ITEM 1. BUSINESS
Bogen Communications
International, Inc., (the “Registrant”, and together with its subsidiaries, the
“Company”), develops, produces and sells sound processing equipment,
telecommunications peripherals and Unified Messaging products and services,
through its direct subsidiaries.
The Company’s United States
business develops, manufactures, and/or distributes commercial
telecommunications and audio products through Bogen Corporation (“Bogen”) and
through its subsidiaries, Bogen Communications, Inc. (“BCI”) and Apogee Sound
International, LLC (“Apogee”).
The Company’s European business
develops, manufactures, and markets voicemail systems and Unified Messaging
products and services through Speech Design International, Inc. (“SDI”) and
through SDI’S subsidiaries, Speech Design GmbH (“Speech Design”) and Speech
Design Carrier Systems GmbH (Carrier Systems), formerly Digitronic
Computersysteme GmbH, both based in Germany, Satelco AG (“Satelco”), based in
Switzerland, and Speech Design (Israel) Ltd., based in Israel.
As used herein, “Bogen” shall
mean the business of Bogen Corporation and its subsidiaries, and “SDI” or
“Speech Design” shall mean Speech Design International Inc. and its
subsidiaries. Certain financial
information about the Company’s two business segments is included in Note 19 to
the Company’s Consolidated Financial Statements, included herein.
Bogen focuses on commercial,
engineered sound, and pro audio equipment and telecommunications (Telco)
peripherals for the voice and sound processing market. For about 70 years, Bogen has been a leader
in commercial amplifiers, speakers and intercom systems for background and
foreground music applications, as well as for security and educational
applications, and, more recently, message/music-on-hold systems (“MOH”) and has
expanded into the pro audio market. Bogen’s products are sold primarily through
a network of distributors, dealers and contractors.
Speech Design focuses on
digital voice processing systems for the mid-sized Private Branch Exchange
(“PABX”) market, targeting the underdeveloped European voice processing market.
With the launch in late 1995 of its product family called “Memo”, Speech Design
added innovative non-PC based voice mail systems to its existing line of
telecommunication peripheral products, which includes voice-mail, automated
attendants, digital announcers and message/music-on-hold systems. In late 1998, Speech Design introduced the
Teleserver Pro range of modular, higher-end (2-8 ports) voice and call
processing peripherals. In addition to
a higher capacity voice mail than possible with Memo, Teleserver also offers
LAN connectivity to PC networks and ACD (automatic call distribution)
functionality. In 1999, Speech Design
added Unified Messaging products and services, through its flagship product,
Thor(TM). Thor improves communications
within any enterprise and delivers value-added services to Internet service
providers (“ISPs”), as well as mobile and fixed-line network operators
(“carriers”). Thor integrates fax and
voice-mail into an existing e-mail environment, and e-mail and fax into the
mobile-phone environment. In 2000 and
2001, Thor was further developed to become a multifunctional added-value
services platform for carriers, delivering innovative new applications such as
SMS (Short Message Service) to fixed-line telephones.
Speech Design sells its
voicemail products through leading European telephone switch manufacturers in
Germany, and through major independent dealers outside Germany. Speech Design’s
Thor Unified Messaging system in its enterprise version is sold through switch
manufacturers and IT system integrators. In addition, Thor unified messaging
services and platforms are sold directly to mobile and fixed-line carriers and
Internet Service Providers (“ISPs”), primarily in Europe but also in emerging
markets.
The Registrant is a Delaware
corporation whose principal executive offices are located at 50 Spring Street,
Ramsey, New Jersey 07446 and its telephone number is (201) 934-8500.
COMPANY HISTORY
The Registrant, formerly known
as European Gateway Acquisition Corp., was formed on May 6, 1993. On October 13, 1993, the Registrant
consummated an initial public offering (the “IPO”) of units consisting of one
share of the Registrant’s common stock, $.001 par value per share (“Common
Stock”), and two warrants (the “Warrants”), each entitling the holder thereof
to purchase one share of Common Stock.
The Company called such Warrants for redemption as of May 1, 2000. An aggregate of 64,615 warrants were not
exercised prior to such date and were cancelled and redeemed for $.01 per
Warrant.
In 1995, the Registrant
acquired from Geotek Communications Inc. (“Geotek”) approximately 67% of the
outstanding capital stock of Speech Design and approximately 99% of the
outstanding capital stock of Bogen.
On May 20, 1998, the Company
consummated the acquisition of the remaining 33% equity interest in Speech
Design, held by the founders and managing directors of Speech Design. The
aggregate consideration paid by the Company for the 33% equity interest
approximated U.S. $8.8 million before acquisition costs, consisting of DM
7,570,000 (approximately U.S. $4.8 million) in cash and 458,000 restricted
shares of the Common Stock.
On December 31, 1998, Speech
Design acquired 100% of Carrier Systems, located in northern Germany. Carrier Systems is a developer and
manufacturer of LAN and Internet based unified messaging products. The
aggregate purchase price, including direct costs of $145,000, amounted to
approximately $1.2 million in cash and assumption of certain liabilities. The
terms of the acquisition agreement also provide for additional cash
consideration up to DM 2.8 million (or approximately $1.7 million) to be paid
based on achievement of targeted sales levels. Such targeted levels have not
been met in the past and may be modified for future periods.
On August 26, 1999, Bogen
Communications Inc., through Apogee Sound International, LLC (“Apogee”), a
newly formed Bogen subsidiary, acquired substantially all of the assets of
Apogee Sound Inc., a privately held company headquartered in Petaluma,
California. Consideration for the
acquisition was the assumption or payment of approximately $2.6 million of
Apogee Sound Inc.’s liabilities.
On September 27, 2001, an agreement
was signed with 2.T-Telematik Venture Beteiligungsgesellschaft mgH
(“T-Venture”), a venture capital subsidiary of Deutsche Telekom AG, a world
leader in telecommunications, to sell 2% of SDI, a newly-formed Company
subsidiary which now holds all equity in Speech Design, the company’s European
operation, to T-Venture. Sale of the SDI common stock minority holding was for
approximately 842,000 Euros, about $765,000.
T-Venture also received a warrant to purchase another 2% of SDI shares
at prices that, if SDI becomes separately traded, would be established at a
discount to initial public market prices.
Separately, T-Venture signed a marketing agreement entitling it to
receive 1% of SDI stock if T-Venture assisted Speech Design in attaining
certain Unified Messaging sales objectives by December 31, 2001. The marketing agreement expired without
being exercised at December 31, 2001.
See below under the headings
“Bogen” and “Speech Design” for a discussion of other acquisitions consummated
by the Company. To further its growth
objectives, the Company continually seeks out, and evaluates, other
acquisitions of companies or product lines that are complementary to its
current businesses and products, and considers itself adequately capitalized to
consummate acquisitions that may be desirable.
BOGEN (DOMESTIC
OPERATIONS)
Since its founding in 1932,
Bogen has been involved in the commercial audio industry and currently
develops, sources, assembles and distributes sound processing equipment and
telecommunications peripherals through its wholly-owned subsidiary, BCI.
Bogen’s audio products include:
commercial audio amplifiers and speakers; related sound and intercom systems
equipment for professional, industrial and commercial system applications;
equipment for background and foreground music applications; and intercom and
communications systems for the security and educational markets, and telephone
paging systems.
acquired through its newly formed subsidiary,
Apogee, substantially all of the assets of Apogee Sound, Inc., a privately held
company headquartered in California.
Through Apogee, Bogen manufactures and distributes amplifiers, speakers,
and related products to the professional audio market.
BOGEN’S PRODUCT LINES
TELCO
Bogen’s Telco products consist
of telephone-based overhead paging systems and equipment and digital
message/music-on-hold players. These
products allow installers to increase the value of their telephone system offerings
by providing users with enhanced efficiency and convenience. During 1999, Bogen’s Easy Install(TM)
Speakers (2 models) and Easy Design(TM) Speakers (5 models) were introduced to
the market. These products and their
corresponding design support tools are targeted at market segments that require
faster install time and have little experience in designing sound systems. Although the speakers were initially
designed for Telco products, they are adaptable to all of Bogen’s product lines.
Bogen’s Telco net sales for the
years ended December 31, 2001, 2000, and 1999 were $14,313,000, $16,773,000 and
$13,335,000, respectively. Telco net
sales provided 25.1%, 25.6%, and 22.6% of the Company’s net sales for these
respective years. Speech Design also
has a Telco line of products, the sales of which are included below under the
heading “Speech Design - Product Line”.
COMMERCIAL AUDIO
Bogen’s Commercial Audio
product line consists of amplifiers, speakers, microphones, intercom systems
and other sound equipment used in non-consumer applications, such as industrial
public address systems, and background music in offices, restaurants, hotels,
and stores. During 1997, NEAR’s All
Environment Speakers were added to Commercial Audio’s product line.
Commercial Audio net sales for
the years ended December 31, 2001, 2000, and 1999 were $9,251,000, $9,648,000
and $11,060,000, respectively.
Commercial Audio provided 16.2%, 14.7%, and 18.8% of the Company’s net
sales for the years ended December 31, 2001, 2000 and 1999, respectively.
PRO-AUDIO
In August 1999, Bogen acquired
the Apogee product line, which includes speakers and speaker systems,
amplifiers, processors, and system-balancing and design equipment for
entertainment sound systems. Pro-Audio
sales for the years ended December 31, 2001 and 2000, and the four months ended
December 31, 1999, were $5,013,000, $5,906,000, and $2,185,000,
respectively. Pro-Audio sales accounted
for 8.8%, 9.0% and 3.7% of the Company’s consolidated net sales for those
years.
ENGINEERED SYSTEMS
Bogen’s Engineered Systems
product line features custom designed intercom/paging systems that are sold to
contractors for installation primarily in schools.
During the second quarter of
1999, Bogen added a new line of Multi-Media Controllers, marketed under the
trade name “iQuest (TM)”. Its Internet
Protocol (“IP”) based communication format allows educators to administer,
schedule, view and control educational media resources (such as multiple VCRs,
DVDs, Laser Disks, and others devices) remotely located in their school’s media
center. In 2001 Engineered Systems expanded its market with the addition and
introduction of the institutional clock product line.
Engineered Systems net sales
for the years ended December 31, 2001, 2000, and 1999 were $11,631,000,
$12,647,000, and $10,741,000, respectively.
Engineered Systems net sales accounted for 20.3%, 19.3% and 18.2% of the
Company’s net sales for the years ended December 31, 2001, 2000, and 1999,
respectively.
BOGEN’S SALES AND
MARKETING
TELCO PRODUCT LINES
Bogen distributes its Telco
products to approximately 100 distributors who operate 200 telecommunications
distribution centers. These
distributors sell to thousands of telecommunications installers, interconnects
dealers, and VAR’s across North America.
In addition to its distribution network, Bogen has a relationship with
about 50 message/music-on-hold studios that specialize in creating custom
messages. These studios sell their services along with Bogen’s Telco
products. Bogen also has an original
equipment manufacturer (OEM) agreement to supply private label overhead paging
systems to Avaya Communications, a spin-off from Lucent Technologies
(“Lucent”), and Exp@nets, also a Lucent spin-off.
Bogen markets its Telco
products through a team of regional sales representatives, who sell Bogen’s
Telco and other complementary products to distributors in their assigned
territories.
COMMERCIAL AUDIO, PRO-AUDIO, AND ENGINEERED
SYSTEMS PRODUCT LINES
Bogen’s Commercial Audio
products are marketed through several independent manufacturers’
representatives under the direction of Bogen’s internal sales management
team. Bogen’s Engineered Systems
products are sold to a network of contractors covering North America by a staff
of Bogen-employed Regional Managers.
The field sales personnel receive a salary and bonus based on
performance and the representatives are compensated on a commission basis.
Sales agreements are maintained with all of Bogen’s independent sales representatives
and Engineered Systems contractors. The sales representative agreements
typically permit the sale of Bogen products by the representative in a specific
territory assigned to one sales representative firm. Similarly, the Engineered Systems contractor agreements typically
allow the contractor to purchase and install specific product lines in a
designated territory.
Bogen distributes its
Commercial Audio products through about 1,000 active sound contractors, sound
equipment and electronic distributors, and audio dealers, and is often sold as
a complete system solution designed to satisfy an end-user’s specific needs.
Virtually every major master sound products distributor, industrial equipment
distributor, and commercial security products distributor in North America
stocks Bogen’s Commercial Audio products.
In addition, approximately 200 major contractors and dealers market
Bogen’s Engineered Systems. The
principal users of these products are industrial, professional, commercial and
civic concerns and institutions such as schools, nursing homes, correctional
facilities, retail stores, restaurants and churches. Bogen’s management
believes that these user markets are relatively stable and that Bogen has
developed significant name recognition in these markets.
The Apogee product line was
acquired by Bogen in August 1999 and consists of a worldwide network of almost
250 distributors, touring companies, and contractors who specialize in the area
of entertainment sound systems. The
wide Apogee line includes speakers and speaker systems, amplifiers, processors
and system balancing and design equipment.
Apogee speaker products range from compact cabinets for foreground music
applications to large arrays that can accommodate applications in theaters, arenas,
stadiums, and other larger facilities where high-quality entertainment sound is
required. In addition to a base of
customers in the United States, approximately 45% of Apogee’s business in 2001
was derived from export sales.
NEW
PRODUCTS INTRODUCTION
In 2001, Bogen introduced a
number of new products through its various channels. Leveraging its strong distribution into the telecommunications
channel, Bogen introduced its telephone headset line and a companion amplifier
in late 2001, with a positive sales impact anticipated in 2002. Following Bogen’s philosophy of expanding
its line into product categories with large market size and capitalizing on its
sizable channels of distribution, Bogen enters a headset market in excess of
$400 million, far greater than the market size/potential of its core
telecommunications paging products.
This product offering consists of both monaural and binaural headsets
and a unique headset amplifier that automatically optimizes its electrical
parameters for operation with the host telephone.
Also in 2001, Bogen expanded
its product offering of high power dual-channel amplifiers with the
introduction of the Black Max series of dual-channel, 70-volt amplifiers.
Although the primary focus is in the Commercial Audio market, it will sell
across all channels. A fast follow-up
to last year’s introduction of the M-Class series of high powered dual
amplifiers, the Black Max amplifiers address a growing need for two-channel audio
in distributed commercial systems and further positions Bogen as a manufacturer
of high-quality, high-powered amplifiers.
This line of three products uses the same 600W/450W/300W per channel
power levels as the M-Class amplifiers and a low power sleep mode that saves
power in applications where paging is infrequent. The Black Max line is designed to be more economical for general
purpose paging applications where budgets are constrained.
