SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For November 8, 2002
BONSO ELECTRONICS
INTERNATIONAL INC.
---------------------------------------------
(Translation of Registrant's name into English)
Unit 1106-1110, 11F., Star House 3 Salisbury Road,
Tsimshatsui Kowloon, Hong Kong
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(Address of principal executive offices)
[Indicate by check mark whether the Registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.]
Form 20-F X Form 40-F
----- -----
[Indicate by check mark whether the Registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.]
Yes No X
----- -----
BONSO ELECTRONICS INTERNATIONAL INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
TO BE HELD OCTOBER 9, 2002
Notice is hereby given that an annual meeting of the shareholders (the
"Shareholders") of Bonso Electronics International Inc., a British Virgin
Islands corporation (the "Corporation" or "Bonso"), will be held at 10:00 a.m.,
local time, on October 9, 2002, at Bonso's Corporate office which is located at
Star House 11/F, Unit 1106 - 1110, 3 Salisbury Road, Tsimshatsui, Kowloon, Hong
Kong and any adjournments or postponements thereof (the "Meeting" or "Annual
Meeting") for the following purposes:
1. To elect the following seven (7) persons to serve as directors of the
Corporation until the next Annual Meeting of Shareholders and
thereafter until their successors shall have been elected and
qualified: Anthony So; Kim Wah Chung; Cathy Kit Teng Pang; Woo Ping
Fok; J. Stewart Jackson IV; George O'Leary; and Henry F. Schlueter;
2. To ratify the selection of PricewaterhouseCoopers as the independent
public accountants of the Corporation for the fiscal year ending March
31, 2003; and
3. To consider and act upon such other business as may properly come
before the Meeting or any adjournments thereof.
Only Shareholders of record at the close of business on September 6, 2002,
shall be entitled to notice of and to vote at the meeting or any adjournments
thereof. All Shareholders are cordially invited to attend the Meeting in person.
By Order of the Board of Directors
September 13, 2002 Anthony So, Chairman and
Hong Kong Chief Executive Officer
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WISH YOUR SHARES OF COMMON
STOCK TO BE VOTED, YOU ARE REQUESTED TO SIGN AND MAIL PROMPTLY THE ENCLOSED
PROXY WHICH IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. A RETURN
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES IS ENCLOSED
FOR THAT PURPOSE.
BONSO ELECTRONICS INTERNATIONAL INC.
Star House 11/F
Unit 1106 - 1110
3 Salisbury Road
Tsimshatsui
Kowloon, Hong Kong
PROXY STATEMENT
DATED SEPTEMBER 13, 2002
ANNUAL MEETING OF SHAREHOLDERS
FOR THE FISCAL YEAR ENDED MARCH 31, 2002
TO BE HELD ON OCTOBER 9, 2002
GENERAL
-------
This Proxy Statement is being furnished to the Shareholders of Bonso
Electronics International Inc. ("Bonso" and "Corporation") in connection with
the solicitation of proxies by the Board of Directors of the Corporation (the
"Board of Directors") from the Shareholders of the Corporation for use at the
Annual Meeting of the Shareholders to be held at 10:00 a.m., local time, on
October 9, 2002, at Bonso's Corporate offices which are located at Star House
11/F, Unit 1106 - 1110, 3 Salisbury Road, Tsimshatsui, Kowloon, Hong Kong, and
any adjournments or postponements thereof. This Proxy Statement, Notice of
Annual Meeting of Shareholders, and the accompanying Proxy Card are first being
mailed to shareholders on or about September 13, 2002.
VOTING SECURITIES AND VOTE REQUIRED
-----------------------------------
Only Shareholders of record at the close of business on September 6, 2002
(the "Record Date"), are entitled to notice of and to vote the shares of Common
Stock of the Corporation held by them on such date at the Meeting or any and all
adjournments thereof. As of the Record Date, 5,709,859 shares of Common Stock
were outstanding. There was no other class of voting securities outstanding at
that date.
Each share of Common Stock held by a Shareholder entitles such Shareholder
to one vote on each matter that is voted upon at the Meeting or any adjournments
thereof.
The presence, in person or by proxy, of the holders of one-third of the
outstanding shares of Common Stock is necessary to constitute a quorum at the
Meeting. Assuming that a quorum is present, the affirmative vote of the holders
of a majority of the shares of Common Stock represented at the Meeting in person
or by proxy and entitled to vote will be required to approve Proposals 1 and 2
and to adopt the resolutions of the Shareholders corresponding to such
proposals.
Abstentions and broker "non-votes" will be counted toward determining the
presence of a quorum for the transaction of business; however, abstentions will
have the effect of a negative vote on the proposals being submitted. Abstentions
may be specified on the proposal to ratify the selection of
PricewaterhouseCoopers as the independent accountants of the Corporation. A
broker "non-vote" will have no effect on the outcome of any of the proposals.
If the accompanying Proxy Card is properly signed and returned to the
Corporation and not revoked, it will be voted in accordance with the
instructions contained therein. Unless contrary instructions are given, the
persons designated as proxy holders in the accompanying Proxy Card will vote
"FOR" each proposal to be considered by the Shareholders at the Meeting or, if
no such recommendation is given, in their own discretion. The Corporation's
executive officers and directors have advised the Corporation that they intend
to vote their shares (including those shares over which they hold voting power),
representing approximately 2,332,493 shares or 40.85% of the outstanding shares
of Common Stock, in favor of each of the proposals above. Each Proxy granted by
a Shareholder may be revoked by such Shareholder at any time thereafter by
writing to the Secretary of the Corporation prior to the Meeting, or by
execution and delivery of a subsequent Proxy or by attendance and voting in
person at the Meeting, except as to any matter or matters upon which, prior to
such revocation, a vote shall be cast pursuant to the authority conferred by
such Proxy.
The cost of soliciting these Proxies, consisting of the printing, handling,
and mailing of the Proxy and related material, and the actual expense incurred
by brokerage houses, custodians, nominees and fiduciaries in forwarding proxy
materials to the beneficial owners of the shares of Common Stock, will be paid
by the Corporation.
In order to assure that there is a quorum, it may be necessary for certain
officers, directors, regular employees and other representatives of the
Corporation to solicit Proxies by telephone or telegraph or in person. These
persons will receive no extra compensation for their services.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
----------------------------------------
OWNERS AND MANAGEMENT
---------------------
The following table shows the number of shares of Common Stock beneficially
owned by each shareholder of the Corporation who beneficially owns 5% or more of
the Corporation's Common Stock and the Corporation's directors and executive
officers, both individually and as a group, as of August 31, 2002:
Remainder of this page left blank intentionally
Shares of Total Number of
--------- ---------------
Common Stock Shares of Percent of Beneficial
------------ --------- ---------------------
Owned of Options and Common Stock Ownership
-------- ----------- ------------ ---------
Name Record Warrants Held Beneficially
---- ------ ------------- ------------
Owned
-----
Anthony So 1,626,195(1) 414,000(2),(3),(4) 2,040,195 33.31%
---------- ------------ ------------------ --------- ------
Kim Wah Chung 93,700 60,000(5),(6),(7) 153,700 2.66%
------------- ------ ----------------- ------- -----
Cathy Kit Teng Pang 35,438 60,000(5),(6),(7) 95,438 1.65%
------------------- ------ ----------------- ------ -----
Woo Ping Fok 61,907 30,000(8)(9)(10) 91,907 1.60%
------------ ------ ---------------- ------ -----
J. Stewart Jackson IV 463,075 120,000 (9), (10) 583,075 10.00%
--------------------- ------- ----------------- ------- ------
George O'Leary 17,775 30,000(8)(9)(10) 47,775 0.83%
-------------- ------ ---------------- ------ -----
Henry F. Schlueter 34,403 10,000 (5) 44,403 0.79%
------------------ ------ ---------- ------ -----
W. Douglas Moreland 501,400 0 501,400 8.78%
------------------- ------- - ------- -----
All Directors and Officers as a
group (7 persons) 2,332,493 724,000 3,056,493 47.51%
----------------- --------- ------- --------- ------
-----------------
(1) Includes 1,143,421 shares of Common Stock owned of record by a corporation
that is wholly-owned by a trust of which Mr. So is the sole beneficiary.
(2) Includes options to purchase 158,000 shares of Common Stock at an exercise
price of $8.00 per share which expire on January 6, 2010.
(3) Includes options to purchase 128,000 shares of Common Stock at an exercise
price of $3.65 per share which expire on April 9, 2011.
(4) Includes options to purchase 128,000 shares of Common Stock at an exercise
price of $2.50 per share which expire on March 6, 2012.
(5) Includes options to purchase 20,000 shares of Common Stock at an exercise
price of $8.00 per share which expire on January 6, 2010.
(6) Includes options to purchase 20,000 shares of Common Stock at an exercise
price of $3.65 per share which expire on April 9, 2011.
(7) Includes options to purchase 20,000 shares of Common Stock at an exercise
price of $2.50 per share which expire on March 6, 2012.
(8) Includes options to purchase 10,000 shares of Common Stock at an exercise
price of $8.125 per share which expire on January 12, 2010.
