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 7, 2005
BONSO ELECTRONICS INTERNATIONAL INC.
------------------------------------
(Translation of Registrant's name into English)
Unit 1106-1110, 11F., Star House 3 Salisbury Road,
Tsimshatsui Kowloon, Hong Kong
------------------------------
(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 December 31, 2004
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TABLE OF CONTENTS
REPORT FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2004 ON FORM 6-K
Page
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Third Quarter Shareholders Letter 4
Consolidated Financial Statements 6
Audited Consolidated Balance Sheet as of March 31, 2004 and
Unaudited Consolidated Balance Sheet as of December 31, 2004 6
Unaudited Consolidated Statements of Income and Comprehensive
Income for the Nine-Month Periods Ended December 31, 2003 and 2004
and the Three-Month Periods Ended December 31, 2003 and 2004 8
Management Discussion and Analysis of Financial Condition
and Results of Operations 9
Liquidity and Capital Resources 12
Stock Repurchase Program 13
Legal Proceedings 13
Signature 15
Press Release Reporting Third Quarter Results 16
3
[Bonso Electronics International Inc. Letterhead]
Dear Shareholders: 7 February 2005
For the third quarter ended 31 December 2004, Bonso's sales were $18.3 million,
or 6.3% above the same quarter in 2003. Sales were driven mainly by increases in
sensor based products. Net income was $600,000 or $0.10 per share (diluted). Net
income was approximately equal to the same period last year.
Net income for the nine month period ended 31 December 2004 was $2.1 million or
$0.35 per share, which is approximately equal to the net income in the same
period last year. Sales for the nine month period ended 31 December were $55.7
million, a decrease of 4.4% compared to sales of $58.3 million in the comparable
2003 period.
We accomplished these results, over the last nine months, at a time when raw
material (oil, metal, plastic, etc) and skilled labor costs were increasing. We
were able to keep the gross profit margin constant by initiating design and
manufacturing process changes which offset the negative impact of rising costs.
At the same time we reduced expenses; thereby, allowing us to maintain
approximately the same level of profitability.
The biggest challenge facing Bonso today is to return to double digit sales
growth. Our primary focus will be on doing more for our existing customers and
to show initiative in proposing solutions to new potential customers in our
niche markets of sensor based and telecommunication products. We have developed
several new sensor based products that are being received well by new potential
OEM customers and have also expanded our branded product offerings in both North
America and Europe.
We increased sales and took market share away from competitors in our sensor
based business during calendar 2004 as a result of offering better service and
creative solutions for our customers. We are optimistic about continuing this
trend in the future. We are especially motivated by the new 5.8 gigahertz
cordless telephone that we are currently producing for an OEM customer that
services the US market.
We are excited about the projected future growth of wireless technology, and we
believe that we are well positioned in both sensor products and
telecommunications products to capitalize on our strong application experience
in this growing industry sector.
In preparation for planned future growth, we have restructured our top
management team and appointed George O'Leary as the President and Chief
Executive Officer. George is currently a member of the Board of Directors and
has been associated with Bonso for over 15 years--initially as a client, then
for the last eight years as a consultant, and since 1997 as a member of the
Board of Directors. George is the right person for the CEO role at this time.
This announcement is part of a planned, on-going process to enhance and expand
our global reach by strengthening our management structure worldwide. George
will continue to operate out of the US where he can be in close contact with
industry and customer requirements in North America, Europe and elsewhere. With
his strong business background, we believe that George will be a great addition
to our management team and a capable leader in the execution of our strategic
business plan.
Mr. O'Leary was President, CEO and a director of Micro General Corporation, a
NASDAQ listed company located in Santa Ana, California for eight years and prior
to that was Vice President and General Manager at Lanier Business Products, in
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Atlanta, Georgia. Mr. O'Leary has a Bachelor of Science degree in Electrical
Engineering from Northeastern University, Boston, Massachusetts.