Bogen also introduced the CDC 3
multi-disc CD changer in 2001.The CDC 3 is an industrial-grade, three-disc CD
changer with specific mechanical and electrical features that are unavailable
in products designed for the consumer market. These features include, integral
rack mounting brackets, all metal enclosure construction with heavy aluminum
face plate, auxiliary music source feed through (the aux source plays through
he CDC 3 when ever it is in stop mode), both stereo and mono outputs and an
output level control. Bogen’s product offering in the area of music sources had
previously been limited to AM/FM turners and receivers and cassette players.
The CDC 3 allows expansion into the more popular CD market.
In 2001 Bogen introduced the
CAM2 microphone mixer as a follow up to last years introduction of the CAM8
series of microphone mixers. The CAM2 is a significant up grade of Bogen’s
venerable CAM microphone mixer. Improvements include output level meter, clip
indicators for each input channel, phantom microphone power per input and a
dual level signal output to mention a few. The CAM 2 is a popular distributor
item because of its economical price and simple operation. The CAM 2 is
intended to improve the unit’s popularity through a much-enhanced feature set
while selling at a price similar to the CAM.
Capitalizing on the well-known
Apogee name, Bogen’s Engineered Systems division introduced a selected group of
Apogee products that address the school auditorium and gymnasium markets. The addition of these products to the
channel product mix allows Engineered Systems contractors to use Bogen products
for the full scope of school audio needs.
Engineered Systems also introduced a digital video server enhancement to
the highly successful iQuest product line.
The DVS provides Video On Demand to the classroom and/or the desktop. Video material may be scheduled, reserved,
and delivered via network streaming or broadband or baseband distribution
throughout the school.
In 2001, Apogee introduced its
large-scale concert Line Array series, ALA9, to round out its existing ALA
series products and address the largest of performing sound needs. More importantly, Apogee introduced the APL
family of self-amplified loudspeakers consisting of 7 products, the APL-220,
APL-500, APL-800 full-range loudspeakers and APL10, APL-12 and APL-SB sub
woofers. Self-amplifier loudspeakers are an emerging class of loudspeaker
product where the high-powered amplifiers (1000 watts and greater) are packaged
into the loudspeaker enclosure providing an extremely compact audio system and
ensuring that the amplifiers are perfectly matched to their speaker load. The
APL products use innovative amplifier designs that produce professional grade
sound quality while occupying a small amount of space and producing a minimum
of waste heat. The subwoofer products use amplifiers capable of producing total
powers of 1000 and 2000 watts (depending on model). The APL full-rang products
use two amplifiers (one dedicated to the high frequencies and one dedicated to
low frequencies) with total output powers of up to 800 watts. The new APL series is expected to be a factor
driving Apogee’s revenue growth in 2002.
BOGEN’S SALES OUTSIDE THE U.S.
Although Bogen’s sales are
primarily in the United States, Bogen also sells its products in Canada through
a stocking representative with offices throughout Canada. Telco export sales to Europe are handled
through the Company’s subsidiaries in Europe. Export sales to other foreign
countries are handled in the same manner as sales within the United States
(i.e., through distributors, dealers and contractors that purchase the products
and sell them to an established account base overseas). Sales outside the U.S. accounted for less
than 10% of Bogen’s revenues in each of the last three fiscal years. Bogen
recognizes sales as foreign based upon shipping destination.
BOGEN’S SOURCING AND
MATERIALS
All components and raw
materials used in the construction of Bogen’s products are of standard
commercial quality or better, and are readily available from overseas and
United States suppliers. Bogen relies
principally upon established suppliers and subcontractors primarily located in
the Republic of South Korea, and to a lesser extent elsewhere in East Asia, and
the United States. These suppliers and
sub-contractors either produce sub-assemblies for use in the finished product
or produce and assemble the finished products themselves. Products are based on Bogen designs and are
built in accordance with Bogen drawings and specifications. The majority of Apogee’s finished products
are manufactured in its Petaluma, California, facility. Efforts to optimize all aspects of Apogee’s
supply chain began in 2000 and continued into 2001. Cost savings and quality improvements were realized during 2001
and are reflected in Apogee’s current cost structure.
In view of periodic economic
instability in Asia, the Company takes precautions to ensure that production
will continue without interruption such as assuring, to the extent practicable,
that alternative sources of supplies and subcontractors are available. There can be no assurance, however, that
events beyond the Company’s control, including, without limitation, the
financial requirements of any of the Company’s suppliers and subcontractors,
will not disrupt the production schedule or the Company’s source of
supplies. Any such disruption may have
a material adverse effect on the Company’s results of operations.
BOGEN’S PATENTS AND
TRADEMARKS
“Bogen(R)” is a trademark of
the Company, which is registered in the United States and in certain foreign
countries throughout the world. The
trademark expires in the United States and in these countries between 2009 and
2010. Trademark applications and
renewals for the Bogen mark have been filed in other countries. Bogen has also obtained U.S. trademark
registration for the trade name “Multicom2000(R)”. This trademark is utilized in connection with Engineered Systems
and expires in June 2011. Bogen has
obtained U.S. trademark registration for the trademark “NEAR”. This trademark expires in November
2011. In addition, Bogen holds a U.S.
trademark for the mark “Speech Design(R)”, which will expire on December 31,
2006, and which can be renewed at that time for an additional ten years. Other trademarks currently in the
application process include “NEAR Armadillo Speakers”, “Easy Install Speakers”,
and “iQuest”. The Company believes that
certain of these trademarks provide substantial value to the Company.
In June 1998, Bogen was awarded
a patent for the technology of its Pro Matrix(TM) amplifier product. In June 1999, Bogen was awarded a US patent
for its Pro DRDX product (an MOH system) technology. NEAR(TM) has two patents related to its speaker products, one for
its MLS (Magnetic Liquid Suspension) Spider less cone speaker expiring in 2011
and the other for an in-ground sub-woofer, which was granted in 1998, expiring
in 2015. In 2000, the Company received
a design patent on its NEAR A-Series™ speakers.
In 2000, the Company applied
for a patent for its highly innovative Easy InstallÔ
speakers and in 2001, it applied for a patent for the technology used in its
M-Class and Black Max amplifier products.
There is no assurance that the Company’s patent applications will be
granted, or, if granted, that they will provide the Company with exclusive
rights to sell or market a particular line of such product.
BOGEN’S RESEARCH AND
DEVELOPMENT
Bogen’s in-house engineering
department (“R&D”) is responsible for all phases of new product
development, continuing support of existing product, specification and project
management of products developed by its offshore development group and OEM
product evaluations.
During the first half of 2001
much of Bogen’s engineering resources were consumed in the development of the
Black Max amplifier family. This product family was conceived, developed and
delivered within a 7-month period. In certain circumstances, Bogen’s R&D
creates derivative products, which typically address a set of features
complementary to the original product thereby accessing adjacent markets.
Derivative products not only provide the advantage of fast time to market, they
also provide a means for second generation improvements in the original product
and greatly improve amortization of tooling which is also used, in large part,
by the derivative products.
Also during 2001 Bogen
undertook development of a new line of modular input amplifiers to replace its
aging existing line of product. Expected to be available during the first
quarter of 2002, the new line of products will have added features and is
intended to compete well against alternative products.
As a complement to this line of
modular amplifier, Bogen’s product development group worked on creating 5 new
modules to expand the existing line of 6 modules that were developed in 2000
for the M-Class introduction. These modules provide functions that would
normally be available only by using external equipment, and they provide this
functionality at comparatively low costs. Surface mount technology was used
heavily in these designs because of the space saving the technology provides.
Bogen’s product development
group also continued work with overseas vendors to produce high-quality audio
drivers used in Apogee speaker products.
This effort resulted in the redesign of a majority of Apogee’s drivers,
which provided 3 benefits; 1) Significant cost savings, 2) relief from single
source vendors, 3) process improvement whereby the vendors now perform
manufacturing steps previously performed as a secondary operation in Apogee’s
factory. All drivers were critically matched to the existing drivers to ensure
that customers would not be affected by the change in driver manufacturers.
Bogen’s product development
group partnered with a large manufacturer of headsets to create the current
line of Bogen headsets. Bogen performed critical product evaluations on product
iterations, electrical evaluations on the amplifiers and assistance in
obtaining the required safety and FCC approvals for the products.
During 2001 the product
development group partnered with a Korean development group to produce a
high-quality, full-duplex speakerphone. This product is now undergoing the
necessary regulatory approval testing.
During 2001, Apogee’s in-house
engineering department completed development of the APL series of self-powered
loudspeakers. This new product line of 7 products is based on and revitalizes
well-established and accepted loudspeaker products. The line provides an extremely compact means of creating an audio
system by building the high-powered amplifiers into the speaker enclosure. The
speakers in this product line were derived from Apogee’s best selling passive
speakers and maintained the same form factors. This allows customers who have
already made an investment in mounting hardware to use the APL products without
the need to purchase new hardware. Special high-efficiency amplifiers were
needed for these products. These loudspeakers have been joined with the most
up-to-date amplifier technology to produce products that have the greatest ease
of use and overall performance of any product currently on the market. Apogee partnered with two companies
producing innovative high-powered (up to 1000 watts) and high-performance amplifiers
in order to obtain amplifiers small enough in size and low enough in heat
dissipation to meet the strict requirement of the APL products. Apogee’s
in-house engineering then designed the critical front-end processing
electronics that protect and enhance the performance of the speakers.
Research has also begun on a
DSP card as an option in the new APL series.
First phase prototypes have already been produced. This card would allow the speaker to have,
internally, several previously external processing devices like equalizers and
digital delays. The devices would be
controlled via network connection to each loudspeaker. Also, the new card would allow digital audio
distribution directly to the loudspeaker.
The above feature set currently does not exist in the marketplace in a
single unified package.
Additionally, research was
started on improvements to Apogee’s ACS line speaker products. The improvements
being considered address product industrial design, performance, and cost
There can be no assurances that
any new products will be able to compete with similar products offered by other
manufacturers.
Research and development
expenditures for the years ended December 31, 2001, 2000, and 1999 were
$1,774,000, $1,703,000 and $1,971,000, respectively.
BOGEN’S
COMPETITION AND MAJOR CUSTOMERS
Bogen’s competition varies by
market and product line. Bogen competes
on name recognition, price, delivery, availability, innovation and product
features and quality. However, such
factors vary in relative importance depending on the markets and products
involved. Bogen has concentrated on
markets in which it believes that it can obtain a significant market share, be
one of the top two or three suppliers, or which have substantial growth
potential. Bogen’s key strength
continues to be its distribution channels and name recognition, especially in
the school market, background/foreground music market, overhead paging, and the
security markets.
Bogen’s Telco products compete
in the overhead paging and Music-On-Hold (`MOH”) niches of the Telco
market. In the over-head paging
market, Bogen’s main competitor is Valcom, Inc., a company that has been
established in this market for several decades. Several other U.S. companies, which have been losing market share
over the past few years, and several companies attempting to enter the market
also compete with Bogen’s overhead paging products. Bogen believes it has increased its share in recent years. In the MOH market, Bogen’s competitors are
relatively small companies that offer basic systems.
The Commercial Audio customer
market is characterized by intense competition, particularly from several
overseas companies, with no one company accounting for more than 10% of the
U.S. market. At the contractor level,
Bogen faces competition from many sources, including a number of overseas
companies. There are a number of
comparatively small manufacturers with whom Bogen competes, whose sales and
market share depend upon established reputation for quality and support and
solid relationships with their account base.
Bogen concentrates on customer needs to design, manufacture, and market
tailored packaged solutions for each particular vertical market.
The Engineered System customer
market is a highly specialized market characterized by low unit volume and high
dollar sales. Bogen’s principal
competition comes from Rauland Borg Corp., the market leader in this area, and
Dukane Corporation, each of which, like Bogen, has been in the market for
several decades and has well established name recognition and distribution
channels.
BACKLOG
OF ORDERS
As of December 31, 2001, Bogen
had a backlog of firm orders of about $1,138,000, all of which it expects to
fill within 2002. As of December 31,
2000, Bogen had a backlog of firm orders of approximately $1,320,000, all of
which were filled in 2001.
SPEECH
DESIGN (FOREIGN OPERATIONS)
Speech Design, located in
Germering, Germany, outside Munich, and Hamburg, Germany, develops, manufactures
and markets telephone peripheral hardware utilizing digital voice processing
technologies.
Speech Design product lines
include voice mail systems, automated attendants, digital announcers,
message/music-on-hold systems and Unified Messaging products and services.
Speech Design’s products are in the Telco line of products.
In late 1995, Speech Design
launched its “Memo(TM)” product line of stand-alone non-PC based voice mail
peripherals for small-to-medium PABX’s.
The high-end Memo-CDA model includes a CD based music and information on
hold system. Memo offers full
integration with most of the popular PABX models on the European market and has
rapidly become one of the fastest selling voice mail systems in the 2 - 4 port
(channel) category. In late 1998, Speech Design introduced the “Teleserver
Pro(TM)” range of modular, higher-end (2 - 8 port) voice and call processing
peripherals. In addition to higher
capacity voice mail than possible with Memo, Teleserver also offers ACD
(automatic call distribution) functionality.
On December 31, 1998, Speech
Design acquired 100% of Carrier Systems, located in northern Germany. Carrier
Systems is a developer and manufacturer of LAN and Internet-based Unified Messaging
products. It’s flagship product, Thor™, improves communications within any
enterprise and delivers value-added services to Internet service providers
(“ISPs”) and mobile as well as fixed-line carriers. Thor integrates fax and voice mail into an existing e-mail
environment. The user can retrieve and
manipulate all messages either locally, using the familiar PC-desktop, or
remotely, via an Internet computer, telephone or fax machine from anywhere in
the world. Services such as listening
to e-mails on the telephone, forwarding e-mails or faxes to a fax machine
nearby, or message notification to a mobile phone are available. Thor has been sold to several major ISPs
operating in Europe, including America On Line, 1&1, GMX, and Easynet. Deutsche Telekom (“DT”), Europe’s largest
telecommunications company, selected Thor as the strategic platform for its
added value messaging services in the fixed-line network. In 2001, three Thor-based services were
launched by DT. Based on the DT
experience, further carrier projects were implemented with e-plus in Germany
(e-mail reading on the mobile telephone), TDC in Denmark, and Vodacom in South
Africa (both SMS-to-Voice: delivery of SMS messages to fixed-line telephones).
The enterprise version of Thor, compatible with MS Exchange, Lotus Notes and
other corporate e-mail servers, was launched in mid-1999.
SPEECH DESIGN’S
PRODUCT LINE
Speech Design’s products are in
the Telco line. Telco net sales
provided by Speech Design were $16,935,000, $20,546,000 and $21,556,000 for the
years ended December 31, 2001, 2000, and 1999, respectively. Speech Design Telco sales amounted to 29.6%,
31.4% and 36.7% of the Company’s consolidated net sales for these years.
