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 September 16, 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
----- -----
[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 June 30, 2003
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TABLE OF CONTENTS
REPORT FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003 ON FORM 6-K
Page
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First Quarter FY2004 Shareholders Letter 4
Consolidated Financial Statements
Unaudited Consolidated Balance Sheet as of 7
June 30, 2003 and Audited Consolidated Balance Sheet
as of March 31, 2003
Unaudited Consolidated Statements of Income and 8
Comprehensive Income for the Three Months
Ended June 30, 2003 and June 30, 2002
Management Discussion and Analysis of Financial Conditions 9
and Results of Operations
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[BONSO LETTERHEAD]
Dear Shareholders: Setpember 15, 2003
I am very pleased to report that during the first quarter we showed significant
sales improvement in virtually every sector of our business resulting in record
sales for our first quarter of over $20 million!
Quarterly revenues jumped 98% to $20,045,000 over last year's $10,118,000. Net
income increased 36% to $708,000 or $0.12 per share compared to $522,000 and
$0.09 per share for the same period last year.
Telecommunications product sales improved almost 300%; scale product sales
increased 43% and Korona branded sales improved as well. Gram Precision Scales,
Inc, which was acquired in August, 2002 contributed revenues and profits to the
first quarter of this year but not last year. Greater than 90% of the sales
increase was from internal growth with the remainder from past acquisition
activities.
The first quarter represents a significant positive change in our business.
Management believes we have succeeded in promptly responding to our customers
needs by taking advantage of increased outsourcing requirements from existing
customers as well as new customers. Building the capabilities in-house to
respond rapidly to high volume customer demand has taken years and has cost
millions of dollars. It appears that these investments in people, plant and
equipment are starting to pay off in increased sales and increased profit. We
find ourselves in a business that has significant barriers (time and money) to
entry, thereby offering some level of security to the investment.
The electronics manufacturing industry continues to grow at a 25% worldwide rate
according to Technology Forecasters. Last year we fell behind the growth rate
for our industry, but we are off to a good start this year with the dramatic
increase in our first quarter sales. Unfortunately, the first quarter earnings
are not keeping up with the rate of sales growth. Clearly, we have work to do to
improve the gross profit margin in the future.
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We ended the first quarter with a strong balance sheet - including $10.372
million in working capital and $28.67 million in stockholders equity. The
company's long term debt was only $577k. Our book value is approximately $5.04
per share and we have a total of $ 10.561 million in cash and cash equivalents.
This represents approximately $1.85 per share in cash. The company continues to
generate cash from operations which, if continued, will give us the ability to
expand our capabilities in manufacturing, enter new product niche areas and to
make acquisitions without diluting the existing shareholders.
As Bonso continues to grow and expand worldwide, it is important that we focus
on our long term strategy to compete and succeed. Integrating Korona GmbH and
Gram Precision Scales, Inc. into the Bonso corporate culture is an ongoing
process that is continuing. We will continue our material and process cost
reduction programs; we will continue to expand our global reach through internal
expansion & external acquisitions, and we will aggressively pursue new customer
relations. At the same time, we will make efforts to continue the progress we
have made in strengthening our balance sheet.
Bonso does not want to be just an electronics manufacturing provider for our
customers. We want to be their operations management partner. Our current and
future customers need a partner who can offer low cost solutions in the
Americas, Europe, and Asia/Pacific. Within our core competency of sensor based
and communications products, we can offer engineering services, as well as fast
response to high volume manufacturing requirements and the necessary high
quality supply chain communications and services.
The arbitration proceedings with Augusta Technologie AG continue in New York
regarding the dispute over Augusta's right to redeem the 180,726 shares for a
promissory note for $1,445,808. Also, a lawsuit has been filed against Bonso and
certain of Bonso's officers and directors. The complaint alleges, among other
things, that Bonso and its director's breached fiduciary duties and were
negligent and committed fraud by disseminating materially misleading information
regarding Bonso's financial condition and its prospective revenue. Management
has evaluated the complaint and has retained council to defend against this
action. Further, Management believes the allegations in the complaint are
without merit and intends to defend against this action vigorously.
