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TERADYON, Israel–(BUSINESS WIRE)–May 22, 2006–B.O.S. Better Online Solutions Ltd. (the “Company” or “BOS”) (NASDAQ:BOSC – News; TASE:BOSC) reported today its results for the first quarter of 2006.

Revenues for the first quarter of 2006 amounted to $5.1 million compared to $7.3 million in the first quarter of 2005. The decrease in revenues is due to the fact that revenues for the first quarter of 2005 included $1.6 million revenues from product lines (Thin Client and Software Utilities) and the Communication division, that were sold during year 2005.

Gross profit for the first quarter of 2006 was $1.2 million representing a gross margin of 23.6%, compared to $1.9 million representing a gross margin of 26.9% in the first quarter of the year 2005. The decrease in gross margin is related mainly to the Communication division (that was sold in late 2005) whose gross margin in the first quarter of 2005 was 29%.

Operating loss was reduced to $43 thousand in the first quarter of 2006, from a loss of $533 thousand in the first quarter of 2005.

Other income for the first quarter of 2006 includes a gain of $350 thousand as a result of the conversion of debt owed to BOS by IP Gear Ltd. (a subsidiary of Qualmax Inc. (Pink Sheets:QMXI – News) to which BOS sold its Communication division), into Qualmax Inc. shares.

Net income for the first quarter of 2006 amounted to $137 thousand (or 0.02 $ per share) compared to net loss of $943 thousand (or -$0.20 per share) in the first quarter of 2005.

As of March 31, 2006, the Company’s balance sheet shows financial resources (cash, cash equivalents and marketable securities) of $2.6 million and loans (long and short term) of $3.9 million.

Adiv Baruch, BOS’ President and CEO commented: “This quarter represents the operations of the Company as it is based on two divisions, enabling BOS management to focus on additional growth through mergers and acquisitions.”

Edouard Cukierman, Chairman of the Board of Directors, said: “We are pleased that the Company has reached a stage at which it can generate both top and bottom line guidance thus enhancing visibility and strengthening its ties with investors. Guidance for the full year 2006 is as follows: we expect revenues to exceed $20 million and that the Company will generate a net profit in its audited financials (exclusive of M&A transactions that may transpire).”

About BOS

B.O.S. Better Online Solutions Ltd. (the “Company” or “BOS”) (NASDAQ:BOSC – News; TASE:BOSC) was established in 1990. Through its wholly owned subsidiaries, BOS activities are focused on two divisions:

Connectivity division, with products marketed under the BOSaNOVA brand name. These products deliver instant and transparent connectivity from IBM iSeries computers to personal computers, thin clients and browsers.

Electronic Components division, based on Odem Electronic Technologies 1992 Ltd., providing solutions in RFID, semiconductors, electronic components, CCD, imaging, networking, telecom and automation.

BOS, www.boscorporate.com is traded on NASDAQ and on the Tel-Aviv stock exchange.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained herein reflect management’s current views with respect to future events and financial performance, as of the date of this press release. 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 earnout payments to be paid to BOS during year 2006, 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.

CONSOLIDATED BALANCE SHEETS
                       U.S. dollars in thousands

                                                   March 31,  Dec. 31,
                                                      2006      2005
                                                   ———  ——–
   ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                         $ 2,456   $ 2,346
  Marketable securities                                 200     1,333
  Trade receivables                                   4,602     5,199
  Other accounts receivable and prepaid expenses        703       592
  Inventories                                         3,460     3,323
                                                     ——-   ——-
Total current assets                                 11,421    12,793
                                                     ——-   ——-
LONG-TERM ASSETS:
  Severance pay fund                                    664       937
  Investment in companies                             5,723     5,412
Total long-term assets                                6,387     6,349
                                                     ——-   ——-
OTHER ASSETS                                            47        49
                                                     ——-   ——-
PROPERTY, PLANT AND EQUIPMENT, NET                      631       667
                                                     ——-   ——-
GOODWILL                                                952       952
                                                     ——-   ——-
CUSTOMER LIST, NET                                    1,785     1,836
                                                     ——-   ——-
                                                    $21,223   $22,646
                                                     =======   =======