Despite our accomplishments, we do have one key disappointment - namely, the
continuing gap between the underlying value of Bonso and the market value of our
stock. We continue to believe that the current stock price is not reflective of
Bonso's strength and value, with a price to earning ration as of January 28,
2005 of 13.18, a price to sales ratio of 0.41 and a price to book ratio of 0.87.
Further, we intend to continue to make efforts to continue the progress we have
made in strengthening our Balance Sheet. Because of positive cash flow from
operations, our cash position has increased to $13.5 million, or approximately
$2.30 per share.
The company looks forward to a successful 2005 with confidence and enthusiasm.
We look forward to the opportunities the future will bring us. Thank you for
your continued trust.
Yours truly, Yours truly,
Bonso Electronics International, Inc. Bonso Electronics International, Inc.
/s/ Anthony So /s/ George D. O'Leary
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Anthony So George D. O'Leary
Chairman President and CEO
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
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.
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BONSO ELECTRONICS INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
(In U.S. Dollars)
Dec 31 March 31
------ --------
2004 2004
---- ----
(Unaudited) (Audited)
Assets
Current assets
Cash and cash equivalents 13,528,569 10,815,279
Restricted cash deposits 4,872 4,337
Trade receivables, net 12,122,415 10,389,769
Inventories, net 7,092,061 10,881,932
Tax recoverable 249,769 58,464
Deferred income tax assets - current 52,057 52,057
Other receivables, deposits and prepayments 1,050,871 888,658
Total current assets 34,100,614 33,090,496
----------- -----------
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 2,247,392 2,397,392
Property, plant and equipment 14,552,353 16,377,361
Total assets 52,633,555 53,598,445
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Liabilities and shareholders' equity
Current liabilities
Bank Overdraft 286,640 156,429
Notes payable 6,167,842 3,244,194
Accounts payable 5,780,314 8,280,039
Accrued charges and deposits 2,226,891 2,951,797
Income taxes payable 123,473 279,485
Short-term loans 4,589,149 4,599,652
Current portion of long-term debt and capital lease obligations 384,615 678,397
Total current liabilities 19,558,924 20,189,993
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Long-term debt and capital lease obligations, net of current
maturities 762,688 1,158,081
Deferred Income Tax 1,504 39,718
Minority Interests (38,671) 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 10,038,437 8,515,793
Accumulated other comprehensive income 529,156 552,469
----------- -----------
32,349,110 30,750,642
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Total liabilities and shareholders' equity 52,633,555 53,598,445
=========== ===========
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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
-------------------------- -------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net sales 18,344 17,260 55,741 58,340
Cost of sales (14,356) (13,234) (44,576) (46,485)
---------- ---------- ---------- ----------
Gross margin 3,988 4,026 11,165 11,855
Selling expenses 701 635 1,992 2,117
Salaries and related costs 1,303 1,541 3,816 4,063
Research and development expenses 128 84 332 340
Administration and general expenses 877 1,067 2,468 2,781
Amortization of Brand Name 44 47 150 149
---------- ---------- ---------- ----------
Income from operations 935 652 2,407 2,405
Interest Income 75 81 168 105
Other income (13) 106 294 270
Interest Expenses (168) (192) (568) (657)
Foreign exchange gains \(Loss) (0) (35) (59) 45
Consultancy fee
---------- ---------- ---------- ----------
Income before income taxes and minority interest 829 612 2,242 2,168
Income tax expense (192) (3) (215) (18)
---------- ---------- ---------- ----------
Net income before minority interest 637 609 2,027 2,150
Minority interests (37) (8) 53 (45)
---------- ---------- ---------- ----------
Net income 600 601 2,080 2,105
========== ========== ========== ==========
Earnings per share
Diluted 0.10 0.11 0.35 0.37
Adjusted weighted average shares 5,863,956 5,675,570 5,863,956 5,675,570
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Management Discussion and Analysis of Financial Condition and Results of
Operations
------------------------------------------------------------------------
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 on August 13, 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.
