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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

COMMISSION FILE NUMBER 0-22046

BOGEN COMMUNICATIONS INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 934-8500

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON STOCK, $0.001 PAR VALUE
(Title of class)

        Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Registration S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or amendment to this Form 10-K. o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o    No ý

        The aggregate market value of the voting stock, based on the closing price of the Registrant's common stock on February 26, 2003, as reported on the Nasdaq National Market System ("NASDAQ"), held by non-affiliates of the Registrant was approximately $7,313,282.

        As of February 26, 2003, 5,214,171 shares of the Registrant's Common Stock, par value $.001 per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

        The information called for by Part III of this Form 10-K is incorporated by reference to the definitive proxy statement for the 2003 annual meeting of stockholders of Bogen Communications International, Inc., which definitive proxy statement will be filed no later than 120 days after December 31, 2002.

PART I

        All statements contained herein that are not historical facts, including, but not limited to, statements regarding Bogen Communications International, Inc. and its subsidiaries (collectively, the "Company") and its current business strategy, projected sources and uses of cash, and plans for future development and operations, are based upon current expectations. These statements are forward-looking in nature and involve a number of risks and uncertainties. Actual results may differ materially. Among the factors that could cause actual results to differ materially are the following: competitive factors, including the fact that the Company's competitors are highly focused and may have greater resources and/or name recognition than the Company; changes in technology and the Company's ability to develop or acquire new or improved products and/or modify and upgrade its existing products; changes in labor, equipment and capital costs; changes in access to suppliers and sub-contractors; currency fluctuations; changes in United States and foreign regulations affecting the Company's business; future acquisitions or strategic partnerships; implementation or termination of strategic initiatives or transactions; availability of sufficient capital to finance potential acquisitions on terms satisfactory to the Company; general business and economic conditions; political instability in certain regions; employee turnover; issues relating to the Company's information technology infrastructure, stability, and performance; and other factors set forth elsewhere in the Annual Report, including under "Risk Factors" contained in Item 7 of this Annual Report, and otherwise described from time to time in the Company's reports filed with the Securities and Exchange Commission. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which are made pursuant to the Private Litigation Reform Act of 1995 and, as such, speak only as of the date made.

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 18 to the Company's Consolidated Financial Statements, included herein.

        Bogen focuses on commercial and pro audio equipment, engineered systems, and telecommunications (Telco) peripherals for the voice and sound processing market. Since 1932, Bogen has been a leader in commercial amplifiers, speakers and intercom systems for background and foreground music applications, security and educational applications, and message/music-on-hold ("MOH") systems and has expanded into the pro audio market. Bogen's products are sold primarily through a network of distributors, dealers and contractors.

        Speech Design's Corporate Voice Processing ("CVP") line of business focuses on digital voice processing systems for mid-sized Private Branch Exchanges ("PABX"), targeting the European voice

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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 2000 and 2001, Speech Design ported its functions of its standard voicemail product onto a single electronic board, which integrates in a major customer's PABX. In late 2002, the Teleserver family was further expanded to include MobilePro, integrating mobile worker's cellular telephones with their office PABX.

        In 1999, Speech Design added Unified Messaging products and services ("UMS"), 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. Since its introduction and through 2002, Thor has been 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 and e-mail accessibility via telephone.

        Speech Design sells its PABX peripheral 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 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. 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 Company's 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 provided for additional cash consideration up to DM 2.8 million (or approximately

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$1.7 million) to be paid based on achievement of targeted sales levels. Based on actual sales performance, the total additional cash consideration reached approximately DM 1.0 million (or approximately $500,000).

        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 that now holds all equity in Speech Design 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. 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.

        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 inception 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. Bogen also markets a line of high performance, all environment speakers. In the third quarter of 1999, Bogen acquired substantially all of the assets of Apogee Sound, Inc. Through Apogee, Bogen manufactures and distributes amplifiers, speakers, and related products to the pro 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.

        Bogen's Telco net sales for the years ended December 31, 2002, 2001, and 2000, were $14,757,000, $14,313,000, and $16,773,000, respectively. Telco net sales provided 25.0%, 25.1%, and 25.6% 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's Product Lines".

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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 2002, Bogen introduced its new Power Vector modular amplifier series. With more models, higher power, and unique plug-in modules, this product line was specifically designed and created to successfully compete within the modular amplifier market.

