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 23, 2006
BONSO ELECTRONICS INTERNATIONAL INC.
------------------------------------
(Translation of Registrant's name into English)
Unit 1106-1110, 11/F., 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]
TABLE OF CONTENTS
REPORT FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005 ON FORM 6-K
Page
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Second Quarter Shareholders Letter 3
Consolidated Financial Statements
Audited Consolidated Balance Sheets as of March 31, 2005 and 5
Unaudited Consolidated Balance Sheets as of September 30, 2005
Unaudited Consolidated Statements of Income and 7
Comprehensive Income for the Six-Month Periods
Ended September 30, 2004 and 2005 and the Three-Month
Periods Ended September 30, 2004 and 2005
Management Discussion and Analysis of Financial Conditions 8
and Results of Operations
Liquidity and Capital Resources 10
Stock Repurchase Program 11
Section 404 Compliance 11
Submission of Matters to a Vote of Security Holders 11
Signature 13
Exhibits
99.1 Press Release Disclosing Second Quarter Results dated November 18, 2005
99.2 Press Release announcing Shareholder Meeting dated October 3, 2005
2
BONSO ELECTRONICS INTERNATIONAL INC.
Dear Shareholders: January 23, 2006
As predicted last quarter, sales of our communications products continued to be
soft. Sales of our sensor based products were off somewhat also, resulting in a
reduction in net income as compared to the same period last year.
The company reported that net sales for the three month period ended 30
September 2005 was approximately $15,962,000 or 17.5% below the same period last
year. Net income was approximately $244,000 or $0.04 per share (diluted). Net
income was 69% below the same period last year. The gross profit margin was
improved by over 1% as a result of product mix and a formal program of product
redesign and process improvement. This was not enough to offset the increases in
labor cost and research and development expenditures.
Net sales for the six month period ended 30 September 2005 was approximately
$34,112,000, which was 8.8% below the same period last year. Net income for the
six month period ended 30 September was approximately $891,000 or $0.16 per
share (diluted), a decrease of 39.8% when compared to the net income in the same
period last year.
The sensor based and communications markets we serve are large and we are
actively seeking to secure additional business from existing and new customers.
Based on our current customer list and our competitive position in the markets
we serve, we are in a favorable position to obtain new business from existing
and new customers worldwide. 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. Going forward, the Company intends to continue to expand its operation
in the Peoples Republic of China and restructure its Hong Kong operation to keep
a minimal workforce, which we will maintain for so long as required.
We are continuing to invest in our sales subsidiaries in Europe and North
America with a goal of stand alone profitability in the near term future.
Throughout the six months of fiscal 2006, we have been enjoying the benefits of
generating positive cash flow from operations. Our cash position at the end of
the second quarter is over $10 million ($1.76 per share). We have many
opportunities to exploit, and we have the financial resources to implement the
initiatives we choose. 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 will continue to
enhance the capabilities of our global information system and add 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 we are implementing and we look forward
with optimism and confidence to opportunities ahead of us.
3
The company filed it's form 6K for the three and six months ended 30 September
2005 on January 23, 2006. Please refer to the Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's Form 6K filed for a complete discussion of sales, margins and
expenses.
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.