Results of Operations
Nine Month Period ended December 31, 2004 compared to the Nine Month period
ended December 31, 2003
Net Sales. Our sales decreased approximately $2,599,000 or 4.4% from
approximately $58,340,000 for the nine month period ended December 31, 2003, to
approximately $55,741,000 for the nine month period ended December 31, 2004,
primarily as a result of sales drop of telecommunications products. Sales of our
scales business increased from approximately $34,188,000 during the nine month
period ended December 31, 2003, to approximately $36,782,000 during the nine
month period ended December 31,2004, and sales for telecommunications products
were down 21.5% from approximately $24,152,000 to approximately $18,959,000
during this period.
Gross Margin. Gross margin as a percentage of sales remained constant at
approximately 20% during the nine month period ended December 31, 2004 as
compare to the same period in 2003.
Selling Expenses. Selling expenses decreased by 5.9% from approximately
$2,117,000 for the period ended December 31, 2003 to approximately $1,992,000
for the period ended December 31, 2004. This decrease was primarily the result
of decreased sales and reduced shipping costs as a result of the consolidation
of shipments. Selling expenses as a percentage of revenue remained constant at
3.5% during the period ended December 31, 2004 as compared to the same period in
2003.
Salaries And Related Costs. Salaries and related costs decreased by
approximately 6.1% from approximately $4,063,000 for the period ended December
31 ,2003 to approximately $3,816,000 for the period ended December 31 2004. This
decrease was primarily due to reduced spending in the recruitment of employees.
Research And Development. Research and development expenses decreased 2.4%
from approximately $340,000 during the nine month period ended December 31, 2003
to approximately $332,000 during the nine month period ended December 31, 2004.
Research and Development as a percentage of revenue increased to 0.6% during the
period ended December 31, 2004 as compared to 0.58% during the prior year.
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Administration And General Expenses. Administration and general expenses
decreased by 11.3% from approximately $2,781,000 during the period ended
December 31, 2003 to approximately $2,468,000 during the nine month period ended
December 31, 2004. This decrease was primarily the result of reduced legal and
professional fees, and reduced expenses relating to the United States branch
office.
Amortization Of Brand Names. We amortized approximately $150,000 relating
to the brand names acquired upon the acquisitions of Korona and Gram Precision
during the nine month period ended December 31, 2004 and approximately $149,000
during the nine month period ending December 31, 2003. 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, there was no
significant change in income from operations. As a percentage of revenue, income
from operations increased from 4.1% during the nine month period ended December
31, 2003 to 4.3% for the period ended December 31, 2004.
Interest Income. Interest income amounted to approximately $168,000 during
the nine month period ended December 31, 2004, compared to $105,000 during the
nine month period ended December 31, 2003. This increase was primarily the
result of depositing our cash into higher yield accounts.
Other Income. Other income increased 8.9% from approximately $270,000
during the nine month period ended December 31, 2003, to approximately $294,000
during the nine month period ended December 31, 2004. The increase was primarily
due to the higher sales of scrap during the first and second quarter and
compensation from vendors for shipping and stocking defective goods.
Interest Expenses. Interest expenses and financials charges decreased 13.5%
from approximately $657,000 during the nine month period ended December 31, 2003
to approximately $568,000 during the nine month period ended December 31, 2004.
The decrease was primarily the result of reduced use of the Company's banking
facilities.
Foreign Exchange Losses/Gains. Foreign currency exchange decreased from a
gain of approximately $45,000 for the period ended December 31, 2003 to a loss
of approximately $59,000 for the period ended December 31, 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 $2,105,000 during the nine month period ended December 31, 2003 to
$2,080,000 during the nine month period ended December 31, 2004, a decrease of
approximately $25,000, or 1.2%.
