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 January 13, 2003
--------------------
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 September 30, 2002
2
TABLE OF CONTENTS
REPORT FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002 ON FORM 6-K
Page
----
Second Quarter FY2003 Shareholders Letter 4
Consolidated Financial Statements
Unaudited Consolidated Balance Sheets as of
June 31, 2002 and September 30, 2002 7
Unaudited Consolidated Statements of Income and
Comprehensive Income for the Six Month Periods
Ended June 30, 2001 and 2002 9
Management Discussion and Analysis of Financial Conditions
and Results of Operations 10
3
[BONSO ELECTRONICS INTERNATIONAL INC. LETTERHEAD]
Dear Shareholders,
The second quarter of fiscal 2003 was a continued trend from the first
quarter of reduced sales of telecommunications products, as consumer demand for
two-way radios & cordless telephones continued to be depressed. But due to
recent developments the company is cautiously optimistic that our
telecommunications business will improve during the second half of this fiscal
year. The second quarter and six-month results reflect the continuing slow
recovery of the telecommunications industry, which provided Bonso with
approximately 33% of its fiscal year 2002 sales. Our scale business for the
first half of the year was maintained at the same level of $15 million as fiscal
2002 but orders for telecommunications products were down 45%.
Net income for the three months ended 30 September 2002 was $26,000 or
$0.005 per share, on revenues of $10,611,000 compared to $408,000 or $0.074 per
share and revenues of $13,848,000 for the second quarter of fiscal 2002. Six
months' net income of $549,000 or $0.096 per share was down from the prior
year's total of $1,075,000 or $0.194 per share, while revenues reduced 22% to
$20,728,000.
The second quarter gross profit margin improved 3.5% on lower revenues,
compared to the same fiscal year 2002 period, which we attribute to a formal
program for improving manufacturing efficiency and overall business processes.
Bonso has been operating for almost two decades and our vision has remained
constant throughout this time. We will continue to be a world class manufacturer
of sensor based products and telecommunications products. Toward this end, we
have committed ourselves to the electronics manufacturing services (EMS)
industry and have overcome the significant barriers to entry into this market.
We have a solid management team and a good business plan to address the needs of
our customers in our selected niche markets of sensor based & telecommunications
products.
The question is why and when do companies decide to "outsource" their
electronic manufacturing. The major drivers to outsourcing include continuous
market pressures to shorten time-to-market, enhance asset utilization and master
the complexity of process technologies. In essence outsourcing enables companies
to focus on their core competencies, which include research and development,
sales and marketing. Customers also can realize significant financial benefits.
Bonso offers high efficiency and superior capital utilization, thanks to a
business model, which leverages these resources among multiple customers. In
addition, the risks of frequent design changes, shorter product life cycles,
component price fluctuations, component shortages and increased product
complexities are significantly reduced.
4
These benefits are further enhanced by operating in China, which offers one
of the lowest labor rates in the world and where our 500,000-sq. ft. factory
provides volume efficiencies.
Historically outsourcing has bucked the trend of economic expansion. That
is, companies have been more inclined to outsource when they see sales dropping
and efficiencies and costs 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.
The integration of Korona, GmbH and Gram Precision into Bonso's culture
remains ongoing. Gram Precision has recently opened a sales office in the United
Kingdom with distribution services in the Netherlands, while Korona GmbH has
been struggling with a significant economic downtrend in Germany and the rest of
Europe. Korona GmbH's sales and earnings for the first half are below last
year's levels. Korona USA has successfully obtained a large OEM customer for
bathroom scales. Also the new products have been well received by chain store
merchandisers and specialty retailers. Korona USA is fully prepared to sell and
support these customers from their stocked distribution center in Wisconsin.
We believe that Bonso's entry into distribution of branded products is an
important step in meeting the challenge of improving overall financial
performance. In the short term it has been an investment that we feel will pay
significant rewards in development and performance of the company in the future.
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 SEC 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 SEC 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.
I want to express to you some level of disappointment in the financial
performance of the company in the first half of this year. But when you consider
that we grew sales 80% last year and although our sales in the first half have
dropped 22% over last year's record levels; our gross profit margins have
improved, and we remain profitable while significantly expanding distribution of
branded products, continuing with our acquisition plans and investing in
manpower, plant & equipment in the factory. I continue to be optimistic about
the future.