(9) Includes options to purchase 10,000 shares of Common Stock at an exercise
price of $7.875 per share which expire on January 9, 2011.
(10) Includes options to purchase 10,000 shares of Common Stock at an exercise
price of $2.55 per share which expire on October 15, 2011.
There are no arrangements known to the Corporation the operation of
which may at a subsequent date result in a change in control of the Corporation.
BOARD COMMITTEES
On October 1, 1994, the Board of Directors appointed, and has since
maintained, an Audit Committee of the Corporation. The Committee was established
to (i) review and approve the scope of audit procedures employed by the
Corporation's independent auditors; (ii) review and approve the audit reports
rendered by the Corporation's independent auditors; (iii) approve the audit fee
charged by the independent auditors; (iv) report to the Board of Directors with
respect to such matters; (v) recommend the selection of independent auditors;
and (vi) discharge such other responsibilities as may be delegated to it from
time to time by the Board and to discharge such other responsibilities as may be
delegated to it from time to time by the Board of Directors. Effective as of
August 17, 2000, the Board of Directors adopted a formal charter for its Audit
Committee. Messrs. Woo Ping Fok, John Stewart Jackson IV and Henry F. Schlueter
are members of our Audit Committee. Mr. Woo Ping Fok acts as chairman of the
Audit Committee. Messrs. Woo Ping Fok and John Stewart Jackson IV are
"independent" as defined in the NASDAQ listing standards; however, Mr. Schlueter
is not "independent" under those standards.
COMPENSATION OF OFFICERS AND DIRECTORS
The aggregate amount of compensation paid by Bonso and its subsidiaries
during the year ended March 31, 2002, to all directors and officers as a group
for services in all capacities was approximately $1,082,564, including
compensation in the form of housing in Hong Kong for Anthony So, the
Corporation's Chairman and Chief Executive Officer, and Kim Wah Chung, its
Director of Engineering and Research and Development, consistent with the
practice of other companies in Hong Kong. Total compensation for the benefit of
Mr. So was $559,672; for the benefit of Cathy Kit Ten Pang -- $109,497; for the
benefit of Mr. Chung -- $140,016; for the benefit of George O'Leary -- $165,000,
and for the benefit of Henry F. Schlueter was an aggregate of $108,379. The
$108,379 listed as having been paid for the benefit of Mr. Schlueter was paid to
his law firm of Schlueter & Associates, P.C. for legal services rendered and
expense incurred.
We did not set aside or accrue any amounts to provide pension, retirement
or similar benefits for directors and officers for the fiscal year ended March
31, 2002, other than contributions to the Corporation's Provident Fund Plan,
which aggregated $31,654. (See "Provident Fund Plan" below.)
Options of Directors and Senior Management
The following table provides information concerning options owned by the
directors and senior management at August 31, 2002. The table excludes our
publicly traded warrants owned by the directors and senior management,
information about which is disclosed in the section captioned "Security
Ownership of Certain Beneficial Owners and Management," together with
information concerning the beneficial ownership of our common shares by
directors and senior management and major shareholders.
----------------------- --------------------- ----------------- ----------------
Number of Common
Shares Subject to Exercise Price
Name Stock Options Per Share Expiration Date
----------------------- --------------------- ----------------- ----------------
Anthony So 158,000 $8.00 January 6, 2010
----------------------- --------------------- ----------------- ----------------
128,000 $3.65 April 9, 2011
----------------------- --------------------- ----------------- ----------------
128,000 $2.50 March 6, 2012
----------------------- --------------------- ----------------- ----------------
Kim Wah Chung 20,000 $8.00 January 6, 2010
----------------------- --------------------- ----------------- ----------------
20,000 $3.65 April 9, 2011
----------------------- --------------------- ----------------- ----------------
20,000 $2.50 March 6, 2012
----------------------- --------------------- ----------------- ----------------
Cathy Kit Teng Pang 20,000 $8.00 January 6, 2010
----------------------- --------------------- ----------------- ----------------
20,000 $3.65 April 9, 2011
----------------------- --------------------- ----------------- ----------------
20,000 $2.50 March 6, 2012
----------------------- --------------------- ----------------- ----------------
George O'Leary 10,000 $8.125 January 12, 2010
----------------------- --------------------- ----------------- ----------------
10,000 $7.875 January 9, 2011
----------------------- --------------------- ----------------- ----------------
10,000 $2.55 October 15, 2011
----------------------- --------------------- ----------------- ----------------
Woo Ping Fok 10,000 $8.125 January 12, 2010
----------------------- --------------------- ----------------- ----------------
10,000 $7.875 January 9, 2011
----------------------- --------------------- ----------------- ----------------
10,000 $2.55 October 15, 2011
----------------------- --------------------- ----------------- ----------------
J. Stewart Jackson IV 10,000 $7.875 January 9, 2011
----------------------- --------------------- ----------------- ----------------
10,000 $2.55 October 15, 2011
----------------------- --------------------- ----------------- ----------------
Henry F. Schlueter 10,000 $8.00 January 6, 2010
----------------------- --------------------- ----------------- ----------------
Directors
Except for that mentioned above, our directors do not receive any
additional monetary compensation for serving in their capacities. However,
outside directors receive stock options pursuant to the 1996 Non-Employee
Directors' Stock Option Plan and have been granted other options. (See "Stock
Option Plans -- The 1996 Non-Employee Directors' Stock Option Plan," below.) All
directors are reimbursed for all reasonable expenses incurred in connection with
services as a director.
Provident Fund Plan
With effect from January 1, 1988, Bonso Electronics Limited ("BEL"), our
wholly-owned foreign subsidiary, started a Provident Fund Plan (the "Plan") with
a major international assurance company to provide life insurance and retirement
benefits for its employees. All permanent full time employees who joined BEL
before December 2000, excluding factory workers, are eligible to join the Plan.
Members of the Plan are required to contribute 5% of their monthly salary.
The contribution by BEL is as follows:
Years of Service % of salary as BEL's contribution
---------------- ---------------------------------
Less than 5 years 5.0%
5 to 10 years 7.5%
More than 10 years 10.0%
The Mandatory Provident Fund (the "MPF") was introduced by the Hong Kong
Government commencing in December 2000. BEL joined the MPF with a major
international assurance company. All permanent full time employees who joined
BEL in or after December 2000, excluding factory workers, are eligible to join
the MPF. Members' and employers' contributions to the MPF are both at 5% of the
members' monthly salaries and are subject to a maximum contribution of HK$1,000
monthly.
At normal retirement age, death or ill health, the member shall be entitled
to receive from the Provident Fund Plan a lump sum equal to the total of the
member's and BEL's contributions plus a return on their investment. On
resignation prior to normal retirement age, a member shall be entitled to
receive from the Plan a lump sum equal to the member's contributions plus a
percentage of the employer's balance determined in accordance with a
predetermined set scale.
BEL's total contributions to the Plan and the MPF for the years ended March
31, 2000, 2001 and 2002 amounted to $64,921, $53,704 and $78,995, respectively.
Compensation Pursuant to Options to Purchase Common Stock
Outside, non-employee directors receive stock options pursuant to the 1996
Non-Employee Directors' Stock Option Plan and have been granted other options.
In August 1996, the Board of Directors of the Corporation adopted a 1996
Non-Employee Directors' Stock Option Plan which provided for the grant of
options to purchase an aggregate of not more than 100,000 shares of the
Corporation's Common Stock. In January 2000, the Shareholders of the Corporation
approved the proposal of the Board of Directors to increase from 100,000 to
600,000 the aggregate number of options to purchase Common Stock of the
Corporation under the Non-Employee Directors' Plan. The purpose of the 1996
Non-Employee Directors' Stock Option Plan is to promote the long-term success of
the Corporation by creating a long-term mutuality of interests between the
non-employee directors and the stockholders of the Corporation, to provide an
additional inducement for the non-employee directors to remain with the
Corporation and to provide a means through which the Corporation may attract
able persons to serve as directors of the Corporation. The 1996 Non-Employee
Directors' Stock Option Plan is administered by a committee appointed by the
Board of Directors.
Under the 1996 Non-Employee Directors' Stock Option Plan, on the third
business day following each annual meeting of the stockholders, each director
who is not then an employee of the Corporation or any of its subsidiaries will
automatically be granted a stock option to purchase 10,000 shares of Common
Stock. The exercise price of all options granted under the 1996 Non-Employee
Directors' Stock Option Plan will be equal to the fair market value of the
underlying shares on the date of grant, based on guidelines set forth in the
plan. The exercise price may be paid in cash, by the surrender of options, in
Common Stock, in other property, including the optionee's promissory note, or by
a combination of the above, at the discretion of the Corporation. The term of
each option granted pursuant to the 1996 Non-Employee Directors' Stock Option
Plan will be ten years from the date of grant; however, no option may be
exercised during the first six months of its term. The term of an option granted
pursuant to the 1996 Non-Employee Directors' Stock Option Plan may be reduced in
the event that the optionee ceases to be a director of the Corporation. No
option granted pursuant to the plan will be transferable otherwise than by will
or the laws of descent and distribution.