We begin this fiscal year 2004 (ending 31 March 2004) with a renewed confidence
that our business model & strategy will produce superior returns over time. I am
personally disappointed in the poor performance of our stock price and its
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impact on our shareholders & associates; however, I continue to believe that our
long-term success will be reflected in our share price and that our valued
shareholders will be repaid for their confidence and support
These are exciting times at our company. With nearly 3,000 employees, a growing
base of OEM customers, and two successful branded product distribution
organizations for Europe and North America, we look forward and prepare
ourselves for the challenges ahead in the coming year and beyond. Also we want
to thank our partners worldwide and our shareholders for their continued support
in this exciting journey.
Best regards,
Bonso Electronics International, Inc.
/s/ Anthony So
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Anthony So
Chairman, President and Chief Executive Officer
US contact: George OLeary (949) 760 9611; (949) 760 9607 (FAX)
Hong Kong Contact: Cathy Pang (852) 2605 5822; (852) 2691 1724 (FAX)
Attachments: 1. Balance Sheet 2. Income Statement
The statements contained this quarterly report to Shareholders which are not
historical facts are forward-looking statements that involve certain risks and
uncertainties including, but not limited to, risks associated with the
uncertainty of future financial results, additional financing 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.
CONSOLIDATED BALANCE SHEET
(In U.S. Dollars)
June 30 March 31
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2003 2003
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(Unaudited) (Audited)
Assets
Current assets
Cash and cash equivalents 10,560,667 3,633,528
Restricted cash deposits -- 4,104,168
Trade receivables, net 9,131,798 6,191,627
Inventories, net 11,319,198 12,656,518
Notes receivable -- 358,188
Tax recoverable 377,998 52,087
Deferred income tax assets - current 72,904 38,348
Other receivables, deposits and prepayments 1,359,191 1,166,234
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Total current assets 32,821,756 28,200,698
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Deposits -- 551,399
Deferred income tax assets - non current 128,887 128,887
Goodwill 1,186,872 1,100,962
Brand name, net 2,547,391 2,597,392
Property, plant and equipment 16,535,099 16,331,398
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Total assets 53,220,005 48,910,736
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Liabilities and shareholders' equity
Current liabilities
Bank overdraft -- 216,410
Notes payable 5,492,806 4,818,971
Accounts payable 9,224,136 6,350,527
Accrued charges and deposits 1,893,860 1,827,286
Short-term loans 5,595,791 4,727,988
Current portion of long-term debt and capital
lease obligations 242,260 482,940
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Total current liabilities 22,448,853 18,424,122
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Long-term debt and capital lease
obligations, net of current maturities 577,148 606,488
Minority Interests 78,100 55,275
Redeemable Common Stock 1,445,808 1,445,808
Shareholders' equity
Common stock par value $0.003 per share
- authorized shares - 23,333,334
- issued and outstanding shares : 2000 - 5,712,610;
2001 - 5,496,133; 30 September 2001 - 5,601,859 16,521 16,583
Additional paid-in capital 21,418,147 21,458,376
Capital Reserves
Retained earnings 6,956,598 6,533,224
Accumulated other comprehensive income 278,831 409,692
Common stock held in treasury, at cost -- (38,832)
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28,670,097 28,379,043
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Total liabilities and shareholders' equity 53,220,005 48,910,736
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BONSO ELECTRONICS INTERNATIONAL
INC.