5
In the final analysis, a measure of a company's worth is measured by how we
benefit our customers and the loyalty and enthusiasm of our management &
employees. In these measurements Bonso's performance is high as we continue to
obtain new business from existing customers, as well as, to attract new
prospects due to strong customer referrals. Also the Bonso Team remains
dedicated and committed to delivering results for our customers and shareholders
in the future.
We are continuing our investor relations activities and have found that
most small cap institutions that have been tracking us are continuing to see
Bonso as an exciting company in a dynamic industry with bright future prospects.
Our employees and management join me in expressing our appreciation for
your loyalty and support as we build a strong base for 2003 and beyond.
Best regards,
Bonso Electronics International, Inc.
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
Attachments: 1. Income Statement 2. Balance Sheet
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.
6
BONSO ELECTRONICS INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
(In U.S. Dollars)
Sept 30 March 31
2002 2002
---------- -----------
(Unaudited) (Audited)
Assets
Current assets
Cash and cash equivalents 3,901,201 1,878,156
Restricted cash deposits 2,509,348 3,972,542
Trade receivables, net 5,668,960 6,838,576
Inventories, net 12,123,371 8,861,952
Notes receivable 600,591 686,258
Deferred income tax assets - current 13,013 27,219
Other receivables, deposits and prepayments 1,821,351 822,646
----------- -----------
Total current assets 26,637,835 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 3,466,535 2,797,392
-- --
Property, plant and equipment 17,423,598 18,261,659
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Total assets 47,828,402 44,451,077
=========== ===========
Liabilities and shareholders' equity
Current liabilities
Notes payable 3,386,220 2,857,533
Accounts payable 5,308,404 4,122,443
Accrued charges and deposits 1,877,635 2,022,472
Income taxes payable 95,409 83,614
Short-term loans 4,846,138 3,754,477
Current portion of long-term debt and capital lease obligations 371,179 647,501
----------- -----------
Total current liabilities 15,884,985 13,488,040
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7
BONSO ELECTRONICS INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
(In U.S. Dollars)
(Continued)
Sept 30 March 31
2002 2002
---------- -----------
(Unaudited) (Audited)
Long-term debt and capital lease obligations, net of current
maturities 187,861 317,009
Redeemable Common Stock 1,445,808 1,445,808
Minority Interests 64,049 --
Shareholders' equity
Common stock par value $0.003 per share -- --
- authorized shares - 23,333,334 -- --
- issued and outstanding shares March 31, 2002 - 5,404,133
Spetmber 30, 2002 - 5,601,859 16,583 16,208
Additional paid-in capital 21,458,377 21,152,502
Capital Reserves -- --
Deferred consultancy fee (190,710) (381,420)
Retained earnings 8,725,477 8,176,958
Accumulated other comprehensive income 235,972 235,972
Common stock held in treasury, at cost -- --
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30,245,699 29,200,220
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Total liabilities and shareholders' equity 47,828,402 44,451,077
=========== ===========
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BONSO ELECTRONICS INTERNATIONAL INC.
CONSOLIDATED INCOME STATEMENT
(In Thousands of U.S. Dollars)
Unaudited
Three months Six months ended
ended Sept 30 Sept 30
------------------------ ------------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net sales 10,611 13,848 20,728 26,429
Cost of sales (7,797) (10,657) (15,046) (20,551)
---------- ---------- ---------- ----------
Gross margin 2,814 3,191 5,682 5,878
Selling expenses 545 905 1,002 1,318
Salaries and related costs 1,147 873 2,186 1,681
Research and development expenses 127 69 152 134
Administration and general expenses 883 672 1,477 1,216
Amortization of Brand Name 10 -- 114 --
---------- ---------- ---------- ----------
Income from operations 102 672 751 1,529
Interest Income 29 36 30 147
Other income 144 103 276 134
Interest Expenses (153) (296) (314) (496)
Foreign exchange gains/(losses) 20 (10) 16 (23)
Consultancy fee (95) (95) (191) (191)
---------- ---------- ---------- ----------
Income before taxation 47 410 568 1,100
Income tax benefit/(expense) (11) (2) (11) (26)
---------- ---------- ---------- ----------
Income after taxation 36 408 557 1,074
Minority interests (8) -- (8) --
---------- ---------- ---------- ----------
Net income 28 408 549 1,074
---------- ---------- ---------- ----------
Earnings per share
Basic .005 .074 .096 .194
Diluted .005 .074 .096 .194
Weighted average shares Outstanding 5,709,859 5,539,815 5,709,859 5,539,815
Incremental shares from assumed
Exercise of warrants and Stock options -- -- -- --
Adjusted weighted average shares 5,709,859 5,539,815 5,709,859 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 2002 Form 20-F for the fiscal year ended
March 31, 2002, 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
---------------------
Six Month Period ended September 30, 2002 compared to the Six Month period ended
September 30, 2001
Net Sales. Our sales decreased 22% from approximately $26,429,000 for the
period ended September 30, 2002, to approximately $20,728,000 for the period
ended September 30, 2002, primarily as a result of the reduction in contribution
from our telecommunications products. Our scales business maintained the same
level of orders for the same period in fiscal 2002 with approximately $15
million in orders. However, orders for telecommunications products were down
45%.