SPEECH DESIGN’S SALES
AND MARKETING
The general market for Speech
Design’s products is the underdeveloped European voice processing market for
commercial and industrial end-users.
According to the Company’s estimates, the current penetration in Europe
of applications such as voice mail is very low compared to the levels in the
U.S. In 1999, Speech Design entered the
innovative and rapidly growing Unified Messaging market.
In 1994, Speech Design acquired
a 67% interest in Satelco, a Swiss company that is a marketer of telephone
peripherals and a distributor of Speech Design’s and Bogen’s products. In order to further support its efforts to
enter the UK market, Speech Design founded a sales subsidiary, Speech Design
(UK) Ltd., in early 1996. Due to a
slower-than-expected UK market development, Speech Design (UK) Ltd. was closed
effective December 31, 2000 (Speech Design continues to sell to UK customers
directly from Germany). Sales outside
of Germany constituted 19% of total sales in 2001; up from 16% in 2000.
In mid-1996, a manufacturing
subsidiary, Speech Design (Israel) Ltd., was founded in Israel and has assumed
production of certain product lines from Speech Design, resulting in reduced
manufacturing cost and tax levels. The
Israeli facility was granted a 10-year income-tax exemption effective January
1, 1997. In 2001, approximately 30% of
all units manufactured by Speech Design came from the Israel facility.
Speech Design markets its PABX
peripherals to major manufacturers and distributors of PABX systems throughout
Europe for use by mid-size companies consisting of approximately 50-200
employees. PABX’s are multiple-line
business telephone systems, which are installed at end users’ businesses to
facilitate internal and external communications. The PABX is an alternative to providing each employee in a company
with his or her own direct line. The
major manufacturers integrate Speech Design’s products with their PABX’s for
sale to the end-user as part of a new system.
The increased visibility of Speech Design’s products has led to more
Speech Design peripherals being sold to owners of previously installed PABX’s.
Speech Design attempts to
differentiate itself both from high-end suppliers of large customized systems
and suppliers of semi-professional, price-sensitive solutions for the small
company sector by providing standard, high-quality, affordable and easy-to-use
products for the small to mid-size PABX.
Speech Design sells its
voicemail products through resellers.
In Germany, Speech Design’s main customers are sales organizations of
leading PABX manufacturers and major independent dealers. In other European countries, Speech Design
has exclusive agreements with national distributors, which in Switzerland is a
Speech Design subsidiary, which market to the reseller base in their respective
territories. Sales to three customers
of Speech Design totaled approximately $10,305,000, accounting for 60% of
Speech Design’s net sales in 2001.
Thor unified messaging systems
are sold directly to service providers (ISP’s and telecommunications carriers)
as well as indirectly (through PABX manufacturers and IT system integrators) to
corporate customers. In 2001, Speech
Design has focused on developing sales of Thor platforms to mobile and fixed
line network operators (“carriers”). A
major contract was signed with Deutsche Telekom (“DT”) in late 2000, with three
different services launched in 2001.
Revenues consist of per-mailbox pricing, maintenance fees, and certain
development/customization fees. In
addition, some contracts with ISP’s/carriers are based on revenue-sharing: the ISP or carrier provides access to their
customer base and marketing support, while the end-user pays a per-minute toll
to access Thor services (for example e-mail reading on the mobile telephone)
and a portion of this revenue is passed back to Speech Design. In late 2001, several major international
carriers started Thor-based services: e-plus in Germany, TDC (formerly
TeleDanmark) in Denmark, and Vodacom in South Africa.
GERMANY
In Germany, Speech Design has
developed an effective approach for local distribution of voice processing
products. Speech Design sells directly to the regional sales offices of the
leading manufacturers of PABX equipment including Siemens, Tenovis (formerly Bosch
Telecom), DeTeWe and DT. Approximately
63% of Speech Design’s sales are to these customers (which percentage
corresponds to these manufacturers’ approximate joint share of the PABX
market). Speech Design has achieved
central pricing agreements and technical as well as commercial endorsements
from the headquarters of each of these companies. The regional offices of these companies consist of approximately
200 locations and a combined sales force of approximately 3,000 people. Speech Design’s sales and technical team
supports and motivates the regional sales forces of the large PABX companies to
actively market Speech Design’s products.
Speech Design routinely updates its data bank of all PABX sales
representatives in Germany to help the sales team optimize communications and
efficiency. In late 1999, Speech Design
entered into an OEM agreement with DT, under which DT resells the full range of
Speech Design’s voicemail products. DT offers the systems under its own
“Octopus Mail” trademark to its installed base of customers, as well as to new
switch customers.
In 2001, Speech Design
continued to intensify its efforts to sell voice mail systems to the installed
switch base (“the aftermarket”). Since
the Company’s distributors mainly focus on sales to new switch customers, the
aftermarket is largely under-penetrated and offers significant sales
potential. The aftermarket effort
centers on the high-end Teleserver product.
Speech Design considers its
sales network in Germany, Europe’s largest telecommunications market, to be one
of its most valuable assets and a market entry barrier to potential
competitors.
For the enterprise version of
Thor, Speech Design uses the existing PABX sales channel and builds an
additional IT system integrator reseller network. For Thor sales to ISP’s and carriers, potential German customers
in this field are being approached directly by Speech Design’s senior key
account executives.
OUTSIDE OF GERMANY
Speech Design utilizes
exclusive national distributors in selected European markets (Austria, Belgium,
Denmark, Finland, France, Italy, The Netherlands, Sweden, and
Switzerland). These distributors -
other than Satelco - are independent resellers of telecommunications equipment,
who market Speech Design’s products to local manufacturers and distributors of
PABX’s. Speech Design’s key account managers based in Germany are offering Thor
platforms and services to selected European ISP’s and carriers.
SPEECH DESIGN’S SOURCING AND MATERIAL
Speech Design manufactures its
products in cooperation with a network of German subcontractors and its Israeli
subsidiary. Speech Design purchases all
mechanical and electronic components for its products and ships them for
board-level assembly work by its subcontractors. Speech Design’s own manufacturing group assembles finished
products from pre-tested modules and performs final quality tests.
Thor Unified Messaging systems
are assembled from standard PC-server components (mainly sourced from Compaq)
and standard communications boards from several suppliers.
Speech Design maintains a
computerized order processing and warehouse system and a level of product
availability that generally enables it to deliver products in Germany on an
average of three days after receipt of an order and within two weeks after
receipt of an order from other countries.
SPEECH
DESIGN’S PATENTS AND TRADEMARKS
“Speech DesignÔ”
is a registered trademark in Germany and the U.S. Several of Speech Design’s
products also have registered trademarks including: Thor ™, MozartÔ,
GeniusÔ, and SissyÔ.
SPEECH
DESIGN’S RESEARCH AND DEVELOPMENT
Speech Design’s in-house
engineering department is responsible for research and development and
production engineering of all Speech Design products. In 2001, the R&D department maintained its focus on the
development of Speech Design’s next generation call processing platform,
suitable both for integration into PABX’s (switches) and for stand-alone
operation. The platform offers higher
scalability (up to 30 ports), digital (ISDN) interfaces and a standard,
open-platform operating system (Linux).
In comparison, the currently marketed Memo and Teleserver product lines
cannot be switch-integrated, scale to a maximum of 8 ports, have analog-only
interfaces and are based on a proprietary operating system. Under an OEM and Licensing Agreement, the
first implementation of the new platform is an integrated voicemail system for
a leading European switch manufacturer, to be launched in early 2002.
The R&D team responsible
for the development of the Thor unified messaging platform and services is
based at Carrier Systems. In 2001, the
main effort was to complete the development of a turnkey system aimed at ISPs
and mobile telcos, offering customers a rapid service rollout with a minimum
investment of their own in-house resources.
The package includes web-based registration infrastructure, database
management and customized front-end design.
Customization of Thor for several added-value services at DT and three
other carrier customers, along with the introduction of new applications such
as SMS-to-voice, accounted for a significant portion of the engineering effort
in 2001. In addition, the core technology
team continued to expand Thor capabilities by including voice recognition,
telephone access to PIM (Personal Information Manager) functions, voice-XML
standards, and other areas.
Research and development
expenditures for the years ended December 31, 2001, 2000, and 1999, were
$1,982,000, $1,048,000, and $2,448,000.
The lower level of expenditure in 2000 was due to the accounting
treatment of an OEM development project (development costs charged to COGS) and
from the capitalization of third-party costs to subcontractors for the
development of TeamPro (the Teleserver call distribution subsystem).
SPEECH
DESIGN’S COMPETITION
In Germany, Speech Design is
the acknowledged market leader in the small to mid-size PABX peripherals
market. Speech Design’s main competitor
in Germany is a provider of telephone peripherals primarily at the low-end of
the Speech Design product range (simple music-on-hold units and announcers).
There is no single dominating
company in the European market for small to mid-size PABX peripherals. With the exception of Northern Telecom,
Lucent, and a handful of other competitors who are highly focused on the large,
customized systems market, Speech Design’s competition comes from a large
number of smaller companies offering PC-based voice mail systems. These companies tend to be highly focused in
their national markets and generally cannot afford to be global players due to
the cost of establishing distribution channels and gaining regulatory approval
for selling telecommunications products in each country.
In the emerging market of
Unified Messaging, Speech Design’s main competitor in the corporate area in
Germany is Cycos, while the competition in the carrier market mainly consists
of companies that have supplied mobile and fixed-line operators with their
voice mail infrastructure. Such vendors
(Comverse, Lucent, Unisys and others) see Unified Messaging as an opportunity
to up-sell to the existing voice mail-only customer base.
Management believes that the
combination of Speech Design’s mid-size PABX focus, broad and unique product
range and Europe-wide distribution presence may enable Speech Design to become
a leading provider of telephone peripherals in many European countries. There can be no assurance, however, that
such results will occur or that the Teleserver family of voice mail and related
products and Thor Unified Messaging System will increase Speech Design’s
competitive advantage in Europe, because this industry is highly sensitive to
general economic conditions and is characterized by rapid technological
change. Speech Design’s ability to
compete successfully may depend in substantial measure on its ability to
develop or acquire new or improved equipment, techniques and products and/or to
modify and upgrade its existing equipment, techniques and products.
SPEECH
DESIGN’S BACKLOG OF ORDERS
As of December 31, 2001, Speech
Design had a backlog of firm orders of approximately $420,000, all of which it
expects to fill in 2002. As of December
31, 2000, Speech Design had a backlog of firm orders of approximately $552,000,
all of which were filled in 2001.
GOVERNMENT
REGULATIONS AND INDUSTRY CERTIFICATIONS
The U.S. Federal government
regulates domestic telecommunications equipment and related industries. The Federal agency vested with primary
jurisdiction over the telecommunication industry is the Federal Communications
Commission (the “FCC”). Many telephone
peripheral producers and distributors, while not directly regulated by the FCC,
are nevertheless substantially affected by the enforcement of its regulations
and changes in its regulatory policy.
The FCC has adopted regulations
regarding attachments to the telephone networks as well as regulations imposing
radio frequency emanation standards for computing and radio equipment and many
of Bogen’s products require authorization by the FCC. In addition, many of Bogen’s products also require the
authorization of the Underwriter’s Laboratory (“UL”). All such required authorizations have been obtained. As a result of modifications and
improvements to Bogen’s products, Bogen will be obligated to seek new
authorizations where there is degradation in the radio frequency
emissions. Failure to obtain such
authorizations may preclude Bogen from selling its products in the U.S. Bogen
makes all reasonable efforts to ensure that its products comply with such
requirements.
To successfully access the
Canadian market, Bogen must obtain Underwriters Laboratory Canada and Canadian
Standards Association authorizations for all AC powered products, which it has
done for all of its current products.
All Speech Design products have
been adapted to the technical (PTT-approvals) and commercial audio requirements
of Western European markets. All Speech
Design products carry the Community European (“CE”) marking, which is the
equivalent of a UL certification in the United States.
In 1995, Speech Design received
the ISO 9001 Quality Certificate for its research and development, production
and customer support operations in Germany.
In 1996, the Quality Mark was extended to include Speech Design’s Israel
subsidiary. In 1999, Carrier Systems
was certified. ISO 9001 is an
internationally recognized Quality Assurance certification.
EMPLOYEES
As of December 31, 2001, the
Company had approximately 250 full-time employees engaged in its
businesses. The Company also uses
temporary and/or part-time employees, as required. About 15 of Bogen’s U.S. employees are subject to collective
bargaining agreements, which expire in June and September of 2003. The Company considers its relationship with
its employees to be satisfactory.
ITEM 2.
ITEM 2. PROPERTIES
The Registrant’s principal
place of business is located at 50 Spring Street, Ramsey, New Jersey 07446,
which is subleased from an unaffiliated third party. Bogen also maintains its principal warehouse and executive
offices at that location. The lease,
which covers approximately 70,000 square feet, commenced on January 1, 1987 and
was extended for 10 years on November 28, 2000. Annual base rental payments over the remainder of the lease are
approximately $532,000, plus taxes and other expenses. Apogee leases approximately 30,000 square
feet for its facility in Petaluma, California, under a lease, which commenced
in April 2000, and expires on March 31, 2005.
Annual rental payments over the remainder of the lease are approximately
$268,000.
Speech Design leases its
facilities in Munich, Germany, under a lease expiring in September 2005. It is comprised of a warehouse and executive
offices, covering a total of 21,000 square feet. Speech Design’s subsidiaries have leases in Wedel, Germany; Kfar
Saba, Israel; and Richterswil, Switzerland, which expire over the next five
years. Speech Design and subsidiaries’
aggregate annual rental payments are approximately $440,000.
Management of the Company
believes that the facilities occupied by the Company and its subsidiaries are
adequate to meet current needs.
ITEM
3.
ITEM
3. LEGAL PROCEEDINGS
The Company is party, in the
ordinary course of business, to various legal actions and claims which relate
to its products, intellectual property, employee matters, or other aspects of
its operations. In the opinion of
management, the ultimate disposition of these matters will not have a material
adverse effect on the Company’s consolidated financial position, results of
operations, or liquidity.
ITEM
4.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
Not Applicable
PART II
ITEM
5.
ITEM
5. MARKET PRICE FOR REGISTRANT’S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
The
Registrant’s Common Stock currently trades on the NASDAQ National Market System
(“NASDAQ”) under the symbol “BOGN.
The following
table sets forth the range of high and low closing prices for (i) the Common
Stock on NASDAQ, and (ii) for Warrants (see Note 12 regarding redemption and
cancellation of Warrants) as reported by the OTC Bulletin Board, for each of
the fiscal quarters during the period from January 1, 2000, through December
31, 2001. The quoted prices represent
“inter-dealer” prices without retail markups, markdowns or commissions and may
not necessarily represent actual transactions.