        Commercial Audio net sales for the years ended December 31, 2002, 2001, and 2000,were $9,156,000, $9,251,000, and $9,648,000, respectively. Commercial Audio provided 15.5%, 16.2%, and 14.7% of the Company's net sales for the years ended December 31, 2002, 2001, and 2000, respectively.

PRO AUDIO

        The Apogee product line 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, 2002, 2001, and 2000 were $4,930,000, $5,013,000, and $5,906,000, respectively. Pro-audio sales accounted for 8.3%, 8.8%, and 9.0% of the Company's consolidated net sales for those years.

ENGINEERED SYSTEMS

        Bogen's Engineered Systems product line features custom assembled microprocessor-based intercom/paging, IP-based media control, clock systems, and Apogee's pro audio systems. These product lines are sold to systems integrators for installation primarily in schools.

        Engineered Systems net sales for the years ended December 31, 2002, 2001, and 2000, were $12,966,000, $11,631,000, and $12,647,000, respectively. Engineered Systems net sales accounted for 22.0%, 20.3%, and 19.3% of the Company's net sales for those respective years.

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, often called "interconnects" or dealers, and VARs 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"), Avaya volume distributors, and Exp@nets, a large interconnect which acquired a portion of Lucent's business.

        Bogen markets its Telco products through a team of regional sales representatives, who exclusively sell Bogen's Telco products to Telco 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

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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. We believe that 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 houses of worship. 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 consists of a worldwide network of about 200 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 35% of Apogee's business in 2002 was derived from export sales.

NEW PRODUCTS INTRODUCTION

        In 2002, the Company introduced a number of new products. The Power Vector family, or V-Series of modular input amplifiers, is applicable to all Bogen divisions, but primarily targeted to the commercial audio customer. This line of products consists of five amplifier power levels from 35 watts to 250 watts and eleven different input modules that can be installed into any of the eight input channels of the amplifiers. The Power Vector amplifier models also allow the installation of any of three specialized plug-in modules, which can take the place of expensive external signal processing equipment. This product capability is unique to Bogen and unavailable in competing equipment.

        The product line was carefully positioned to provide a compelling feature set and a superior value over competing products. Including the accessories, such as security cover plates, rack-mounting adapters and remotely located volume control panels, the Power Vector product line comprises 22 products and accessories, with a wider scope of models/power ranges, top-end units that exceed the competition's power levels and modules that are more robust than those of our competitors. This represents one of the largest product family introductions in recent years and signals to the market Bogen's intentions to become a leader in the product segment.

        Accompanying this introduction early in 2003 will be the launch of a wall-mounted product in this line, the WV-Series. This family will consist of three models from 100 watts to 250 watts with the same modular capabilities and a nearly identical feature set. The WV-Series is targeted primarily at the educational market but it is applicable to any type of audio installation, where its broad, shallow, form factor is desirable. This product line shares the same aggressive product positioning as the Power Vector family.

        At the NSCA trade show in April 2002, Bogen introduced a concept line of NEAR speakers, called the Orbit products, designed to meet the needs of higher end business music applications such as hospitality, restaurants and retail. This line consisted of a full range ceiling speaker, a full range pendant speaker for open space applications, a powered, compact subwoofer and a compact satellite

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speaker. Market response to the concept family led to the decision to move forward on production for two of the four line members, the ceiling and pendant speakers, which we expect will be available in the first quarter of 2003. Both speakers employ NEAR MDT metal alloy cones and patented MLS magnetic liquid suspension. MLS technology provides highly linear and accurate speaker response, plus superior speaker cooling for higher power applications. These speakers, like the Power Vector amplifier series described above, are designed to make the Company's product line more appealing to the important medium/large systems contractor segment.

        Also introduced in late 2002 was the Bogen VHub teleconferencing device. This product was positioned to flow through Bogen's Telco channel. In addition to providing high quality, full duplex operation, the VHub's value is further enhanced by its LCD display, 10 number speed dial, and attractive design. Special attention was paid to the product's packaging to make it appealing and eye-catching. Its bold graphics and clear product message are designed to provide a meaningful sales advantage when displayed on vendor shelves. The VHub is expected to have an impact on Telco sales in 2003.

