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 December 9, 2005
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]
BONSO ELECTRONICS INTERNATIONAL INC.
Information for the Quarter Ended June 30, 2005
TABLE OF CONTENTS
REPORT FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005 ON FORM 6-K
Page
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First Quarter Shareholders Letter..............................................1
Consolidated Financial Statements..............................................3
Unaudited Consolidated Balance Sheet as of June 30, 2005 and unaudited
Consolidated Balance Sheet as of March 31, 2005.............................4
Unaudited Consolidated Statements of Income and Comprehensive
Income for the Three-Month Periods Ended June 30, 2005 and 2004.............5
Management's Discussion and Analysis...........................................6
Liquidity and Capital Resources................................................7
Stock Repurchase Program.......................................................7
Legal Proceedings..............................................................9
EXHIBITS:
99.1 - Press Release - Dated September 27, 2005 Presentation at the New York
Society of Securities Analyst Conference in New York.......................12
[Bonso Electronics International Inc. Letterhead]
Dear Shareholders: 26 September 2005
During the quarter ended June 30, 2005. Sensor based scale product sales were up
but communications product sales were down. We anticipate that sales of
communications products will be continue to be soft in the near term future.
Earnings per share stayed at $0.12 despite net income dropping by $46,000.
The Company reported sales of $18,150,000 and net earnings of $647,000 for the
three months period ended 30 June 2005. This represents an increase of 0.6% in
sales and a decrease of 6.6% in net income as compared to sales of $18,041,000
and net income of $693,000 posted during the same period last year.
Despite continued increases in material and labor costs we were able to keep the
gross profit margin to within 0.3% of last year's level. We attribute this to
our ongoing formal program of product redesign and process improvement, as well
as, our cost-cutting sourcing strategy. The primary cause of the increase in
expenses was the expansion of the branded sales operation in North America; we
consider this another investment in the future.
We are aware of the uncertainties in the market, such as the shortage of skilled
labor in the PRC, the recent announcement of the 2% appreciation of the Chinese
currency (RMB) on July 21, 2005, power supply shortages and high oil and
material prices. The Company reviews these, and many other issues on a regular
basis, and is taking appropriate steps to safeguard itself and to mitigate the
potential impact on our performance. Our factories have their own electricity
generating capability to ensure our operations will not be affected by any
disruptions to the electricity supply. High costs of oil and raw materials will
undoubtedly exert pressure on the Company's gross profit margin. Nevertheless,
we expect it to be relieved by our proven cost-cutting sourcing strategy and
long term relationship with our suppliers.
Competition remains keen but we have successfully secured new orders from
existing customers to offset the potential impact from increased competition.
Going forward, the Company intends to continue to expand its operation in the
PRC and restructure its Hong Kong operation to keep a minimal workforce, which
we will maintain for so long as required.
With a cash position of $9.7 million, the Company continues to maintain a strong
financial position even after the payment of a dividend of $0.10 per share in
August, 2005. Furthermore, we have no material long-term short-term debt. With
our strong cash position, we expect to be able to finance our investment and
expansion of our business internally in the foreseeable future. As a result, we
do not believe that we are subject to any material risk in relation to any rise
in interest rates.
Our strategy for sustained, profitable growth is to enhance the core business,
extend the business and expand the market. We believe that the size of the
global market opportunity for weighing instruments is approximately $3.5
billion. This includes major industry segments such as laboratory, personal
health, industrial, mailing and food processing. We are currently addressing the
main segments of the available market for weighing instruments. Therefore we are
in the fortunate position to pick and chose the most lucrative areas for
corporate capability and new product enhancement and development. Since North
America and Europe represent approximately 75% of the world wide market
potential; we believe that we are well positioned to capitalize on our current
OEM customer base, as well as, our branded product distribution operations in
both Europe and North America. Currently we are doing in excess of 90% of our
business in these two areas.
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The company will hold its 2005 Annual General Meeting (Shareholders Meeting) at
10:00 AM on December 1, 2005 at the Hilton Hotel, located at 5711 West Century
Boulevard, Los Angeles, CA 90045. All shareholders of record are cordially
invited to attend.
As our first quarter results have demonstrated, we are committed to keeping one
eye on the future and one eye on the bottom line; as we continue to pursue
planned profitable growth.
We thank you for your patience and support as we strive for consistency in our
earnings and revenue growth in the future.