Employee directors may receive stock options pursuant to the Corporation's
1996 Stock Option Plan. In August 1996, the Board of Directors of the
Corporation adopted the 1996 Stock Option Plan which provided for the grant of
options to purchase an aggregate of not more than 400,000 shares of the
Corporation's Common Stock. In January 2000, the shareholders of the Corporation
approved the proposal of the Board of Directors to increase from 400,000 to
900,000 in the aggregate the number of options to purchase Common Stock of the
Corporation under the 1996 Stock Option Plan. The purpose of the 1996 Stock
Option Plan is to make options available to management and employees of the
Corporation in order to encourage them to secure or increase on reasonable terms
their stock ownership in the Corporation and to encourage them to remain in the
employ of the Corporation.
The 1996 Stock Option Plan is administered by a committee appointed by the
Board of Directors which determines the persons to be granted options under the
plan, the number of shares subject to each option, the exercise price of each
option and the option period, subject to the requirement that no option may be
exercisable more than 10 years after the date of grant. The exercise price of an
option may be less than fair market value of the underlying shares of Common
Stock. No options granted under the plan will be transferable by the optionee
other than by will or the laws of descent and distribution and each option will
be exercisable, during the lifetime of the optionee, only by the optionee.
The exercise price of an option granted pursuant to the 1996 Stock Option
Plan may be paid in cash, by the surrender of options, in Common Stock, in other
property, including the optionee's promissory note, or by a combination of the
above, at the discretion of the Corporation.
CERTAIN TRANSACTIONS
Over the years, the Corporation has provided to and received cash advances
from its officers and directors. In October 1994, the Board of Directors adopted
a policy resolution prohibiting the Corporation from making any loan or advance
of money or property, or guaranteeing the obligation of any directors of the
Corporation, and limiting the Corporation's ability to make such loans, advances
or guarantees to officers of the Corporation or its subsidiaries unless a
majority of independent, disinterested outside directors determine that such
loan, advance or guarantee may reasonably be expected to benefit the
Corporation. Further, all future material affiliated transactions, loans and
loan guarantees, if any, will be made on terms that are no less favorable to the
Corporation than those that are generally available from unaffiliated third
parties. The Corporation has neither provided nor received any cash advances to
its officers or directors since this policy resolution was adopted.
It is common practice in Hong Kong, the location of the Corporation's
principal executive offices, to provide a housing allowance or living
accommodations for senior executives as part of their compensation. One of the
Corporation's properties in Hong Kong is provided to Mr. So as part of his
compensation. The Corporation also provides Mr. Kim Wah Chung, its Director of
Engineering and Research and Development and a director of the Corporation, with
a housing allowance.
Mr. George O'Leary, a director, is paid a commission on orders placed by
customers which he obtains for us. The amount of the commission is negotiated on
a deal-by-deal basis, without a written agreement. During the fiscal year ended
March 31, 2002, Mr. O'Leary was paid an aggregate of $165,000 as a consultancy
fee for provision of support and marketing services such as soliciting
customers, negotiating prices and public relations in the United States.
During the fiscal year ended March 31, 2002, the Corporation paid Schlueter
& Associates, P.C. an aggregate of $108,379 for legal fees and expenses. Mr.
Henry F. Schlueter, a director, is the Managing Director of Schlueter &
Associates, P.C.
PROPOSAL 1
ELECTION OF SEVEN (7)
PERSONS TO SERVE AS DIRECTORS OF THE CORPORATION
The Corporation's directors are elected annually to serve until the next
Annual Meeting of Shareholders and thereafter until their successors shall have
been elected and qualified. The number of directors presently authorized by the
Articles of Association of the Corporation shall be not less than one (1) nor
more than seven (7).
Unless otherwise directed by shareholders, the proxy holder will vote all
shares represented by proxies held by them for the election of the following
nominees, all of whom are now members and constitute the Corporation's Board of
Directors. The Corporation is advised that all nominees have indicated their
availability and willingness to serve if elected. In the event that any nominee
becomes unavailable or unable to serve as a director of the Corporation prior to
the voting, the proxy holder will vote for a substitute nominee in the exercise
of his best judgment.
INFORMATION CONCERNING NOMINEES
ANTHONY SO, 58, is the founder of Bonso. He is our Chief Executive Officer
and Chief Financial Officer and has been our President, Chairman of the Board of
Directors and Treasurer since inception, and our Secretary since July 1991. Mr.
So received his BS degree in civil engineering from National Taiwan University
in 1967 and a Masters degree in business administration ("MBA") from the Hong
Kong campus of the University of Hull, Hull, England in 1994. Mr. So has been
Chairman of the Hong Kong GO Association since 1986, and also served as Chairman
of the Alumni Association of National Taiwan University for the 1993-1994
academic year. Mr. So has served as a trustee of the Chinese University of Hong
Kong, New Asia College since 1994.
KIM WAH CHUNG, 44, has been a director since September 21, 1994. Mr. Chung
has been employed by Bonso since 1981 and currently holds the position of
Director of Engineering and Research and Development. Mr. Chung is responsible
for all research projects and product development. Mr. Chung's entire
engineering career has been spent with Bonso, and he has been involved in all of
our major product developments. Mr. Chung graduated with honors in 1981 from the
Chinese University of Hong Kong with a Bachelor of Science degree in
electronics.
CATHY KIT TENG PANG, 40, has been a director of Bonso since January 1,
1998. Ms. Pang was first employed by us as Financial Controller in December 1996
and was promoted to Director of Finance on April 1, 1998. Ms. Pang was employed
as an auditor in an international audit firm from 1987 to 1991, at which time
she joined a Hong Kong listed company in the field of magnetic industry as
Assistant Financial Controller. From 1994 until she joined us in 1996, she was
employed as Deputy Chief Accountant in a management and property development
company in Hong Kong and China. Ms. Pang has a Bachelor of Business
Administration degree from York University in Toronto, Canada. She is a member
of the American Institute of Certified Public Accountants and of the Hong Kong
Society of Accountants.
WOO PING FOK, 53, was elected to our Board of Directors on September 21,
1994. Mr. Fok and his firm, Norman M.K. Yeung & Co., have served as our Hong
Kong counsel since 1993. Mr. Fok was admitted to the Canadian Bar as a Barrister
& Solicitor in December 1987 and was a partner in the law firm of Woo & Fok, a
Canadian law firm with its head office in Edmonton, Alberta, Canada. In 1991,
Mr. Fok was qualified to practice as a Solicitor of England & Wales, a Solicitor
of Hong Kong and a Barrister & Solicitor of Australian Capital Territory. Mr.
Fok practices law in Hong Kong and is a partner with Wong & Fok. Mr. Fok's major
areas of practice include conveyancing or real property law, corporations and
business law, commercial transactions and international trade with a special
emphasis in China trade matters.
J. STEWART JACKSON IV, 66, has been a director since January 10, 2000. From
1962 until its merger with Republic Industries in 1996, Mr. Jackson served in
various management capacities, including President, of Denver Burglar Alarm Co.,
Inc., a business founded by his family. In addition, in the mid-1960's, Mr.
Jackson founded Denver Burglar Alarm Products, a separate company which
invented, patented, manufactured, distributed and installed contained ionization
smoke detectors and which was later sold to a conglomerate manufacturer. After
the merger of Denver Burglar Alarm Co., Inc., Mr. Jackson founded Jackson
Burglar Alarm Co., Inc., of which he is currently President. Mr. Jackson served
on the advisory board of directors for Underwriter's Laboratories for burglar
and fire alarm systems for 25 years and has been an officer in the Central
Station Protection Association, which, along with the National Burglar Alarm
Association, was formed by his family in the late 1940's. Mr. Jackson graduated
from the University of Colorado in 1962 with a degree in Business Management and
Engineering.
GEORGE O'LEARY, 64, has been a director since January 1997. From November
1994 to the present time, Mr. O'Leary has been President of Pacific Rim
Products, Newport Beach, California, a trading company that provides offshore
sourcing alternatives to U.S. based electronics companies. For eight years prior
to 1994, Mr. O'Leary was President, CEO and a director of Micro General
Corporation, Santa Ana, California, a manufacturer and distributor of mechanical
and electronic scale products. For eight years prior to that, Mr. O'Leary was
Vice President and General Manager of Lanier Business Products, Atlanta,
Georgia, a manufacturer and distributor of office products. Mr. O'Leary has a
Bachelor of Science degree in Electrical Engineering from Northeastern
University, Boston, Massachusetts.
HENRY F. SCHLUETER, 51, has been a director since October 2001, and has
been our Assistant Secretary since October 6, 1988. Since 1992, Mr. Schlueter
has been the Managing Director of Schlueter & Associates, P.C., a law firm,
practicing in the areas of securities, mergers and acquisitions, finance and
corporate law. Mr. Schlueter has served as our United States corporate and
securities counsel since 1988. From 1989 to 1991, prior to establishing
Schlueter & Associates, P.C., Mr. Schlueter was a partner in the Denver,
Colorado office of Kutak Rock (formerly Kutak, Rock & Campbell), and from 1984
to 1989, he was a partner in the Denver office of Nelson & Harding. Mr.