        Capitalizing on the well-known Apogee name, Bogen's Engineered Systems division has 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 ("DVS") 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 2002, Apogee developed the AFI series for fixed installations. AFI models introduced in 2002 include the AFI-4, AFI-8 and AFI-118 subwoofer. These loudspeakers are targeted to the fixed installation market, which includes houses of worship, nightclubs, theaters and school auditoriums. The AFI series is designed to be a less expensive alternative to Apogee's flagship AE series with the same sonic quality but in a non-touring cabinet. Certain models are specifically designed to complement Bogen's existing Engineered Systems product mix. In 2003, Apogee intends to complete the AFI line with the AFI-3, AFI-7, AFI-4M stage monitor, the AFI-115 sub-woofer and several other smaller models. Certain ACS models will be phased into the AFI series, as well.

        In 2002, certain loudspeakers were removed from the Apogee product line, as part of an ongoing program to keep the line fresh. Several of the models in the high output F-series will be merged into the AE line in late 2003. Apogee will continue to offer parts and services on all of the discontinued speakers. These cuts have allowed the Company to reduce and standardize the number of different drivers it stocks. In 2002, Apogee completed the implementation of its driver redevelopment program and now owns all the designs for its drivers. This project is expected to generate product cost savings in 2003.

        In December 2002, Apogee finished development of a new high-powered amplifier, the CA-8000. This amplifier is less expensive than Apogee's DA-800 but provides the same output in a non-digital format. It completes the CA series of amplifier, is designed for fixed installations and can be used with any of the AE, ALA or AFI series loudspeakers. The CA-1000 and 3000 were removed from CA series.

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). In 2002, Engineered Systems started distributing products to and via Singapore for sale throughout Southeast

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Asia. Also in 2002, Apogee began exporting the NEAR speaker line through its international distributor network. 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. A limited number of Bogen products are either built or assembled by Apogee, which may take on additional Bogen products in 2003.

        Although Bogen sources a majority of its products from South Korea and elsewhere in East Asia, the Company takes precautions to ensure that production will continue without interruption by assuring, to the extent practicable, that alternative sources of supplies and subcontractors are available. However, there can be no assurance that events beyond the Company's control, including, without limitation, the world geopolitical tensions, and, in particular, the current uncertainties affecting North and South Korea, the financial circumstances 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® 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®". 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®", which will expire on December 31, 2006, and which can be renewed at that time for an additional ten years. Bogen also holds the U.S. trademark for "NEAR Armadillo Speakers®" and "Easy Install Speakers®" Trademarks currently in the application process include "IQ IQuest™". We believe that these trademarks provide value to the Company.

        In June 1998, Bogen was awarded a patent for the technology of its Pro Matrix™ amplifier product. In June 1999, Bogen was awarded a U.S. patent for its Pro DRDX product (an MOH system) technology. NEAR® has two U.S. 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 U.S. design patent on its NEAR A-Series™ speakers. In 2002 Bogen was awarded a patent for its highly innovative Easy Install Speaker®, which expires in 2020. Also this same year Bogen was granted a patent on its Backslope Regulator System, which is used in the M-Class and Black Max amplifier lines. It expires in 2021.

        There can be no assurance that the Company's pending 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.

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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 2002 much of Bogen's R&D resources were focused on completing development of the Power Vector family of products. This included the finalization and initial production of the amplifiers, development of the accessory items, as well as completion of nine new modules that were ultimately developed to fill out the module offering. The wall mounted WV-Series consumed the remainder of the Power Vector project group's time during 2002.

        Bogen's NEAR product division has developed a line of speakers named Orbit, targeted at retail establishments. The initial line consists of high-quality ceiling speakers, a hanging pendant with the same high quality sound, an innovative vented, self-powered subwoofer and complementary satellite speaker. Ultimately out of these 4 items, the ceiling and pendant speakers are being put into mass production. Bogen made a deliberate decision to hold on the subwoofer and satellite, as market research indicated that current demand in this product segment would not provide the desired opportunity for these products. Bogen continues to monitor the opportunity in the segment for a possible future launch of these products.

        During 2002, Bogen invested R&D resources in the update of the Multicom 2000 product's UL and CUL regulatory status. From time to time, UL updates its regulations and manufacturers must redesign and retest their products to ensure compliance to the new regulations within certain time frames. The Multicom has been approved to these new standards ensuring its applicability in the future.

        A new line of Telco products was also under development during 2002. Targeted for a 2003 launch, the Company hopes the line will allow Bogen customers to address applications previously unavailable.

        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 three benefits: (1) significant product cost savings, (2) relief from single source vendors, and (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.

