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 November 19, 2004
BONSO ELECTRONICS INTERNATIONAL INC.
------------------------------------
(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]
BONSO ELECTRONICS INTERNATIONAL INC.
Information for the Quarter Ended September 30, 2004
TABLE OF CONTENTS
REPORT FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004 ON FORM 6-K
Page
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Second Quarter Shareholders Letter 4
Consolidated Financial Statements
Audited Consolidated Balance Sheets as of March 31, 2004 and
Unaudited Consolidated Balance Sheets as of
September 30, 2004 6
Unaudited Consolidated Statements of Income and
Comprehensive Income for the Six-Month Periods
Ended September 30, 2003 and 2004 and the Three-Month
Periods Ended June 30, 2003 and 2004 8
Management Discussion and Analysis of Financial Conditions 9
and Results of Operations
Results of Operations 9
Liquidity and Capital Resources 12
Stock Repurchase Program 12
Legal Proceedings 13
Signature 15
Press Release Reporting Second Quarter Results 16
3
[Bonso Electronics International Inc. Letterhead]
Dear Shareholders: 16 November 2004
The results for the quarter were again mixed, with second quarter profits
flat while sales declined 8% as compared to the same period last year. Our
sensor-based scale product sales remained strong but were offset by reduced
telecommunications product sales.
The company reported net income of $787,000 or $0.13 per share on revenues
of $19.4 million for the three month period ended 30 September 2004. Net income
and earnings per share when compared to the same period last year were
approximately equal, with net sales declining approximately 8%, compared to net
sales of $21.0 million posted during the same period last year.
Net income for the six month period ended 30 September 2004 was $1.48
million or $0.25 per share as compared to $1.50 million or $0.27 per share
during the six month period ended 30 September 2004, a decline of approximately
1.5%. Sales for the six month period ended 30 September was $37.4 million as
compared to sales of $41.0 million, a decrease of 9% as compared to the six
month period ended 30 September 2003.
We were unable to surpass the record sales we posted in the second quarter
and first half of last year, but as a result of taking quick action to reduce
expenses 1.3%, we were able to maintain a similar level of profitability in the
second quarter on lower sales volume.
Like many other businesses, we are facing increasing pressure from rising
oil and higher raw material prices. This has squeezed our gross profit margin
from 19.1% to 18.4% in the second quarter when compared to the same period last
year. Fortunately, we identified these factors early and took appropriate action
to offset the impact on second quarter earnings.
We are aware of uncertainties in the market, such as the shortage of
skilled labor in China and electricity shortage concerns. The Company reviews
these issues, on a regular basis, and we believe that we have taken appropriate
steps to safeguard ourselves from the impact on our financial performance. For
example, we have increased wages for our workers to be more competitive and
encouraged employees to remain with the Company. Also our factory has its own
electricity generating capability to ensure minimum risk of a possible
disruption of electrical power.
Throughout the first half of fiscal 2005, we have been enjoying the
benefits of generating positive cash flow from operations. Our cash position at
the end of the second quarter was $11.7 million (over $2.00 per share). We are
continuing to invest in expansion of our plant and equipment to support future
growth. We have many opportunities to exploit, and we have the financial
resources to implement the initiatives we chose.
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With no sizable debt and a strong balance sheet, we never stop investing in
the future of Bonso. We aggressively fund development of new products and
technologies, facilities and capital equipment. We enhanced the capabilities of
our global information system and added functionality focused on strengthening
our relationships with our customers and suppliers.
We believe we have great upside potential in both the Sensor based and
Telecommunications markets we serve. Business challenges notwithstanding, we
remain confident in the overall strategy and growth plan we are implementing.
Our strength and power is due to our management, our employees, our
business partners, our shareholders and most importantly, our customers. I thank
you all. And, I am excited about all we will accomplish in the remainder of this
fiscal year.
Best regards,
Bonso Electronics International, Inc.
Anthony So
Chairman, President and Chief Executive Officer
The statements contained in this letter 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.