CONSOLIDATED INCOME STATEMENT
(In Thousands of U.S. Dollars)
Unaudited
Three months ended June 30
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2003 2002
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Net sales 20,045 10,118
Cost of sales (16,229) (7,249)
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Gross margin 3,816 2,869
Selling expenses 829 457
Salaries and related costs 1,276 987
Research and development expenses 98 77
Administration and general expenses 789 594
Amortization of brand name and goodwill 57 104
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Income from operations 767 650
Interest Income 12 --
Interest Expenses (274) (161)
Foreign exchange gains/(losses) 18 (4)
Other income 127 132
Consultancy fee -- (95)
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Income before income taxes & Minority Interest 650 522
Income tax benefit/(expense) 81 --
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Minority Interest 23 --
Net income 708 522
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Earnings per share
Basic 0.12 0.09
Diluted
Adjusted weighted average shares 5,689,159 5,591,891
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Management Discussion and Analysis of Financial Conditions and Results of
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Operations (1st Quarter 2003)
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Period ended June 30, 2003 compared to period ended June 30, 2002
Net Sales. Our sales increased 98% from approximately $10,118,000 for the
period ended June 30, 2002, to approximately $20,045,000 for the period ended
June 30, 2003, primarily as a result of the increased demand for our
telecommunication and scales products. Sales from our scales segment increased
43% from approximately $7,903,000 for the period ended June 30, 2002, to
approximately $11,319,000 for the period ended June 30, 2003 and
telecommunication segment climbed 293 from approximately $2,215,000 for the
period ended June 30, 2002, to approximately $8,726,000 for the period ended
June 30, 2003.
Gross Margin. Gross margin expressed as a percentage of sales decreased 9%
to 19% for the three month period ended June 30, 2003, as compared with 28% for
the three months ended June 30, 2002.. The decreased in Gross Margin is
attributed to changes to the sales mix proportion between scale and
telecommunication products.
Selling Expenses. Selling expenses increased by 81% from approximately
$457,000 for the period ended June 30, 2002 to approximately $829,000 for the
period ended June 30, 2003. This increase is attributable primarily to increased
export transportation costs and advertising cost.
Salaries And Related Costs. Salaries and related costs increased 29% from
approximately $987,000 for the period ended June 30, 2002 to approximately
$1,276,000 for the period ended June 30, 2003. This increase was primarily due
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to the inclusion of Gram Precision's salaries of $216,000 for the current
period, which were not included in the three months ended June 30, 2002 because
the acquisition of Gram Precision was consummated in August 2002.
Research And Development. Research and development expenses increased 27%
from approximately $77,000 for the period ended June 30, 2002 to approximately
$98,000 for the period ended June 30, 2003 due to increased research and
development activities for both scales and telecommunications products. [please
explain the additional activities]
Administration And General Expenses. Administration and general expenses
increased by 32% from approximately $594,000 for the period ended June 30, 2002
to approximately $789,000 for the period ended June 30, 2003. This increase was
primarily due to inclusion of Gram Precision's general and administrative
expenses.
Amortization Of Brand Names and Goodwill. We amortized approximately
$104,000 relating to the brand name acquired upon the acquisition of Korona
during the period ended June 30, 2002. The brand name is amortized using the
straight line method over the related estimated useful life of 15 years.
Pursuant to U.S. GAAP, goodwill is no longer required to be amortized. Due to
including the amortization of Gram Precision's trade mark, the amortization of
brand name increased from approximately $55,000 for the period ended 30 June
2002 to approximately $57,000 for the period ended 2003.
Income From Operations. As a result of the above changes, income from
operations increased 18% from approximately $650,000 for the period ended June
30, 2002 to $767,000 for the period ended June 30, 2003.
Interest Income. Interest income was approximately $12,000 for the period
ended June 30, 2003, compared to none for the prior years period. This increase
was mainly due to maintaining greater cash balances with our banks.
Interest Expenses. Interest expenses increased 70% from approximately
$161,000 for the period ended June 30, 2002 to approximately $274,000 for the
period ended June 30, 2003. The increase is increase primarily the result of the
increased utilization of banking facilities to support sales during the first
quarter of this year.
Foreign Exchange Losses/Gains. We experienced a foreign currency exchange
gain of approximately $18,000 for the three month period ended June 30, 2003 as
compared to a loss of approximately $4,000 for the period ended June 30, 2002.
The gain was primarily attributable to the stronger Canadian Dollar to the U.S.
Dollar.
Other Income. Other income decreased 3.8% from approximately $132,000 for
the period ended June 30, 2002 to approximately $127,000 for the period ended
June 30, 2003. This decrease was the result of decreased rental income from PRC
property.