Gross Margin. Gross margin rose 5% to 27% for the period ended September
30, 2002, as compared with 22% 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 24% from approximately
$1,318,000 for the period ended September 30, 2001 to approximately $1,002,000
for the period ended September 30, 2002. This decrease was attributable
primarily to the downturn in sales of telecommunications products.
Salaries And Related Costs. Salaries and related costs increased by 30%
from approximately $1,681,000 for the period ended September 30, 2001 to
approximately $2,186,000 for the period ended September 30, 2002. This increase
was primarily due to a 66% increase in Korona's salaries from $399,000 to
$661,000 and the inclusion of two months salaries of $148,000 for Gram
Precision, which was acquired by Bonso on August 1, 2002.
Research And Development. Research and development expenses increased 14%
from approximately $134,000 for the period ended September 30, 2001 to
approximately $152,000 for the period ended September 30, 2002 due to increased
research and development activities for telecommunications products and new
models of scales not yet introduced into market.
10
Administration And General Expenses. Administration and general expenses
increased by 21% from approximately $1,216,000 for the period ended September
30, 2001 to approximately $1,477,000 for the period ended September 30, 2002.
This increase was primarily due to establishment of a new US office for
exploring markets in the USA, and an increase in professional services rendered
relating to the acquisition of Gram Precision and the preparation and review of
documents filed with the SEC.
Amortization Of Brand Names. We amortized approximately $114,000 relating
to the brand name acquired upon the acquisition of Korona and Gram Precision
during the period ended September 30, 2002. The brand names is 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 51% from approximately $1,529,000 for the period ended
September 30, 2001 to $751,000 for the period ended September 30, 2002.
Interest Income. Interest income amounted to approximately $30,000 for the
period ended September 30, 2002, compared to $147,000 in the period ended
September 30, 2001. This decrease was mainly due to lower interest rates for
deposits with out banks, despite the slight increase in cash balances.
Other Income. Other income increased 106% from approximately $134,000 for
the period ended September, 2001 to approximately $276,000 for the period ended
September 30, 2002.
Interest Expenses. Interest expenses decreased 37% from approximately
$496,000 for the period ended September 30, 2001 to approximately $314,000 for
the period ended September 30, 2002. This decrease primarily resulted from the
decline in sales, with the Company using less of its banking facilities to
support sales during the first quarter of this year and lower interest rates.
Foreign Exchange Losses/Gains. Foreign exchange significantly improved from
the period ended September 30, 2001 in which the Company lost approximately
$23,000, to a gain of approximately $16,000 for the period ended September 30,
2002. This decrease was primarily attributable to the increased strength of the
Euro against the US Dollar, benefiting 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 three years of the contract, resulting in a non-cash consultancy fee of
approximately $191,000 for the period ended September 30, 2002, relating to
warrants that were issued to the consultant.
11
Net Income. As a result of the above changes, net income decreased from
approximately $1,075,000 for the period ended September 30, 2001 to $549,000 for
the period ended September 30, 2002, a decrease of approximately $526,000, or
49%.
Three Month Period ended September 30, 2002 compared to the Three Month period
ended September 30, 2001
Net Sales. For the three months ended September 30, 2002, net sales of
approximately $10,611,000 represented a decrease of approximately $3,237,000, or
23%, from the same prior year period. The decline was primarily due to lower
sales from Korona because of a general downturn in demand for consumer products
in Europe and reduction in contribution from our telecommunications products.
Gross Margin. Gross margin rose to 26.5% for the three months ended
September 30, 2002, as compared with 23% fiscal 2002. The gain is attributed to
a decrease in materials and labor costs as a result of the Company's emphasis in
improving manufacturing efficiencies.
