SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For February 14, 2003
BONSO ELECTRONICS INTERNATIONAL INC.
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(Translation of Registrant's name into English)
Unit 1106-1110, 11F., Star House 3 Salisbury Road,
Tsimshatsui, Kowloon, Hong Kong
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(Address of principal executive offices)
[Indicate by check mark whether the Registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.]
Form 20-F X Form 40-F
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[Indicate by check mark whether the Registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.]
Yes No X
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BONSO ELECTRONICS INTERNATIONAL INC.
Information for the Quarter Ended December 31, 2002
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TABLE OF CONTENTS
REPORT FOR THE QUARTERLY PERIOD ENDED December 31, 2002 ON FORM 6-K
Page
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Third Quarter FY2003 Shareholders Letter 4
Consolidated Financial Statements 6
Unaudited Consolidated Balance Sheets as of
December 31, 2002 and March 31, 2002 6
Unaudited Consolidated Statements of Income and
Comprehensive Income for the Three Month and Nine Month Periods
Ended December 31, 2002 and December 31, 2001 8
Management Discussion and Analysis of Financial Conditions
and Results of Operations 9
3
[BONSO LETTERHEAD]
14 February 2003
Dear Shareholders,
The third quarter results were mixed with profits up 15% while sales
decreased 6% as compared to the same period last year. Our sensor based scale
product sales remained strong but were offset by both reduced telecommunications
product sales and reduced sales of Korona branded products in Europe. The third
quarter shows a rebound in the telecommunications business over depressed sales
in the first half of this year. We remain cautiously optimistic that this
improved sales trend in our telecommunications business will continue through
the remainder of this fiscal year.
The increased profit of 15% was primarily due to improved product gross
profit margins which showed a 13.74% improvement. We attribute this improvement
to a formal program dedicated to improving manufacturing efficiencies and
overall business processes.
Net income for the three months ended 31 December 2002 was $489,000 or
$0.09 per share on revenues of $13,853,000 compared to $425,000 or $0.08 per
share on revenues of $14,790,000 for the third quarter of fiscal 2002. Net
income of $1,037,000 or $0.19 per share for the nine months ended was down from
the prior year's total of $1,502,000 or $0.27 per share, while revenues fell 16%
to $34,581,000.
Amid a global downturn, Bonso continues to show improvement in net
earnings, and the sales trend from the second quarter to the third quarter is up
over 30%. This is primarily due to the recovery in our telecommunications
business.
Historically, outsourcing has bucked the trend of economic expansion. That
is, companies have been more inclined to outsource when they see sales dropping
and the efficiencies in their company owned factories drop. As reported by
Business Week on 7 September 2002, the downturn in the economy of the U.S. could
benefit Asian exporters because the cost squeeze at home for U.S. manufacturers
is hastening the outsourcing of their production to Asia.
As stated in a Wall Street Journal article on 29 January 2003, most Asian
economies are booming. J. P. Morgan projects that China's economic growth this
year will be 7.5% and China is benefiting from the migration of manufacturing to
China.
Looking forward, our business plan is to continue to address the needs of
our customers in our selected niche markets of sensor based and wireless
products. We have invested heavily in manpower, plant and equipment and have
overcome the significant barriers to entry into these markets. We continue to
obtain new business from existing customers and are attracting new prospects due
to strong customer referrals.
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Our stock price continues to be depressed as our shares trade at a
significant discount to tangible book value and low price/earnings and
price/sales ratios. Currently the shares are trading at 0.39 times the net book
value of $5.57 per share. Based upon this tangible book value per share ratio,
we believe that the current stock price is not reflective of Bonso's strength
and value. We believe we continue to benefit customers while investing in our
operating and distribution capabilities for the future.
We thank you for your patience and support as we continue to strive for
consistency in our earning and revenue growth in the future.
Best regards,
Bonso Electronics International, Inc.
