Boca Research Announces Q2 Results - Company Financial Information

Edge: Work-Group Computing Report, August 2, 1999

Boca Research, Inc. (Nasdaq:BOCI) has announced its results for the second quarter ended June 30, 1999. The Company reported net sales of $8.7 million and a net loss of $4.8 million, or $0.51 per share, compared to net sales of $13.2 million and a net loss of $9.3 million, or $1.06 per share in the second quarter of 1998.

As previously disclosed, revenue in the second quarter was negatively impacted by a recent Apple promotion that offered purchasers of a Power Macintosh G3 computer the option of receiving either a 56K internal modem or an internal Zip drive at no additional cost. Mac-based modems have been a significant source of revenue for the Company since its mid-1998 acquisition of the modem business of Global Village Communication, Inc. The Apple promotion has resulted in pricing and inventory issues in the Global Village modem business, which is expected to continue to impact the third quarter as well.

Anthony F. Zalenski, Boca Research's president and chief executive officer, commented, "Given the status of the modem industry, we made strides to reposition the Company and diversify our business into products with significant growth potential, such as information appliances and thin clients."

Second Quarter Accomplishments

Zalenski continued, "In May, we announced the licensing of our BocaVision ST2001 set-top box reference design to Philips Business Electronics B.V. to be used as part of a Philips co-branded, single-purpose AOL TV . Although timing is ultimately driven by the product's introduction by America Online Inc., we expect to see initial royalty revenues by the end of 1999. We also entered into a strategic alliance with Philips to jointly develop DSL (Digital Subscriber Line) modem technology, which we intend to extend to our entire line-up of communications products in the future."

Zalenski added, "During the quarter, we entered into a common stock purchase agreement with Infomatec Integrated Information Systems AG, an Internet software company focused on IT, retail and the Internet. Infomatec purchased 1,747,965 common shares of Boca Research, currently a 16.5% stake and, in return, we received approximately $8.0 million in cash. In addition to providing Boca Research with additional capital, Infomatec strengthens our position in the Internet and information appliance marketplaces and provides access to global sales channels. With the addition of several of Infomatec's executives to our Board of Directors, we look forward to the benefit of their counsel."

"In addition to the funds received from Infomatec, during the second quarter we received a federal income tax refund of approximately $2 million, which boosted cash and cash equivalents to $10.8 million as of June 30, 1999. This combined with our unused line of credit improves Boca Research's financial position and gives us the ability to continue to target the growing thin client and information appliance markets," said Zalenski.

Outlook

"Both the BocaVision ST2001 information appliance and the BocaVision WT120 thin client products are currently available for shipping and additional BocaVision products are targeted for introduction later in the year. Our plans are to market our thin client products through value-added resellers (VARs), which we are in the process of recruiting. The BocaVision family of products builds on our superior hardware and software design expertise as well as our relationships with strong technology partners including Citrix, Liberate Technologies, National Semiconductor and Philips to provide products that have a cost, performance and time-to-market advantage," Zalenski concluded.

Founded in 1985, Boca Research is a leading provider of hardware and software technology. Boca Research provides communications solutions that enable data transmission, connectivity of devices, and access to applications and information via the Internet, personal computers, and/or server-based environments. The Company designs, manufactures, markets, and supports quality, innovative products that have a cost, performance, and time-to-market advantage.

Boca Research markets modems, I/O cards, and multiport products under the Boca Research brand name. The Company also markets Macintosh peripherals under the Global Village brand name, as well as thin client/server computing devices and information appliances under the BocaVision brand name. Products are sold worldwide through original equipment manufacturers (OEMs), wholesale distributors, and retailers. The thin client products are sold only through value-added resellers. Boca Research is a U.S. corporation headquartered in Boca Raton, Florida with international operations and ventures worldwide.

FMI: http://www.bocaresearch.com, http://www.globalvillage.com, and http://www.bocavision.com.

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

                                              (Unaudited)
                                                June 30,   Dec. 31,
                                                 1999        1998
                                               ------*   --------
Assets

Current assets:

   Cash and cash equivalents                   $ 10,787    $  6,959

   Trade receivables, net                         6,986      11,549

   Inventory, net                                 6,982       9,246

   Prepaid expenses and other current assets        911         637

   Prepaid and deferred income taxes                     2,051
                                               ------*   --------

      Total current assets                       25,666      30,442

Property and equipment, net                       3,325       3,874

Goodwill and other intangible assets              4,087       4,804

Other assets                                        670         622
                                               ------*   --------

         Total assets                          $ 33,748    $ 39,742
                                               ========    ========

Liabilities and Stockholders' Equity

Current liabilities:

   Accounts payable                            $  3,928    $  6,804

   Notes payable                                         2,800

   Deferred revenue                                 511          --

   Accrued expenses and other current
    liabilities                                   3,752       4,037
                                               ------*   --------

      Total current liabilities                   8,191      13,641
                                               ------*   --------

Deferred revenue                                     67          --
                                               ------*   --------

Stockholders' Equity:

   Common stock                                     106          87

   Additional paid-in capital                    34,056      26,045

   Retained deficit                              (8,672)        (31)
                                               ------*   --------

      Total stockholders' equity                 25,490      26,101
                                               ------*   --------

         Total liabilities and stockholders'
          equity                               $ 33,748    $ 39,742
                                               ========    ========


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

                          Three Months            Six Months
                          Ended June 30,         Ended June 30,
                        1999       1998         1999       1998
                      ------*  ------*    ------*  --------


Net sales             $  8,747    $ 13,210    $ 19,448    $ 28,826

Cost of goods sold       8,305      16,239      16,908      32,006
                      ------*   ------*   ------*   --------

  Gross profit (loss)      442      (3,029)      2,540      (3,180)
                      ------*   ------*   ------*   --------

Operating expenses:

  Research and
   development             891         656       1,974       1,233

     Selling, general and
   administrative        4,342       2,943       9,304       5,923

     In-process research
   and development              2,800              2,800
                      ------*   ------*   ------*   --------

      Total operating
       expenses          5,233       6,399      11,278       9,956
                      ------*   ------*   ------*   --------

Loss from operations    (4,791)     (9,428)     (8,738)    (13,136)

Non-operating
 income/(expense), net     (38)        168         103         372
                      ------*   ------*   ------*   --------

Loss before income taxes(4,829)     (9,260)     (8,635)    (12,764)

Income taxes                 6                  6          --
                      ------*   ------*   ------*   --------

Net loss              ($ 4,835)   ($ 9,260)   ($ 8,641)   ($12,764)
                      ========    ========    ========    ========

Basic and diluted loss
 per share            ($  0.51)   ($  1.06)   ($  0.95)   ($  1.46)
                      ========    ========    ========    ========

Shares used in per
 share calculation       9,449       8,742       9,115       8,742
                      ========    ========    ========    ========