Schlueter is a member of the American Institute of Certified Public Accountants,
the Colorado Society of CPA's, the Colorado and Denver Bar Associations and the
Wyoming State Bar.
There are no family relationships between any of our directors and
executive officers.
No arrangement or understanding exists between any such director or officer
and any other persons pursuant to which any director or executive officer was
elected as a director or executive officer. Our directors are elected annually
and serve until their successors take office or until their death, resignation
or removal. The executive officers serve at the pleasure of the Board of
Directors.
Board Recommendation
The Board recommends a vote FOR the election of each of the seven (7)
nominees for directors of the Corporation.
PROPOSAL 2
RATIFICATION OF SELECTION OF ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers as the
independent public accountants of the Corporation for the fiscal year ending
March 31, 2003, and has further directed that the Corporation submit the
selection of the independent public accountants for ratification by shareholders
at the Annual Meeting of Shareholders.
Unless otherwise directed by shareholders, the proxy holders will vote all
shares represented by Proxies held by them to ratify the selection of
PricewaterhouseCoopers as the independent public accountants of the Corporation
for the fiscal year ending March 31, 2003.
Fees Paid to the Independent Auditors
Audit Fees
The aggregate fees billed by PricewaterhouseCoopers for professional
services rendered for the audit of the Corporation's annual consolidated
financial statements for the year ended March 31, 2002 were $105,128.
Financial Information Systems Design and Implementation Fees
PricewaterhouseCoopers did not perform any professional services with
respect to financial information systems design and implementation for the year
ended March 31, 2002 ("Technology Services").
All Other Fees
PricewaterhouseCoopers did not perform any professional services other than
Audit Services for the year ended March 31, 2002.
Board Recommendation
The Board recommends a vote FOR the ratification of the selection of
PricewaterhouseCoopers as the independent public accountants of the Corporation
for the fiscal year ending March 31, 2003.
GENERAL
Other Matters
The Board of Directors does not know of any matters that are to be
presented at the Annual Meeting of Shareholders other than those stated in the
Notice of Annual Meeting and referred to in this Proxy Statement. If any other
matters should properly come before the Meeting, it is intended that the Proxies
in the accompanying form will be voted as the persons named therein may
determine in their discretion.
By Order of the Board of Directors
Anthony So, Chairman of the Board of Directors
BONSO ELECTRONICS INTERNATIONAL INC.
ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 9, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Bonso Electronics International Inc., a
British Virgin Islands corporation (the "Corporation"), acknowledges receipt of
the Notice of Annual Meeting of Shareholders and Proxy Statement, dated
September 13, 2002, and hereby appoints Anthony So and Henry F. Schlueter, or
either of them, each with the power of substitution, as Attorneys and Proxies to
represent and vote all shares of Common Stock of the Corporation which the
undersigned would be entitled to vote at the Annual Meeting of Shareholders and
at any adjournment or adjournments thereof, hereby revoking any proxy or proxies
heretofore given and ratifying and confirming all that said Attorneys and
Proxies may do or cause to be done by virtue thereof with respect to the
following matters:
1. Election of each of the following seven (7) persons to serve as
directors of the Corporation until the next Annual Meeting of
Shareholders and thereafter until their successors shall have been
elected and qualified:
Anthony So
FOR /___/ WITHHOLD AUTHORITY FOR /___/
Kim Wah Chung
FOR /___/ WITHHOLD AUTHORITY FOR /___/
Cathy Kit Teng Pang
FOR /___/ WITHHOLD AUTHORITY FOR /___/
Woo Ping Fok
FOR /___/ WITHHOLD AUTHORITY FOR /___/
J. Stewart Jackson IV
FOR /___/ WITHHOLD AUTHORITY FOR /___/
George O'Leary
FOR /___/ WITHHOLD AUTHORITY FOR /___/
Henry F. Schlueter
FOR /___/ WITHHOLD AUTHORITY FOR /___/
2. Approval of the ratification of the selection of
PricewaterhouseCoopers as the independent public accountants of the
Corporation for the fiscal year ending March 31, 2003.
FOR /___/ AGAINST /___/ ABSTAIN /___/
3. To act upon such other matters as may properly come before the Meeting
or any adjournments thereof.
This Proxy, when properly executed, will be voted as directed. If no direction
is indicated, the Proxy will be voted (1) FOR the election of each of the
nominees listed above to the Board of Directors; (2) FOR the approval of the
ratification of the selection of PricewaterhouseCoopers as the independent
public accountants of the Corporation for the fiscal year ending March 31, 2003.
Dated: _____________, 2002
----------------------------
----------------------------
[LABEL]
Please sign your name exactly as it appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as it
appears hereon. When signing as joint tenants, all parties in the joint tenancy
must sign. When a proxy is given by a corporation, it should be signed by an
authorized officer and the corporate seal affixed. No postage is required if
returned in the enclosed envelope and mailed in the United States.
PLEASE SIGN, DATE AND MAIL THIS PROXY IMMEDIATELY IN THE ENCLOSED ENVELOPE.
Please sign exactly as name appears on the label ATTACHED TO THIS PROXY. When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by President or other
authorized person. If a partnership, please sign in full partnership name by
authorized person.
Bonso Electronics International, Inc.
Annual Report
2001-02
CONTENTS
--------
o Message from the Chairman Page 2
o Corporate Overview Page 5
o Bonso Across the Globe Page 6
o Product Range Page 8
o Report of Independent Accountants Page 11
o Consolidated Balance Sheets as of March 31, 2001 and 2001 Page 12
o Consolidated Statements of Comprehensive Income for the years Page 13
ended March 31, 2000, 2001 and 2002
o Consolidated Statements of Changes in Shareholders' Equity for Page 14
the years Ended March 31, 2000, 2001 and 2002
o Consolidated Statements of Cash Flows for the years ended Page 15
March 31, 2000, 2001 and 2002
o Notes to Consolidated Financial Statements Page 17
Message from the Chairman
-------------------------
Dear Shareholders;
For the third consecutive year, Bonso Electronics has gained strength and
momentum through increased revenues and earnings, acquisitions, and
diversification of customers with global leadership status. With fiscal year
ended 2002 revenues and e4arnings at all=time highs of $53.3 million (80 percent
over fiscal year ended 2001) and $0.32 per share (13 percent over fiscal year
ended 2001), respectively , we have financial resources available to continue on
a very aggressive growth strategy.
Our achievements are noteworthy in the contract manufacturing services
(CMS) industry, which slumped considerably during the past calendar year. The
longer term outlook for the industry is considered positive by one leading
market research firm - International Data Corporation (IDC) - which predicts
that annual CMS revenues will be $230 billion by 2005, more than double the $103
billion reported in 2000. IDC's proposed model for success in coming years is
precisely the strategy that Bonso (and other) have been following over the past
three years:
o Focus on vertical markets
o Increase service offerings
o Diversify product portfolio
o Improve internal systems
o Integrate contract manufacturing services into branded customer's
business.
Bonso's vertical market strengths vertical strengths are clearly in two
primary areas - sensor-based scale products and telecommunications. Since
launching a diversification initiative in fiscal year 2000, telecommunications
products as a percentage of total revenues has increased form 5 percent in year
ended 2000 to 33 percent in year ended 2002. Scale products has shifted from 82
percent to 63 percent of revenues in the same frame.
While every customer does not use our full range of capabilities, we
believe that we are equipped and staffed to provide turnkey services comparable
to the top tier of CMS companies, including design engineering to customer
specifications, prototyping, supply chain management, assembly, packaging and
distribution. Over the past three years, our product portfolio has expanded to
included several consumer wireless products, such as two-way radios and cordless
telephones.
2
Management has a number of measurements by which it can demonstrate
continuous improvement in internal processes. Perhaps the most significant is
embodies in our customer relationship practices. In the electronics industry,
there are general expectations that for any product being manufactured,
technology and competition will drive down materials costs over time while
advances in factory equipment and worker skills will drive down labor costs. In
most cases, we have incentives to share the results of cost reductions, and to
that end we have developed considerable skills in shopping Asia for components,
training a work force capable of conforming to the stringent quality standards
of ISO 9001:2000 and TL9000, and upgrading factory equipment.
In the context of the CMS industry, Bonso management believes the company
is either consistent with or ahead of best practice trends. Yet, we maintain the
advantage of remaining an entrepreneurial company - a quality that many of our
customers admire as it translates into a willingness and ability to integrate
our business processes into theirs.
We remain intent on accelerating growth though acquisitions. The purchase
of the Korona brand and distributorship of household scales in Europe -
effective May 1, 2001 - added $16 million to our fiscal year ended 2002
revenues. We are also working to introduce the Korona brand into the U.S.
markets by establishing a distribution center near Chicago. Korona's high-end
kitchen and bathroom scales are visually-stunning examples of modern design and
materials, and we have high expectations for acceptance by both retail
merchandisers and consumers who are attracted to European styling and quality.