/s/ Anthony so
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Anthony so
Chairman, President and Chief Executive Officer
U..S. Contact: George O'Leary (949) 760-9611, (949) 760-9607 FAX
Hong Kong contact: Cathy Pang (852)2605 5822, (852) 2691 1724 FAX
The statements contained in this letter which are not historical facts are
forward-looking statements that involve certain risk and uncertainties
including, but not limited to, risks associated with the uncertainty of future
financial results, additional financial requirements, development of new
products, government approval processes, the impact of competitive products or
pricing, technological changes, the effect of economic conditions and other
uncertainties detailed in the company's filings with the Securities and Exchange
Commission.
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Bonso Electronics International Inc. and
Subsidiaries
Consolidated Balance Sheet
(Expressed in United States Dollars)
December 31 March 31
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2002 2002
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(Unaudited) (Audited)
$ $
Assets
Current assets
Cash and cash equivalents 4,903,380 1,878,156
Restricted cash deposits 2,509,348 3,972,542
Trade receivables, net 6,851,530 6,838,576
Inventories 12,015,217 8,861,952
Notes receivable 686,258 686,258
Deferred income tax assets - current 13,013 27,219
Other receivables, deposits and prepayments 1,709,938 822,646
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Total current assets 28,688,684 23,087,349
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Deposits -- 16,038
Deferred income tax assets - non current 96,217 84,422
Goodwill 204,217 204,217
Brand name, net 3,552,706 2,797,392
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Property, plant and equipment 17,156,014 18,261,659
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-- --
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Total assets 49,697,838 44,451,077
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Liabilities and shareholders' equity
Current liabilities
Notes payable 3,647,178 2,857,533
Accounts payable 6,157,788 4,122,443
Accrued charges and deposits 1,682,449 2,022,472
Income taxes payable 95,409 83,614
Shortterm loans 5,054,912 3,754,477
Current portion of long-term debt and capital lease
obligations 256,792 647,501
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Total current liabilities 16,894,528 13,488,040
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Longterm debt and capital lease obligations, net of
current maturities Commitments and contingencies 474,178 317,009
Redeemable Common Stock
Redeemable Common Stock par value $0.003 per share
- issued and outstanding shares: December 31, 2002 -
180,726; March 31, 2002 - 180,726 1,445,808 1,445,808
Minority Interests 77,886 --
Shareholders' equity
Preferred stock par value $0.01 per share
- authorized shares - 10,000,000
- issued and outstanding shares : December 31, 2002 - 0;
March 31, 2002 - 0
Common stock par value $0.003 per share -- --
- authorized shares - 23,333,334 -- --
- issued and outstanding shares : December 31, 2002 -
5,529,133; March 31, 2002 - 5,404,133 16,583 16,208
Additional paid-in capital 21,458,377 21,152,502
Deferred consultancy fee (95,355) (381,420)
Retained earnings 9,214,051 8,176,958
Accumulated other comprehensive income 235,972 235,972
Common stock held in treasury, at cost (24,190) --
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30,805,438 29,200,220
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Total liabilities and shareholders' equity 49,697,838 44,451,077
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BONSO ELECTRONICS INTERNATIONAL INC.
CONSOLIDATED INCOME STATEMENT
(In Thousands of U.S. Dollars)
Unaudited
Three months ended Dec. 31 Nine months ended Dec. 31
-------------------------- -------------------------
2002 2001 2002 2001
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Net sales 13,853 14,790 34,581 41,219
Cost of sales (10,315) (11,678) (25,361) (32,229)
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Gross margin 3,538 3,112 9,220 8,990
Selling expenses 564 1,062 1,566 2,380
Salaries and related costs 1,154 737 3,340 2,418
Research and development expenses 105 24 257 158
Administration and general expenses 922 576 2,399 1,792
Amortization of Brand Name 17 -- 131 --
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Income from operations 776 713 1,527 2,242
Interest Income 15 35 45 183
Other income 73 43 349 177
Interest Expenses (172) (187) (487) (682)
Foreign exchange gains/(losses) (16) (13) -- (36)
Consultancy fee (95) (65) (286) (255)
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Income before taxation 581 526 1,148 1,629
Income tax benefit/(expense) (62) (101) (73) (127)
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Income after taxation 519 425 1,075 1,502
Minority interests (30) -- (38) --
---------- ---------- ---------- ----------
Net income 489 425 1,037 1,502
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Earnings per share
Basic 0.09 0.08 0.19 0.27
Diluted 0.09 0.08 0.19 0.27
Weighted average shares Outstanding 5,529,133 5,539,815 5,529,133 5,539,815
Incremental shares from assumed
Exercise of warrants and Stock options -- -- -- --
Adjusted weighted average shares 5,529,133 5,539,815 5,529,133 5,539,815
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Management Discussion and Analysis of Financial Conditions and Results of
Operations
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This section and other parts of this Form 6-K contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such differences include, but are not
limited to, those discussed in the section entitled "Risk Factors" contained in
the Company's Form 20-F that was filed with the Securities and Exchange
Commission for the Fiscal Year Ended March 31, 2002. The following discussion
should be read in conjunction with the Form 20-F for the fiscal year ended March
31, 2002, and the condensed consolidated financial statements included elsewhere
in this Form 6-K.