The Registrant
has not declared or paid any cash dividends on its Common Stock since
commencing operations and currently does not anticipate paying any dividends on
the Common Stock in the foreseeable future.
As of March 8, 2002, there were approximately 125 record holders of the
Common Stock.
ITEM
6.
ITEM
6. SELECTED FINANCIAL DATA
The following table summarizes certain
selected consolidated financial information for the Company and should be read
in conjunction with the more detailed consolidated financial statements and the
notes thereto. See “Item 8. Financial Statements and Supplementary
Data.”
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31,
(1) In
2000, the Company adopted the provisions of the FASB’s Emerging Issues Task
Force (EITF), Issue No. 00-10, “Accounting for Shipping and Handling Fees and
Costs,” which requires the Company to report all amounts billed to a customer
related to shipping and handling costs as revenue and report all costs incurred
by the seller for shipping and handling as cost of goods sold. Consequently, the Company has reclassified
such revenues and expense amounts, which were previously netted in selling,
general, and administrative, to sales and cost of goods sold. As a result of this reclassification, sales were
increased by $1,009, $879, $654, and $743 and cost of sales were increased by
$2,261, $1,924, and $1,443, and $1,723
for the years ended December 31, 2000, 1999, 1998, and 1997, respectively. There is no effect on operating income. In 2001, the Company adopted the provisions
of EITF Issue No. 00-22, “Accounting for “Point” and Other Loyalty Programs”,
which classifies customer rebates as a reduction of sales, and Issue No. 00-25,
“Accounting for Consideration from a Vendor to a Retailer in Connection with
the Purchase or Promotion of the Vendor’s Products”, which classifies such
consideration as a reduction of sales.
Consequently, the Company has reclassified such expenses that were
previously a component of selling, general, and administrative expenses against
sales. As a result of these
reclassifications, sales were decreased by $673, $743, $489, $275, and $263 for
the years ended December 31, 2001, 2000, 1999, 1998 and 1997,
respectively. There is no effect on
operating income.
BALANCE
SHEETS AS OF DECEMBER 31,
The Company
did not pay a cash dividend on the Common Stock during any period indicated.
ITEM 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The
consolidated financial statements and the following discussion include the
Registrant’s 99% owned subsidiary Bogen; Bogen’s wholly-owned subsidiary, BCI;
BCI’s wholly-owned subsidiaries, NEAR (until December 31, 1999) and, as of
August 27, 1999, Apogee; SDI, the Registrant’s 98% owned
subsidiary; SDI’s wholly-owned
subsidiary Speech Design; Satelco, a 67% owned subsidiary of Speech Design; and
Speech Design’s wholly-owned subsidiaries, Speech Design (Israel) Ltd., Speech
Design (UK) Ltd. (closed effective December 31, 2000), and Carrier
Systems. All significant inter-company
balances and transactions have been eliminated in consolidation. Certain prior years balances have been
reclassified to conform to the current year presentation.
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. The Company records all
losses after the minority interest liability is reduced to zero.
RESULTS
OF OPERATIONS 2001 COMPARED TO 2000
NET
SALES
Net sales of
$57,143,000 for 2001 decreased 12.8% from 2000 net sales of $65,520,000. General weakness in both domestic and
foreign markets, primarily due to the underlying economy, caused revenues in
all major lines of business to decline.
Bogen
(domestic)
Telco net
sales in 2001 amounted to $14,313,000 compared to $16,773,000 in 2000, a
decrease of $2,460,000 or 14.7%.
Net sales of
Commercial Audio products amounted to $9,251,000 in 2001, a decrease of 4.1%
from net sales of $9,648,000 of such products in 2000.
Net sales of
Pro Audio products, through Apogee, amounted to $5,013,000 in 2001, down
$893,000, or 15.1%, from $5,906,000 in 2000.
Net sales of
the Engineered System line decreased $1,016,000, or 8.0%, to $11,631,000 in
2001 from $12,647,000 in 2000.
Speech
Design (foreign)
Speech
Design’s products are in the Telco line.
Net sales in 2001 were to $16,935,000 compared to $20,546,000 in 2000, a
decrease of $3,611,000, or 17.6%. In
Deutsche Marks (“DM”), net sales in 2001 decreased 14.7%, to 36,987,000 from
43,359,000 DM in 2000. The decline at
Speech Design reflected deep cutbacks on telecommunications spending by end
users and telecom carriers and resulting lower sales of Speech Design’s
telephone peripheral hardware, music on hold systems, and most other digital
voice processing technologies. This
overall decline was offset somewhat by the second consecutive year of 100%
annual growth in Unified Messaging revenues.
GROSS
PROFIT
The Company’s
gross profit in 2001 was $26,965,000, a decrease of $3,394,000 from $30,359,000
in 2000. As a percentage of sales, 2001
showed an increase to approximately 47.2% from 46.3% in 2000. This improvement in gross margin percentage
primarily reflects changes in sales mix within each of the Company’s segments
and lines of business.
Bogen’s gross
profit decreased from $19,038,000 in 2000, to $17,530,000 in 2001. Gross profit as a percentage of sales
increased from 42.3% in 2000 to 43.6% in 2001.
Speech
Design’s gross profit decreased from $11,321,000 in 2000 to $9,435,000 in
2001. Gross profit as a percentage of
sales increased slightly from 55.1% to 55.7% from 2000 to 2001. The increase in gross profit as a percentage
of sales in 2001 versus 2000 is primarily a result of the recognition in 2000,
as cost of goods sold, of certain research and development expenses incurred
for developing a software enhancement to a standard Speech Design product for
an OEM development project. The project
generated increased cost of goods sold, offset by the reduction of research and
development expenses.
RESEARCH
AND DEVELOPMENT
Research and
Development expense (R&D) was $3,756,000, or 6.6% of sales in 2001,
compared to $2,751,000, or 4.2% of sales in 2000. This increase reflects the Company’s continuing effort to
introduce innovative products to the market and to update existing
products. The increase also reflects
the effect of the prior year recognition as a cost of sales of certain Speech
Design research and development costs relating to fees for an OEM project.
SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES
Selling,
general and administrative expenses (“SG&A”) decreased $1,094,000, or 5.0%,
from 2000 to 2001. SG&A expense was
$21,052,000, or 36.8% of sales, in 2001 compared to $22,146,000, or 33.8% of
sales, in 2000. The decrease in
SG&A is generally a result of overhead cost control initiatives taken by
the Company throughout 2001, reduction of expenses related to decreased sales
volume, and declines in travel-related costs due to temporary restrictions in
the third and fourth quarters of 2001.
ASSET
IMPAIRMENT
The Company’s
domestic operations recorded a non-cash charge of approximately $1,409,000,
reflecting the elimination of all goodwill associated with pro audio acquired
assets, in compliance with existing generally accepted accounting
principles. The amount of the
impairment was determined by comparing the carrying value of the goodwill to
the discounted cash flows of the underlying operations.
RESTRUCTURING
AND OTHER CHARGES
In 2001, the Company
wrote off all remaining costs, approximately $581,000 of legal fees, incurred
to date in connection with its exploration of alternatives for enhancing
shareholder value, which had included a possible separation of the domestic and
foreign businesses. In addition, Speech
Design recorded approximately $305,000 in restructuring charges associated with
its voicemail business and $176,000 of restructuring charges for the Unified
Messaging business.
In 2000,
expenses of approximately $310,000 were incurred in connection with the
Company’s ongoing exploration of alternatives for enhancing value, including
but not limited to, a possible separation of the U.S. and European businesses,
entirely or in stages.
INTEREST
INCOME and EXPENSE
Interest
income was $472,000 in 2001, a slight increase from $465,000 in 2000. The increase in interest income primarily
reflects the Company’s increase in cash and marketable securities from December
31, 2000, offset by declining interest rates throughout the year.
Interest
expense, was $122,000 in 2001, a decrease of $51,000, or 29.5%, from $173,000
in 2000. The decrease is primarily a
result of the Company’s overall reduced borrowing requirements on short-term
credit lines and declining interest rates from 2000.
INCOME
TAXES
The Company
recorded a tax benefit of approximately $315,000 in 2001. The tax provision for 2000 resulted in tax
expense of $1,381,000. Foreign taxes
decreased by $799,000, a result of reduced profitability and the establishment
of a benefit for certain foreign loss carryforwards. Domestic taxes decreased by $897,000 from 2000, primarily due to
lower profits.
RESULTS
OF OPERATIONS 2000 COMPARED TO 1999
NET
SALES
Net sales of
$65,520,000 for 2000 increased 11.3% from 1999 net sales of $58,877,000. Bogen’s revenues excluding Apogee grew by
11.2%, primarily due to growth in Telco and Engineered Systems,
which increased $3,438,000 and $1,906,000, respectively,
over 1999. Speech Design revenues declined
4.7% in U.S. dollars from 1999 although in local currency Speech Design
revenues grew 8.7%; currency exchange fluctuation negatively impacted reported
revenues.
Bogen
(domestic)
Telco (U.S.)
net sales in 2000 amounted to $16,773,000 compared to $13,335,000 in 1999, an
increase of 25.8%. The increase of
Telco sales is attributable to sales achieved under the Lucent OEM agreement
entered into in November 1999, partly offset by a decrease in sales of non-OEM
product.
Net sales of
Commercial Audio products amounted to $9,648,000 in 2000, a decrease of 12.8%
from net sales of $11,060,000 of such products in 1999. The decrease reflects the continued weakness
of overall demand and the withdrawal from the NEAR Home Theater market.
Net sales of
Pro Audio products, through Apogee, amounted to $5,906,000 in 2000, up
significantly from $2,185,000 in 1999.
The increase results from the full year inclusion of Apogee, which was
acquired in August 1999.
Net sales of
the Engineered System line increased 17.7% from $10,741,000 in 1999 to
$12,647,000 in 2000. This increase is
primarily attributed to the introduction of new products, the expansion of the
Bogen sales force and continuing availability of funding for school technology
and communications installations.
Speech
Design (foreign)
Speech
Design’s products are in the Telco line. Net sales in 2000 amounted to
$20,546,000 compared to $21,556,000 in 1999, a decrease of 4.7%. In Deutsche Marks (“DM”), net sales in 2000
increased to 43,359,000 DM, 8.7% over 39,886,000 DM for 1999.
GROSS
PROFIT
The Company’s
gross profit in 2000 was $30,359,000, or approximately 46.3% of sales, an
increase of $1,800,000, or 6.3%,
compared to $28,559,000, or 48.5% of sales, in 1999.
Bogen’s gross
profit increased from $16,016,000 in 1999, to $19,038,000 in 2000. Gross profit as a percentage of sales
decreased slightly from 42.9% in 1999 to 42.3% in 2000. This decrease reflects the full year inclusion
of Apogee product sales, which traditionally obtain lower gross margins than
core Bogen products, offset by improvements achieved by reducing overhead cost
through the outsourcing of the NEAR manufacturing operations in July 1999 and
the better absorption of fixed costs relative to sales volume.
Speech
Design’s gross profit decreased from $12,543,000 in 1999 to $11,321,000 in
2000. Gross profit as a percentage of
sales decreased from 58.2% to 55.1% from 1999 to 2000. The decrease in gross profit as a percentage
of sales is primarily a result of the recognition, as cost of goods sold, of
certain research and development expenses incurred for developing a software
enhancement to a standard Speech Design product for an OEM development project
in 2000. The project generated
increased cost of goods sold, offset by the reduction of research and
development expenses.
RESEARCH
AND DEVELOPMENT
Research and
Development expense (R&D) was $2,751,000, or 4.2 % of sales in 2000,
compared to $4,419,000, or 7.5% of sales in 1999. This decrease primarily reflects Speech Design’s reduction of
research and development expenses, relating to fees for an OEM project which
were recognized as cost of sales, and Bogen’s reduction of certain outside
development fees offset by the full year inclusion of research and development
expenses at Apogee.
SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES
Selling,
general and administrative expenses (“SG&A”) increased by $4,078,000, or
22.6%, from 1999 to 2000. SG&A
expense was $22,146,000, or 33.8% of sales, in 2000 compared to $18,068,000, or
30.7% of sales, in 1999. SG&A
expenses include approximately $1,400,000 of additional costs due to the full
year inclusion of Apogee. The remaining
increase is generally a result of expenses incurred to
support sales and marketing
programs for existing and new product lines at Bogen, in particular the Lucent
OEM business, the marketing of Speech Design’s new Teleserver Pro and Thor
platforms in Europe, and the expansion of the sales force at Speech Design to
address the PABX after-market.
RESTRUCTURING
AND OTHER CHARGES
Expenses of
approximately $310,000 were incurred in connection with the Company’s ongoing
exploration of alternatives for enhancing value, including but not limited to,
a possible separation of the U.S. and European businesses, entirely or in
stages.
INTEREST
INCOME and EXPENSE
Interest
income was $465,000 in 2000, an increase of $408,000 from $57,000 in 1999. The increase in interest income primarily
reflects the Company’s investment of net cash proceeds from the warrants
exercised in the first half of 2000.
Interest
expense, was $173,000 in 2000, a decrease of $92,000, or 34.7%, from $265,000
in 1999. The decrease is primarily a
result of the Company’s overall reduced borrowing requirements on short-term
credit lines.
INCOME
TAXES
The Company
incurred approximately $1,381,000 in taxes in 2000, a decrease of $56,000 from
$1,437,000 in 1999. Foreign taxes
decreased by $748,000, mainly as a result of the Company’s ability to utilize
certain foreign loss carry forwards, the reduction of a portion of the foreign
operations’ valuation allowances and reduced profits. Domestic taxes increased by $692,000 from 1999 primarily
resulting from the reduction of a portion of the U.S. operation’s valuation
allowance in 1999, which did not recur in 2000.
LIQUIDITY,
CAPITAL RESOURCES AND FINANCIAL CONDITION
In the
economic climate of 2001, the Company increased its focus on cost control and
cash and asset management, while supporting its product lines and distribution
channels. Cash utilization focused on
debt reduction, facilities improvements, and adding shareholder value.
The Company’s
operations generated $6,858,000 of net cash through effective working capital
and cash management. Although the
Company reported a net loss of $728,000, receivables and inventory decreased by
$1,322,000 and $1,807,000, respectively.
Net non-cash charges totaled $3,325,000. These charges were depreciation and amortization expenses of
$2,813,000; $1,409,000 to eliminate all goodwill associated with pro audio
acquired assets; increased accounts receivable and inventory obsolescence
reserves of $606,000; and acquired tax benefits of $107,000 charged to
goodwill. The non-cash expenses were
partly offset by adjustments to deferred income taxes of $1,515,000 and
minority interest credits of $96,000.