        Research continues on a DSP card as an option in the APL series. A working model has 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. Apogee expects to have the DSP card available for the APL series in the second half of 2003.

        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, 2002, 2001, and 2000, were $1,771,000, $1,774,000, and $1,703,000, 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

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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, background/foreground music, overhead paging, and the security markets.

        Bogen's Telco products compete in the overhead paging and MOH niches of the Telco market.    In the overhead 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. In the newly entered market of teleconferencing, Polycom holds approximately 95% of the market and is Bogen's primary competitor.

        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 Systems customer market is a specialized market characterized by low unit volume and high dollar sales. Bogen's principal competition comes from Rauland-Borg Corporation, the market leader in this area, and Dukane Communications Systems (recently acquired by Edwards Systems Technology, Inc.), each of which, like Bogen, has been in the market for several decades and has well established name recognition and distribution channels.

        The Apogee brand is well known in the pro audio market, and its AE-5 loudspeaker is a market leader for performance. Meyer Sound, EAW, Renkus-Hienz, and the JBL brand are all among Apogee's competitors. Each of these companies provides similar products to the pro-audio market, but they have superior brand recognition and market penetration. In 2003, Apogee expects to improve market share through its new AFI series and with the introduction of its DSP option to the APL line.

BACKLOG OF ORDERS

        As of December 31, 2002, Bogen had a backlog of firm orders of about $837,000, all of which it expects to fill within 2003. As of December 31, 2001, Bogen had a backlog of firm orders of approximately $1,138,000, all of which were filled in 2002.

SPEECH DESIGN (FOREIGN OPERATIONS)

        Speech Design, located in Germering, Germany, outside Munich; Wedel, Germany; Richterswil, Switzerland; and Kfar Saba, Israel; develops, manufactures and markets telephone peripheral hardware utilizing digital voice processing technologies.

        Speech Design product lines include voice mail systems, automated attendants, digital announcers, MOH systems and Unified Messaging ("UMS") products and services. Speech Design's products are in the Telco line of products.

        In late 1995, Speech Design launched its "Memo™" product line of stand-alone non-PC based voice mail peripherals for small-to-medium PABXs. 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 to 4 port (channel) category. In late 1998, Speech Design introduced the "Teleserver

9

Pro™" range of modular, higher-end (2 to 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. In early 2002, Speech Design launched its first switch-integrated (internal board in a PABX) voicemail system in an OEM cooperation with a leading European PABX manufacturer. In late 2002, the Teleserver family was further expanded to include MobilePro, integrating mobile worker's cellular telephones with their office PABX.

        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 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. 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 and 2002, four 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, Vodacom in South Africa, and Orange in France (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 CVP products are in the Telco line. CVP sales were $11,251,000, $13,090,000, and $18,636,000 for the years ended December 31, 2002, 2001, and 2000, respectively. Speech Design's UMS product line sales were $6,017,000, $3,845,000, and $1,910,000 for the years ended December 31, 2002, 2001, and 2000, respectively. Total Speech Design net revenues were 29.2%, 29.6%, and 31.4%, respectively, 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 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 low compared to the levels in the U.S. In 1999, Speech Design entered the new, 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 and Bogen products. In mid-2002, Speech Design acquired the remaining 33% from Satelco's minority shareholders. 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 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 16% of total sales in 2002; down from 19% in 2001.

        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 2002, approximately 45% of all units manufactured by Speech Design came from the Israel facility.

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        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 to 200 employees. PABXs are multiple-line business telephone systems, which are installed at end users' businesses to facilitate internal and external communications. The major manufacturers integrate Speech Design's products with their PABXs for sale to the end-user as part of a new system. Because of this product integration, Speech Design's products have increased visibility, leading to more peripherals being sold to owners of previously installed PABXs.

        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 leading PABX manufacturers and major independent dealers. In other European countries, Speech Design has 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 $14,000,000, accounting for 66% of Speech Design's net sales in 2002.

        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. Since 2000, 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 four different services launched in 2001 and 2002. Revenues consist of per-mailbox pricing, maintenance fees, and certain development/customization fees. In late 2001 and in 2002, several major international carriers started Thor-based services: e-plus in Germany, TDC (formerly TeleDanmark) in Denmark, Vodacom in South Africa, and Orange in France.