U.S. Contact: George O'Leary 949-760-9611, FAX 949-760-9607
Hong Kong Contact: Cathy Pang 852 2605 5822, FAX 852 2692 1724
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BONSO ELECTRONICS INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
(In U.S. Dollars)
Sept 30 March 31
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2004 2004
---- ----
(Unaudited) (Audited)
Assets
Current assets
Cash and cash equivalents 11,725,988 10,815,279
Restricted cash deposits 4,640 4,337
Trade receivables, net 12,905,428 10,389,769
Inventories, net 8,143,016 10,881,932
Tax recoverable 437,314 58,464
Deferred income tax assets - current 52,057 52,057
Other receivables, deposits and prepayments 826,947 888,658
Total current assets 33,090,496 34,095,390
----------- -----------
Deposits 617,056 617,056
Deferred income tax assets - non current 15,178 15,178
Goodwill 1,100,962 1,100,962
Brand name, net 2,439,755 2,397,392
Property, plant and equipment 15,097,775 16,377,361
Total assets 53,366,116 53,598,445
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Liabilities and shareholders' equity
Current liabilities
Bank Overdraft 261,097 156,429
Notes payable 5,108,708 3,244,194
Accounts payable 7,561,233 8,280,039
Accrued charges and deposits 3,121,261 2,951,797
Income taxes payable 278,821 279,485
Short-term loans 4,053,698 4,599,652
Current portion of long-term debt and capital
lease obligations 384,615 678,397
Total current liabilities 20,769,434 20,189,993
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Long-term debt and capital lease obligations,
net of current maturities 888,330 1,158,081
Deferred Income Tax 1,419 39,718
Minority Interests (75,619) 14,203
Redeemable Common Stock
Redeemable Common Stock par value $0.003 per share
- issued and outstanding shares : March 2004 - 180,726
September 2004 - 0 0 1,445,808
Shareholders' equity
Preferred stock par value $0.01 per share
-authorized shares - 10,000,000
-issued and outstanding shares : March & September, 2004-0 -- --
Common stock par value $0.003 per share
- authorized shares - 23,333,334
- issued and outstanding shares : March 2004 - 5,527,639 16,729 16,579
September 2004 - 5,758,365
Additional paid-in capital 21,764,788 21,665,801
Capital Reserves
Retained earnings 9,438,675 8,515,793
Accumulated other comprehensive income 562,360 552,469
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31,782,552 30,750,642
----------- -----------
Total liabilities and shareholders' equity 53,369,116 53,598,445
=========== ===========
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BONSO ELECTRONICS INTERNATIONAL INC.
CONSOLIDATED INCOME STATEMENT
(In Thousands of U.S. Dollars)
Unaudited
Three months ended Sept 30 Six months ended Sept 30
-------------------------- ------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net sales 19,356 21,035 37,397 41,080
Cost of sales -15,799 -17,022 -30,220 -33,251
---------- ---------- ---------- ----------
Gross margin 3,557 4,013 7,177 7,829
Selling expenses 592 653 1,291 1,482
Salaries and related costs 1,261 1,246 2,513 2,522
Research and development expenses 114 158 204 256
Administration and general expenses 919 925 1,591 1,714
Amortization of Brand Name 53 45 106 102
---------- ---------- ---------- ----------
Income from operations 618 986 1,472 1,753
Interest Income 50 12 93 24
Other income 267 37 307 164
Interest Expenses (193) -191 -400 -465
Foreign exchange gains \(Loss) (8) 62 -59 80
Consultancy fee -- --
---------- ---------- ---------- ----------
Income before income taxes and minority interest 734 906 1,413 1,556
Income tax expense -13 -96 -23 -15
---------- ---------- ---------- ----------
Net income before minority interest 721 810 1,390 1,541
Minority interests 66 -14 90 -37
---------- ---------- ---------- ----------
Net income 787 796 1,480 1,504
========== ========== ========== ==========
Earnings per share
Diluted 0.13 0.14 0.25 0.27
Adjusted weighted average shares 5,945,411 5,675,383 5,945,411 5,675,383
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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, 2004. The following discussion
should be read in conjunction with the 2004 Form 20-F for the fiscal year ended
March 31, 2004, and the condensed consolidated financial statements included
elsewhere in this Form 6-K. All information is based on the Company's fiscal
calendar.
Six Month Period ended September 30, 2004 compared to the Six Month period ended
September 30, 2003
Net Sales. During the six-month period ended September 30, 2004, our sales
decreased 9% from approximately $41,080,000 for the six-month period ended
September 30, 2003, to approximately $37,397,000. The decreased sales were
primarily the result of decrease of demand for our telecommunication products.