In addition, prepaid expenses and other current assets decreased by
$509,000, accounts payable increased by $515,000, and net changes in other operating
assets and liabilities amounted to $109,000.
Net cash
expended for investing activities of $5,163,000 included $1,193,000 for
equipment, computer hardware and software, and other fixed assets and
$3,970,000 to purchase certain trading marketable securities.
Net cash used
for financing activities was $2,868,000.
In an effort to improve shareholder value, the Company paid $3,133,000
to repurchase 1,012,211 common shares through a self-tender offer. The Company continued to reduce its overall
debt by paying down $145,000 of its existing lines of credit and $251,000 of
capitalized lease obligations. The
Company received $661,000, net, when it sold 2% of a newly formed subsidiary
holding the Company’s European operations to a venture capital subsidiary of
Deutsche Telekom.
As of December
31, 2001, the Company’s total liabilities were $8,061,000, of which $7,630,000
is due and payable within one year.
On April 21,
1998, the Company and BCI entered into a $27 million credit facility (the “Facility”)
with KeyBank National Association (“Key”), which matured on April 30,
2001. The Facility provided, subject to
certain criteria, for a $20 million revolving line of credit for acquisition
financing and a $7 million working capital line. Effective June 30, 2001, the Company and Key entered into a
Modification Agreement (“The Agreement”), under which the working capital line
was reduced to $5 million and the parties agreed to an unsecured $20 million
line of credit for acquisition financing.
The Agreement extends the provisions, warranties, certifications, and
other criteria of the expired Facility to June 30, 2002, and reduces the number
of financial covenants required to be met.
The Company was not in compliance with one covenant for the period ended
December 31, 2001, for which it received a waiver from Key. As of December 31, 2001 and 2000, Bogen had
no short-term domestic borrowings outstanding under either the Agreement or the
Facility.
The Agreement
bears interest at either Key’s prime rate or, at the borrower’s option, LIBOR
plus 125 to 200 basis points. The
interest rate at December 31, 2001, was 4.75%.
Speech Design
has credit lines and overdraft facilities of approximately 8.7 million Deutsche
Marks (“DM”) (approximately U.S. $3.9 million) from six banks. Speech Design’s short-term lines of credit
are collateralized by all of Speech Design’s accounts receivable and
inventory. Speech Design has a 15 million
DM (U.S. $6.8 million) 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 Euribor rate, which
was 3.330% at December 31, 2001.
At December
31, 2001 and 2000, Speech Design had short-term borrowings amounting to
$973,000 and $1,201,000, respectively.
The amounts available under Speech Design’s credit lines were
approximately $3.0 million at December 31, 2001, with rates tied to short-term
bank notes and Euromarket loans. At
December 31, 2001 and 2000, these rates ranged from 6.5% to 15.25%.
There were no
borrowings under either the Bogen or Speech Design acquisition credit
facilities. The Company believes that
it has adequate liquidity to finance its ongoing activities and capital
expenditures for the near term.
INFLATION
Inflation did
not have a material effect on the Company’s results during the periods
discussed herein.
CURRENCY
FLUCTUATIONS
Approximately
30% of the Company’s 2001 revenues were derived outside of the United States,
primarily in Germany. Accordingly, currency
fluctuations may impact the Company’s earnings. Over the course of 2001, the Deutsche Mark exchange rate averaged
DM 2.1844 to the U.S. dollar, with a low of 2.0377 and a high of 2.3440. This represents a 15.0% movement of the DM
vs. the U.S. dollar throughout the year.
Local
currencies are considered to be the functional currencies of the Company and
its subsidiaries. Translation adjustments that arise from translation of the
Company and its subsidiaries’ financial statements are accumulated in a
separate component of stockholders’ equity.
Transaction gains and losses that arise from exchange rate changes on
transactions denominated in a currency other than local currencies are included
in income as incurred.
ECONOMIC
ENVIRONMENT-ASIA
Bogen relies
principally upon an established network of suppliers and subcontractors
primarily located in the Republic of South Korea, and to a lesser extent in the
Asia Pacific Region, and in the United States.
Over the past few years, since the economic crisis of 1997 and 1998 in
the Asia Pacific Region, financial conditions have improved and stabilized in
the Republic of South Korea. The
Company’s manufacturing partners are believed to be financially stable.
The Company
continues to enjoy the long-established relationships it has built with these
manufacturing partners. The Company
approved additional manufacturing partners in 1999 in the United States,
Mexico, and Switzerland as part of an effort to diversify and expand its
manufacturing sources. However, there can be no assurances that events beyond
the Company’s control will not disrupt
production or that suitable
alternative sources of production can be identified on a timely basis, thereby
resulting in material adverse effects on the Company’s results of operations.
CRITICAL
ACCOUNTING POLICIES
The Company’s
critical accounting policies are as follows:
• revenue recognition;
• estimating valuation allowances and accrued
liabilities, specifically sales returns and the allowance for doubtful
accounts;
• accounting for income taxes;
• valuation of long-lived and intangible assets
and goodwill; and
• determining functional currencies for the
purposes of consolidating our international operations.
REVENUE
RECOGNITION
The Company
derives its revenue from primarily two sources (i) sale of sound
processing and telecommunications peripheral equipment and (ii) services
and support revenue for telecommunications equipment and Unified Messaging
products. The Company recognizes
revenue from the sale of equipment upon shipment. Services and support revenue are recognized upon customer
acceptance where a product deliverable or repair is called for, or ratably over
the contract term in the case of support or maintenance contracts. In the case of services subject to customer
acceptance, recognition occurs upon the earlier of receipt of a written
customer acceptance or expiration of the acceptance period.
SALES
RETURNS AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amount of assets and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Specifically, management must make estimates
of potential future product returns related to current period product
revenue. Management analyzes historical
returns, current economic trends, and changes in customer demand and acceptance
of our products when evaluating the adequacy of the sales returns and other
allowances. Significant management judgments and estimates must be made and
used in connection with establishing the sales returns and other allowances in
any accounting period. Differences may
result in the amount and timing of our revenue for any period if management
made different judgments or utilized different estimates. The provision for sales returns and other
allowances amounted to $234,000 in 2001.
Similarly, management must make estimates of the uncollectability of
accounts receivables. Management
specifically analyzes accounts receivable and analyzes historical bad debts,
customer concentrations, customer credit-worthiness, current economic trends
and changes in customer payment terms when evaluating the adequacy of the
allowance for doubtful accounts.
Accounts receivable balance was $5,819,000, net of allowance for
doubtful accounts of $471,000 as of December 31, 2001.
ACCOUNTING
FOR INCOME TAXES
As part of the
process of preparing consolidated financial statements, the Company is required
to estimate its income taxes in each of the jurisdictions in which it
operates. This process involves
estimating actual current tax exposure together with assessing temporary
differences resulting from differing treatment of items, such as deferred
revenue, for tax and accounting purposes.
These differences result in deferred tax assets and liabilities, which are
included within the consolidated balance sheet. The Company then assesses the likelihood that its deferred tax
assets will be recovered from future taxable income and to the extent that the
Company believes that recovery is not likely, it must establish a valuation
allowance. To the extent it establishes
a valuation allowance or increases this allowance in a period, the Company
includes an expense within the tax provision in the statement of operations.
Significant
management judgment is required in determining the provision for income taxes,
deferred tax assets and
liabilities and any valuation allowance recorded against net deferred tax
assets. The Company has recorded a
valuation allowance of $948,000 as of December 31, 2001, due to uncertainties
related to its ability to utilize certain deferred tax assets, primarily
domestic and foreign net operating losses carried forward. The valuation allowance is based on
estimates of taxable income by jurisdiction in which the Company operates and
the period over which the deferred tax assets will be recoverable. In the event that actual results differ from
these estimates or these estimates are adjusted in future periods the Company
may need to establish an additional valuation allowance which could materially
impact its financial position and results of operations.
The net
current deferred tax asset as of December 31, 2001 was $1,454,000. The net long term deferred tax asset as
December 31, 2001 was $590,000, net of a valuation allowance of $948,000.
VALUATION
OF LONG-LIVED AND INTANGIBLE ASSETS AND GOODWILL
The Company
assesses the impairment of identifiable intangibles, long-lived assets and
related goodwill whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Factors considered important which could
trigger an impairment review include the following:
• significant
underperformance relative to expected historical or projected future operating
results;
• significant
changes in the manner of the Company’s use of the acquired assets or the
strategy for the overall business and
• significant
negative industry or economic trends.
When the
Company determines that the carrying value of intangibles, long-lived assets
and related goodwill may not be recoverable based upon the existence of one or
more of the above indicators of impairment, the Company measures any impairment
based on the projected discounted cash flow method using a discount rate
reflecting the Company’s average cost of funds. Net intangible assets, long-lived assets, and goodwill amounted
to $19,831,000 as of December 31, 2001.
In 2002,
Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and
Other Intangible Assets” became effective and as a result, the Company will
cease to amortize goodwill. The Company
has recorded approximately $935,000 of amortization on these amounts during
2001 and would have recorded approximately $935,000 of amortization during
2002. In lieu of amortization, the
Company is required to perform an initial impairment review of goodwill in 2002
and an annual impairment review thereafter.
The Company expects to complete the initial review during the first half
of 2002.
The Company
currently does not expect to record an impairment charge upon completion of the
initial impairment review. However,
there can be no assurance that at the time the review is completed a material
impairment charge will not be recorded.
DETERMINING
FUNCTIONAL CURRENCIES FOR THE PURPOSE OF CONSOLIDATION
The Company has
several foreign subsidiaries which together account for approximately 30% of
our net revenues, 20% of assets and 42% of total liabilities as of
December 31, 2001.
In preparing
the consolidated financial statements, the Company is required to translate the
financial statements of the foreign subsidiaries from the currency in which
they keep their accounting records, generally the local currency, into United
States dollars. This process results in
exchange gains and losses that, under the relevant accounting guidance, are
either included within the statement of operations or as a separate part of net
equity under the caption “accumulated other comprehensive loss.”
Under the
relevant accounting guidance the treatment of these translation gains or losses
is dependent upon management’s determination of the functional currency of each
subsidiary. The functional currency is determined based on management judgment
and involves consideration of all relevant economic facts and circumstances
affecting the subsidiary. Generally,
the currency in which the subsidiary transacts a majority of its transactions,
including billings, financing, payroll and other
expenditures would be
considered the functional currency but any dependency upon the parent and the
nature of the subsidiary’s operations must also be considered.
If a
subsidiary’s functional currency is deemed to be the local currency, then any
gain or loss associated with the translation of that subsidiary’s financial
statements is included in accumulated other comprehensive loss. If the Company disposes of a subsidiary, any
cumulative translation gains or losses would be realized into the statement of
operations.
Based on the
assessment of the factors discussed above, the Company considers the relevant
subsidiary’s local currency to be the functional currency for each of its
international subsidiaries. Accordingly
the Company had cumulative translation losses of approximately $1,386,000 and
$1,032,000, which were included as part of accumulated other comprehensive loss
within its balance sheet at December 31, 2001 and 2000, respectively. During 2001, 2000 and 1999, translation
adjustments of $354,000, $475,000, and $420,000, respectively, were included
under accumulated other comprehensive loss.
The magnitude
of these gains or losses is dependent upon movements in the exchange rates of
the foreign currencies in which it transacts business against the United States
dollar. Any future translation gains or
losses could be significantly higher than those noted in each of these
years. In addition, if determined that
a change in the functional currency of one of its subsidiaries has occurred at
any point in time the Company would be required to include any translation
gains or losses from the date of change in our statement of operations.
OTHER
Recent Accounting Pronouncements
In 2000, the
Company adopted the provisions of the Financial Accounting Standards Board’s
(“FASB”) Emerging Issues Task Force (EITF), Issue No. 00-10, “Accounting for
Shipping and Handling Fees and Costs,” which requires the Company to report all
amounts billed to a customer related to shipping and handling costs as revenue
and report all costs incurred by the seller for shipping and handling as cost
of goods sold. Consequently, the
Company has reclassified such revenues and expense amounts, which were
previously netted in selling, general, and administrative, to sales and cost of
goods sold. As a result of this
reclassification, sales were increased by $1,009,000 and $879,000 and cost of
sales were increased by $2,261,000 and $1,924,000 for the years ended December
31, 2000 and 1999, respectively. There
is no effect on operating income.
In 2001, the
Company adopted the provisions of EITF Issue No. 00-22, “Accounting for “Point”
and Other Loyalty Programs”, which classified customer rebates as a reduction
of sales, and Issue No. 00-25, “Accounting for Consideration from a Vendor to a
Retailer in Connection with the Purchase or Promotion of the Vendor’s
Products”, which classifies such consideration as a reduction of sales. Consequently, the Company has reclassified
such expenses that which were previously a component of selling, general, and
administrative expenses against sales.
As a result of these reclassifications, sales were decreased by
$673,000, $743,000, and $489,000 for the years ended December 31, 2001, 2000,
and 1999, respectively. There is no
effect on operating income.
In September
of 2001, the EITF issued EITF Issue No. 01-09, “Accounting for
Consideration Given by Vendor to a Customer or a Reseller of the Vendor’s
Products”, which is a codification of EITF Issues No. 00-14, No. 00-25 and
No. 00-22 “Accounting for ‘Points’ and Certain Other Time- or Volume-Based
Sales Incentive Offers and Offers for Free Products or Services to be Delivered
in the Future.”
In July 2001,
the FASB issued SFAS No. 141, “Business Combinations.” SFAS No. 141
requires the purchase method of accounting for business combinations initiated
after June 30, 2001 and eliminates the pooling-of-interests method. We do not believe that the adoption of SFAS
No. 141 will have a significant impact on our financial statements.
In July 2001,
Statement No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), which
is effective for fiscal years beginning after December 15, 2001. SFAS 142 requires that goodwill no longer be
amortized. In addition, SFAS 142
includes provisions upon adoption for the reclassification of certain existing
recognized intangibles as goodwill, reassessment of the useful lives of
existing recognized
intangibles, reclassification
of certain intangibles out of previously reported goodwill, and the testing for
impairment of existing goodwill and other intangibles. Upon adoption of SFAS
142, the Company will cease to amortize approximately $15,189,000 of net
goodwill.
In addition,
the Company will be required to perform an impairment review of its goodwill
balance upon the initial adoption of SFAS No. 142. The impairment review will involve a two-step process as follows:
• Step 1 - We will compare the
fair value of our reporting units to the carrying value, including goodwill of
each of those units. For each reporting
unit where the carrying value, including goodwill, exceeds the unit’s fair
value, we will move on to step 2.