Results of Operations
Nine Month Period ended December 31, 2002 compared to the Nine Month period
ended December 31, 2001
Net Sales. Our sales decreased 16% from approximately $41,219,000 for the
period ended December 31, 2001, to approximately $34,581,000 for the period
ended December 31, 2002, primarily as a result of the reduction in contribution
from our telecommunications products. Our scales business has dropped slightly
from approximately $24,000,000 in Fiscal 2002 to approximately $23,000,000 in
Fiscal 2003, while orders for telecommunications products were down 33% from
approximately $17,219,000 in Fiscal 2002 to approximately $11,581,000 in Fiscal
2003.
Gross Margin. Gross margin rose 5% to 27% for the period ended December 31,
2002, as compared with 22% for the same period in the prior year. The gain is
attributed to a decrease in materials and labor costs as a result of the
Company's emphasis upon improving manufacturing efficiencies.
Selling Expenses. Selling expenses decreased by 34% from approximately
$2,380,000 for the period ended December 31, 2001 to approximately $1,566,000
for the period ended December 31, 2002. This decrease was attributable primarily
to the downturn in sales of telecommunications products and an 18% drop in sales
of scales by Korona.
Salaries And Related Costs. Salaries and related costs increased by 38%
from approximately $2,418,000 for the period ended December 31, 2001 to
approximately $3,340,000 for the period ended December 31, 2002. This increase
was primarily due to a 40% increase in Korona's salaries from $702,000 to
$981,000 and the inclusion of five months of salaries of $347,000 for Gram
Precision, which was acquired by Bonso on August 1, 2002.
Research And Development. Research and development expenses increased 63%
from approximately $158,000 for the period ended December 31, 2001 to
approximately $257,000 for the period ended December 31, 2002 due to increased
research and development activities for telecommunications products and new
scale models not yet introduced into market.
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Administration And General Expenses. Administration and general expenses
increased by 34% from approximately $1,792,000 for the period ended December 31,
2001 to approximately $2,399,000 for the period ended December 31, 2002. This
increase was primarily due to the establishment of a new U.S. office for
exploring markets in the U.S., and an increase in professional services rendered
relating to the acquisition of Gram Precision and the preparation and review of
documents filed with the Securities and Exchange Commission.
Amortization Of Brand Names. We amortized approximately $131,000 relating
to the brand names acquired upon the acquisitions of Korona and Gram Precision
during the period ended December 31, 2002. Brand names are amortized using the
straight-line method over the related estimated useful life of 15 years.
Income From Operations. As a result of the above changes, income from
operations decreased by 32% from approximately $2,242,000 for the period ended
December 31, 2001 to $1,532,000 for the period ended December 31, 2002.
Interest Income. Interest income amounted to approximately $45,000 for the
period ended December 31, 2002, compared to $183,000 in the period ended
December 31, 2001. This decrease was mainly due to a general lowering of
interest rates for deposits despite a slight increase in cash balances with our
banks.
Other Income. Other income increased 97% from approximately $177,000 for
the period ended December 31, 2001, to approximately $349,000 for the period
ended December 31, 2002. The increase was primarily due to an increase in sales
of scrap.
Interest Expenses. Interest expenses decreased 29% from approximately
$682,000 for the period ended December 31, 2001 to approximately $487,000 for
the period ended December 31, 2002. This decrease primarily resulted from the
decline in sales, because the Company used less of its banking facilities to
support sales during the first quarter of this year and general lowering of
interest rates.