Sales from our scales business increased by approximately $600,000 from
$23,000,000 for the period ended September 30, 2003 to $23,600,000 for the
six-month period ended September 30, 2004. Sales from our telecommunications
products decreased by approximately $4,054,000 from approximately $18,080,000
for the period ended September 30, 2003 to $13,797,000 for the period ended
September 30, 2004.
Gross Margin. Gross margin as a percentage of revenue remained relatively
unchanged at 19% during the six-month period ended September 30, 2004 as
compared to the same period in the prior year. Despite of the increased pressure
upon the sales price of both our FRS telecommunication products and scales, we
implemented cost reduction procedures to reduce costs, which resulting in no
change in gross margin as a percentage of revenue.
Selling Expenses. Selling expenses decreased by 13% from approximately
$1,482,000 for the six-month period ended September 30, 2003 to approximately
$1,291,000 for the six-month period ended September 30, 2004. The decrease was
primarily the result of decreased sales and reduced shipping costs as a result
of the consolidation of shipments and direct shipment from China to end users.
Selling expenses decreased as a percentage of revenue to 3.4% during the
six-month period ended September 30, 2004 as compared to 3.6% during the period
in the prior year.
Salaries And Related Costs. Salaries and related costs decreased slightly
by 0.3% from approximately $2,522,000 for the six-month period ended September
30, 2003 to approximately $2,513,000 for the six-month period ended September
30, 2003. This decrease was primarily due to reduced spending in the recruitment
of employees.
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Research And Development. Research and development expenses decreased 20.3%
from approximately $256,000 for the six month period ended September 30, 2003 to
approximately $204,000 for the six month period ended September 30, 2004 due to
the decreased research and development activities for telecommunications
products and new scale models. Research and development as a percentage of
revenue declined to 0.5% during the period ended September 30, 2004 as compared
to 0.6% during the prior year.
Administration And General Expenses. Administration and general expenses
decreased by 7.2% from approximately $1,714,000 for the six-month period ended
September 30, 2003 to approximately $1,591,000 for the six-month period ended
September 30, 2004. This decrease was primarily the result of reduced legal and
professional fees, reduced expenses relating to the United States branch office,
reduced charitable contributions and utility costs.
Income From Operations. As a result of the above changes, income from
operations decreased by 16% from approximately $1,753,000 for the six-month
period ended September 30, 2003 to $1,472,000 for the six-month period ended
September 30, 2004.
Interest Income. Interest income amounted to approximately $93,000 for the
six-month period ended September 30, 2004, compared to $24,000 in the six-month
period ended September 30, 2003. This increase was mainly due to deposit cash
into those higher yield structure deposit tools.
Other Income. Other income increased 87.2% from approximately $164,000 for
the six-month period ended September 30, 2003 to approximately $307,000 for the
six-month period ended September 30, 2004. The increase resulted from higher
sales of scrap during the period and compensation from vendors for shipping and
other costs related to defective goods.
Interest Expenses. Interest expenses decreased 14% from approximately
$465,000 for the six-month period ended September 30, 2003 to approximately
$400,000 for the six-month period ended September 30, 2004. The decrease was
primarily the result of reduced use of the Company's banking facilities.
Foreign Exchange Gains/(Loss) Foreign exchange gain decreased from
approximately $80,000 for the six-month period ended September 30, 2003 to a
loss of approximately $59,000 for the six-month period ended September 30, 2004.
The loss was primarily attributable to the devaluation of the United States
dollar compared to other foreign currencies, especially the Euro and the
Canadian dollar.
Net Income. As a result of the above changes, net income decreased from
approximately $1,504,000 for the six month period ended September 30, 2003 to
$1,480,000 for the six month period ended September 30, 2004, a decrease of
approximately $24,000, or 1.6%.
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Three Month Period ended September 30, 2004 compared to the Three Month period
ended September 30, 2003
Net Sales. During the three month period ended September 30, 2004, net
sales were approximately $19,356,000 as compared to $21,035,000 during the three
month period ended September 30, 2003, representing a decrease of approximately
$1,679,000. The decrease was primarily due to the decrease demand for our
telecommunication products.
Gross Margin. Gross margin as a percentage of revenue declined to 18.4%
during the three-month period ended September 30, 2004 as compared to 19.1%
during the prior year. This decline was principally caused by increased pressure
upon the sales price of our FRS telecommunication products and scales.