GERMANY

        In Germany, Speech Design's approach for local distribution of voice processing products consists primarily of selling directly to the regional sales offices of the leading manufacturers of PABX equipment including Siemens, Tenovis (formerly Bosch Telecom), DeTeWe and DT. Approximately 71% 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 2,000 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 2002, 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 and enterprise Thor products.

        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.

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        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 ISPs 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 (Belgium, Denmark, Finland, France, Italy, The Netherlands, and Sweden). Speech Design's foreign distributors are independent resellers of telecommunications equipment, who market Speech Design's products to local manufacturers and distributors of PABXs. The Austrian sales market is managed by the Germany sales organization and Speech Design products are sold in Switzerland through Satelco.

        Speech Design's key account managers based in Germany sell Thor platforms and services to selected European ISPs and carriers. Internationally, Speech Design also cooperates with Hewlett-Packard ("HP") in marketing and implementing Thor-based carrier solutions.

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 HP) and standard communications boards from several suppliers. Large carrier configurations are completely manufactured in a specialized HP facility under a cooperative agreement with Speech Design.

        Speech Design maintains a computerized order processing and warehouse system and a level of product availability that generally enables it to deliver standard 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 Design®" is a registered trademark in Germany and the U.S. Several of Speech Design's products also have registered trademarks in Germany, including: Thor ™, Mozart™, Genius™, and Sissy™.

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 2002, the R&D department maintained its focus on further development of Speech Design's next generation call processing platform, suitable both for integration into PABXs (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 eight 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, launched in early 2002 and sold worldwide. Another ongoing development effort has been Teleserver Mobile Pro, a system enabling mobile workers to use their cellular phones as "virtual extensions" of the

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office PABX, resulting in a better integration of the mobile workforce and potentially significant savings on mobile connections. Market launch of Mobile Pro is scheduled for the first quarter of 2003.

        The R&D team responsible for the development of the Thor UMS platform and services is based at Carrier Systems. In 2002, the main effort was the continued 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 and capital expenditure. 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 other carrier customers, along with the development of new applications, accounted for a significant portion of the engineering effort in 2002. 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, 2002, 2001, and 2000, were $2,197,000, $1,982,000, and $1,048,000, respectively. The lower level of expenditure in 2000 was due to the accounting treatment of an OEM development project (development costs were charged to cost of goods sold) 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 among the market leaders 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 (MOH units and announcers).

        No single company dominates 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, possibly due to the cost of establishing distribution channels and gaining regulatory approval for selling telecommunications products in each country.

        In the market of UMS, 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. We believe that such vendors (Comverse, Lucent, Unisys and others) see UMS 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 (including the new MobilePro) and Thor UMS 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. 2001 and 2002 saw a major decline in sales of telecommunications equipment in Europe, including PABXs, and a significant reduction of carriers' capital expenditure budgets. These developments continue to have a negative impact on Speech Design's sales, both in the PABX peripherals and carrier unified messaging markets. Speech Design's ability to compete successfully may also 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.

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SPEECH DESIGN'S BACKLOG OF ORDERS

        As of December 31, 2002, Speech Design had a backlog of firm orders of approximately $550,000, all of which it expects to fill in 2003. As of December 31, 2001, Speech Design had a backlog of firm orders of approximately $420,000, all of which were filled in 2002.

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 commercially reasonable efforts to ensure that its products comply with such requirements, but makes no assurance as to our ability to comply with such requirements at all times in the future.

        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 regulatory 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, 2002, the Company had approximately 240 full-time employees engaged in its businesses. The Company also uses temporary and/or part-time employees, as required. About 20 of the Company'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. The Company's Chief Executive Officer, President, and key officers have entered into employment contracts with the Company.

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 approximately 10 years on November 28, 2000. Annual base rental payments over the remainder of the lease are approximately $540,000, plus taxes

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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 $270,000 plus taxes and other charges.

        Speech Design leases its facilities in Germering, 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 three years. Speech Design and subsidiaries' aggregate annual rental payments are approximately $485,000.

        Management of the Company believes that the facilities occupied by the Company and its subsidiaries are adequate to meet current needs.

ITEM 3. LEGAL PROCEEDINGS

        The Company develops and utilizes technology for substantially all of the products it offers and intends to offer and has, from time to time, been the subject of infringement claims related thereto. It is difficult to predict the outcome of such litigation and the amount of damages that may be awarded in these types of cases. The Company does not believe that the results of any pending or threatened litigation related to the Company's technology or use thereof will have a material adverse effect on its financial position.