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Three Month Period ended December 31, 2004 compared to the Three Month period
ended December 31, 2003
Net Sales. Net sales increased to $18,344,000 during the three months ended
December 31, 2004 as compared to $17,260,000 during the three months ended
December 31, 2003, an increase of approximately $1,084,000, or 6.3%. The
increase was primarily the result of increased demand for our products in Europe
and the United States. Sales from our scales business increased from
approximately $11,188,000 for the three months ended December 31, 2003, to
approximately $13,182,000 for the three months ended December 31,2004, and sales
for telecommunications products decreased from approximately $6,072,000 for the
three months ended December 31, 2003, to approximately $5,162,000 for the three
months ended December 31,2004.
Gross Margin. Gross margin as a percentage of revenue declined to 21.7%
during the three-month period ended December 31, 2004 as compared to 23.3%
during the same period in the prior year. This decline was primarily the result
of increased pressure on both the sales price of our FRS telecommunication
products and scales.
Selling Expenses. Selling expenses increased by 10.4% from approximately
$635,000 during the three months ended December 31, 2003 to approximately
$701,000 during the three months ended December 31, 2004. This increase was
attributable to the increased cost of sales commission and freight insurance.
Salaries And Related Costs. Salaries and related costs decreased by 15.4%
or $238,000, from approximately $1,541,000 for the three months ended December
31, 2003 to approximately $1,303,000 for the three months ended December 31,
2004. This decrease was primarily due to reduced spending in the recruitment of
employees.
Research And Development. Research and development expenses increased 52%
or $44,000, from approximately $84,000 for the three months ended December 31,
2003 to approximately $128,000 for the three months ended December 31, 2004
primarily as a result of increased research and development in both scales and
telecommunication products during the three months ended December 31, 2004.
Administration And General Expenses. Administration and general expenses
decreased by approximately $190,000 or 17.8% from approximately $1,067,000 for
the three months ended December 31, 2003 to approximately $877,000 for the three
months ended December 31, 2004. This decrease was primarily the result of
reduced legal and professional fees and reduced expenses relating to the United
States branch office.
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 $44,000 relating to the brand names acquired upon the
acquisitions of Korona and Gram Precision during the period ended December 31,
2004 as compared to approximately $47,000 during the three month -period ending
December 31, 2003.
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Income From Operations. As a result of the above changes, income from
operations increased by 43.4% from approximately $652,000 for the three months
ended December 31, 2003 to $935,000 for the three months ended December 31,
2004.
Interest Income. Interest income decreased to approximately $75,000 for the
three months ended December 31, 2004 as compared to $81,000 in the three months
ended December 31, 2003. This decrease was mainly due to less cash balances to
earn interest during the period.
Other Income. Other income decreased 112% from a gain of approximately
$106,000 for the three months ended December 31, 2003, to a loss of
approximately $13,000 for the three months ended December 31, 2003. The decrease
primarily resulted from the repurchase of some of the scrap sold in the prior
quarter.
Interest Expenses. Interest expenses and financials charges decreased 12.5%
from approximately $192,000 during the three months ended December 31, 2003 to
approximately $168,000 during the three months ended December 31, 2004. This
decrease was primarily the result of the decreased use of our banking facilities
in that period.
Foreign Exchange Losses/Gains. Foreign currency exchange losses decreased
from approximately $35,000 for the three months ended December 31, 2003 to $0
for the three months ended December 31, 2004.
Net Income. As a result of the above changes, net income decreased from
approximately $601,000 for the three month ended December 31, 2003 to $600,000
for the three months ended December 31, 2004, a decrease of approximately
$1,000, or 0.2%.
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 working
capital resulting from normal operation.
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 December 31, 2004, we had $13,528,569 in cash and
cash equivalents as compared to $10,815,279 as of March 31, 2004. Working
capital at September 30, 2004 was $14,541,690 compared to $12,900,503 at March
31, 2004. We believe our working capital is sufficient for our present
requirements.
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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.
Legal Proceedings
-----------------
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
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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
(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 February 7, 2005 Disclosing the Results for the
Quarter ended December 31, 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: February 7, 2005 By: /s/ Henry F. Schlueter
---------------- ---------------------------------------
Henry F. Schlueter, Assistant Secretary
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