Selling Expenses. Selling expenses decreased by 9.3% from approximately
$653,000 for the period ended September 30, 2003 to approximately $592,000 for
the period ended September 30, 2004. The decrease is primarily attributable to
the decreased sales and reduced shipping costs as a result of the consolidation
of shipments and direct shipment from China to end users as compared to the same
period in the prior year. Also, selling expenses decreased as a percentage of
revenue to 3% during the period ended September 30, 2003 as compared to 3.1%
during the same period in the prior year.
Salaries And Related Costs. Salaries and related costs increased by 1.2%
from approximately $1,246,000 for the three months ended September 30, 2003 to
approximately $1,261,000 for the three months ended September 30, 2004. This
small increase was primarily due to an increase in the number of employees.
Research And Development. Research and development expenses decreased 27.8%
from approximately $158,000 for the three months ended September 30, 2003 to
approximately $114,000 for the three months ended September 30, 2004 due to
decreased research and development activities for telecommunications products
and new scale models.
Administration And General Expenses. Administration and general expenses
decreased by 0.7% from approximately $925,000 for the three months ended
September 30, 2003 to approximately $919,000 for the three months ended
September 30, 2004. This decrease was primarily the result of reduced legal and
professional fees.
Income From Operations. As a result of the above changes, income from
operations decreased by 37.3% from approximately $986,000 for the three months
ended September 30, 2003 to $618,000 for the three months ended September 30,
2004.
Interest Income. Interest income increased to approximately $50,000 for the
three months ended September 30, 2004, compared to $12,000 in the three months
ended September 30, 2003. This increase was mainly due to deposit cash into
those higher yield structure deposit tools.
Other Income. Other income increased 622% from approximately $37,000 for
the three months ended September, 2003 to approximately $267,000 for the three
months ended September 30, 2004. The increase resulted from higher sales of
scrap during the period and compensation from vendors for shipping and other
costs related to defective goods.
11
Interest Expenses. Interest expenses increased 1% from approximately
$191,000 for the three months ended September 30, 2003 to approximately $193,000
for the three months ended September 30, 2004. This increase was primarily the
result of higher interest rates.
Foreign Exchange Losses/Gains. Foreign exchange gain decreased from
approximately $62,000 for the three months ended September 30, 2003 to a loss of
approximately $8,000 for the three months ended September 30, 2004. The loss was
primarily attributable to the devaluation of United States dollar to most of the
foreign currencies compared to other foreign currencies, especially the Euro and
the Canadian dollar.
Net Income. As a result of the above changes, net income decreased from
approximately $796,000 for the three month ended September 30, 2003 to $787,000
for the three months ended September 30, 2004, a decrease of approximately
$9,000, or 1.1%.
Liquidity and Capital Resources
-------------------------------
We have financed our growth and cash needs to date primarily from
internally generated funds and bank debt. We do not use off-balance sheet
financing arrangements, such as securitization of receivables or obtaining
access to assets through special purpose entities, as sources of liquidity. Our
primary uses of cash have been to fund expansions and upgrades of our
manufacturing facilities, to make strategic acquisitions and to fund increases
in inventory and accounts receivable resulting from increased sales.
We believe that our cash flows from operations, our current cash balance
and funds available under our working capital and credit facilities will be
sufficient to meet our working capital needs and planned capital expenditures
for the next 12 months. As of September 30, 2004, we had $11,725,988 in cash and
cash equivalents as compared to $14,959,859 as of September 30, 2003. Working
capital at September 30, 2004 was $13,325,956 compared to $10,361,610 at
September 30, 2003. We believe our working capital is sufficient for our present
requirements.
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. The Company may from time
to time repurchase shares of its Common Stock under this program.
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Legal Proceedings
-----------------
We have been involved in a dispute with Augusta Technologie AG ("Augusta"),
relating to the acquisition of Korona from Augusta. On October 22, 2002, Augusta
filed a request for arbitration in New York asserting breach of the Agreement
and registration rights agreement. Several hearings were held before an ICC
arbitration panel ("Tribunal").
On July 28, 2004, the Tribunal issued a Final Award in favor of Augusta.