In other acquisition activity in July, 2002, we acquired a majority
interest in Gram Precision, a privately owned Ontario Corporation and a
distributor of digital scales for laboratory, industrial, jewelry and other
markets requiring precise measurement and high resolution. In pursuing brand
ownership in two distinct markets, we intend to further leverage our many years
of technical and design innovations to make our China campus a global center of
sensor-based scale technology.
3
China's admission to the World Trade Organization in December 2001,
accompanied by the U.S. Congress conferring "most favored nation" trade status,
will result in favorable export terms for China-based companies, as well as
opening China markets to expanded foreign investment and imports. Since more
that 956 percent of Bonso producing is exported to North America and Europe, we
anticipate a number of long-term benefits to accrue from China's WTO membership.
Bonso management is totally committed to increasing shareholder value
through prudent application of human, financial, technical and plant resources.
During fiscal year ended 2002 we have completed a major acquisition, expanded
research and development, invested in plant and equipment, paid a 10 cents per
common share dividend, and increased shareholders' equity by 6 percent.
Despite these accomplishments, public markets continue to substantially
undervalue Bonso stock when compared to most all statistical measures. Bonso
management shares your concerns and is directing increasing resources to
investor relation by retaining well-known consultants, direct executive contact
with institutional investors and participation in investor forums in key U.S.
financial centers.
We are making progress in attracting attention, and our performance is
being watched by an increasing number of "small cap" institutions. In the final
analysis, continued improvements in customer satisfaction and financial
performance are pre-requisite to market corrections, and on behalf of loyal
shareholders, that is our pledge for the new fiscal year.
Anthony So
Chairman, President and Chief Executive Officer
4
CORPORATE OVERVIEW
1980 Bonso was established with headquarter based in Hong Kong.
1987 Bonso started production in China.
1989 Bonso Electronics was listed in the USA.
1995 Bonso was granted ISO 9001 Accreditation.
1997 Bonso relocated centralized manufacturing complex to replace the
older plant.
1998 Bonso completed the final phase of the new manufacturing complex.
2001 Bonso acquired Korona.
2002 Bonso was grated TL 9000 Accreditation.
2002 Bonso acquired 51% equity interest of Gram Precision Group.
5
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8
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10
Board of Directors and Shareholders
Bonso Electronics International Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Bonso
Electronics International Inc. and Subsidiaries (the "Group") as of March 31,
2001 and 2002 and the related consolidated statements of income and
comprehensive income, changes in shareholders' equity and cash flows for each of
the three years in the period ended March 31, 2002. These consolidated financial
statements are the responsibility of the Group's management. Our responsibility
is to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bonso Electronics
International, Inc. and Subsidiaries as of March 31, 2001 and 2002 and the
results of their operations and cash flows for each of the three years in the
period ended March 31, 2002, in conformity with generally accepted accounting
principles in the United States of America.
PricewaterhouseCoopers
Hong Kong, June 21, 2002
11
Bonso Electronics International Inc. and Subsidiaries
Consolidated Balance Sheets
(Expressed in United States Dollars)
March 31
-------------------------
2001 2002
$ $
Assets
Current assets
Cash and cash equivalents -- 1,878,156
5,322,397 --
Restricted cash deposits 2,873,898 3,972,542
Trade receivables, net 3,518,943 6,838,576
Inventories 5,310,889 8,861,952
Notes receivable 1,086,949 686,258
Deferred income tax assets - current 10,190 27,219
Other receivables, deposits and prepayments 619,858 822,646
---------- ----------
18,743,124 23,087,349
Total current assets
---------- ----------
Deposits 70,511 16,038
Deferred income tax assets - non current 87,245 84,422
Goodwill -- 204,217
Brand name, net -- 2,797,392
Property, plant and equipment
Leasehold land and buildings 12,248,784 12,567,309
Plant and machinery 10,766,115 11,995,871
Moulds 2,113,066 --
Furniture, fixtures and equipment 3,291,043 4,239,602
Motor vehicles 304,869 343,068
---------- ----------
28,723,877 29,145,850
Less: accumulated depreciation and amortization (10,128,087) (10,884,191)
---------- ----------
Net property, plant and equipment 18,595,790 18,261,659
---------- ----------
Total assets 37,496,670 44,451,077
========== ==========
Liabilities and shareholders' equity
Current liabilities
Notes payable 3,234,897 2,857,533
Accounts payable 3,435,626 4,122,443
Accrued charges and deposits 1,029,967 2,022,472
Income taxes payable 95,694 83,614
Short-term loans 1,086,949 3,754,477
Current portion of long-term debt and capital lease obligations 537 029 647,501
---------- ----------
Total current liabilities 9,420,162 13,488,040
---------- ----------
Long-term debt and capital lease obligations, net of current,
maturities 403 890 317,009
Commitments and contingencies (Note 6(b) and 11)
Redeemable common stock
Redeemable common stock par value $0.003 per share
- issued and outstanding shares: 2001 - 0; 2002 - 180,726 -- 1,445,808
Shareholders' equity
Preferred stock par value $0.01 per share
- authorized shares - 10,000,000 in 2002
- issued and outstanding shares: 2001-0; 2002-0 -- --
Common stock par value $0.003 per share
- authorized shares - 23,333,334 -- --
issued and outstanding shares: 2001-5,496,133; 2002-5,404,133 16,484 16,208
Additional paid-in capital 21,854,160 21,152,502
(762,840) (381,420)
Deferred consultancy fee 6,927,842 8,176,958
Retained earnings 235,972 235,972
Accumulated other comprehensive income (599,000) --
Common stock held in treasury, at cost ---------- ----------
27,672,618 29,200,220
========== ==========
37,496,670 44,451,077
Total liabilities and shareholders' equity ========== ==========
See notes to these consolidated financial statements
12
Bonso Electronics International Inc. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income
(Expressed in United States Dollars)
2000 2001 2002
$ $ $
Net sales 15,380,286 29,566,680 53,303,101
Cost of sales 11,117,922 22,400,017 40,192,242
----------- ----------- -----------
Gross margin 4,262,364 7,166,663 13,110,859
Selling expenses 261,297 382,422 2,476,285
Salaries and related costs 1,898,944 2,333,776 3,880,274
Research and development expenses 186,251 297,740 426,364
Administration and general expenses 1,646,320 2,410,872 3,411,336
Amortization of brand name -- -- 202,608
----------- ----------- -----------
Income from operations 269,552 1,741,853 2,713,992
Interest income 129,794 458,328 166,723
Interest expenses (261,288) (337,526) (645,045)
Foreign exchange gains/(losses) 14,449 42,722 (39,954)
Other income 191,790 204,585 181,272
Consultancy fee -- (381,420) (381,420)
----------- ----------- -----------
Income before income taxes 344,297 1,728,542 1,995,568
Income tax benefit/(expense) 3,401 (124,743) (189,962)
----------- ----------- -----------
Net income 347,698 1,603,799 1,805,606
Other comprehensive income, net of tax:
Foreign currency translation adjustments 701 -- --
----------- ----------- -----------
Comprehensive income 348,399 1,603,799 1,805,606
=========== =========== ===========
Earnings per share
Basic $ 0.10 $ 0.29 $ 0.32
=========== =========== ===========
Diluted $ 0.09 $ 0.28 $ 0.32
=========== =========== ===========
See notes to these consolidated financial statements
13
Bonso Electronics International Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
(Expressed in United States Dollars)
Common stock
Promissory
note
Shares Additional receivable Common
issued and Amount paid-in from stock held
outstanding outstanding capital shareholder at treasury
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1999 3,119,159 9,353 10,285,105 (1,430,000) --
Net income -- -- -- -- --
Other comprehensive income, net of tax
Foreign currency adjustments:
Cumulative translation adjustments -- -- -- -- --
Common stock issued upon exercise
of share options 919,675 2,759 52,089 -- --
Common stock issued upon exercise
of warrants, net of expenses 1,673,776 5,021 11,988,306 -- --
----------- ----------- ----------- ----------- -----------
Balance, March 31, 2000 5,712,610 17,133 22,325,500 (1,430,000) --
Net income -- -- -- -- --
Common stock issued upon exercise
of share options 7,023 21 (21) -- --
Deferred consultancy fee (note 15(d)) -- -- 1,144,260 -- --
Amortization of deferred consultancy fee (note 15(d) -- -- -- --
Common stock issued upon exercise of warrants 50,000 150 399,850 -- --
Cash dividends declared on common stock
($0.1 per share) -- -- -- -- --
Purchase of common stock -- -- -- -- (1,185,249)
Retirement of common stock (73,500) (220) (586,029) -- 586,249
Cancellation of common stock subscribed (200,000) (600) (1,429,400) 1,430,000 --
----------- ----------- ----------- ----------- -----------
Balance, March 31, 2001 5,496,133 16,484 21,854,160 -- (599,000)
Net income -- -- -- -- --
Amortization of deferred consultancy fee (note 15(d) -- -- -- --
Cash dividends declared on common stock
($0.1 per share) -- -- -- -- --
Purchase of common stock -- -- -- -- (102,934)
Retirement of common stock (92,000) (276) (701,658) -- 701,934
----------- ----------- ----------- ----------- -----------
Balance, March 31, 2002 5,404,133 16,208 21,152,502 -- --
=========== =========== =========== =========== ===========
See notes to these consolidated financial statements
14
Bonso Electronics International Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