If a unit’s fair value exceeds the carrying value, no further work is
performed and no impairment charge is necessary.
• Step 2 - We will perform an allocation
of the fair value of the reporting unit to its identifiable tangible and
non-goodwill intangible assets and liabilities. This will derive an implied fair value for the reporting unit’s
goodwill. We will then compare the
implied fair value of the reporting unit’s goodwill with the carrying amount of
reporting unit’s goodwill. If the
carrying amount of the reporting unit’s goodwill is greater than the implied
fair value of its goodwill, an impairment loss must be recognized for the
excess.
We expect to
complete this review during the first half of 2002. We do not expect to record an impairment charge upon completion
of the initial review. However, there
can be no assurance that at the time the review is completed a material
impairment charge may not be recorded.
In October
2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets.” SFAS No. 144 addresses significant issues
relating to the implementation of SFAS No. 121, “Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,”
and develops a single accounting method under which long-lived assets that are
to be disposed of by sale are measured at the lower of book value or fair value
less cost to sell. Additionally, SFAS
No. 144 expands the scope of discontinued operations to include all
components of an entity with operations that (1) can be distinguished from
the rest of the entity and (2) will be eliminated from the ongoing operations
of the entity in a disposal transaction.
SFAS No. 144 is effective for financial statements issued for
fiscal years beginning after December 15, 2001 and its provisions are to
be applied prospectively. We are
currently assessing the impact of SFAS No. 144 on our financial position and
results of operations.
Euro Conversion
On January 1,
1999, eleven of the fifteen member countries of the European Union (the
“participating countries”) established fixed conversion rates between their
existing sovereign currencies (the “legacy currencies”) and the Euro. The participating countries adopted the Euro
as their common legal currency on that date.
As of January 1, 1999, a newly created European Central Bank was
established to control monetary policy, including money supply and interest rates
for the participating countries. The
legacy currencies are scheduled to remain legal tender in the participating
countries as denominations of the euro between January 1, 1999, and January 1,
2002 (the “transition period”).
During the
transition period, public and private parties may pay for goods and services
using either the Euro or the participating country’s legacy currency on a “no
compulsion, no prohibition” basis.
The Company
has evaluated and continues to evaluate on an on-going basis the effects, if
any, of the Euro conversion upon its business.
Factors being considered include, but are not limited to: the possible
impact of the Euro conversion on revenues, expenses, and income from
operations, the ability to adapt information technology to accommodate
Euro-denominated transactions, the market risks with respect to financial
instruments, the continuity of material contracts, and the potential tax
consequences.
The Company
does not believe that the Euro-conversion has had or will have a material
operational or financial impact.
ITEM
7A.
ITEM
7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
In the normal
course of business, the Company is exposed to fluctuations in interest rates on
the Company’s debt and credit facilities.
The Company is also exposed to fluctuations in foreign currency exchange
rates as the financial results of its foreign subsidiaries are translated into
U.S. dollars in consolidation. In
general, the Company does not use derivative instruments or hedging to manage
its exposures and does not currently hold any material market risk sensitive
instruments for trading purposes at December 31, 2001.
The
information below summarizes the Company’s market risk associated with its debt
obligations as of December 31, 2001.
Fair value included herein has been estimated taking into consideration
the nature and term of the debt instrument and the prevailing economic and
market conditions at the balance sheet date.
The table below
presents principal cash flows by year of maturity based on the terms of the
debt. The variable interest rate
disclosed represents the rate at December 31, 2001. Changes in the LIBOR and Prime interest rates during fiscal 2001
will have a positive or negative effect on the Company’s interest expense. Each 1% fluctuation in the LIBOR and Prime
interest rates will increase or decrease annual interest expense for the
Company by approximately $11, based on the debt outstanding as of December 31,
2001. Further information specific to
the Company’s debt is presented in Notes 7 and 8 to the consolidated financial
statements.
ITEM
8.
ITEM
8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
FINANCIAL INFORMATION
(a) The
Company operates in two reportable business segments, Bogen (domestic) and
Speech Design (foreign). The domestic
operations are engaged in the development and manufacturing of sound processing
and telecommunication products in the United States (Bogen). The foreign operations, through Speech
Design, are engaged in the development, manufacturing and marketing of
telephone peripheral hardware and Unified Messaging products and services.
Financial
information regarding the breakdown of the Company’s foreign and domestic
operations is disclosed in note 19 to the Company’s Consolidated Financial
Statements.
BOGEN
COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND
FINANCIAL
STATEMENT
SCHEDULES
The following consolidated
financial statement schedule of Bogen Communications International, Inc. is
included in Item 14(a) 2:
II.
VALUATION AND QUALIFYING ACCOUNTS
All other schedules are omitted
as the required information is inapplicable or the information is presented in
the consolidated financial statements or related notes.
INDEPENDENT
AUDITOR’S REPORT
The Stockholders and Board of
Directors
Bogen Communications International, Inc:
We have audited the
consolidated financial statements of Bogen Communications International, Inc.
and subsidiaries as listed in the accompanying index as of December 31, 2001
and 2000, and for each of the years in the three-year period ended December 31,
2001. In connection with our audits of
the consolidated financial statements, we also have audited the financial
statement schedule as listed in the accompanying index. These consolidated financial statements and
financial statement schedule are the responsibility of the Company’s
management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion the consolidated
financial statements referred to above present fairly, in all material
respects, the financial position of Bogen Communications International, Inc.
and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America.
Also in our opinion the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the information set forth
therein.
KPMG
LLP
Short Hills, New Jersey
February 27, 2002
BOGEN COMMUNICATIONS
INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
(In Thousands of Dollars, Except Share and Per Share
Amounts)
See
accompanying notes to consolidated financial statements.
BOGEN
COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
DECEMBER 31, 2001, 2000, and 1999
(In Thousands of Dollars, Except Share and Per Share Amounts)
See accompanying notes to consolidated financial statements.
BOGEN
COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001,
2000, and 1999
(In Thousands of Dollars, Except Share and Per Share Amounts)
See
accompanying notes to consolidated financial statements.
BOGEN
COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001,
2000, and 1999
(In Thousands of Dollars, Except Share and Per Share Amounts)
See
accompanying notes to consolidated financial statements.
BOGEN
COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND
PER SHARE AMOUNTS)
1. ORGANIZATION
Bogen
Communications International, Inc., together with its subsidiaries, (the
“Company”) is engaged in the development, manufacturing and marketing of audio
and communication products. Product
lines sold by the Company include Telephone Paging Products, voicemail, and
Unified Messaging products and services (“Telco”), Commercial Audio Products
(“Commercial Audio”) and Intercom/Paging Equipment (“Engineered Systems”). The Company’s operations are located in the
United States, Germany, Switzerland and Israel.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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”), which combined with
BCI in 1999, and Apogee Sound International, LLC (“Apogee”); the Company’s 98%
owned subsidiary, Speech Design International Inc. (“SDI”), SDI’s wholly-owned
subsidiary, Speech Design GmbH (“Speech Design”); Speech Design’s 67% owned
subsidiary Satelco AG (“Satelco”); and Speech Design’s wholly-owned
subsidiaries: Speech Design (Israel), Ltd., and Speech Design Carrier Systems
GmbH (“Carrier Systems”), formerly Digitronic Computersysteme GmbH. 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 are recorded as minority
interest. The Company records all
losses after the minority interest liability is reduced to zero.
REVENUE
RECOGNITION
The Company
derives its revenue from primarily two sources: (i) sale of sound
processing and telecommunications peripheral equipment and (ii) services
and support revenue for telecommunications equipment and Unified Messaging
products. The Company recognizes
revenue from the sale of equipment upon shipment. Services and support revenue are recognized upon customer
acceptance where a product deliverable or repair is called for, or ratably over
the contract term in the case of support or maintenance contracts. In the case of services subject to customer
acceptance, recognition occurs upon the earlier of receipt of a written
customer acceptance or expiration of the acceptance period.
In 2000, the
Company adopted the provisions of the Financial Accounting Standards Board’s
(“FASB”) Emerging Issues Task Force (EITF), Issue No. 00-10, “Accounting for
Shipping and Handling Fees and Costs,” which requires the Company to report all
amounts billed to a customer related to shipping and handling costs as revenue
and report all costs incurred by the seller for shipping and handling as cost
of goods sold. Consequently, the
Company has reclassified such revenues and expense amounts, which were
previously netted in selling, general, and administrative, to sales and cost of
goods sold. As a result of this
reclassification, sales were increased by $1,009 and $879 and cost of sales
were increased by $2,261 and $1,924 for the years ended December 31, 2000 and
1999, respectively. There is no effect
on operating income.
In 2001, the
Company adopted the provisions of EITF Issue No. 00-22, “Accounting for “Point”
and Other Loyalty Programs”, which classified customer rebates as a reduction
of sales, and Issue No. 00-25, “Accounting for Consideration from a Vendor to a
Retailer in Connection with the Purchase or Promotion of the Vendor’s
Products”, which classifies such consideration as a reduction of sales. Consequently, the Company has reclassified such
expenses that were previously a component of selling, general, and
administrative expenses against sales.
As a result of these reclassifications, sales were decreased by $673,
$743, and $489 for the years ended December 31, 2001, 2000, and 1999, respectively. There is no effect on operating income.
GOODWILL
Goodwill
represents the excess of cost over the fair value of net assets acquired in
purchase transactions. Goodwill is being amortized using the straight-line
method over periods of between 7 to 40 years.
The Company assesses the recoverability of this intangible asset by
determining whether the amortization of the goodwill balance over its remaining
life can be recovered through undiscounted future operating cash flows of the
acquired operation. The amount of
goodwill impairment, if any, is measured based on projected discounted future
operating cash flows using a discount rate reflecting the Company’s average
cost of funds. The assessment of the
recoverability of goodwill will be impacted if estimated future operating cash
flows are not achieved.
In July 2001,
the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 141,
“Business Combinations”, (“SFAS 141”) and No. 142, “Goodwill and Other
Intangible Assets” (“SFAS 142”). SFAS 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001.
SFAS 141 also specifies that intangible assets acquired in a purchase method business
combination must meet certain criteria to be recognized and reported apart from
goodwill. SFAS 142 will require that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead they will be tested
for impairment at least annually in accordance with the provisions of SFAS 142.
SFAS 142 will also require that intangible assets with definite useful lives be
amortized over their respective estimated useful lives to their estimated
residual values and reviewed for impairment in accordance with SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets”. The Company is required to adopt the
provisions of SFAS 141, for acquisitions initiated after June 30, 2001, and
SFAS 142 effective January 1, 2002. Goodwill and intangible assets acquired in business combinations
completed before July 1, 2001, will continue to be amortized until the
Company’s adoption of SFAS No. 142 on January 1, 2002. In connection with the transitional goodwill
impairment evaluation, SFAS 142 will require the Company to perform an
assessment of whether there is an indication that goodwill is impaired as of
the date of adoption. To the extent an
indication exists that the goodwill may be impaired, the Company must measure
the impairment loss, if any. Any
transitional impairment loss will be recognized as the cumulative effect of a
change in accounting principle in the Company’s statement of earnings. The Company has approximately $15,189 of
unamortized goodwill as of January 1, 2002, which will be subject to the
transition provisions of SFAS 142.
Amortization
expense related to goodwill was approximately $935, $899, and $792 for the
years ended December 31, 2001, 2000, and 1999, respectively. In addition, accumulated amortization as of
December 31, 2001 includes the effect of the $1,409 writedown of all goodwill
associated with pro audio acquired assets.
Other than prospective non-amortization of goodwill, the Company does
not expect the adoption of SFAS 142 to have a material effect on its revenue,
operating results or liquidity.
CASH
AND CASH EQUIVALENTS
Cash includes
cash on-hand and all highly liquid debt instruments purchased with original
maturities of three months or less.
MARKETABLE
SECURITIES
The Company’s
investments consist primarily of taxable adjustable rate bonds (7-day put
bonds). There is no unrealized gain or
loss on these bonds.
INVENTORIES
Inventories
are stated at the lower of cost or market and are valued using the first-in,
first-out method.
EQUIPMENT
AND LEASEHOLD IMPROVEMENTS
Equipment and
leasehold improvements are recorded at cost, less accumulated depreciation and
amortization. Depreciation of equipment
is provided using the straight-line method over the estimated useful lives of
the related assets. Leasehold
improvements are amortized on a straight-line basis over the shorter of the
term of the lease or the estimated useful life of the improvement. The estimated useful lives used in computing
depreciation of equipment and leasehold improvements are:
• Machinery,
equipment and tooling 3-17
years
• Furniture
and office equipment 4-7
years
• Leasehold
improvements lesser
of 10 years or remaining lease term
Expenditures
for maintenance, repairs and renewals of minor items are charged to operations
as incurred. Major renewals and improvements are capitalized. Upon disposition, the cost and related
accumulated depreciation is removed from the accounts and the resulting gain or
loss is reflected in operations for the period.
RESEARCH
AND DEVELOPMENT
Internal
research and development costs are expensed as incurred.
INCOME
TAXES
Income taxes
are accounted for under the asset and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on tax deferred
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
No provision
has been made for Federal income or withholding taxes which may be payable on
the remittance of undistributed retained earnings of foreign subsidiaries. These earnings have been reinvested to meet
future operating requirements and the Company intends to continue such policy
for the foreseeable future. Such
undistributed earnings were $1,554 and $3,842 at December 31, 2001 and 2000,
respectively.
INCOME
(LOSS) PER COMMON 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, adjusted for the dilutive effect of
options and warrants (anti-dilutive in 2001, 601,792 in 2000, and 1,040,391 in
1999).
STOCK-BASED
COMPENSATION
The Company
applies the intrinsic value-based method of accounting prescribed by Accounting
Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
Employees,” and related interpretations including FASB Interpretation No. 44,
“Accounting for Certain Transactions involving Stock Compensation an
interpretation of APB Opinion No. 25” issued in March 2000, to account for its
fixed plan stock options. Under this
method, compensation expense is recorded on the date of the grant only if the
current market price of the underlying stock exceeded the exercise price. SFAS No. 123, “Accounting for Stock-Based
Compensation”, established accounting and disclosure requirements using a fair
value-basis method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has
elected to continue to apply the intrinsic value-based method of accounting
described above, and has adopted the disclosure requirements of SFAS No. 123.
USE
OF ESTIMATES
The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenues and
expenses during the reporting period.
Some of the more significant estimates made by management involve the
reserve for doubtful accounts, provision for slow moving and obsolete inventory
and evaluation of the recoverability of assets. Actual results could differ from those estimates.
