B.O.S. Better Online Solutions Ltd. Reports First Quarter 2005 Results.TERADYON, Israel Israel, in the Bible Israel (ĭz`rēəl, ĭz`rāəl) [as understood by Hebrews,=he strives with God], according to the book of Genesis, name given to Jacob as eponymous ancestor of the Hebrews, the chosen people of God. -- B.O.S. Better Online Solutions Ltd. (the "Company" or "BOS") (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :BOSC) (TASE TASE Tel Aviv Stock Exchange TASE The All Seeing Eye TASE Tactical Air Support Element TASE Thrust Assessment Support Environment TASE Telecontrol Application Service Elements (IEC communications protocol) :BOSC) reported today its results for the quarter ended March 31, 2005. Revenues for the first quarter of 2005 were $7.3 million, compared to $1.2 million for the first quarter of 2004. Our revenues increased mainly due to the consolidation of Odem ODEM Order of Our Lady of Mercy (religious order) Electronic Technologies 1992 ("Odem") (related to the Electronic Component operating segment), which was acquired in November November: see month. 2004, as well as an increase of 60% in the sales of the Connectivity A generic term for connecting devices to each other in order to transfer data back and forth. It often refers to network connections, which embraces bridges, routers, switches and gateways as well as backbone networks. and Communication operating segments (including Quasar Telecom (2004) Ltd., which began operating in late September September: see month. 2004). Net loss for the first quarter of 2005 was $943,000 (or -$0.20 per share), compared to a net loss of $511,000 (or -$0.12 per share), for the comparable period in 2004. Gross profit for the first quarter of 2005 was $1.96 million, or 27% of revenues, compared to $670,000, or 56% of revenues, for the first quarter of 2004. The lower gross margin is due mainly to the consolidation of Odem's results since the gross margin of products sold by Odem is lower than the average gross margin of the Company's other products. Operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for the first quarter of 2005 was $533,000, compared to $452,000 for the first quarter of 2004. Financial expenses for the first quarter of 2005 were $161,000, compared to financial income of $15,000, for the first quarter of 2004. The financial expenses reflect the interest expenses related to the convertible note of a $2 million principal amount issued in June June: see month. 2004. During March 2005, $308,000 of the principal amount of the note were converted into 100,000 shares. As of March 31, 2005, the Company's balance sheet shows financial resources (cash, cash equivalents and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has ) of $4.5 million and loans (long and short term) of $3.5 million. Adiv Baruch Baruch, in the Bible Baruch (bər  k`, bā`rk), in the Bible. , BOS' CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. stated:
"The first quarter was characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by growth, and an increase in revenues alongside an increase in sales and marketing costs. This increase in costs was needed in order to strengthen the sales and marketing infrastructure in correlation correlation In statistics, the degree of association between two random variables. The correlation between the graphs of two data sets is the degree to which they resemble each other. with the Company's growth." Edouard Cukierman, Chairman of BOS commented: "I believe in the direction that the Company chose and its continuing implementation towards further growth. The Catalyst catalyst, substance that can cause a change in the rate of a chemical reaction without itself being consumed in the reaction; the changing of the reaction rate by use of a catalyst is called catalysis. fund, of which I am the CEO, is participating as a lead investor in the new investment round in the Company." About BOS BOS (www.boscorporate.com) which is traded on the NASDAQ (NASDAQ: BOSC - News) and on Tel-Aviv stock exchange (TASE: BOSC), was established in 1990. Through its subsidiary BOScom Ltd. it develops and markets three types of products under the BOSaNOVA brand: --A communications products line (www.boscom.com) provides innovative VoIP solutions to companies and organizations; --A connectivity products line (www.bosweb.com) provides connectivity solutions for IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) computers, from intermediate computers to personal computers and LAN (Local Area Network) A communications network that serves users within a confined geographical area. The "clients" are the user's workstations