B.o.s. Better Online Solutions (NASDAQ:BOSC)

BOSC has retraced most of its recent gains.  After an impressive 2010 second quarter showing,  investors are probably betting that third quarter financial results will not impress:

In the last three months, BOS' US subsidiary has experienced a reduction in orders from one of its main customers. Mr. Zelicovsky commented: "We are examining the activities of our US subsidiary, Summit, which continues to struggle with the slowdown in the civil aerospace industry, and with the resulting decreased working capital. Summit's bank credit line (non recourse towards BOS) will expire at the end of October this year and we will be entering into a discussion with the bank for a renewal. We are committed to the long-term profitability of BOS and are examining various alternatives in order to obtain this goal."

On the positive side, the company was able to place new shares at a premium to where the stock currently trades:

On October 5, 2010  B.O.S. Better Online Solutions Ltd.  announced that it has entered into a definitive private placement agreement with Telegraph Hill Capital Fund I, LLC ("THCAP") for the issuance of an aggregate of 96,362 Ordinary Shares (equal to 3.5% of the outstanding shares of the Company following the investment) at a price per share of $3.11 (3% above the closing price on October 4, 2010), or $300,000 in total.

We will closely monitor developments.

B.O.S. Better Online Solutions Ltd. announced today that it has entered into a definitive private placement agreement with Telegraph Hill Capital Fund I, LLC ("THCAP") for the issuance of an aggregate of 96,362 Ordinary Shares (equal to 3.5% of the outstanding shares of the Company following the investment) at a price per share of $3.11 (3% above the closing price on October 4, 2010), or $300,000 in total.

Bos Better Online Solutions shares have been strong lately. on August 11, 2010 we initiated a short-term trading position in BOSC shares @ $1.50.  So far, this trade has worked out, but unfortunately the company has not been responsive to our interview requests, making it difficult to determine if we will hold on to our position for the long-term. (we will take some off the table at current prices of around $3.10)

Highlights from 2010 second quarter release issued on August 11 2010:

Second Quarter

• Revenues for the second quarter of 2010 amounted to $10.4 million, which reflects 10% growth over the previous quarter, and 30% growth as compared to the second quarter last year.
  
• Backlog as of June 30, 2010, continued to remain at the relatively high level of $12.3 million.
  
• Operating profit for the second quarter amounted to $563,000 compared to an operating loss of $2.1 million in the comparable quarter last year.
  
• Net profit for the second quarter amounted to $115,000 compared to a net loss of $2.4 million dollars in the comparable quarter last year.
  
• Excluding the amortization of intangible assets and stock based compensation, BOS' net profit was $362,000 compared to a net loss.

• Adjusted EPS was $0.13.

Six Months:

• Operating profit for the first six months of 2010 amounted to $778,000 compared to an operating loss of $2.4 million in the comparable six month period last year.
  
• Net profit for the first six months of 2010 amounted to $15,000 compared to a net loss of $3.1 million in the comparable six month period last year.
  
• Excluding the amortization of intangible assets and stock based compensation, BOS' net profit was $488,000 compared to a net loss.
  
• Adjusted EPS was $0.18.

Edouard Cukierman, Chairman of the Board, stated, "We are very pleased with these results, which prove that the company has turned itself around. These results reflect the successful execution of our cost-reduction plan. In parallel, we are continuing to expand our RFID activities, and we expect these positive trends to continue in the future."

Yuval Viner, BOS CEO, stated, "For the first time in many years, we are pleased to report a net profit, as well as two consecutive quarters of operating profit. We are revising our original outlook for 2010: we reiterate our target of $35 million in revenues, and now believe we will end the year with net profit, not only an operating profit. We expect to make several new customer-related announcements in the near future."

On the surface, the 2010 second quarter financial results appears to be a break out quarter. We will await the 2010 third quarter results with great anticipation. The big elephant in the room is the impending massive dilution of 1.4 million shares from a convertible debt obligation and related in the money warrants.