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 was from July 2000 to January 2003. A total
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consultancy fee of $1,144,260 was capitalized in 2000 and was amortized over the
three year period of the contract, resulting in a non-cash consultancy fee of
approximately $95,000 for the period ended June 30, 2002, relating to warrants
issued to the consultant. As such consultancy fee was fully amortized on January
2003, there was no consultancy fee for the period ended June 30, 2003.
Minority Interest.This is to reflect our 51% equity interest in Gram
Precision.
Income tax benefit/expense. We recorded a tax credit in the amount of
approximately $81,000 for the period ended June 30, 2003. This tax credit was
recorded in Korona because of the tax loss they have incurred last year.
Net Income. As a result of the above changes, net income increased from
approximately $522,000 for the period ended June 30, 2002 to $708,000 for the
period ended June 30, 2003, an increase of approximately $186,000, or 36%.
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.
On October 22, 2002, Augusta filed a request for arbitration in the state
of New York asserting breach of the Agreement and registration rights agreement.
On January 13, 2003, we filed our answer to Augusta's request for arbitration
asserting that Augusta breached the Agreement and the implied duty of good faith
and fair dealing by withholding consent from Korona's auditors for the release
of Korona's financial statements. We are currently in the process of proceeding
through the arbitration. Although we are optimistic that we will be successful
in the arbitration, there can be no assurance that this will occur. Further, if
the arbitration proceeds, there will be legal fees, travel expenses and other
costs related to the arbitration that will be incurred by us in defending the
matter. If we do not succeed in the arbitration, we may be obligated to
repurchase the stock by exchanging it for the promissory note, to be repaid with
accrued interest, over a nine-month period of time.
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.
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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.
On August 11, 2003, we reported on a Form 6-K that according to published
accounts, a lawsuit was filed against Bonso and certain of Bonso's officers and
directors in the District Court of Jefferson County, in the state of Colorado
and that at that time, Bonso and to Bonso's belief none of Bonso's officers or
directors had been served with a copy of the Complaint. On August 20, 2003,
Bonso and at least one of Bonso's directors were served with a copy of the
Complaint. The Complaint was filed on July 23, 2003 in District Court of
Jefferson County, State of Colorado, Case No. 03CV2505. Plaintiffs Doug
Moreland, William Pinard, Richard Pinard, Leigh Investment Company, LP, Patricia
Johnson, Jason Pinard and Larry Rowe (collectively the "Plaintiffs") name
Anthony So, George O'Leary, Henry F. Schlueter, Cathy Pang, and John Stewart
Jackson (the "Individual Defendants") and Bonso as defendants in the case.
The Complaint alleges that the Individual Defendants breached their
fiduciary duties for insider trading and misappropriation of information by
selling shares of Bonso's common stock while in possession of. material adverse
non-public information pertaining to Bonso's financial outlook. The Complaint
also alleges that the Individual Defendants breached their fiduciary duties of
care, loyalty, and good faith by causing Bonso, through its directors, to
disseminate to the market materially misleading and inaccurate information and
its failure to correct such information. Further the Complaint alleges that each
of the Individual Defendants failed to disclose materially adverse information
so the stock price would trade at artificially inflated prices. The Complaint
also alleges the Defendants committed corporate waste by possessing confidential
proprietary information and using such information for their personal benefit by
selling shares of Bonso's common stock while providing no consideration to the
Company for such benefit. The Complaint also alleges negligent
misrepresentations and fraud by Bonso and the Individual Defendants for
negligently representing its intention to conduct a share buyback and selling
shares of Bonso at inflated prices for their own benefit. The Complaint seeks
unspecified damages in an amount to be determined at trial, plus pre- and
post-judgment interest, and attorneys' fees costs.
Bonso believes there is no basis for the claims asserted by the Plaintiffs
in the Complaint and intends to defend this action vigorously.
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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: September 16, 2003 By: /s/ Henry F. Schlueter
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Henry F. Schlueter,
Assistant Secretary
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