typically running Windows, although Mac and Linux clients are also used. networks; and --Software utilities products line (www.printbos.com) provides solutions for the design, distribution and management documents for a range of operating systems Operating systems can be categorized by technology, ownership, licensing, working state, usage, and by many other characteristics. In practice, many of these groupings may overlap. , including mainframe mainframe Digital computer designed for high-speed data processing with heavy use of input/output units such as large-capacity disks and printers. They have been used for such applications as payroll computations, accounting, business transactions, information retrieval, and UNIX UNIX Operating system for digital computers, developed by Ken Thompson of Bell Laboratories in 1969. It was initially designed for a single user (the name was a pun on the earlier operating system Multics). . In addition BOS supplies cellular adapters based on products of Quasar Communication Systems Ltd., whose assets were acquired by BOS, and design components and services through the ODEM Division, based on Odem Electronic Technologies 1992 Ltd. in which a controlling stake was also recently acquired. The forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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, including, but not limited to, those 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or 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 STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except per share data
Three months ended Year ended
March 31, December 31,
-------------------
2005 2004 2004
---------- -------- ------------
Revenues $ 7,272 $ 1,189 $ 8,282
Cost of revenues 5,314 519 4,608
--------- ------- ------------
Gross profit 1,958 670 3,674
--------- ------- ------------
Operating costs and expenses:
Research and development 736 423 2,296
Less - grants and participation - - (492)
Sales and marketing 919 292 1,706
General and administrative 836 407 1,705
--------- ------- ------------
Total operating costs and expenses 2,491 1,122 5,215
Operating loss (533) (452) (1,541)
Financial income (expenses), net (161) 15 (158)
--------- ------- ------------
Loss before taxes on income (694) (437) (1,699)
Taxes on income (59) - (20)
Equity in losses of an affiliated
company (145) (74) (308)
Minority interest in earnings of a
subsidiary (45) - (17)
---------- ------- ------------
Loss from continuing operations (943) (511) (2,044)
Loss related to discontinued
operations - - (9)
---------- ------- ------------
Net loss $ (943) $ (511) $ (2,053)
========== ======= ============
Basic and diluted net loss per share
from continuing operations $ (0.20) $ (0.12) $ (0.44)
========== ======= ============
Basic and diluted net loss per share
from discontinued operations $ - $ - $ -
========== ======= ============
Basic and diluted net loss of NIS
4.00 par value per share $ (0.20) $ (0.12) $ (0.44)
========== ======= ============
Revenues and gross profit (loss) for operating segments for the
first quarter of 2005 compared to the first quarter of 2004
Electronic
Connectivity Communication Components Total
-------------- ------------- ------------- --------------
Three months Three months Three months Three months
ended March ended March ended March ended March
31, 31, 31, 31,
-------------- ------------- ------------- --------------
2005 2004 2005 2004 2005 2004 2005 2004
------ ------ ----- ----- ------ ----- ------ -----
Revenues $1,504 $1,063 $ 919 $ 126 $4,849 $ - $7,272 $1,189
====== ====== ===== ===== ====== ===== ====== =====
Gross profit
(loss) $ 852 $ 680 $ 267 $ (10) $ 839 $ - $1,958 $ 670
====== ====== ===== ===== ====== ===== ====== =====
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands, except share and per share data
March 31, December 31,
2005 2004
--------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,189 $ 2,578
Marketable securities 1,580 2,324
Trade receivables 5,576 4,557
Other accounts receivable and prepaid expenses 885 722
Inventories 2,955 3,086
-------- --------
Total current assets 13,185 13,267
-------- --------
LONG-TERM ASSETS:
Marketable securities 751 757
Severance pay fund 1,106 1,143
Investment in affiliated company 2,327 2,472
Property, plant and equipment, net 982 1,019
Goodwill 1,573 1,569
Customer list, net 1,362 1,389
Other intangible assets, net 449 471
Other assets 356 398
-------- --------
Total long-term assets 8,906 9,218
$ 22,091 $ 22,485
======== ========
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands, except share and per share data
March 31, December
2005 31, 2004