Selling Expenses. Selling expenses decreased by 40% from approximately
$905,000 for the three months ended September 30, 2001 to approximately $545,000
in the three months ended September 30, 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 31%
from approximately $873,000 for the three months ended September 30, 2001 to
approximately $1,147,000 for the three months ended September 30, 2002. This
increase was primarily due to a 33% increase in Korona's salaries from $243,000
to $333,000 and the inclusion of two months salaries of $148,000 for Gram
Precision, which was acquired by Bonso on August 1, 2002.
Research And Development. Research and development expenses increased 84%
from approximately $69,000 for the three months ended September 30, 2001 to
approximately $127,000 for the three months ended September 30, 2002 due to
increased research and development activities for telecommunications products
and new models of scales not yet introduced into market.
Administration And General Expenses. Administration and general expenses
increased by 31% from approximately $672,000 for the three months ended
September 30, 2001 to approximately $883,000 for the three months ended
September 30, 2002. This increase was primarily due to the establishment of a
new US office for exploring markets in the USA, and an increase in professional
services rendered relating to the acquisition of Gram Precision and the
preparation and review of documents filed with the SEC.
Income From Operations. As a result of the above changes, income from
operations decreased by 85% from approximately $672,000 for the three months
ended September 30, 2001 to $102,000 for the three months ended September 30,
2002.
12
Interest Income. Interest income amounted to approximately $29,000 for the
three months ended September 30, 2002, compared to $36,000 in the three months
ended September 30, 2001. This decrease primarily resulted from the decline in
sales, with the Company using less of its banking facilities to support sales
during the first quarter of this year and lower interest rates.
Other Income. Other income increased 40% from approximately $103,000 for
the three months ended September, 2001 to approximately $144,000 for the three
months ended September 30, 2002.
Interest Expenses. Interest expenses decreased 48% from approximately
$296,000 for the three months ended September 30, 2001 to approximately $153,000
for the three months ended September 30, 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.
Foreign Exchange Losses/Gains. Foreign exchange significantly improved from
loss from approximately $10,000 for the three months ended September 30, 2001 to
a gain of approximately $20,000 for the three months ended September 30, 2002.
This decrease was primarily attributable to the increased strength of the Euro
against the US Dollar, benefiting 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 three years of the contract, resulting in a non-cash consultancy fee of
approximately $95,000 for the three months ended September 30, 2002, relating to
warrants that were issued to the consultant.
Net Income. As a result of the above changes, net income decreased from
approximately $408,000 for the three month ended September 30, 2001 to $28,000
for the three months ended September 30, 2002, a decrease of approximately
$380,000, or 93%.
Liquidity and Capital Resources
-------------------------------
We have traditionally relied on loans to meet our working capital
requirements. These loans have been supplemented by internally generated funds
and trade credits from suppliers.
Effective August 1, 2002, we acquired a majority interest in Gram
Precision, a privately owned Mississauga, Ontario Canada based corporation and a
distributor of digital scales for laboratory, industrial, jewelry and other
markets requiring precise measurement and high resolution.
We paid $1 million in cash over a 5-year period and 125,000 shares of
Bonso's common stock for a 51 percent equity interest in Gram Precision, subject
to certain provisions for the adjustment of the purchase price. Gram Precision's
products are distributed primarily in the United States and Canada, with United
States distribution taking place from the Company's distribution center in Reno,
Nevada.
13
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. No shares were repurchased
during the first six months of fiscal 2003. Between inception of the repurchase
program and September 30, 2002, the Company has repurchased or committed to
repurchase a total of 2,000 shares of its common stock at a cost of $ 5,434. 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 SEC 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 SEC 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.
Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The annual general meeting of shareholders was held on October 9, 2002.
The following directors were elected at the meeting to serve as directors
until the next annual general meeting of the Company thereafter until their
successors have been elected and qualified:
14
Director For Authority Withheld
-------- --- ------------------
Anthony So 3,147,630 15,375
Kim Wah Chung 3,147,630 15,375
Cathy Kit Teng Pang 3,147,630 15,375
Woo Ping Fok 3,147,630 15,375
John Stewart Jackson IV 3,147,714 15,291
George O'Leary 3,147,714 15,291
Henry F. Schlueter 3,147,714 15,291
The Shareholders ratified the selection of PricewaterhouseCoopers as the
independent public accountants of the Company for the fiscal year ending March
31, 2003, as follows:
For Against Abstain
--- ------- -------
3,147,367 14,370 3,268
15
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: January 13, 2003 By: /s/ Henry F. Schlueter
---------------- ---------------------------------------
Henry F. Schlueter, Assistant Secretary
16