Foreign Exchange Losses/Gains. Foreign exchange significantly improved from
a loss from approximately $36,000 for the period ended December 31, 2001 to a
loss of only $91 for the period ended December 31, 2002. The improvement was
primarily attributable to the increased strength of the Euro against the U.S.
Dollar which benefits Korona's sales in Europe.
Consultancy Fee. We entered into an agreement with a third party to provide
consulting/advisory services relating to our capital structure and fund-raising
activities. The period of service is from July 2000 to January 2003. A total
consultancy fee of $1,144,260 was capitalized in 2000 and is being amortized
over the three year period of the contract. This resulted in a non-cash
consultancy fee of approximately $286,000 for the period ended December 31,
2002, relating to warrants issued to the consultant.
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Net Income. As a result of the above changes, net income decreased from
approximately $1,502,000 for the period ended December 31, 2001 to $1,037,000
for the period ended December 31, 2002, a decrease of approximately $465,000, or
31%.
Three Month Period ended December 31, 2002 compared to the Three Month period
ended December 31, 2001
Net Sales. For the three months ended December 31, 2002, net sales of
approximately $13,853,000 represented a decrease of approximately $937,000, or
6%, from the same period in the prior year. The decline was primarily due to the
lower sales contribution from Korona for a general downturn of demand for
consumer products in Europe, especially in Germany and the reduction in
contribution from our telecommunications products.
Gross Margin. Gross margin rose to 25.5% for the three months ended
December 31, 2002, as compared with 21% for the same period in the prior year.
The gain is attributed to a decrease in materials as a result of the Company's
emphasis upon improving manufacturing efficiencies.
Selling Expenses. Selling expenses decreased by 47% from approximately
$1,062,000 for the three months ended December 31, 2001 to approximately
$564,000 in the three months ended December 31, 2002. This decrease was
attributable primarily to the downturn in sales from Korona and
telecommunications products.
Salaries And Related Costs. Salaries and related costs increased by 57%
from approximately $737,000 for the three months ended December 31, 2001 to
approximately $1,154,000 for the three months ended December 31, 2002. This
increase was primarily due to a 6% increase in Korona's salaries from $302,000
to $319,000 and the inclusion of salaries of $199,000 for Gram Precision, which
was acquired by Bonso on August 1, 2002.
Research And Development. Research and development expenses increased 337%
from approximately $24,000 for the three months ended December 31, 2001 to
approximately $104,000 for the three months ended December 31, 2002 due to
increased research and development activities for telecommunications products
and new scale models not yet introduced into market.
Administration And General Expenses. Administration and general expenses
increased by 60% from approximately $576,000 for the three months ended December
31, 2001 to approximately $922,000 for the three months ended December 31, 2002.
This increase was primarily due to the establishment of a new U.S. office for
exploring markets in the U.S., and an increase in professional services rendered
relating to the acquisition of Gram Precision and the preparation and review of
documents filed with the Securities and Exchange Commission.
Amortization Of Brand Names. Brand names are amortized using the
straight-line method over the related estimated useful life of 15 years. We
amortized approximately $17,000 relating to the brand names acquired upon the
acquisitions of Korona and Gram Precision during the period ended December 31,
2002.
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Income From Operations. As a result of the above changes, income from
operations increased by 9% from approximately $713,000 for the three months
ended December 31, 2001 to $776,000 for the three months ended December 31,
2002.
Interest Income. Interest income amounted to approximately $15,000 for the
three months ended December 31, 2002, compared to $36,000 in the three months
ended December 31, 2001. This decrease was mainly due to general lowering of
interest rates for deposits despite a slight increase in cash balances with our
banks.
Other Income. Other income increased 70% from approximately $43,000 for the
three months ended December 31, 2001, to approximately $73,000 for the three
months ended December 31, 2002. The increase was primarily due to an increase in
sales of scrap.
Interest Expenses. Interest expenses decreased 8% from approximately
$187,000 for the three months ended December 31, 2001 to approximately $172,000
for the three months ended December 31, 2002. This decrease primarily resulted
from the general lowering of interest rates.