CREDIT
RISK
The Company
develops, manufacturers, markets and sells commercial audio, paging,
communications and other equipment and telecommunications peripherals. The
Company performs on-going credit evaluations of its customers. The Company provides reserves for potential
losses from these receivables.
TRANSLATION
OF FOREIGN CURRENCIES
Foreign
denominated assets and liabilities of the Company are translated from local
currencies into U.S. dollars at the exchange rates in effect at the end of the
period. Revenues and expenses are
translated at average exchange rates prevailing during the period. Translation adjustments that arise from
translation of subsidiary financial statements denominated in foreign currency
are accumulated in a separate component of other comprehensive income
(loss). Transaction gains and losses
that arise from exchange rate changes on transactions denominated in a currency
other than local currencies are included in operations as incurred.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
The recorded
amount of cash, cash equivalents, marketable securities, accounts receivable,
accounts payable, accrued expenses, and revolving credit agreements
approximates fair value due to the short-term maturities of these assets and
liabilities and the variable interest rate of others.
DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998,
the FASB issued SFAS No. 133, “Accounting for Derivative Instruments and
Certain Hedging Activities.” In June
2000, the FASB issued SFAS No. 138, “Accounting for Certain Derivative
Instruments and Certain Hedging Activity, an Amendment of SFAS 133.” These statements establish accounting and
reporting standards for derivative instruments, including those embedded on
other contracts, and for hedging activities.
They require that all derivative instruments be recorded on the balance
sheet at their respective fair values.
The Company adopted SFAS No. 133 and SFAS No. 138 on January 1,
2001. The Company does not purchase or
hold derivative instruments for trading or speculative purposes. There were no contracts outstanding at
December 31, 2001 and 2000, or for the year ending December 31, 2001.
COMPREHENSIVE
INCOME
SFAS 130,
“Reporting Comprehensive Income” establishes standards for reporting and
presentation of comprehensive income and its components in a full set of
financial statements. The Company’s
comprehensive income consists of net income and translation adjustments and is
presented in the consolidated statement of stockholder’s equity. The Statement requires only additional
disclosures in the consolidated financial statements; it does not affect the
Company’s financial position or results of operations.
SEGMENT
INFORMATION
The Company
operates in two reportable business segments, Bogen (domestic) and Speech
Design (foreign) and follows the requirements of SFAS No. 131, “Disclosures
about Segments of an Enterprise and Related Information.” (See Note 19).
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
PABX market and in Unified Messaging products and services, targeting the
growing European voice processing and Unified Messaging markets.
The Company’s
reportable segments are strategic business units that offer different products
and services. They are managed separately because each business requires
different technology, marketing and distribution strategies.
The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies. The
Company evaluates performance based on profit or loss from operations before
income taxes not including other income (expense), nonrecurring gains and
losses, and foreign exchange gains and losses.
ISSUANCE
OF SHARES BY SUBSIDIARIES
Gains or
losses arising from the issuances of shares by subsidiaries, due to changes in
the Company’s proportionate share of the value of the issuer’s equity, are
recorded as a component of Stockholders’ Equity, pursuant to U.S. Securities
and Exchange Commission Staff Accounting Bulletin topic 5H, “Accounting for
Sales of Stock by a Subsidiary”.
RECLASSIFICATIONS
Certain prior
year balances have been reclassified to conform to the current year
presentation.
3. ACQUISITIONS
On August 26,
1999, Bogen Communications, Inc., through Apogee, a newly formed Bogen
subsidiary, acquired substantially all of the assets of Apogee Sound, Inc., a
privately owned company headquartered in Petaluma, California. Consideration
for the acquisition was the assumption or payment of approximately $2,600 of
Apogee 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 estimate of fair market values at the date of
acquisition. In connection with the
acquisition, the Company recorded goodwill of
$1,836. (See note 6).
4. INVENTORIES
Inventories, net of reserves
are, as follows:
5. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold
improvements is comprised of the following items:
In 2001 and
2000, furniture and office equipment includes amounts of $925 under capital
lease obligations (see Note 10).
Depreciation
and amortization expense was $1,706, $1,549 and $1,033 for the years ended
December 31, 2001, 2000, and 1999, respectively.
6. GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets
consists of the following:
Goodwill on
the Company’s books is comprised of $14,050 for the acquisition of Bogen, with
an amortizable life of 40 years; $241 for the acquisition of NEAR, with a life
of 20 years; $1,836 for the Apogee acquisition, with a 15 year life; $5,323 for
the purchase of the minority interest in Speech Design, with a life of 20
years; $518 relating to the majority acquisition of Satelco, with a 20 year
life; and $567 recorded for the
acquisition of Carrier Systems, with an average life of 6 years. In December 2001, in accordance with current
FASB requirements, the Company wrote off the remaining Apogee goodwill balance
of $1,409.
Intangible
assets on the Company’s books includes $126 for Bogen organization costs,
patents and trademarks; $874 for existing technology, trade names, and
workforce, as a result of the acquisition of minority interest of Speech
Design; and $403 for existing technology, trade names, and workforce as a
result of the acquisition of Carrier Systems.
These assets are being amortized over three to ten years.
Amortization
of intangibles, primarily goodwill, was $1,107, $1,017 and $866 for the years
ended December 31, 2001, 2000, and 1999, respectively.
7. REVOLVING CREDIT AGREEMENTS
On April 21,
1998, the Company and BCI entered into a $27 million credit facility (the
“Facility”) with KeyBank National Association (“Key”), which matured on April
30, 2001. The Facility provided,
subject to certain criteria, for a $20 million revolving line of credit for
acquisition financing and a $7 million working capital line. Effective June 30, 2001, the Company and Key
entered into a Modification Agreement (“The Agreement”), under which the
working capital line was reduced to $5 million and the parties agreed to an
unsecured $20 million line of credit for acquisition financing. The Agreement extends the provisions,
warranties, certifications, and other criteria of the expired Facility to June
30, 2002, and reduces the number of financial covenants required to be
met. The Company was not in compliance
with one covenant for the period ended December 31, 2001, for which it received
a waiver from Key. As of December 31,
2001 and 2000, Bogen had no short-term domestic borrowings outstanding under
either the Agreement or the Facility.
The Agreement
bears interest at either Key’s prime rate or, at the borrower’s option, LIBOR
plus 125 to 200 basis points. The
interest rate at December 31, 2001, was 4.75%.
Speech Design
has credit lines and overdraft facilities of approximately 8.7 million Deutsche
Marks (“DM”) (approximately U.S. $3.9 million) from six banks. Speech Design’s short-term lines of credit
are collateralized by all of Speech Design’s accounts receivable and
inventory. Speech Design has a 15
million DM (U.S. $6.8 million) 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 Euribor
rate, which was 3.330% at December 31, 2001.
At December
31, 2001 and 2000, Speech Design had short-term borrowings amounting to $973
and $1,201, respectively. The amounts
available under Speech Design’s credit lines were approximately $3.0 million at
December 31, 2001, with rates tied to short-term bank notes and Euromarket loans. At December 31, 2001 and 2000, these rates
ranged from 6.5% to 15.25%. There were
no borrowings under either the Bogen or Speech Design acquisition credit
facilities.
Total outstanding revolving
lines of credit are summarized as follows:
8. NOTES PAYABLE TO RELATED PARTIES
There is a
$315 original note to the minority shareholders of Satelco, payable in
quarterly installments of $31 plus interest at the Zurich Kantonal Bank rate,
with the initial payment in February 1995.
The payments of this note were suspended (with the approval of the note
holders) until such time as the Satelco subsidiary became profitable. Payments resumed in 2000 and the note was
classified as short-term at December 31, 2000.
In 2001, payments were again suspended and the note was reclassified as
long term. The amounts outstanding were
$120 and $124 at December 31, 2001 and 2000, respectively.
9. INCOME TAXES
The Company’s pre-tax book
income (loss) is as follows:
The components of income tax
expense (benefit) are as follows:
The difference between the
provision for income taxes computed at the U.S. Federal income tax rate of 34%
and the provision as reported are as follows:
The components of deferred tax
assets and liabilities are as follows:
The Company has net operating
loss (“NOL”) carryforwards of approximately $1,931 for U.S. Federal tax
purposes as of December 31, 2001, which expire between the years 2004 through
2010. Under Section 382 of the Internal
Revenue Code of 1986, as amended, these operating loss carryforwards are
subject to certain limitations on their utilization as a result of the changes
in control of the Company in 1991 and 1995.
Subsequently recognized tax benefits, in the amount of $657, relating to
the reduction of the valuation allowance as these NOL carryforwards are
realized, will be allocated to Goodwill and other intangible assets.
The Company has foreign loss
carryforwards of approximately $2,600 as of December 31, 2001. Certain of these loss carryforwards expire
between the years 2002 through 2005.
The valuation
allowance for all deferred tax assets as of December 31, 2001 and 2000, was
$948 and $946, respectively. The net
change in the total valuation allowance for the year ended December 31, 2001,
was an increase of $2. The net change
in the total valuation allowance for the year ended December 31, 2000, was a
decrease of $514. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become deductible. Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income, certain
limitations on the utilization of operating loss carryforwards and tax planning
strategies in making this assessment.
Based upon the level of historical taxable income and projections for
future taxable income, by jurisdiction, over the periods which the deferred tax
assets are deductible, management believes it is more likely than not the
Company will realize the benefits of these deductible differences, net of the existing
valuation allowances at December 31, 2001.
The amount of the deferred tax asset considered realizable, however,
could be reduced in the near term if estimates of future taxable income during
the carryforward period are reduced.
10. LEASES
The Company is obligated under
various capital leases for certain office equipment that expire over the next
four years. The gross amount of assets
and related accumulated amortization recorded under capital leases were as
follows:
Amortization of assets held
under capitalized leases is included with depreciation expense. The Company occupies its plant and office
facilities and operates certain equipment and vehicles under leases expiring at
various dates through 2010. The
facility leases contain escalation clauses and provide for payments of taxes
and expenses over base rent. The
facility leases also contain renewal options of varying lengths.
Future minimum annual lease
payments under non-cancelable operating leases (with initial or remaining lease
terms in excess of one year) and future minimum capital lease payments as of
December 31, 2001, are as follows:
The facility
leases include scheduled rent increases over the lease terms. Rent expense has been recorded on a
straight-line basis and the related deferred rent obligation of $47 and $0 at
December 31, 2001 and 2000, respectively.
Rent expense
charged to operations totaled approximately $1,907, $1,740, and $1,552 for the
years ended December 31, 2001, 2000, and 1999, respectively.
11. MINORITY INTEREST
On September
27, 2001, an agreement was signed with 2.T-Telematik Venture
Beteiligungsgesellschaft mgH (“T-Venture”), a venture capital subsidiary of
Deutsche Telekom AG, a world leader in telecommunications, to sell 2% of SDI, a
newly-formed Company subsidiary which now holds all equity in Speech Design,
the company’s European operation, to T-Venture. Sale of the SDI common stock
minority holding was for approximately 842 Euros, about $765, less expenses of
$104. T-Venture also received a warrant
to purchase another 2% of SDI shares at prices that, if SDI becomes separately
traded, would be established at a discount to initial public market prices. As part of the agreement, within thirty days
after the second or third anniversaries of the agreement date, T-Venture has an
option to request that the SDI repurchase all of the common shares held by
T-Venture for a price, set by mutual determination or by an appraiser, not to
exceed 125% of the total amount paid by
T-Venture.
Separately,
T-Venture signed a marketing agreement entitling it to receive 1% of SDI stock
if T-Venture assisted Speech Design in attaining certain Unified Messaging
sales objectives by December 31, 2001.
The marketing agreement expired without being exercised at December 31,
2001.
12. COMMITMENTS AND CONTINGENCIES
EMPLOYMENT
CONTRACTS
The Company
has entered into employment contracts with several officers of the
Company. The employment contracts of
the Chief Executive Officer and the President of the Company both expired in
November 2001and are currently being renegotiated. The management agreement with the President of BCI’s subsidiary,
Apogee Sound International, expires in August 2002. The management agreements of the two Managing Directors of Speech
Design expire in June 2004. The
management agreements with the two managing directors at Speech Design’s
subsidiary, Carrier Systems, expire in December 2003. Compensation accrues to the officers over the term of the contract
as their respective services are provided.
LITIGATION
The Company is
party, in the ordinary course of business, to various legal actions and claims
which relate to its products, intellectual property, employee matters, or other
aspects of its operations. In the
opinion of management, the ultimate disposition of these matters will not have
a material adverse effect on the Company’s consolidated financial position,
results of operations, or liquidity.
13. STOCKHOLDERS’ EQUITY
PREFERRED
STOCK
The Company is
authorized to issue 1,000,000 shares of preferred stock with such designations,
voting and other rights, and preferences as may be determined from time to time
by the Board of Directors.
COMMON
STOCK AND WARRANTS
On November 5,
2001, the Company commenced an offer to repurchase up to 1.5 million shares of
its common stock in a “Dutch Auction” tender offer at a price between $2.50 and
$3.00 per share. Based on the tenders
received, the Company repurchased 1,012,211 shares, for which it paid $3,037,
or $3.00 per share, to the tendering shareholders.
In June 1993,
300,000 Warrants were issued to various individuals in consideration for
providing the Company bridge financing until its initial public offering
(“Offering”) on October 15, 1993. The
Company issued 3,100,000 Warrants to purchase its common stock in connection
with the Offering. Another 60,000
Warrants were issued as consideration for providing certain financings and
services provided to the Company.
On March 30,
2000, the Company called these Warrants for redemption for $.01 per Warrant,
effective May 1, 2000, after which date all remaining warrants would be
cancelled. Such redemption was
authorized by the terms of the Warrant Agreement dated as of October 7, 1993
following any period of twenty trading days on which the Company’s Common Stock
market price closes at $10 per share or higher.
On November
26, 1997, D&S Capital, LLC, a limited liability company whose interests are
owned by the Chief Executive Officer and President of the Company, acquired
46,295 shares of common stock and warrants to purchase 250,000 shares of
restricted common stock at an exercise price of $5.00 per share, for an
aggregate purchase price of $250. The
warrants are exercisable in specified increments through January 1, 2003. Another 575,885 warrants to purchase common
stock were issued on November 28, 1997, to Helix Capital II, LLC and
subsequently distributed to its former owners and employees. These warrants have an exercise price of
$5.50 and expire in November 2002.