4
BONSO ELECTRONICS INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
(In U.S. Dollars)
30-Sep 31-Mar
2005 2005
---- ----
(Unaudited) (Audited)
Assets
Current assets
Cash and cash equivalents 10,130,362 9,707,588
Restricted cash deposits 5,050 4,848
Trade receivables, net 13,042,651 10,585,968
Inventories, net 14,216,769 11,402,239
Tax recoverable 511,760 486,618
Deferred income tax assets - current 52,057 52,057
Other receivables, deposits and prepayments 1,986,855 1,450,322
Total current assets 39,945,504 33,689,640
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Deposits 72,788 72,789
Long term investment 500,000 500,000
Deferred income tax assets - non current 32,213 46,849
Goodwill 1,100,962 1,100,962
Brand name and other intangible assets, net 2,640,528 2,740,530
Property, plant and equipment 13,515,850 14,311,986
Total assets 57,807,845 52,462,756
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Liabilities and shareholders' equity
Current liabilities
Bank Overdraft 430,626 281,085
Notes payable 7,354,257 3,744,726
Accounts payable 7,543,092 6,938,578
Accrued charges and deposits 2,026,326 1,978,222
Short-term loans 5,587,672 4,742,685
Current portion of long-term debt and capital lease obligations 264,892 633,887
Total current liabilities 23,206,865 18,319,183
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Long-term debt and capital lease obligations, net of current
maturities 375,865 167,735
Deferred income tax 43,994 43,856
Shareholders' equity
Preferred stock par value $0.01 per share
-authorized shares - 10,000,000
-issued and outstanding shares : March & September-0 -- --
Common stock par value $0.003 per share
- authorized shares - 23,333,334
- issued and outstanding shares : March 2005 - 5,577,639 16,729 16,729
September 2005 - 5,577,639
Additional paid-in capital 21,764,788 21,764,788
Retained earnings 11,640,318 11,307,642
Accumulated other comprehensive income 759,286 842,823
---------- ----------
34,181,121 33,931,982
---------- ----------
Total liabilities and shareholders' equity 57,807,845 52,462,756
========== ==========
6
BONSO ELECTRONICS INTERNATIONAL INC.
CONSOLIDATED INCOME STATEMENT
(In Thousands of U.S. Dollars)
Unaudited
Three months ended Six months ended
Sept 30 Sept 30
------------------------ -----------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Net sales 15,962 19,356 34,112 37,397
Cost of sales -12,840 -15,799 -27,380 -30,220
---------- ---------- ---------- ----------
Gross margin 3,122 3,557 6,732 7,177
Selling expenses 492 592 1,107 1,291
Salaries and related costs 1,375 1,261 2,743 2,513
Research and development expenses 164 114 272 204
Administration and general expenses 875 919 1,616 1,591
Amortization of Brand Name 50 53 100 106
---------- ---------- ---------- ----------
Income from operations 166 618 894 1,472
Interest Income 31 50 86 93
Other income 172 267 255 307
Interest Expenses (83) (193) -220 -400
Foreign exchange (Loss) \ gains (82) (8) -119 -59
---------- ---------- ---------- ----------
Income before income taxes and minority interest 204 734 896 1,413
Income tax expense 40 -13 -5 -23
---------- ---------- ---------- ----------
Net income before minority interest 244 721 891 1,390
Minority interests -- 66 -- 90
---------- ---------- ---------- ----------
Net income 244 787 891 1,480
========== ========== ========== ==========
Earnings per share
Diluted 0.04 0.13 0.16 0.25
Adjusted weighted average shares 5,759,135 5,945,411 5,759,135 5,945,411
7
Six Month Period ended September 30, 2005 compared to the Six Month period ended
September 30, 2004
Net Sales. During the six-month period ended September 30, 2005, our sales
decreased 9.4% from approximately $37,397,000 for the six-month period ended
September 30, 2004, to approximately $34,112,000. The decreased sales were
primarily the result of the decrease in demand for our telecommunication
products and scales. Sales from our scales business decreased by approximately
$1,417,000 or 6% from $23,600,000 for the period ended September 30, 2004 to
$22,183,000 for the six-month period ended September 30, 2005. Sales from our
telecommunications products decreased by approximately $1,868,000 or 13.5% from
approximately $13,797,000 for the period ended September 30, 2004 to $11,929,000
for the period ended September 30, 2005.
Gross Margin. Gross margin as a percentage of sales increased to 19.7%
during the six-month period ended September 30, 2005 as compared to 19.2% during
the six-month period ended September 30, 2004. Despite the increased pressure
upon the sales price of both our telecommunication products and scales, we
implemented cost reduction procedures to reduce our costs of goods sold, which
resulting in an increase in gross margin as a percentage of sales.
Selling Expenses. Selling expenses decreased by approximately 14.3% from
approximately $1,291,000 during the six-month period ended September 30, 2004 to
approximately $1,107,000 during the six-month period ended September 30, 2005.