(Expressed in United States Dollars)
(Continued)
Accumulated
other
comprehensive
Deferred income-foreign Total
consultancy Retained currency shareholders'
fee earnings adjustments equity
----------- ----------- ----------- -----------
Balance, March 31, 1999 -- 5,525,958 235,271 14,625,687
Net income -- 347,698 -- 347,698
Other comprehensive income, net of tax
Foreign currency adjustments:
Cumulative translation adjustments -- -- 701 701
Common stock issued upon exercise
of share options -- -- -- 54,848
Common stock issued upon exercise
of warrants, net of expenses -- -- -- 11,993,327
----------- ----------- ----------- -----------
Balance, March 31, 2000 -- 5,873,656 235,972 27,022,261
Net income -- 1,603,799 -- 1,603,799
Common stock issued upon exercise
of share options -- -- -- --
Deferred consultancy fee (note 15(d)) (1,144,260) -- -- --
Amortization of deferred consultancy fee (note 15d) 381,420 -- -- 381,420
Common stock issued upon exercise of warrants -- -- -- 400,000
Cash dividends declared on common stock
($0.1 per share) -- (549,613) -- (549,613)
Purchase of common stock -- -- -- (1,185,249)
Retirement of common stock -- -- -- --
Cancellation of common stock subscribed -- -- -- --
----------- ----------- ----------- -----------
Balance, March 31, 2001 (762,840) 6,927,842 235,972 27,672,618
Net income -- 1,805,606 -- 1,805,606
Amortization of deferred consultancy fee (note 15d) 381,420 -- -- 381,420
Cash dividends declared on common stock
($0.1 per share) -- (556,490) -- (556,490)
Purchase of common stock -- -- -- (102,934)
Retirement of common stock -- -- -- --
----------- ----------- ----------- -----------
Balance, March 31, 2002 (381,420) 8,176,958 235,972 29,200,220
=========== =========== =========== ===========
See notes to these consolidated financial statements
14(Con't)
Bonso Electronics International Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Expressed in United States Dollars)
2000 2001 2002
$ $ $
Cash flows from operating activities
Net income 347,698 1,603,799 1,805,606
Adjustments to reconcile net income to net cash
provided by operating activities :
Depreciation 1,316,994 2,019,621 2,738,937
Amortization 302,179 329,564 548,978
Consultancy fee -- 381,420 381,420
Other (25,677) 124,743 8,040
Changes in assets and liabilities:
Trade receivables (1,259,455) (1,857,893) 499,236
Other receivables, deposits and prepayments 7,380 (384,007) (99,911)
Notes receivable 165,274 (561,774) 400,691
Inventories (1,622,488) 865,373 (932,725)
Accounts payable, accrued charges and deposits 2,258,494 554,731 148,483
Other 110,849 51,315 (26,286)
----------- ----------- -----------
Net cash provided by operating activities 1,601,248 3,126,892 5,472,469
----------- ----------- -----------
Cash flows from investing activities
Restricted cash deposits (1,060,264) (801,946) (1,098,644)
Deposits for property, plant and equipment (398,147) (70,511) (16,038)
Proceeds from disposal of property, plant and
equipment 8,149 441 26,555
Acquisition of property, plant and equipment (3,458,318) (5,846,296) (756,010)
Acquisition of a subsidiary, net of cash acquired -- -- (3,044,184)
----------- ----------- -----------
Net cash used in investing activities (4,908,580) (6,718,312) (4,888,321)
----------- ----------- -----------
Cash flows from financing activities
Issue of shares on exercise of warrants and options 12,272,436 400,000 --
Repurchase of common stock -- (1,185,249) (102,934)
Expenses paid for warrant redemption (224,261) -- --
Principal payments under long-term debt (111,984) (65,016) (38,451)
Capital lease payments (436,165) (526,227) (681,748)
Net (repayment)/advance under banking facilities (503,428) 2,880,518 (2,648,766)
Payment of dividends to stockholders -- (549,613) (556,490)
----------- ----------- -----------
Net cash (used in)/provided by financing activities 10,996,598 954,413 (4,028,389)
----------- ----------- -----------
Effect of foreign exchange rate changes on cash (1,309) -- --
----------- ----------- -----------
Net (decrease)/increase in cash and cash equivalents 7,687,957 (2,637,007) (3,444,241)
Cash and cash equivalents, beginning of year 271,447 7,959,404 5,322,397
----------- ----------- -----------
Cash and cash equivalents, end of year 7,959,404 5,322,397 1,878,156
=========== =========== ===========
See notes to these consolidated financial statements
15
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(Expressed in United States Dollars)
2000 2001 2002
$ $ $
Supplemental disclosure of cash flow
information
Cash paid during the year for:
Interest paid 261,288 337,526 645,045
Income tax paid, net of refund (22,276) -- (204,169)
Non-cash investing and financing activities
Property acquired under capital leases 1,540,608 -- 743,821
Acquisition:
Fair valued of net assets acquired -- -- 1,294,512
Cash acquired -- -- 8,737
See notes to these consolidated financial statements
16
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
1 Description of business and significant accounting policies
Bonso Electronics International Inc. ("the Company") and its subsidiaries
are engaged in the designing, manufacturing and selling of a comprehensive
line of electronic scales and weighing instruments, electronic consumer
products, health care products and telecommunication products.
Effective May 1, 2001, the Group acquired 100% of the equity of Korona
Haushaltswaren GmbH & Co. KG ("Korona") from Augusta Technologies AG
("Augusta"). Korona is a German company engaged in the distribution of
electronic scales in Europe.(Note 10)
The consolidated financial statements have been prepared in United States
dollars and in accordance with generally accepted accounting principles in
the United States of America. The preparation of consolidated financial
statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the consolidated
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Significant estimates made by management
include provisions made against inventories and trade receivables, and the
valuation of long-lived assets. Actual results could differ from those
estimates.
The significant accounting policies are as follows:
(a) Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries (hereinafter collectively referred to as the "Group").
All significant intercompany accounts and transactions are eliminated in
consolidation.
The companies acquired during the financial period have been consolidated
from the date on which control of the net assets and operations was
transferred to the Group. Similarly the result of a group company divested
during the accounting period is included in the Group accounts only to the
date of disposal.
Acquisitions of companies are accounted for using the purchase method of
accounting. Goodwill represents the excess of the purchase cost over the
fair value of assets less liabilities of acquired companies.
During the financial year ending March 31, 2003, the Group will adopt
Statement of Financial Accounting Standard ("SFAS") No. 142 "Goodwill and
Other Intangible Assets", which requires discontinuance of goodwill
amortization. Where an indication of impairment exists, the carrying amount
of goodwill is assessed and written down to its recoverable amount.
(b) Cash and cash equivalents
Cash and cash equivalents are short-term, highly liquid investments with
original maturities of three months or less. Cash equivalents are stated at
cost, which approximates fair value because of the short term maturity of
these instruments.
(c) Inventories
Inventories are stated at the lower of cost or net realizable value with
cost determined on a first-in, first-out basis. Net realizable value is the
price at which inventories can be sold in the normal course of business
after allowing for the costs of completion and disposal. Inventories are
reduced by reserves for obsolence and slow moving parts, which are
determined based on management's assessment of their current status.
17
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
1 Description of business and significant accounting policies (Continued)
(d) Revenue recognition
Revenue is recognized on the transfer of title of ownership, which
generally coincides with the time when the products are shipped to
customers.
(e) Impairment
Long-lived assets held and used by the Company and intangible assets are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable.
The Company evaluates recoverability of assets to be held and used by
comparing the carrying amount of an asset to future net undiscounted cash
flows to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the
assets calculated using a discounted future cash flows analysis. Assets to
be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell.
(f) Brand name
Brand name acquired as part of the purchase of a business is capitalized
based on the estimated fair value as at the date of acquisition and
amortized using the straight line method over the related estimated useful
life of 15 years. Where an indication of impairment exists, the carrying
amount of the brand name is assessed and written down to its recoverable
amount.
(g) Property, plant and equipment
(i) Property, plant and equipment are stated at cost. Leasehold land and
buildings are amortized on a straight-line basis over 15 to 50 years,
representing the shorter of the remaining term of the lease or the
expected useful life to the Group.
(ii) Other fixed assets are carried at cost and depreciated using the
straight-line method over their expected useful lives to the Group.
The principal annual rates used for this purpose are:
Plant and machinery - 14% to 33.3%
Moulds - 20%
Furniture, fixtures and equipment - 20%
Motor vehicles - 20%
(iii) The cost of major improvements and betterments is capitalized,
whereas the cost of maintenance and repairs is expensed in the year
incurred.
(iv) Any gain or loss on disposal is included in the Consolidated
Statements of Income and Comprehensive Income.