The
Company had the following warrants outstanding:
14. STOCK OPTIONS
The Company
has a Stock Option Incentive Plan (the “Plan”) under which 1,253,335 shares of
the Company’s Common Stock are reserved for issuance pursuant to the Plan. As of March 29, 2000, the stockholders of
the Company approved an amendment to increase the available shares under the
plan to 1,500,000. The Plan can award
stock options to eligible employees of the Company and its subsidiaries
(including employee directors), non-employee directors, and independent
contractors and consultants who perform services for the Company. The options vest over a period of five years
and are exercisable at prices determined on a case-by-case basis but not less
than the fair market value of the stock at the date of grant and none may be
exercised more than 10 years from the date of grant. From time to time, the Company grants additional stock options to
individuals outside of the Plan. During
1997, the Company granted a total of 325,885 options outside the Plan to the
Company’s newly appointed CEO and President.
These options were granted at an exercise price of $5.00 per share, were
fully vested in 2000, and will expire 10 years from the date of grant.
Information with respect to the
Company’s stock options under the 1996 Plan and discretionary grants are as
follows:
The number of
shares and weighted average price of options exercisable at December 31, 2001,
was 973,105 shares at $6.24 per share and had a weighted average contractual
life remaining of 6.6 years. At
December 31, 2001, 363,583 options were available for future grants under the
terms of the Plan. Outstanding options expire prior to December 31, 2010, and
are exercisable at prices ranging from $5.00 to $8.50 per share.
The Company
has adopted the disclosures provisions of SFAS 123, “Accounting for Stock-Based
Compensation”. This statement defines a
fair value method of accounting for an employee stock option or similar equity
instrument. However, it allows an
entity to continue to measure compensation cost for those instruments using the
intrinsic-value-based method of accounting prescribed by Accounting Principles
Board Opinion No. 25, “Accounting for Stock Issued to Employees” provided it
discloses the effect of SFAS 123 in footnotes to the financial statements. The Company has chosen to continue to
account for stock-based compensation using the intrinsic value method. Had the Company, however, elected to
recognize compensation cost based on fair value of the stock options at the
date of grant under SFAS 123, such costs would have been recognized ratably
over the vesting period of the underlying instruments and the Company’s net
income (loss) and net income per common share would have decreased to the pro
forma amounts indicated in the table below.
Pro forma net income (loss) and
net income (loss) per common share was as follows:
The fair value
of the options granted was estimated using the Black-Scholes option-pricing
model based on the weighted average exercise price at date of grant of $5.00 in
fiscal 2001 and the following weighted average assumptions: risk-free interest
rate of 6.91%; expected option life of 7.5 years; volatility of 55% and no
dividend yield. The average fair value
of options granted during 2001 was $5.00.
The fair value
of the options granted was estimated using the Black-Scholes option-pricing
model based on the weighted average exercise price at date of grant of $6.78 in
fiscal 2000 and the following weighted average assumptions: risk-free interest
rate of 9.24%; expected option life of 7 years; volatility of 78% and no
dividend yield. The average fair value
of options granted during 2000 was $6.78.
The fair value
of the options granted was estimated using the Black-Scholes option-pricing
model based on the weighted average exercise price at date of grant of $6.04 in
fiscal 1999 and the following weighted average assumptions: risk-free interest
rate of 8.00%; expected option life of 7.5 years; volatility of 39% and no dividend
yield. The average fair value of
options granted during 2001 was $5.84.
15. RESTRUCTURING AND OTHER CHARGES
In 2001,
Speech Design recorded approximately $481 of restructuring charges,
approximately $176 in the third quarter for its Unified Messaging business and
approximately $305 in the fourth quarter for its voicemail business. In addition, the Company wrote off all
remaining costs, approximately $581 of legal fees, incurred to date in
connection with its exploration of alternatives for enhancing shareholder
value, which had included a possible separation of the domestic and foreign
businesses. In 2000, the company
expensed $310 of costs related to its exploration of strategic alternatives. All restructuring and other charges are
reported on a separate line in the Consolidated Statements of Operations.
As of December
31, 2001, cash payments of approximately $1,172 had been made for these
charges. The remaining liability to be
paid was $200.
16. INCOME (LOSS) PER COMMON SHARE
Basic earnings
per common share is computed by dividing net earnings per common share by the
weighted average number of common shares outstanding during the period. Diluted earnings per common share gives
effect to all diluted potential common shares that were outstanding during the
period. Potential common shares are not
included in the calculation of diluted earnings per share if their inclusion
would be anti-dilutive. Potential
common shares attributable to outstanding options and warrants have not been
included in the calculation of diluted earnings per common share for the year
ended December 31, 2001, since their inclusion would have been anti-dilutive.
17. RELATED PARTY TRANSACTIONS
Pursuant to a
Mergers & Acquisition Engagement Agreement, dated August 1997, as amended
on November 29, 1997, and the Amended and Restated Mergers & Acquisition
Engagement Agreement, effective as of October 1, 1998, between the Company and
Helix Capital Services, Inc. (“Helix Services”), the Company paid Helix
Services approximately $374 in 1998, including an aggregate of $210 in monthly
retainer fees and $164 for services rendered in connection with the Speech
Design acquisition. Pursuant to the
Amended and Restated Mergers & Acquisition Agreement, Helix Services acted
as the principal financial advisor and, subject to certain exceptions, the
exclusive mergers and acquisition advisor for the Company and all of its
domestic subsidiaries. In exchange for
such services, the Company paid Helix Services a $10 monthly retainer fee
(prior to October 1, 1998, the monthly retainer fee was $20) and, in the event
the Company consummated a financing or other extraordinary corporate
transaction, an additional fee equal to a minimum of 2% of the acquisition
price, subject to reduction in certain circumstances.
Effective as
of October 1, 1998, Speech Design entered into a Mergers & Acquisition
Engagement Agreement with Helix Services pursuant to which Helix Services acted
as the principal financial advisor and, subject to certain exceptions, the exclusive
mergers and acquisition advisor for Speech Design. In exchange for such services, the Company paid Helix Services a
$10 monthly retainer fee and, in the event the Company consummated a financing
or other extraordinary corporate transaction, an additional fee equal to a
minimum 2% of the acquisition price, subject to reduction in certain
circumstances. During 1998, Speech
Design paid Helix Services an aggregate of $30 in monthly retainer fees.
In 1999, the
Company and Speech Design combined paid Helix Services $160 in monthly retainer
fees and approximately $20 in expenses associated with the Apogee
acquisition. The Company and Speech
Design terminated their agreements with Helix Services on August 31 and
September 1, 1999, respectively. The
Company subsequently entered into a Limited Engagement Agreement with Helix
Services that called for certain payments to be made upon the successful
consummation of merger and acquisition transactions. The Limited Engagement Agreement expired on December 31, 1999.
18. EMPLOYEE BENEFIT PLANS
Bogen
participates in multi-employer pension plans, which cover all union employees.
Contributions for the periods ended December 31, 2001, 2000, and 1999, were
approximately $15, $16, and $44, respectively.
Employees of
the Company are also eligible to participate in a Company sponsored defined
contribution 401(k) plan. The Company
provides a matching contribution to a portion of funds contributed by
employees. Amounts charged to expense
were $124, $132, and $100 for the years ended December 31, 2001, 2000, and
1999, respectively.
19. 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
PABX market and in Unified Messaging products and services, targeting the
growing European voice processing and Unified Messaging markets.
The following table presents
information about the Company by segment/geographic area. Inter segment
revenues and transfers are not considered material:
A reconciliation of reportable
segment operating profit and assets to the Company’s consolidated totals are as
follows:
20. CREDIT CONCENTRATION
The Company
had no customers that individually accounted for more than 10% of total
consolidated net sales in 2001 or 2000.
Speech Design had revenues in 1999 from two customers that totaled
$13,060. Bogen had one customer in 1999
with sales of $5,885. Each was greater
than 10% of the Company’s total revenues.
21. QUARTERLY FINANCIAL DATA (UNAUDITED)
ITEM 9.
ITEM 9.
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
NONE
PART III
Certain information required by Part III is omitted from this report
in that the Company will file a definitive proxy statement pursuant to
Regulation 14A (the “Proxy Statement”) not later than 120 days after the end
of the fiscal year covered by this Report, and certain information included
therein is incorporated herein by reference.
ITEM 10.
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
The information required by the Item is incorporated herein by
reference to the Company’s Proxy Statement.
ITEM 11.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to
the Company’s Proxy Statement, including the Stock Price Performance Graph
and the Board of Directors Report on Executive Compensation.
ITEM 12.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by
reference to the Company’s Proxy Statement.
ITEM 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The information required by this Item is incorporated herein by
reference to the Company’s Proxy Statement.
PART IV
ITEM 14.
ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a)(1)
Financial Statements See “Item 8. Financial Statements and
Supplementary Data.”
(a)(2)
Financial Statement Schedule:
Schedule II: Valuation and Qualifying Accounts
BOGEN
COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARES AND
PER SHARE AMOUNTS)
(a) Uncollectible accounts
written off, net of recoveries.
(b) Write-off of obsolete
inventory.
(c) Currency exchange
effect.
(d) Assumption of Apogee allowances
and reserves, net of currency exchange effects.
(e) Write-off of prior year
returns
(b) Reports on Form 8-K
The Company
filed a Form 8-K, dated October 5, 2001, reporting the transfer of ownership of
its subsidiary, Speech Design GmbH, to a newly-formed Delaware corporation,
Speech Design International Inc. (“SDI”), and the sale by SDI of 2 percent of
its common stock to 2.T-Telematik Venture Beteiligungsgesellschaft mgH
(“T-Venture”), a venture capital subsidiary of Deutsche Telekom AG, a world
leader in telecommunications. The sale
was consummated on September 27, 2001, for 842,000 Euros, or approximately
$765,000. A Warrant for an additional
approximately 2 percent of SDI common stock was also issued to T-Venture. The purchase agreement, Warrant Agreement,
and a separate Marketing Agreement between SDI and T-Venture were filed as
exhibits to such Form 8-K.
(c) Exhibits
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)
4.5
Bogen Communications, International, Inc.
1996 Incentive Stock Option Plan. (5)
10.1
Form of Indemnification Agreement between
the Company and its officers, directors and advisors. (4)
10.2
Summary of Agreement for Business Credit
between Speech Design GmbH and Statelparkasse Munchen. (6)
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)
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)
10.17
Management Agreement, dated May 20, 1998,
between Speech Design GmbH and Kasimir Arciszewski. (9)
10.18
Management Agreement, dated May 20, 1998,
between Speech Design GmbH and Hans Meiler. (10)
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. (9)
10.20
Guaranty of Payment and Performance, dated
April 21, 1998, by Bogen Corporation. (9)
10.22
Security Agreement, dated April 21, 1998,
by Bogen Communications International, Inc. in favor of KeyBank National
Association. (9)
10.23
Security Agreement, dated April 21, 1998,
by Bogen Communications, Inc. in favor of KeyBank National Association. (9)
10.24
Security Agreement, dated April 21, 1998,
by Bogen Corporation in favor of KeyBank National Association. (9)
10.25
Security Agreement, dated April 21, 1998,
by New England Audio Resource Corp. in favor of KeyBank National Association.
(9)
10.26
Borrower Pledge Agreement, dated April 21,
1998, by and between Bogen Communications International, Inc. and KeyBank
National Association. (9)
10.27
Borrower Pledge Agreement, dated April 21,
1998, by and between Bogen Communications International, Inc. and KeyBank
National Association. (9)
10.28
Guarantor Pledge Agreement, dated April 21,
1998, by and between Bogen Corporation and KeyBank National Association. (9)
10.29
Guarantor Pledge Agreement, dated April 21,
1998, by and between Bogen Communications, Inc. and KeyBank National
Association. (9)
10.30
Term Sheet for Acquisition Line, dated
September 18, 1998, between Speech Design GmbH and DG Bank. (10)
10.33
Amendment to Employment Agreement dated
February 26, 1997 between the Company and Mr. Jonathan Guss. (11)
10.34
Amendment to Employment Agreement dated
February 26, 1997 between the Company
and Mr. Michael Fleischer. (11)
10.35
Bogen Communications International, Inc.
Amended and Restated Stock Incentive Plan (12)
10.36
Amendment to premises lease between Ramsey
96, L.L.C. and Bogen Communications, Inc. dated July 31, 2000 (13)
10.37
Common Stock and Warrant Purchase Agreement
between Bogen Communications International, Inc, Speech Design International
Inc., Speech Design GmbH and 2.T-Telematik Venture Beteiligungsgesellschaft
mbH dated September 27, 2001. (14)
10.38
Marketing Agreement between Speech Design
International Inc. and 2.T-Telematik Venture Beteiligungsgesellschaft mbH
dated September 27, 2001. (14)
10.39
Modification Agreement dated August 17,
2001, between and among Bogen Communications International, Inc., Bogen
Communications Inc., and KeyBank National Association. (15)
10.40
Management Agreement dated June 29, 2001,
between Speech Design GmbH and Kasimir Arciszewski. (15)
10.41
Management Agreement dated June 29, 2001,
between Speech Design GmbH and Hans Meiler. (15)
99.1
Minority Interest Agreement press release
between Bogen Communications International, Inc, Speech Design International
Inc., Speech Design GmbH and 2.T-Telematik Venture Beteiligungsgesellschaft
GmbH dated October 1, 2001. (14)
*21.1
Subsidiaries of the Company
*23.1
Consent of KPMG LLP
*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 and 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 Current Report on Form 8-K, dated
May 20, 1998.
(10) Incorporated
by reference to the Exhibits to the Company’s Annual Report on Form 10-K for
the year ended December 31, 1998.
(11) Incorporated
by reference to the Exhibits to the Company’s Annual Report on Form 10-K for
the year ended December 31, 1999.
(12) Incorporated
by reference to the Exhibits to the Company’s Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30, 2000.
(13) Incorporated
by reference to the Exhibits to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2000.
(14) Incorporated
by reference to Exhibits to the Company’s Current Report on Form 8-K dated
October 9, 2001.
(15) Incorporated
by reference to the Exhibits to the Company’s Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30, 2001.
SIGNATURES
Pursuant to
the requirements of Section 13 or 15(d) 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.
Pursuant to
the requirements of the Securities Exchange Act of 1934, this report has been
signed on March 27, 2002, by the following persons on behalf of the Registrant
in the capacities indicated.
By:
/s/ Jonathan
Guss
Director,
Chief Executive Officer
Jonathan Guss
By:
/s/ Michael
P. Fleischer
Director,
President
Michael P. Fleischer
By:
/s/ Jeffrey
Schwarz
Director,
Co-Chairman of the Board of Directors
Jeffrey Schwarz
By:
/s/ Yoav
Stern
Director,
Co-Chairman of the Board of Directors
Yoav Stern
By:
/s/ Kasimir
Arciszewski
Director
Kasimir Arciszewski
By:
/s/ Glenn
Dubin
Director
Glenn Dubin
By:
/s/ Zivi R.
Nedivi
Director
Zivi R. Nedivi
By:
/s/ Daniel
Schwartz
Director
Daniel Schwartz