TERADYON, Israel–(BUSINESS WIRE)–B.O.S. Better Online Solutions Ltd. (the “Company” or “BOS”) (NASDAQ:BOSC – News; TASE:BOSC) reported today its results for the third quarter of 2006.
For the convenience of comparing the Revenues and Gross Profit of the third and second quarters of 2006 to the third quarter of 2005, the following table and related discussion refers to these results, on a non-GAAP basis, after excluding the Communication segment and Software Utilities product line, that were sold during 2005:
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Three months ended
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September 30, 2006 June 30, 2006 September 30, 2005
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Revenues $ 5,298 $ 4,457 $ 5,659
Cost of revenues 4,220 3,342 3,899
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Gross profit 1,078 1,115 1,760
Revenues for the third quarter of 2006 reflected a 19% growth to $5.3 million, from $4.5 million in the second quarter of 2006 and were lower by 6% from the revenues of the third quarter of 2005 that amounted to $5.7 million.
Gross profit for the third quarter of 2006 was $1.1 million (gross
Operating expenses for the third quarter of 2006 were reduced to $1.4 million compared to $1.6 million in the second quarter of 2006 and $2.2 million in the third quarter of the year 2005.
Operating loss for the third quarter of 2006 was reduced to $273 thousand, compared to $457 thousands in the second quarter of 2006 and an income of $356 thousands in the third quarter of 2005.
Financial expenses for the third quarter of 2006 increased to $196 thousands from $128 thousands in the second quarter of 2006 and $38 thousand in the third quarter of the year 2005, which increase is attributed to an increase in the Company’s loans.
Other income net, for the third quarter of 2006, amounted to $32 thousands compared to $609 thousands in the second quarter of 2006, both due to gains attributed to the sales of the Communication segment, and compared to $273 thousands in the third quarter of year 2005, which was attributed to capital gain from the sale of Software Utilities product line.
Equity losses of an affiliated company for the three months ended September 2005 in the amount of $1.5 million, refers to the Company’s investment in Surf Communication Solutions Ltd. (“Surf”). Commencing the fourth quarter of year 2005, the Company ceased to have the ability to exercise significant influence over Surf and, accordingly, the adjusted carrying amount of the investment is accounted for based on the cost accounting method.
Net loss for the third quarter of 2006 amounted to $394 thousands (or -$0.06 basic and diluted loss per share), compared to net income of $37 thousands (or $0.01 basic and diluted profit per share) in the second quarter of 2006 and to net loss of $1,744 thousands (or -$0.28 basic and diluted loss per share) in the third quarter of 2005.
Net loss for the nine months ended September 30 2006, amounted to $220 thousand (or $0.03 basic and diluted profit per share) compared to net loss of $3.6 million (or -$0.69 basic and diluted loss per share) in the nine months ended September 30, 2005.
As of September 30, 2006, the Company’s balance sheet shows financial resources (cash and cash equivalents) of $2.8 million and loans (long and short term) of $5.8 million.
Shmuel Koren, who assumed the role of BOS’ President and CEO on November 1st, stated: “We are moving ahead with our contemplated rights offering, which will support our efforts to expand our divisions and consummate acquisition opportunities. I am optimistic regarding our prospects and look forward to leading the execution of the Company’s strategy towards enhancing shareholders’ value.”
Edouard Cukierman, Chairman of the Board of Directors, added: “Our guidance for the full year of 2006, given in May 2006, according to which we expect revenues to exceed $20 million, remains unchanged. We anticipate the 2006 results to reflect that the Company has neared break even (exclusive of M&A transactions that may transpire).”
About BOS
B.O.S. Better Online Solutions Ltd. (the “Company” or “BOS”) (NASDAQ:BOSC; TASE:BOSC) was established in 1990. Through its wholly owned subsidiaries, BOS activities are focused on two segments:
Electronic Components segment, based on Odem Electronic Technologies 1992 Ltd., providing solutions in RFID, semiconductors, electronic components, CCD, imaging, networking, telecom and automation fields.
Connectivity segment, with products marketed under the BOS?NOVA brand name. These products deliver instant and transparent connectivity from IBM iSeries computers to personal computers, thin clients and browsers.
BOS, www.boscorporate.com is traded on NASDAQ and on the Tel-Aviv stock exchange.