Best regards,
Bonso Electronics International, Inc
George O'Leary
President and Chief Executive Officer
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
Attachments: 1) Balance Sheet 2) Income Statement
This letter includes forward looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
and Exchange Act of 1934, as amended. Forward looking statements may be
identified by such words or phrases "should," "intends," "is subject to,"
"expects," "will," "continue," "anticipate," "estimated," "projected," "may,"
"we believe," "future prospects," or similar expressions. The forward-looking
statements above involve a number of risks and uncertainties. Factors that might
cause actual results to differ include, but are not limited to, success of any
reorganization; ability to raise additional funds; conditions in the general
economy and in the markets served by the Company; competitive factors, such as
price pressures and the potential emergence of rival technologies; interruptions
of suppliers' operations affecting availability of component materials at
reasonable prices; timely development and market acceptance, and warranty
performance of new products; success in integrating prior acquisitions; changes
in product mix, costs and yields, fluctuations in foreign currency exchange
rates; uncertainties related to doing business in Hong Kong and China; and the
risk factors listed from time to time in the Company's SEC reports. The Company
from time-to-time considers acquiring or disposing of business or product lines.
Forward-looking statements do not include the impact of acquisitions or
dispositions of assets, which could affect results in the near term. Actual
results may differ materially. The Company assumes no obligation to update the
information in this issue.
2
BONSO ELECTRONICS INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
(In U.S. Dollars)
Unaudited
June 30 March 31
2005 2005
Assets
------
Current assets
Cash and cash equivalents 9,731,619 9,707,588
Restricted cash deposits 4,785 4,848
Trade receivables, net 12,732,914 10,585,968
Inventories, net 14,214,064 11,402,239
Tax recoverable 578,941 486,618
Deferred income tax assets - current 52,057 52,057
Other receivables, deposits and
Prepayments 1,230,610 1,450,322
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Total current assets 38,544,990 33,689,640
========== ==========
Deposits 72,789 72,789
Long term investment 500,000 500,000
Deferred income tax assets - non current 46,797 46,849
Goodwill 1,100,962 1,100,962
Brand name, net 2,147,392 2,197,392
Other intangible, net 539,751 543,138
Net property plant & equipment 13,539,269 14,311,986
Total assets 56,491,950 52,462,756
Liabilities and shareholders' equity
------------------------------------
Current liabilities
Bank overdraft 236,619 281,085
Notes payable 3,898,921 3,744,726
Accounts payable 10,712,557 6,938,578
Accrued charges and deposits 1,972,042 1,978,222
Short-term loans 4,643,619 4,742,685
Current portion of long-term debt
and capital lease obligations 425,748 425,748
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Total current liabilities 21,889,506 18,111,044
========== ==========
Long-term debt and capital lease
obligations net of current maturities 139,323 375,874
Deferred income tax 43,967 43,856
Shareholders' equity
--------------------
Common stock par value $0.003 per share
- authorized shares - 23,333,334
- issued and outstanding shares: 2005-5,577,639;
30 June 2005-5,577,639 16,729 16,729
Additional paid-in capital 21,764,788 21,764,788
Retained earnings 11,954,391 11,307,642
Accumulated other comprehensive income 683,246 842,823
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34,419,154 33,931,982
========== ==========
Total liabilities and shareholders' equity 56,491,950 52,462,756
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BONSO ELECTRONICS INTERNATIONAL INC.
CONSOLIDATED INCOME STATEMENT
(In Thousands of U.S. Dollars)
Unaudited
Three months ended June 30
2005 2004
Net sales 18,150 18,041
Cost of sales (14,540) (14,421)
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Gross margin 3,610 3,620
Selling expenses 615 699
Salaries and related costs 1,368 1,252
Research and development expenses 108 90
Administration and general expenses 740 673
Amortization of brand name and goodwill 50 53
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Income from operations 728 854
Interest Income 55 43
Interest Expenses (137) (207)
Foreign exchange gains/ (losses) (37) (51)
Other income 83 40
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Income before income taxes & Minority Interest 692 679
Income tax benefit/(expense) (45) (10)
Net Income before Minority Interest 647 669
Minority Interest -- 24
Net income 647 693
Earnings per share
Diluted 0.12 0.12
Adjusted weighted average shares 5,577,639 5,825,287
Management Discussion and Analysis of Financial Conditions and Results of
Operations
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Period ended June 30, 2004 compared to period ended June 30, 2005
Net Sales. Our sales increased 0.6% or $109,000 from approximately
$18,041,000 for the period ended June 30, 2004, to approximately $18,150,000 for
the period ended June 30, 2005. Sales from our scales segment increased from
approximately $10,842,000 for the period ended June 30, 2004, to approximately
$11,085,000 for the period ended June 30, 2005 and telecommunication segment
dropped from approximately $7,199,000 for the period ended June 30, 2004, to
approximately $7,065,000 for the period ended June 30, 2005.