        The Company is party, in the ordinary course of business, to various legal actions and claims that 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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        Not Applicable

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PART II

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 bid prices for the Common Stock on NASDAQ for each of the fiscal quarters during the period from January 1, 2001, through December 31, 2002. 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 February 26, 2003, there were approximately 100 holders of record of the Company's Common Stock. Such number of record holders does not reflect shareholders who beneficially own common stock in nominee or street name.

Equity Compensation Plan Information

        The table below sets forth information with respect to shares of Common Stock that may be issued under the Company's equity compensation plans as of December 31, 2002. See Notes 13 and 14 to the

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Company's consolidated financial statements, included herein, for further details concerning equity compensation grants made under equity compensation plans both approved and not approved by the Company's stockholders.

(1)

Includes the Stock Incentive Plan ("Plan"), as amended and restated.

(2)

Includes 325,885 options in the aggregate granted in November 1997 outside the Plan to the Company's CEO and its President and 250,000 warrants acquired by a limited liability company whose interests are owned by the CEO and the President.

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. The Company's future results of operations could be affected by a number of material risks and uncertainties as described in this Annual Report, including, without limitation, the first paragraph of Part I hereof and under the section titled "Risk Factors" contained in Part I, Item 7 hereof. See also "Item 8. Financial Statements and Supplementary Data."

(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF OPERATIONS DATA 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.

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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, and $654 and cost of sales were increased by $2,261, and $1,924, and $1,443 for the years ended December 31, 2000, 1999, and 1998, respectively. There is no effect on income (loss) from operations. 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, and $275, for the years ended December 31, 2001, 2000, 1999, and 1998, respectively. There is no effect on income (loss) from operations.

BALANCE SHEET DATA AS OF DECEMBER 31,

        The Company did not pay a cash dividend on the Common Stock during any period indicated.

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 subsidiary, Apogee; SDI, the Registrant's 98% owned subsidiary; SDI's wholly-owned subsidiary Speech Design; and Speech Design's wholly-owned subsidiaries: Carrier Systems; Satelco (effective June 30, 2002); Speech Design (Israel) Ltd., and Speech Design (UK) Ltd. (closed effective December 31, 2000). All significant inter-company balances and transactions have been eliminated in consolidation. Certain prior years amounts have been reclassified to conform to the current year's 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.

        Approximately 30% of the Company's 2002 revenues in U.S. dollars were derived outside of the United States, primarily in Germany. Accordingly, currency fluctuations may impact the Company's earnings. Over the course of 2002, the Euro exchange rate averaged Euro 1.06125 to the U.S. dollar, with a low of 0.9527 and a high of 1.1682. This represents a 22.6% movement of the Euro to the U.S. dollar throughout the year.

RESULTS OF OPERATIONS 2002 COMPARED TO 2001

NET SALES

        Net sales of $59,077,000 for 2002 increased 3.4% from 2001 net sales of $57,143,000. Revenues in the Telco and Commercial and Pro Audio lines of business were impacted by weakness in both domestic and foreign markets, primarily due to the underlying economy, while Engineered Systems grew due to government funding in 2002 of the educational markets it services. Improvement in foreign exchange rates had a positive impact on foreign operations revenues in U.S. dollars.

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Bogen (domestic)

        Telco net sales in 2002 amounted to $14,757,000 compared to $14,313,000 in 2001, an increase of $444,000 or 3.1%.

        Net sales of Commercial Audio products amounted to $9,156,000 in 2002, a decrease of 1.0% from net sales of $9,251,000 of such products in 2001.

        Net sales of Pro Audio products, through Apogee, amounted to $4,930,000 in 2002, down $83,000, or 1.7%, from $5,013,000 in 2001.

        Net sales of the Engineered System line increased $1,335,000, or 11.5%, to $12,966,000 in 2002 from $11,631,000 in 2001.

Speech Design (foreign)

        Speech Design's products are in the Telco line. Net sales in 2002 were $17,268,000 compared to $16,935,000 in 2001, an increase of $333,000, or 2.0%. In Euros, net sales in 2002 decreased 3.4%, to 18,263,000 from 18,911,000 in 2001. The decline in Euros 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 over 50% growth in Unified Messaging revenues, after two consecutive years of 100% annual growth.