The Final Award provided for aggregate payments to Augusta of $2,387,704,
including: (i) an award of monetary damages in the amount of $1,802,029.07
(including principal and interest), (ii) costs arising out of the arbitration in
the amount of (euro)418,956.42 (approximately $504,675 based upon the noon
buying rate in New York City for cable transfers as certified for customs
purposes by the Federal Reserve Bank of New York on July 28, 2004 of 1.2046
dollars per Euro); and (iii) reimbursement of $76,000 of the fees and expenses
of the Tribunal. The judgment has been satisfied and the shares issued to
Augusta will be returned to us and cancelled at the time of return reducing the
total number of shares outstanding from 5,825,287 to 5,635,287 shares.
Jefferson County Colorado Litigation
On or about August 20, 2003, Bonso and three of Bonso's directors were
served with a copy of a Complaint 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") named
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 alleged 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 alleged 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. In addition, further the Complaint
alleged 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 alleged 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 alleged
negligent misrepresentations and fraud by Bonso and the Individual Defendants
for misrepresenting information concerning Bonso's financial outlook and its
intention to conduct a share buyback. The Complaint sought unspecified damages
in an amount to be determined at trial, plus pre- and post-judgment interest,
and attorneys' fees costs.
On September 26, 2003, Bonso and the Individual Defendants filed a motion
to dismiss the Complaint for lack of standing, failure to state a claim, and
failure to comply with the appropriate procedural requirements for out of state
defendants instituting and maintaining a legal action in the state of Colorado.
On October 30, 2003, the Plaintiff's filed an amended complaint (the
"Amended Complaint") with the substantially the same factual allegations as
asserted in the original Complaint. The Amended Complaint alleged derivative
claims (the "Derivative Claims") against the Individual Defendants for breaches
of fiduciary duties for: (i) insider selling and misappropriation of
information, (ii) dissemination of misleading and inaccurate information and
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(iii) waste of corporate assets. The Derivative Claims allege that Bonso has
sustained damages as a result of the Individual Defendants actions. The Amended
Complaint sought disgorgement of all profits realized by the Individual
Defendants, the imposition of a constructive trust in favor of Bonso for the
amount of profits received by the Individual Defendants as a result of their
sales of Bonso stock and damages in favor of Bonso for breaches of the
Individual Defendants fiduciary duties. In response, Bonso engaged an
independent counsel to review the validity and appropriateness of the Derivative
Claims.
The Amended Complaint also alleged individual claims (the "Individual
Claims") against the Individual Defendants for breach of fiduciary duty against
the individual defendants for: (i) insider selling and misappropriation of
information, (ii) dissemination of misleading and inaccurate information, (iii)
negligent misrepresentations, and (iv) fraud.
On November 20, 2003, Bonso and the Individual Defendants filed a motion to
dismiss the Amended Complaint for lack of standing and failure to comply with
the appropriate procedural requirements for out of state defendants instituting
and maintaining a legal action in the state of Colorado. On January 8, 2004, the
Court entered an Order denying Defendants' motion to dismiss but requiring the
non-resident Plaintiff to file a cost bond
Thereafter, Defendants filed a Verified Second Amended Complaint (the
"Second Amended Complaint") on January 21, 2004. While the Second Amended
Complaint asserts essentially the same derivative and direct claims as the
Amended Complaint, it includes new factual allegations concerning Bonso's
December 17, 2003 announcement to extend the expiration date of its December 31,
2003 warrants (the "Warrants") and reduce the exercise price. Specifically,
Plaintiffs allege, upon information and belief, that one or more of the
Individual Defendants purchased Warrants between November 11, 2003 and December
17, 2003 based on information that the Warrants would be extended and the strike
price reduced.
On October 25, 2004, we agreed to a Agreement and Stipulation with the
Plaintiffs whereby the trial date was cancelled and all pending deadlines were
stayed until the independent counsel makes his determination and recommendation
regarding the Derivatives Claims. Pursuant to the Agreement and Stipulation, the
Plaintiff's agreed that their investigation into the trading of the Warrants
shall be completed by March 31, 2005.
Bonso and the Individual Defendants believe there is no basis for the
claims asserted in the Second Amended Complaint and both intend to defend this
action vigorously.
Exhibits
--------
99.1 Press Release dated November 16, 2004 Disclosing the Results for the
Quarter ended September 30, 2004
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SIGNATURE
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: November 19, 2004 By: /s/ Henry F. Schlueter
----------------- ---------------------------------------
Henry F. Schlueter, Assistant Secretary
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