Gross Margin. Gross margin expressed as a percentage of sales remained
relatively unchanged at 20% for the three months period ended June 30, 2005 and
June 30, 2004.
Selling Expenses. Selling expenses decreased by 12% or $84,000 from
approximately $699,000 for the period ended June 30, 2004 to approximately
$615,000 for the period ended June 30, 2005. This decrease is attributable
primarily to a tighten control in cost, such as to consolidate shipments in
containers to save freight costs.
Salaries And Related Costs. Salaries and related costs increased 9.3% from
approximately $1, 252,000 for the period ended June 30, 2004 to approximately
$1,368,000 for the period ended June 30, 2005. This increase was primarily the
result of an increase in the number of employees.
Research And Development. Research and development expenses increased 20%
from approximately $90,000 for the period ended June 30, 2004 to approximately
$108,000 for the period ended June 30, 2005. The increase is attributable to
increased research and development activities for both scales and
telecommunications products.
Administration And General Expenses. Administration and general expenses
increased by 10% from approximately $673,000 for the period ended June 30, 2004
to approximately $740,000 for the period ended June 30, 2005. This increase was
primarily due to increase in rental expenses in the amount of $25,000 for our
Canadian subsidiary's new office and the increase in professional fees of
approximately $25,000 relating to the disposal of the old office.
Amortization Of Brand Names and Goodwill. The brand name 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 14.6% from approximately $854,000 for the period ended June
30, 2004 to $728,000 for the period ended June 30, 2004.
Interest Income. Interest income was approximately $55,000 for the period
ended June 30, 2005, compared to approximately $43,000 for the period ended June
30, 2004. This increase was primarily the result of an increase in interest
rates and depositing our cash into a higher yield account.
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Interest Expenses. Interest expenses decreased 33.8% or approximately
$70,000 from approximately $207,000 for the period ended June 30, 2004 to
approximately $137,000 for the period ended June 30, 2005. The decrease is
primarily the result of the decreased utilization of our banking facilities and
lower interest rates on amounts borrowed from our banks.
Foreign Exchange Losses/Gains. We experienced a foreign currency exchange
loss of approximately $37,000 for the three month period ended June 30, 2005 as
compared to a loss of approximately $51,000 for the period ended June 30, 2004.
This loss was primarily resulted from the devaluation of United States dollars
to Canadian dollars.
Other Income. Other income increased 107.5% or approximately $43,000 from
approximately $40,000 for the period ended June 30, 2004 to approximately
$83,000 for the period ended June 30, 2005. This increase was the result of a
gain on the disposition of our Canadian subsidiary's old office.
Income tax benefit/expense. We recorded a tax expense in the amount of
approximately $45,000 for the period ended June 30, 2005 as compared to the tax
expense of approximately $10,000 for the period ended June 30, 2004.
Net Income. As a result of the above changes, net income decreased from
approximately $693,000 for the period ended June 30, 2004 to $647,000 for the
period ended June 30, 2005, an decrease of approximately $46,000, or 6.6%.
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 June 30, 2005 we had $9,731,619 in cash and cash
equivalents as compared to $9,707,588 as of March 31, 2005. Working capital at
June 30, 2005 was $16,655,484 compared to $15,578,596 at March 31, 2005. We
believe that current cash balances and working capital plus cash flow from
operations will be sufficient to fund its capital and liquidity needs in the
foreseeable future.
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 purchased
under this program in the first quarter of fiscal 2006. The Company may from
time to time repurchase shares of its Common Stock under this program.
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Legal Proceedings
Jefferson County Colorado Litigation
On August 20, 2004, Bonso and three of Bonso's directors were served with a
copy of a Complaint filed on July 23, 2004 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.
On September 26, 2004, the Company 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, 2004, 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
(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, 2004, the Company 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, 2005, the Court entered an Order denying Defendants' motion to dismiss but
requiring the non-resident Plaintiff to file a cost bond.
Thereafter, Plaintiffs 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.
On April 8, 2005, the District Court of Jefferson County, State of Colorado
dismissed with prejudice this lawsuit with each party paying their own costs and
fees. The Parties' Stipulation For Dismissal With Prejudice was based upon the
Report of Independent Counsel Richard R. Greengard. In his 57 page Independent
Counsel's Report, Mr. Greengard found no credible evidence to support the
plaintiffs' derivative claims after conducting an exhaustive review of the
documents provided by both the plaintiffs and the defendants and conducting
interviews of the individuals identified as having knowledge of the particular
claims.
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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: December 9, 2005 By George D. O'Leary
--------------------
President and Chief Executive Officer
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