Financial: Boca Research Q3 1998 Results - Company Financial Information

Edge: Work-Group Computing Report, Nov 9, 1998

Boca Research, Inc. (NASDAQ: BOCI) Wednesday announced financial results for the third quarter ended September 30, 1998. Boca reported sales of $22.8 million, compared to sales of $13.2 million for the second quarter of 1998 and sales of $18.5 million for the third quarter of 1997. Sales for the nine months ended September 30, 1998 were $51.6 million, compared to sales of $53.7 million for the first nine months of 1997.

For the third quarter of 1998, the Company reported a net loss of $2.0 million, or ($0.22) per share, compared to a net loss of $10.3 million, or ($1.17) per share, in the second quarter of 1998 and a net loss of $1.6 million, or ($0.18) per share, in the third quarter of 1997. In the first nine months of 1998, Boca reported a net loss of $15.7 million, or ($1.80) per share, compared to a net loss of $7.5 million, or ($0.86) per share, during the nine month period ended September 30, 1997.

During the third quarter, the Company further improved the distribution of Boca Research branded products by leveraging the strong retail position of its Global Village line of modems. As a result, large retailers such as Fry's Electronics, J & R Computerworld and Inca Computers are now carrying Boca Research products.

During the third quarter, sales to Apple Computer, Inc. were approximately 23% of net sales. Thus far in the fourth quarter there are no sales to Apple, and Boca is uncertain as to the outlook for any recurrent Apple sales. The decline in sales to Apple Computer may be offset in part by increased sales through the retail channel in the fourth quarter. In addition, Boca released a special iMac version of its award-winning GlobalFax software which capitalizes on the success of Apple's iMac product.

Commenting on the results, Tony Zalenski, Boca's President and CEO, said: "This was the first full quarter of operations after our acquisition of Global Village's modem business assets, and we were able to significantly increase our revenue. The Macintosh modem market has not experienced the same price erosion as the Windows-based market, and our Global Village brand continues to command greater margins. We were unable to return our Company to profitability during the third quarter; however, we continue to make progress in reducing our costs and increasing our presence in retail.

"In the third quarter, we were successful in driving down our inventory and reducing our number of SKUs. Net inventory decreased by approximately $4.5 million during the third quarter of 1998. We have continued to work our product diversification plan, and I am pleased to announce that we recently released news of our expanded business partnership with NCI as well as the first in a series of products we developed with them.

"We are aggressively pursuing large OEM opportunities with NCI in the Internet/information appliance market. Building on our experienced

manufacturing expertise in this product market, we have a jump start on other manufacturers who are entering this market. We are continuing to work with several strategic partners who have expressed interest in our products for this market.

Founded in 1985, Boca Research designs, manufactures, markets and supports quality, cost-effective Internet access devices, data communications and networking products to facilitate the transmission of information on personal computers, computer networks and the Internet.

The Company also markets its products under the Global Village Communication brand name and sells its products worldwide through distributors, original equipment manufacturers (OEMs) and retailers. Boca Research is a U.S. corporation headquartered in Boca Raton, Florida with international operations and ventures worldwide.

                          BOCA RESEARCH, INC.
                      Consolidated Balance Sheets
                            (In thousands)

                                     (Unaudited)
                                   September 30,       Dec. 31,
                                        1998            1997
                                     -----------     ------------
   Assets

   Current assets:

      Cash and cash equivalents          $5,328           $8,205

      Trade receivables, net             20,151           11,723

      Inventory, net                      9,098           14,876

      Prepaid expenses and
        other current assets                820              470

      Prepaid and deferred
        income taxes                      2,052            9,214
                                     ----------      -----------

         Total current assets            37,449           44,488

   Property and equipment, net            4,092            5,540

   Goodwill and other
     intangible assets                    4,432                -

   Other assets                             627              191
                                     -----------     ------------

             Total assets                $46,600          $50,219
                                     ===========     ============

   Liabilities and
     Stockholders' Equity

   Current liabilities:

      Accounts payable                  $11,365           $6,546

      Notes payable                       5,955                -

      Accrued expenses and other
        current liabilities               4,280            3,092
                                     -----------     ------------

         Total current liabilities       21,600            9,638
                                     -----------     ------------

   Stockholders' Equity:

      Common stock                           87               87

      Additional paid-in capital         26,055           25,915

      Retained earnings                  (1,142)          14,579
                                     -----------     ------------

        Total stockholders' equity       25,000           40,581
                                     -----------     ------------

             Total liabilities and
              stockholders' equity       $46,600          $50,219
                                     ===========     ============


                      BOCA RESEARCH, INC.
               Consolidated Statements of Income
                          (Unaudited)
             (In thousands except per share data)

                            Three Months           Nine Months
                         Ended September 30,   Ended September 30,
                         1998         1997       1998       1997
                        ---------  ---------  ---------  ---------

Net sales                 $22,789   $18,549    $51,615    $53,660

Cost of goods sold         19,221    17,138     51,227     51,320
                        ---------  ---------  ---------  ---------

Gross profit               3,568      1,411        388      2,340
                        ---------  ---------  ---------  ---------

Operating expenses:

Research and development     872        690      2,105      2,104

Selling, general and
  administrative           4,830      3,431     10,745     12,384

In process research
  and development             -          -       3,800          -
                        ---------  ---------  ---------  ---------

    Total operating
       expenses            5,702      4,121     16,650     14,488
                        ---------  ---------  ---------  ---------

Loss from operations      (2,134)    (2,710)   (16,262)   (12,148)

Non-operating income, net    169        241        541        603
                        ---------  ---------  ---------  ---------

Loss before income
  tax benefit             (1,965)    (2,469)   (15,721)   (11,545)

Income tax benefit             -       (864)         -     (4,041)
                        ---------  ---------  ---------  ---------

Net loss                 ($1,965)   ($1,605)  ($15,721)   ($7,504)
                        =========  =========  =========  =========

Net loss per share        ($0.22)    ($0.18)    ($1.80)    ($0.86)
                        =========  =========  =========  =========

Weighted average shares
  outstanding              8,756      8,725      8,747      8,716
                        =========  =========  =========  =========