18
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
1 Description of business and significant accounting policies (Continued)
(h) Trade receivables
Provision is made against trade receivables to the extent that collection
is considered to be doubtful.
(i) Research and development costs
Research and development costs are expensed in the financial period during
which they are incurred.
(j) Advertising
Advertising costs are expensed as incurred and are included within selling
expenses.
Total advertising costs incurred for the years ended March 31, 2000, 2001
and 2002 amounted to $12,633, $9,942 and $15,821 respectively.
(k) Deferred income taxes
Amounts in the consolidated financial statements related to income
taxes are calculated using the principles of SFAS No. 109, "Accounting for
Income Taxes". SFAS No. 109 requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
temporary differences between the financial reporting basis and tax basis
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. Future tax benefits, such as
net operating loss carry forwards, are recognized to the extent that
realization of such benefits is more likely than not to occur.
(l) Foreign currency translations
(i) The functional currency of the Company and one of its Hong Kong
subsidiaries is the United States dollar, the functional currency of
the other Hong Kong subsidiaries is the Hong Kong dollar and the
functional currency of the German subsidiary is the Euro. The
functional currency of the Company's subsidiary in the People's
Republic of China (the "PRC") is the Renminbi, the national currency
of the PRC. The Group's functional currency is the United States
dollars.
(ii) The financial statements of foreign subsidiaries where the United
States dollar is the functional currency and which have certain
transactions denominated in non-United States dollar currencies are
remeasured into the United States dollar. The remeasurement of local
currencies into United States dollars creates transaction adjustments
which are included in net income.
(iii) The financial statements of foreign subsidiaries, where the local
currency is the functional currency, are translated into United States
dollars using exchange rates in effect at period end for assets and
liabilities and average exchange rates during each reporting period
for statement of income. Adjustments resulting from translation of
these financial statements are reflected as a separate component of
shareholders' equity.
19
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
1 Description of business and significant accounting policies (Continued)
(m) Stock options and warrants
Stock options are granted to employees, directors and non-employees
directors and warrants are issued to certain shareholders. Upon exercise of
the options and warrants, the holder can acquire ordinary shares of the
Company at an exercise price determined by the board of directors. The
options are exercisable based on the vesting terms stipulated in the option
schemes. The Group follows the intrinsic method of accounting for these
options. For options and warrants granted with exercise price being equal
or higher than the market price of the common stock on the data of grant,
no compensation expense is recognized in the financial statements.
(n) Warrants issued for non - cash consideration
Warrants issued in consideration for services rendered are recorded at fair
value and a charge equivalent to fair value is included in the Consolidated
Statements of Income and Comprehensive Income.
(o) Recent accounting pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, " Business Combinations", and SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 141 requires the use of the purchase method of
accounting and prohibits the use of the pooling-of-interests method of
accounting for business combinations initiated after June 30, 2001. SFAS
No. 141 also requires that the Group recognize acquired intangible assets
apart from goodwill if the acquired intangible assets meet certain
criteria. SFAS No. 141 applies to all business combinations initiated after
June 30, 2001 and for purchase business combinations for which the date of
acquisition is on or after July 1, 2001. It also requires, upon adoption of
SFAS No. 142, that the Group reclassify the carrying amounts of intangible
assets and goodwill based on the criteria in SFAS No. 141.
SFAS No. 142 requires, among other things, that companies no longer
amortize goodwill, but instead test goodwill impairment at least annually.
In addition, SFAS No. 142 requires that the Group identify reporting units
for the purposes of assessing potential future impairments of goodwill,
reassess the useful lives of other existing recognized intangible assets,
and cease amortization of intangible assets with an indefinite useful life.
An intangible asset with an indefinite useful life should be tested for
impairment in accordance with the guidance in SFAS No. 142. SFAS No. 142 is
required to be applied in fiscal years beginning after December 31, 2001 to
all goodwill and other intangible assets recognized at that date,
regardless of when those assets were initially recognized. Upon adoption of
SFAS No.142, anticipated undiscounted cash flow attributable to the
intangible asset and the goodwill will be reviewed to assess whether there
are any impairment losses. The Group will adopt SFAS No. 142 during the
year ended March 31, 2003 and anticipates that implementation of SFAS No.
142 will not have a material impact on its financial statements. Goodwill
of the Group of $204,217 as at March 31, 2002 will no longer be subjected
to amortization.
20
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
(o) Recent accounting pronouncements (continued)
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 supercedes SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of", but retains its fundamental
provisions for recognizing and measuring impairment of long-lived assets to
be held and used. SFAS No. 144 standardizes the accounting and presentation
requirements for all long-lived assets to be disposed of by sale,
superceding previous guidance for discontinued operations of business
segments. It requires that all long-lived assets to be disposed of by sale
are carried at the lower of carrying amount or fair value less costs to
sell, and that depreciation should cease to be recorded on such assets.
This standard is effective for fiscal years beginning after December 15,
2001. The Group anticipates that implementation of SFAS No. 144 will not
have a material impact on its financial statements.
2 Allowance for doubtful accounts
Changes in the allowance for doubtful accounts consist of:
2000 2001 2002
$ $ $
Balance, April 1 39,359 - -
Additions charged to expense - - 220,838
Write-off (39,359) - -
------- ------- -------
Balance, March 31 - - 220,838
======= ======= =======
3 Inventories
(a) The components of inventories are as follows:
2001 2002
$ $
Raw materials 3,611,961 4,287,203
Work in progress 1,125,138 1,012,311
Finished goods 913,265 4,131,054
--------- ---------
5,650,364 9,430,568
Inventories reserves (339,475) (568,616)
--------- ---------
5,310,889 8,861,952
========= =========
(b) Changes in the inventories reserves consist of the following:
2000 2001 2002
$ $ $
Balance, April 1 195,321 323,126 339,475
Additions charged to expense 127,805 210,362 229,141
Write-off - (194,013) -
-------- -------- --------
Balance, March 31 323,126 339,475 568,616
======== ======== ========
21
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
4 Long-term debt
Long-term debt is denominated in Renminbi and consists of the following:
March 31
---------------------------
2001 2002
$ $
Bank loans at 5.3% per annum 68,683 30,231
Less: current portion (38,452) (30,231)
------- -------
Long-term debt, less current maturities 30,231 -
======= =======
5 Taxation
(a) The companies comprising the Group are subject to tax on an entity basis on
income arising in or derived from Hong Kong, the PRC and Germany. The
current rates of taxation of the subsidiaries operating in Hong Kong and,
Shenzhen in the PRC are 16% and 15% respectively. The statutory corporate
tax rate in Germany is 26.375%. The subsidiary of the Group in Germany is
registered as a partnership in Germany which is subject to a statutory rate
of 14.17%. The Group is not subject to income taxes in the British Virgin
Islands.
(b) Pursuant to the relevant income tax laws in the PRC, Bonso Electronics
(Shenzhen) Co., Ltd, a wholly owned subsidiary of the Company, is fully
exempt from PRC state income tax for two years starting from the first
profit-making year followed by a 50% reduction over the ensuing three
years. The first profit-making year of Bonso Electronics (Shenzhen) Co.,
Ltd. was deemed to be the financial year ended December 31, 1998.
(c) The components of the income tax benefit/(expense) are as follows:
2000 2001 2002
$ $ $
Deferred income tax benefit/(expense) 13,898 (28,937) 14,206
Current income tax expense (10,497) (95,806) (204,168)
-------- -------- --------
Total income tax benefit/(expense) 3,401 (124,743) (189,962)
======== ======== ========
22
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
5 Taxation (Continued)
(d) Deferred tax assets are comprised of the following:
2001 2002
$ $
Deferred tax liabilities
Accelerated depreciation (852) (7,147)
Deferred tax assets
Tax loss carry forwards 98,246 85,503
Provision for inventories 10,190 43,434
Valuation allowance (10,149) (10,149)
98,287 118,788
------- -------
Net deferred tax assets 97,435 111,641
Less: current portion 10,190 27,219
------- -------
Non current portion 87,245 84,422
======= =======
As of March 31, 2002, the Group had accumulated tax losses amounting to
$527,305 (the tax effect thereon is $85,503), which may be carried forward
and applied to reduce future taxable income which is earned in or derived
from Hong Kong. Realization of deferred tax assets associated with tax loss
carry forwards is dependent upon generating sufficient taxable income prior
to their expiration. A valuation allowance is established against such tax
losses when management believes it is more likely than not that a portion
may not be utilized by the Group. The valuation allowance carried forward
relates to previous tax losses incurred by a currently dormant subsidiary.
As of March 31, 2002, the Group's accumulated tax losses have no definite
period of expiration.