The forward-looking statements contained herein reflect management’s current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause the actual results to differ materially from those in the forward-looking statements, all of which are difficult to predict and many of which are beyond the control of BOS. These risk factors and uncertainties include, amongst others, the dependency of sales being generated from one or few major customers, the uncertainty of our being able to maintain current gross profit
margins, inability to keep up or ahead of technology and to succeed in a highly competitive industry, inability to maintain marketing and distribution arrangements and to expand our overseas markets, uncertainty with respect to the prospects of legal claims against BOS; and additional risks and uncertainties detailed in BOS’ periodic reports and registration statements filed with the U.S. Securities Exchange Commission. BOS undertakes no obligation to publicly update or revise any such forward-looking statements to reflect any change in its expectations or in events, conditions or circumstances on which
any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the
forward-looking statements.
BALANCE SHEETS
U.S. dollars in thousands
| September 30, 2006 | December 31, 2005 | |||
| ASSETS | Unaudited | |||
| CURRENT ASSETS: | ||||
| Cash and cash equivalents | $ 2,788 | $ 2,346 | ||
| Marketable securities | – | 1,333 | ||
| Trade receivables | 5,563 | 5,199 | ||
| Other accounts receivable and prepaid expenses | 804 | 592 | ||
| Inventories | 3,486 | 3,323 | ||
| Total current assets | 12,641 | 12,793 | ||
| LONG-TERM ASSETS: | ||||
| Severance pay fund | 695 | 937 | ||
| Investment in companies | 6,631 | 5,412 | ||
| Other | 54 | 49 | ||
| Total long-term assets | 7,380 | 6,398 | ||
| PROPERTY, PLANT AND EQUIPMENT, NET | 549 | 667 | ||
| CUSTOMER LIST, NET | 1,681 | 1,836 | ||
| GOODWILL | 952 | 952 | ||
| $ 23,203 | $ 22,646 |
| September 30, 2006 | December 31, 2005 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | Unaudited | |||
| CURRENT LIABILITIES: | ||||
| Short term bank credit | $ 3,288 | $ 2,271 | ||
| Current maturities of long-term bank loans and convertible note | 966 | 354 | ||
| Trade payables | 2,890 | 3,367 | ||
| Employees and payroll accruals | 328 | 772 | ||
| Deferred revenues | 223 | 258 | ||
| Accrued expenses and other liabilities | 645 | 1,571 | ||
| Total current liabilities | 8,340 | 8,593 | ||
| LONG-TERM LIABILITIES: | ||||
| Bank loans (net of current maturities) | 5 | 17 | ||
| Convertible note (net of current maturities) | 1,523 | 921 | ||
| Deferred taxes | 377 | 422 | ||
| Accrued severance pay | 867 | 1,190 | ||
| Total long-term liabilities | 2,772 | 2,550 | ||
| LIABILITIES RELATED TO DISCONTINUED OPERATIONS | 237 | 237 | ||
| Total shareholders’ equity | 11,854 | 11,266 | ||
| Total liabilities and shareholders’ equity | $ 23,203 | $ 22,646 |
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except per share data
|
Nine months ended September 30, |
Three months ended September 30, | Year ended December 31, 2005 | ||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||
| Unaudited | ||||||||||||
| Revenues | $ 14,857 | $ 20,801 | $ 5,298 | $ 6,208 | $ 27,053 | |||||||
| Cost of revenues | 11,460 | 14,984 | 4,220 | 4,386 | 20,025 | |||||||
| Gross profit | 3,397 | 5,817 | 1,078 | 1,822 | 7,028 | |||||||
| Operating costs and expenses: | ||||||||||||
| Research and development | 410 | 2,084 | 121 | 627 | 2,608 | |||||||
| Less – grants and participation | – | (217) | – | (84) | (296) | |||||||
| Sales and marketing | 1,463 | 2,715 | 467 | 797 | 3,563 | |||||||
| General and administrative stock based compensation | 517 | 258 | 122 | 74 | 311 | |||||||