                                                   March 31,  Dec. 31,
                                                      2006      2005
                                                   ———  ——–
   LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
  Short term loans from banks                       $ 2,663   $ 2,271
  Current maturities of long-term bank loans and
   convertible note                                     526       354
  Trade payables                                      2,691     3,367
  Employees and payroll accruals                        554       772
  Deferred revenues                                     266       258
  Accrued expenses and other liabilities                764     1,571
                                                     ——-   ——-
Total current liabilities                             7,464     8,593
                                                     ——-   ——-
LONG-TERM LIABILITIES:
  Bank loans (net of current maturities)                 12        17
  Convertible note (net of current maturities)          723       921
  Deferred taxes                                        407       422
  Accrued severance pay                                 820     1,190
                                                     ——-   ——-
Total long-term liabilities                           1,962     2,550
                                                     ——-   ——-
LIABILITIES RELATED TO DISCONTINUED OPERATIONS          237       237
                                                     ——-   ——-
Total shareholders’ equity                           11,560    11,266
                                                     ——-   ——-
Total liabilities and shareholder’s equity          $21,223   $22,646
                                                     =======   =======

                 CONSOLIDATED STATEMENTS OF OPERATIONS
           U.S. dollars in thousands, except per share data

                                              Three months
                                                  ended        Year
                                                March 31,      ended
                                             —————  Dec. 31,
                                              2006    2005      2005
                                             ——  ——  ———

Revenues                                     $5,102  $7,272   $27,053
Cost of revenues                              3,898   5,314    20,109
Reversal of royalties                             –       –        84
                                              ——  ——   ——-
Gross profit                                  1,204   1,958     7,028
                                              ——  ——   ——-
Operating costs and expenses:
  Research and development                      148     736     2,608
  Less – grants and participation                 –       –      (296)
  Sales and marketing                           524     919     3,563
  General and administrative                    575     836     3,267
                                              ——  ——   ——-
Total operating costs and expenses            1,247   2,491     9,142
                                              ——  ——   ——-

Operating  loss                                 (43)   (533)   (2,114)
Financial expenses, net                         (78)   (161)     (448)
Other income, net                               258       –     1,134
                                              ——  ——   ——-
Profit (loss) before taxes on income            137    (694)   (1,428)
Taxes on income                                   –     (59)     (204)
                                              ——  ——   ——-
Net income (loss) after taxes                   137    (753)   (1,632)
Equity in losses of an affiliated company         –    (145)   (1,750)
Minority interest in earnings of a
subsidiary                                       –     (45)     (223)
                                              ——  ——   ——-
Net income (loss)                            $  137  $ (943)  $(3,605)
                                              ======  ======   =======
Basic net income (loss) per share            $ 0.02  $(0.20)  $ (0.64)
                                              ======  ======   =======

Diluted net income (loss) per share          $ 0.02  $(0.20)  $ (0.64)


                          SEGMENT INFORMATION
                       U.S. dollars in thousands

                        Three months ended March 31, 2006
           ———————————————————–
                         Communi-   Electronics    Not
           Connectivity  cation(a)  Components  allocated Consolidated
           ———— ———- ———– ———- ————

Revenues        $  567    $  –         $4,535     $    –       $5,102

Gross
profit         $  418    $  –         $  786     $    –       $1,204

Operating
profit
(loss)         $   47    $  –         $   31     $ (121)      $  (43)


                       Three months ended March 31, 2005
          ————————————————————
                        Communi-   Electronics    Not
          Connectivity  cation(a)  Components  allocated Consolidated
          ———— ———– ———– ———- ————

Revenues       $1,504     $   919      $4,849      $   –       $7,272

Gross
profit        $  852     $   267      $  839      $   –       $1,958

Operating
profit
(loss)        $  139     $  (598)     $  198      $(272)      $ (533)


                          Year ended December 31, 2005
          ————————————————————
                         Communi-   Electronics    Not
          Connectivity   cation(a)  Components  allocated Consolidated
          ———— ———– ———– ———- ————

Revenues       $3,926     $ 2,954     $20,253      $ (80)     $27,053

Gross
profit        $2,425     $   783     $ 3,820      $   –      $ 7,028

Operating
profit
(loss)        $  235     $(2,374)    $   727      $(702)     $(2,114)

(a) Communication segment was sold at December 2005.


Contact:
Gelbart-Kahana Public Relations & Investors Relations
Mr. Emanuel Kahana,  +972-3-6074717 
info@gk-biz.com

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