The decrease was primarily the result of decreased sales and reduced shipping
costs as a result of the consolidation of shipments in containers. Selling
expenses decreased as a percentage of revenue to 3.2% during the six-month
period ended September 30, 2005 as compared to 3.4% during the six-month period
ended September 30, 2004.
Salaries And Related Costs. Salaries and related costs increased by 9.1%
from approximately $2,513,000 during the six-month period ended September 30,
2004 to approximately $2,743,000 during the six-month period ended September 30,
2005. The increase in total salaries and related cost was primarily the result
of an increase in the number of employees and the increase in wages.
Research And Development. Research and development expenses increased 33.4%
from approximately $204,000 during the six-month period ended September 30, 2004
to approximately $272,000 during the six-month period ended September 30, 2005.
The increase in research and development expenses was primarily the result of
increased research and development activities for our telecommunications
products and new scale models. Research and development as a percentage of
revenue increased to 0.8% during the period ended September 30, 2005 as compared
to 0.5% during the prior year.
Administration And General Expenses. Administration and general expenses
increased by 1.6% from approximately $1,591,000 during the six-month period
ended September 30, 2004 to approximately $1,616,000 during the six-month period
ended September 30, 2005. This increase was primarily the result of increased
expenses in insurance premium, rent and repairs and maintenance.
Income From Operations. As a result of the above changes, income from
operations decreased by 39% from approximately $1,472,000 during the six-month
period ended September 30, 2004 to $894,000 during the six-month period ended
September 30, 2005.
Interest Income. Interest income was approximately $86,000 during the
six-month period ended September 30, 2005, as compared to $93,000 during the
six-month period ended September 30, 2004. The decrease in interest income was
primarily the result of a reduction in the amount of cash deposited into higher
yield accounts.
8
Other Income. Other income decreased 16.8% from approximately $307,000
during the six-month period ended September 30, 2004 to approximately $255,000
during the six-month period ended September 30, 2005. The decrease was primarily
the reduced rental income from July earned during the period.
Interest Expenses. Interest expenses decreased 45% from approximately
$400,000 during the six-month period ended September 30, 2004 to approximately
$220,000 during the six-month period ended September 30, 2005. The decrease was
primarily the result of reduced use of the Company's banking facilities.
Foreign Exchange Gains/(Loss) Foreign exchange loss increased from
approximately $59,000 during the six-month period ended September 30, 2004 to a
loss of approximately $119,000 during the six-month period ended September 30,
2005. The increased loss was primarily the result of the devaluation of the EURO
to the United States dollar.
Net Income. As a result of the above changes, net income decreased from
approximately $1,480,000 during the six-month period ended September 30, 2004 to
$891,000 during the six-month period ended September 30, 2005, a decrease of
approximately $589,000, or 40%.
Three Month Period ended September 30, 2005 compared to the Three Month period
ended September 30, 2004
Net Sales. During the three month period ended September 30, 2005, net
sales were approximately $15,962,000 as compared to $19,356,000 during the three
month period ended September 30, 2004, representing a decrease of approximately
$3,394,000 or 17.5%. The decrease was due to the decrease demand for our
telecommunication products and scales.
Gross Margin. Gross margin as a percentage of revenue increased to
approximately 19.6% during the three-month period ended September 30, 2005 as
compared to approximately 18.4% during the three-month period ended September
30, 2004. This increase was principally caused by the cost reduction procedures
to reduce our costs of goods sold, which resulted in an increase in gross margin
as a percentage of sales.
Selling Expenses. Selling expenses decreased from approximately $592,000
during the period ended September 30, 2004 to approximately $492,000 during the
period ended September 30, 2005, a decrease of approximately $100,000, or 16.9%.
This decrease is primarily the result of decreased sales as compared to sales
during the same period in the prior year. Also, selling expenses as a percentage
of revenue remained relatively unchanged at 3.1% during the three-month period
ended September 30, 2005 as compared to the three-month period ended September
30, 2004.
Salaries And Related Costs. Salaries and related costs increased by
approximately $114,000 or 9% from approximately $1,261,000 during the three
months ended September 30, 2004 to approximately $1,375,000 during the three
months ended September 30, 2005. The increase was primarily the result of an
increase in number of employees and an increase in employee's salaries.