| General and administrative | 1,780 | 2,297 | 641 | 764 | 2,956 | |||||||
| Total operating costs and expenses | 4,170 | 7,137 | 1,351 | 2,178 | 9,142 | |||||||
| Operating loss | (773) | (1,320) | (273) | (356) | (2,114) | |||||||
| Financial expenses, net | (402) | (360) | (196) | (38) | (448) | |||||||
| Other income, net | 899 | 300 | 32 | 273 | 1,134 | |||||||
| Loss before taxes on income | (276) | (1,380) | (437) | (121) | (1,428) | |||||||
| Taxes on income | 56 | (297) | 43 | (63) | (204) | |||||||
| Loss after taxes on income | (220) | (1,677) | (394) | (184) | (1,632) | |||||||
| Equity in losses of an affiliated company | – | (1,720) | – | (1,480) | (1,750) | |||||||
| Minority interest in earnings of subsidiary | – | (230) | – | (80) | (223) | |||||||
| Net loss | $ (220) | $ (3,627) | $ (394) | $ (1,744) | $ (3,605) | |||||||
| Basic and diluted net earnings (loss) per share | $ (0.03) | $ (0.69) | $ (0.06) | $ (0.28) | $ (0.64) | |||||||
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SEGMENT INFORMATION
U.S. dollars in thousands
| Three months ended September 30, 2006 | ||||||||||
| Connectivity | Communication* | Electronics Components | Corporate and adjustments | Consolidated | ||||||
| Revenues | $ 504 | $ – | $ 4,794 | $ – | $ 5,298 | |||||
| Gross profit | $ 310 | $ – | $ 768 | $ – | $ 1,078 | |||||
| Management fee expenses (income) | $ (25) | $ – | $ (196) | $ 221 | $ – | |||||
| Operatingloss | $ (27) | $ – | $ (116) | $ (130) | $ (273) |
| Three months ended September 30, 2005 | ||||||||||
| Connectivity | Communication* | Electronics Components | Corporate and adjustments | Consolidated | ||||||
| Revenues | $ 745 | $ 486 | $ 5,002 | $ (25) | $ 6,208 | |||||
| Gross profit | $ 491 | $ 44 | $ 1,287 | $ – | $ 1,822 | |||||
| Management fee expenses (income) | $ (37) | $ (27) | $ (340) | $ 404 | $ – | |||||
| Operatingprofit (loss) | $ 24 | $ (709) | $ 318 | $ 11 | $ (356) |
| Nine months ended September 30, 2006 | ||||||||||
| Connectivity | Communication* | Electronics Components | Corporate and adjustments | Consolidated | ||||||
| Revenues | $ 1,522 | $ – | $ 13,335 | $ – | $ 14,857 | |||||
| Gross profit | $ 975 | $ – | $ 2,422 | $ – | $ 3,397 | |||||
| Management fee expenses (income) | $ (75) | $ – | $ (522) | $ 597 | $ – | |||||
| Operatingloss | $ (98) | $ – | $ (14) | $ (661) | $ (773) |
| Nine months ended September 30, 2005 | ||||||||||
| Connectivity | Communication* | Electronics Components | Corporate and adjustments | Consolidated | ||||||
| Revenues | $ 3,306 | $ 2,274 | $ 15,301 | $ (80) | $ 20,801 | |||||
| Gross profit | $ 1,946 | $ 575 | $ 3,296 | $ – | $ 5,817 | |||||
| Management fee expenses (income) | $ (165) | $ (117) | $ (340) | $ 622 | $ – | |||||
| Operatingprofit (loss) | $ 97 | $ (1,857) | $ 1,023 | $ (583) | $ (1,320) |
| Year ended December 31, 2005 | ||||||||||
| Connectivity | Communication* | Electronics Components | Corporate and adjustments | Consolidated | ||||||
| Revenues | $ 3,926 | $ 2,954 | $ 20,253 | $ (80) | $ 27,053 | |||||
| Gross profit | $ 2,425 | $ 783 | $ 3,820 | $ – | $ 7,028 | |||||
| Management fee expenses (income) | $ (196) | $ (154) | $ (457) | $ 807 | $ – | |||||
| Operatingprofit (loss) | $ 235 | $ (2,374) | $ 727 | $ (702) | $ (2,114) |
* Communication segment was sold in December 2005.
CONTACT: Gelbart-Kahana Public Relations & Investors Relations
Mr. Emanuel Kahana, 03-607471 info@gk-biz.com
margin of 20%), compared to $1.1 million in the second quarter of 2006 (gross margin of 25%) and $1.8 million (gross margin of 31%) in the third quarter of the year 2005. The decrease in the gross margin in comparison to 2005 is attributed mainly to a change in the mix of sold products, in favor of products with lower gross margins from our Electronic Components segment.