GROSS PROFIT

        The Company's gross profit in 2002 was $27,680,000, an increase of $715,000 from $26,965,000 in 2001. As a percentage of sales, 2002 showed a slight decrease to approximately 46.9% from 47.2% in 2001. This slight decline 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 increased from $17,530,000 in 2001 to $17,831,000 in 2002. Gross profit as a percentage of sales decreased from 43.6% in 2001 to 42.7% in 2002. The decrease in gross profit percentage is primarily a result of greater Engineered Systems revenues, with its slightly lower gross margins, as a percent of total Bogen revenues.

        Speech Design's gross profit increased from $9,435,000 in 2001 to $9,849,000 in 2002. Gross profit as a percentage of sales increased from 55.7% to 57.0% from 2001 to 2002. The increase in gross profit as a percentage of sales in 2002 versus 2001 is primarily a result of increased UMS revenues, which have higher gross profit margins than traditional Telco products.

RESEARCH AND DEVELOPMENT

        Research and Development expense was $3,968,000, or 6.7% of sales in 2002, compared to $3,756,000, or 6.6% of sales in 2001. This increase reflects the Company's continuing effort to introduce innovative products to the market and to update existing products.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

        Selling, general and administrative expenses ("SG&A") decreased $699,000, or 3.3%, from 2001 to 2002. SG&A expense was $20,353,000, or 34.5% of sales, in 2002 compared to $21,052,000, or 36.8% of sales, in 2001. The decrease in SG&A is generally a result of overhead cost controls initiated in response to the softening economy and Company-wide restructuring implemented throughout 2001.

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ASSET IMPAIRMENT

        In 2001, 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 both cases primarily for costs associated with personnel reductions.

INTEREST INCOME AND EXPENSE

        Interest income was $183,000 in 2002, a decrease from $472,000 in 2001. The decrease in interest income primarily reflects the Company's utilization of available cash for stock buybacks in late 2001 and mid 2002 and generally lower interest rates.

        Interest expense was $129,000 in 2002, an increase of $7,000, from $122,000 in 2001. The increase is primarily a result of the Company's use of short-term credit facilities related to its two tender offers, offset by declining interest rates from 2001.

OTHER INCOME, NET

        Other income for 2002 included $128,000 resulting from former minority shareholders of Satelco forgiving a notes payable.

INCOME TAXES

        The Company recorded a tax expense of approximately $1,256,000 in 2002. In 2001, as a result of the Company's net loss, a tax benefit of $315,000 was recorded. Foreign taxes increased from 2001 by $504,000, a result of a return to segment profitability, partly offset by utilization of benefits for certain foreign loss carryforwards. Domestic taxes increased by $1,067,000 from 2001, primarily due to higher profits.

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.

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        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 $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 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 travel restrictions in the third and fourth quarters of 2001.

ASSET IMPAIRMENT

        The Company's domestic operations recorded a non-cash charge in 2001 of approximately $1,409,000, reflecting the elimination of all goodwill associated with pro audio acquired assets, in

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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 both cases primarily for costs associated with personnel reductions.

        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.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

        In 2002, the Company maintained its focus on cost control and asset management, while supporting its product lines and distribution channels, increasing profitability and effective utilization of working capital.

        Bogen's financial condition remains strong. The Company generated $7,782,000 of cash through operations and effective working capital management.

        Working capital, defined as current assets less current liabilities, decreased to $15,153,000 from $27,611,000 in 2001, primarily due to the Company utilizing its cash and available lines of credit in a stock tender offer. The Company paid $17,040,000 to repurchase 5,238,352 common shares during the third quarter of 2002. This utilization of cash was offset by cash generated from operations, resulting from lowering its receivables and reducing inventory through effective working capital management.

        Net cash provided by investing activities of $2,738,000 included $875,000 for equipment, computer hardware and software, and other fixed assets and $357,000 of intangible assets. The Company sold $3,970,000 of marketable securities.

        Net cash used for financing activities was $16,592,000. The Company paid $17,040,000 to repurchase 5,238,252 common shares through a self-tender offer. At the time of the stock buyback, the Company used $2,500,000 of its available lines of credit. This debt was reduced to $1,750,000 by year-

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end. In addition, the Company continued to reduce debt by paying down $1,035,000 of other lines of credit and $267,000 of capitalized lease obligations.

        As of December 31, 2002, the Company's total liabilities were $11,359,000, of which $10,980,000 is due and payable within one year.

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