Research And Development. Research and development expenses increased
approximately 44% from approximately $114,000 during the three months ended
September 30, 2004 to approximately $164,000 during the three months ended
September 30, 2005. The increase was primarily the result of increased research
and development activities for telecommunications products and new scale models.
9
Administration And General Expenses. Administration and general expenses
decreased by 4.8% from approximately $919,000 during the three months ended
September 30, 2004 to approximately $875,000 during the three months ended
September 30, 2005. This decrease was primarily the result of reduced travel.
Income From Operations. As a result of the above changes, income from
operations decreased by 73.1% from approximately $618,000 during the three
months ended September 30, 2004 to $166,000 during the three months ended
September 30, 2005.
Interest Income. Interest income decreased approximately $19,000 to
approximately $31,000 during the three months ended September 30, 2005, compared
to $50,000 during the three months ended September 30, 2004. The decrease in
interest income was primarily the result of a reduction in the amount of cash
deposited into higher yield accounts.
Other Income. Other income decreased approximately $95,000 or 35.5% from
approximately $267,000 during the three months ended September 2004 to
approximately $172,000 during the three months ended September 30, 2005. The
decrease resulted from less rental income earned during the period.
Interest Expenses. Interest expenses decreased approximately $110,000 or
57.1% from approximately $193,000 during the three months ended September 30,
2004 to approximately $83,000 during the three months ended September 30, 2005.
The decrease was primarily the result of reduced use of the company's banking
facilities.
Foreign Exchange Losses/Gains. Foreign exchange loss increased from
approximately $8,000 during the three months ended September 30, 2004 to a loss
of approximately $82,000 during the three months ended September 30, 2005. The
loss was primarily the result of the devaluation of the EURO to United States
dollar.
Net Income. As a result of the above changes, net income decreased from
approximately $787,000 during the three month ended September 30, 2004 to
$244,000 during the three months ended September 30, 2005, a decrease of
approximately $543,000, or 69%.
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 and to fund increases in inventory.
As of September 30, 2005 we had $10,130,362 in cash and cash equivalents as
compared to $9,707,588 as of March 31, 2005. Working capital at September 30,
2005 was $16,738,639 compared to $15,370,457 at March 31, 2005. 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 in the foreseeable
future.
10
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 second quarter of fiscal 2006. The Company may from
time to time repurchase shares of its Common Stock under this program.
Section 404 Compliance
On September 21, 2005, The Securities and Exchange Commission ("the SEC") voted
to postpone for an additional year the compliance date for filing internal
control reports by companies not designated as accelerated filers. Under this
revised compliance schedule, the Company will require to include an internal
control report of management with the annual report on Form 20-F beginning with
the fiscal year ending March 31, 2008.
Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Company's shareholders was held on December 1,
2005. The matters considered at the meeting were:
1. The election of Anthony So; Kim Wah Chung; Cathy Kit Teng Pang; Woo
Ping Fok; John Stewart Jackson IV; George O'Leary; and Henry F.
Schlueter as members of the Company's Board of Directors;
2. The ratification of the selection of PricewaterhouseCoopers as the
independent public accountants of the Company for the fiscal year
ending March 31, 2006; and
Each of the nominees was elected to the Board of Directors, and
PricewaterhouseCoopers were ratified as the Company's independent public
accountants. The votes cast at the annual meeting upon the matters considered
were as follows:
Nominee For Withheld
------- --- --------
Anthony So 4,942,284 400,352
Kim Wah Chung 4,940,284 402,352
Cathy Kit Teng Pang 4,940,384 402,252
Woo-Ping Fok 5,328,875 13,761
J. Stewart Jackson IV 5,328,875 13,761
George O'Leary 4,942,284 400,352
Henry F. Schlueter 4,940,150 402,486
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For Against Abstain
--- ------- -------
Ratification of PricewaterhouseCoopers 5,326,869 11,241 4,526
12
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: January 23, 2006 By: /s/ George O'Leary
-----------------------------------
George O'Leary, President and Chief
Executive Officer
13