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term loans from banks $ 1,982 $ 1,354
Current maturities of long-term bank loans and
convertible note 590 643
Trade payables 3,787 3,845
Employees and payroll accruals 679 664
Deferred revenues 442 364
Accrued expenses and other liabilities 1,041 1,141
-------- --------
Total current liabilities 8,521 8,011
-------- --------
LONG-TERM LIABILITIES:
Bank loans (net of current maturities) 41 54
Convertible note (net of current maturities) 900 1,151
Put option issued to minority shareholders in a
subsidiary 359 359
Deferred taxes 330 348
Accrued severance pay 1,435 1,468
-------- --------
Total long-term liabilities 3,065 3,380
-----
MINORITY INTEREST IN A SUBSIDIARY 843 809
======== ========
LIABILITIES RELATED TO DISCONTINUED OPERATIONS 237 237
======== ========
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY:
Share capital 4,915 4,823
Additional paid-in capital 44,650 44,426
Deferred stock-based compensation (157) (174)
Accumulated other comprehensive income 18 31
Accumulated deficit (40,001) (39,058)
-------- --------
Total shareholders' equity 9,425 10,048
-------------------------- -------- --------
Total liabilities and shareholder's equity $ 22,091 $ 22,485
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CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Three months Year
ended ended
March 31, December 31,
------------- -----------
2005 2004 2004
------- ------ -------
Cash flows from operating activities:
-------------------------------------
Net loss $ (943) $ (511) $(2,053)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Loss (income) from discontinued operations - - 9
Depreciation and amortization of
intangible assets 58 - 51
Depreciation of property, plant and
equipment 86 71 300
Amortization of marketable securities
premium 13 21 47
Accrued severance pay, net 4 (6) 8
Equity in losses of an affiliated company 145 74 308
Minority interest in earnings in a
subsidiary 45 - 17
Capital loss from sale of property and
equipment - - 5
Stock based compensation related to
warrants issued to service providers 58 33 121
Stock based compensation related to
options issued to employee 15 - 5
Amortization of financial expenses related
to issuance of convertible note 35 - 78
Decrease (increase) in trade receivables (1,055) 301 (342)
Decrease in deferred taxes (21) - (47)
Decrease in other accounts receivable and
prepaid expenses (168) (15) 33
Decrease (increase) in inventories 111 (39) (461)
Increase (decrease) in trade payables 111 110 961
Increase (decrease) in employees and
payroll accruals, deferred revenues,
accrued expenses and other liabilities 20 (123) (63)
------- ------ -------
Net cash provided by (used in) operating
activities from continuing operations (1,486) (84) (1,023)
Net cash provided by (used in) operating
activities from discontinued operations - (82) (96)
------- ------ -------
Net cash provided by (used in) operating
activities (1,486) (166) (1,119)
------- ------ -------
Cash flows from investing activities:
-------------------------------------
Purchase of property and equipment (54) (39) (214)
Proceeds from sale of property and equipment - - 38
Investment in long-term marketable
securities - (278) (1,247)
Acquisitions, net of cash acquired (139) - (1,443)
Proceeds from redemption of marketable
securities 731 - 1,000
------- ------ -------
Net cash provided by (used in) investing
activities from continuing operations 538 (317) (1,866)
Net cash used in investing activities from
discontinued operations - - -
------- ------ -------
Net cash provided by (used in) investing
activities 538 (317) (1,866)
------- ------ -------
Cash flows from financing activities:
-------------------------------------
Proceeds (repayment) of short term and long
term bank loans 632 - (93)
Proceeds from long term convertible note and
warrants, net of issuance expenses (21) - 1,787
Payment of long term convertible note (40) - (80)
------- ------ -------
Net cash provided by (used in) financing
activities from continuing operations 571 - 1,614
Net cash used in financing activities from
discontinued operations - - -
------- ------ -------
Net cash provided by (used in) financing
activities 571 - 1,614
------- ------ -------
Decrease in cash and cash equivalents (377) (483) (1,371)
Decrease in cash and cash equivalents from
discontinued operations 1 57 66
Effect of exchange rate changes on cash and
cash equivalents (13) - 11
Cash and cash equivalents at the beginning
of the year 2,578 3,872 3,872
------- ------ -------
Cash and cash equivalents at the end of the
year $ 2,189 $3,446 $ 2,578
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