix contemplated hereby and cancels and superseded all
prior understandings and agreements between the parties with respect
thereto and no agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement.
12. MISCELLANEOUS. This Agreement may be executed in any number of
counterparts; each of which shall be deemed to be an original and all of
which together shall be deemed to be the same agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hand on September
1, 1999.
HELIX CAPITAL SERVICES INC.
By: /s/ Yoav Stern
--------------------------
Name: Yoav Stern
Title: Managing Partner
BOGEN COMMUNICATIONS
INTERNATIONAL, INC.
By: /s/ Yoav M. Cohen
--------------------------
Name: Yoav M. Cohen
Title: Senior Vice President &
Chief Financial Officer
7
Exhibit 10.34
TERMINATION AGREEMENT
TERMINATION AGREEMENT, effective as of September 1, 1999, by and between
Speech Design GmbH, a company organized under the laws of the Federal
Republic of Germany (together with all its subsidiaries and affiliates, the
"Company"), and Helix Capital Services Inc. ("Helix"), successor by merger to
Helix Capital Services LLC.
W I T N E S S E T H :
WHEREAS, the Company and Helix entered into the Mergers and Acquisition
Engagement Agreement effective October 1, 1998 (the "M&A Agreement");
WHEREAS, the Company and Helix wish to terminate the M&A Agreement in
its entirety.
NOW, THEREFORE, in consideration of the mutual premises contained
herein, the parties hereby agree as follows:
Effective as of August 31, 1999, the M&A Agreement shall be terminated
and of no force and effect and the parties shall have no remaining
liabilities thereunder other than the obligations set forth in Sections 2.5
(Confidentiality) and 2.6 (Indemnification) of the M&A Agreement, which shall
survive the termination thereof.
This Termination Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which together shall be
deemed to be the same agreement.
IN WITNESS WHEREOF, the parties hereto have set their hand on September
1, 1999.
HELIX CAPITAL SERVICES LLC
By: /s/ Yoav Stern
-----------------------
Name: Yoav Stern
Title: Managing Partner
SPEECH DESIGN GMBH
By: /s/ Kasimir Arciszewski
-----------------------
Name: Kasimir Arciszewski
Title: Managing Director
<TABLE> <S> <C>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 645
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<RECEIVABLES> 10,350
<ALLOWANCES> 686
<INVENTORY> 8,044
<CURRENT-ASSETS> 20,692
<PP&E> 8,492
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0
0
<COMMON> 7
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<TOTAL-LIABILITY-AND-EQUITY> 43,633
<SALES> 42,328
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<CGS> 20,293
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<OTHER-EXPENSES> (5)
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