Foreign Exchange Losses/Gains. Foreign exchange losses deepened from
approximately $13,000 for the three months ended December 31, 2001 to
approximately $16,000 for the three months ended December 31, 2002. The increase
was primarily attributable to the increased strength of the Renminbi against the
HK Dollar and the increased strength of the Euro against the U.S. Dollar which
benefits Korona's sales in Europe.
Consultancy Fee. We entered into an agreement with a third party to provide
consulting/advisory services relating to our capital structure and fund-raising
activities. The period of service is from July 2000 to January 2003. A total
consultancy fee of $1,144,260 was capitalized in 2000 and is being amortized
over the three year period of the contract. This resulted in a non-cash
consultancy fee of approximately $95,000 for the three months ended December 31,
2002, relating to warrants issued to the consultant.
Net Income. As a result of the above changes, net income increased from
approximately $425,000 for the three month ended December 31, 2001 to $489,000
for the three months ended December 31, 2002, an increase of approximately
$64,000, or 15%.
Liquidity and Capital Resources
We have traditionally relied on borrowings to meet our working capital
requirements. These borrowings have been supplemented by internally generated
funds and trade credits from suppliers. Management believes the Company has
sufficient working capital available for its projected operations.
Effective August 1, 2002, we acquired a majority interest in Gram
Precision, a privately owned Ontario Corporation and a distributor of digital
scales for laboratory, industrial, jewelry and other markets requiring precise
measurement and high resolution.
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We paid $1,000,000 in cash over a 5-year period and 125,000 shares of
Bonso's common stock for 51% of the equity interest of Gram Precision, subject
to certain provisions for adjustment of the purchase price. Headquartered in
Mississauga, Ontario (a Toronto suburb), Gram Precision's products are
distributed primarily in the U.S. and Canada, with U.S. distribution taking
place from the company's distribution center in Reno, Nevada.
Stock Repurchase Program
In August 2001, the Company's Board of Directors authorized a program for
the Company to repurchase up to $500,000 of its common stock. This repurchase
program does not obligate the Company to acquire any specific number of shares
or acquire shares over any specified period of time. During the first nine
months of fiscal 2003, 12,700 shares were repurchased. Between the inception of
the repurchase program and December 31, 2002, the Company repurchased or
committed to repurchase a total of 14,700 shares of its common stock at a cost
of $29,624. The Company may from time to time repurchase shares of its Common
Stock under this program.
Legal Proceedings
In May of 2001, Bonso acquired KORONA Haushaltswaren GmbH & Co. KG
("Korona") from Augusta Technologie AG ("Augusta"). Part of the purchase price
paid to Augusta was the issue of 180,726 shares of Bonso's restricted common
stock. The Stock Purchase Agreement gave Augusta the right to have Bonso redeem
the common stock if the registration of the stock had not been declared
effective by the Securities and Exchange Commission on or before January 31,
2002. Bonso filed a registration statement to register the common stock held by
Augusta, which was declared effective by the Securities and Exchange Commission
on March 7, 2002. In March 2002, Augusta exercised the repurchase obligation
requesting to return the 180,726 shares of common stock to us in exchange for a
promissory note of $1,445,808, repayable in nine monthly payments which would
have commenced April 1, 2002 and bearing interest at a rate of 8% per annum
which would have resulted in an interest cost of approximately $50,000 for the
whole period of the promissory note. Management believes that Bonso was not
required to accept Augusta's tender of their shares, because Augusta hindered
the registration process by refusing to allow Korona's auditors to update and
certify Korona's financial statements. Although management believes that it has
meritorious defenses to the claims asserted by Augusta and intends to defend
these claims vigorously, arbitration is uncertain and Bonso may not prevail in
the arbitration proceeding.
Exhibit Index
The following is a list of Exhibits included as part of this Report on Form 6-K.
Exhibit Number Description
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Exhibit 99.1 Press Release entitled "Bonso Reports Third Quarter Results"
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BONSO ELECTRONICS INTERNATIONAL INC.
(Registrant)
Date: February 14, 2003 By: /s/ Henry F. Schlueter
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Henry F. Schlueter
Assistant Secretary
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