(e) Changes in the valuation allowance consist of:
2000 2001 2002
$ $ $
Balance, April 1 34,693 15,420 10,149
Reduction credited to income tax
expense (337) (5,271) -
Release of valuation allowance upon:
- approval of losses by tax authorities (18,936) - -
-------- -------- --------
Balance, March 31 15,420 10,149 10,149
======== ======== ========
23
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
5 Taxation (Continued)
(f) The actual income tax benefit/(expense) attributable to earnings for the
years ended March 31, 2000, 2001 and 2002 differed from the amounts
computed by applying the Hong Kong statutory tax rate in accordance with
the relevant income tax law as a result of the following:
2000 2001 2002
$ $ $
Hong Kong statutory tax rate 16.0% 16.0% 16.0%
Income tax expense at the Hong
Kong statutory tax rate (55,088) (276,567) (319,291)
Offshore profit not subject to income tax 77,672 171,520 197,676
Expenses not deductible for income tax
purposes (24,365) (13,480) (48,049)
Valuation allowance on tax loss 19,273 5,271 -
Over/(under) provision for Hong Kong
tax in prior years (5,200) 3,194 (18,803)
Other (8,891) (14,681) (1,495)
----- ----- -----
Total income tax benefit/(expense) 3,401 (124,743) (189,962)
----- ----- -----
6 Leases
(a) Capital leases
Motor vehicles and plant and machinery include the following amounts for
capitalized leases:
Motor vehicles Plant and machinery
------------------ -----------------------
March 31 March 31
------------------ -----------------------
2001 2002 2001 2002
$ $ $ $
Cost 59,513 110,065 1,975,887 2,626,620
Less: accumulated amortization 20,830 7,338 532,831 999,432
--------- --------- --------- ---------
38,683 102,727 1,443,056 1,627,188
========= ========= ========= =========
24
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
6 Leases (Continued)
(a) (Continued)
During the years ended March 31, 2000, 2001 and 2002, the Group entered
into additional capital lease obligations amounting to $1,540,608, $Nil and
$743,821 respectively.
Future minimum payments for capital leases as of March 31, 2002 with an
initial term of more than one year are as follows:
$
2003 698,618
2004 278,445
2005 76,674
---------
Total minimum lease payments 1,053,737
Less: amount representing interest (119,458)
---------
Present value of net minimum lease payments (including
current portion of $617,270, as of March 31, 2002) 934,279
=========
(b) Operating leases
As of March 31, 2002, future minimum lease commitments in respect of
noncancellable operating leases for factory, office premises and staff
quarters in Hong Kong, the PRC and Germany are as follows:
$
2003 256,176
2004 110,977
2005 75,179
2006 68,853
2007 65,751
Thereafter 318,921
-------
895,857
=======
Rent expense for all operating leases amounted to $84,749, $123,124 and
$286,351 for the years ended March 31, 2000, 2001 and 2002, respectively.
25
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
7 Banking facilities
As of March 31, 2002, the Group had general banking facilities for bank
overdrafts, letters of credit, notes payable, short-term loans and
long-term loans. The facilities are interchangeable with total amounts
available of $25,430,340 (2001: $14,555,862). The general banking
facilities utilitized by the Group are denominated in Hong Kong dollars,
Renminbi, Japanese Yen and Euro.
The Group's general banking facilities, expressed in United States Dollars,
are further analyzed as follows:
Terms of banking
facilities as of
Amount available Amount utilized March 31, 2002
----------------------- ---------------------- ------------------------------
March 31 March 31
----------------------- ----------------------
2001 2002 2001 2002 Interest Repayment
$ $ $ $ rate terms
Import and export
facilities
Letters of credit 7,179,487 12,012,821 4,749,698 3,308,973
Including sublimit
of:
Notes payable 7,179,487 12,012,821 3,234,897 2,857,533 Prime rate Repayable in
minus 0.25% full within
to Prime rate four months
or HIBOR
+2.5%
Short-term loans 5,384,615 11,656,519 1,086,949 3,754,477 Prime rate Repayable in
minus 0.25% full within
to Prime rate three months
or HIBOR
+2.5% or at
fixed rate
of 8%
Other facilities
Bank overdrafts 1,923,077 1,730,769 - - Prime rate Repayable
or HIBOR on demand
+0.5% to
Prime rate
plus 0.5%
Long-term loans 68,683 30,231 68,683 30,231 Fixed rate Repayable by
(Note 4) of 5.3% 9 monthly
instalments
---------- ---------- ---------- ----------
14,555,862 25,430,340 5,905,330 7,093,681
========== ========== ========== ==========
26
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
7 Banking facilities (Continued)
The amount of banking facilities utilized by the Group are denominated in
the following currency:
Amount utilized
---------------
March
31
2001 2002
$ $
Euro -- 2,846,593
Hong Kong dollars 1,719,659 1,712,006
Japanese Yen 69,952 198,755
Renminbi 68,683 30,231
United States dollars 4,047,036 2,306,096
--------- ---------
5,905,330 7,093,681
========= =========
The Prime rate and HIBOR rate were 5.13% and 2.19% per annum, respectively,
as of March 31, 2002. The Prime rate is determined by the Hong Kong Bankers
Association and is subject to revision from time to time.
The banking facilities are collateralized by the following:
(a) a legal charge over leasehold properties of the Group with net book
value of $3,942,336 (2001: $3,967,190); and
(b) bank guarantee of $5,129,908 (2001:$150,000) and restricted cash
deposits of $3,972,542 (2001: $2,873,898). The restricted cash
deposits have original maturities of less than three months.
The weighted average interest rate of short-term borrowings of the Group is
as follows:
Year ended March 31
------------------------
2001 2002
Bank overdrafts 9.3% 6.5%
Notes payable 8.6% 5.9%
Short-term loans 8.6% 5.9%
27
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
8 Related party transactions
(a) The Group paid emoluments, commissions and/or consultancy fees to its
directors as follows:
Year ended Mr So Hung Gun, Ms Pang Kit Mr Chung Kim Mr Luk Kam
March 31 Anthony Teng, Cathy Wah Sun
-------- --------------- ----------- ------------- ----------
2000 $553,718 (iii) $103,744 $128,854(ii) $106,923(iv)
2001 $559,672 (iii) $106,359 $137,285(ii) $20,816(iv)
2002 $559,672 (iii) $109,497 $140,016(ii) N/A
Mr Fok Woo Mr George Mr J Stewart Mr Henry
Ping O'Leary Jackson Schlueter
------------- ----------- ------------- ----------
2000 Nil $136,286(i) Nil N/A
2001 Nil $170,134(i) Nil N/A
2002 Nil $165,000(i) Nil $108,379(v)
(i) This represented commissions and consultancy fee paid to Mr George
O'Leary. Mr O'Leary received commissions on orders placed by customers
which he obtained for the Group for the years ended March 31, 2000 and
2001. Since April 1, 2001, a monthly consultancy fee was paid to Mr.
O'Leary for provision of support and marketing services in the United
States.
(ii) Included in the emoluments is a housing allowance for $38,462 for each
of the three years in the period ended March 31, 2002 payable to a
company in which Mr Chung Kim Wah has a beneficial interest.
(iii) Apart from the emoluments paid by the Group as above, one of the
properties of the Group in Hong Kong is also provided to Mr So Hung
Gun, Anthony as part of his compensation.
(iv) Mr Luk Kam Sun resigned as a director of the Company on April 3, 2000.
(v) Mr Henry Schlueter was appointed as a director of the Company on
October 10, 2001. The amount for the year ended March 31, 2002
represented professional fee paid to Schlueter & Associates, P.C., the
Group's SEC counsel in which Mr Henry Schlueter is one of the
principals.
(b) Promissory note receivable from shareholder
On March 27, 1998, Advantage List & Marketing Corporation ("ALMC")
subscribed for 200,000 shares of common stock of the Company at a price of
$6.75 per share which represented the fair market value at the date of
subscription, in exchange for ALMC's promissory note of $1,470,000. On the
same date, ALMC entered into a pledge agreement simultaneously under which
ALMC agreed to pledge the common stock to the Company as security for the
payment of the promissory note. The promissory note is with full recourse,
interest free and was fully repayable on or before September 27, 2000. On
September 17, 1998, a total of 200,000 shares of common stock were issued
and the shares were held by the Company as security for payment of the
promissory note. The promissory note was recorded at its discounted value
of $1,350,000. Interest of $80,000 accrued thereon in the year ended March
31, 1999 has been included in additional paid in capital. On November 10,
1999, the Company has entered into an agreement with ALMC to rescind the
previous share subscription such that in April 2000, the 200,000 shares of
common stock of the Company held by ALMC were returned to the Company in
exchange for cancellation of the promissory note of $1,470,000. The 200,000
shares of common stock were cancelled in 2002 and returned to the status of
authorized but unissued shares.
28
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
9 Provident fund plan
(a) With effect from January 1, 1988, Bonso Electronics Limited ("BEL"), a
wholly-owned foreign subsidiary of the Company, implemented a defined
contribution plan (the "Plan") with a major international assurance company
to provide life insurance and retirement benefits for its employees. All
permanent full time employees who joined BEL before December 2000,
excluding factory workers, are eligible to join the provident fund plan.
The Mandatory Provident Fund (the "MPF") was introduced by the Hong Kong
Government, and commenced in December 2000. BEL joined the MPF by
implementing a Plan with a major international assurance company. All
permanent Hong Kong full time employees who joined BEL in or after December
2000, excluding factory workers, are eligible to join the MPF.
(b) Members of the Plan are required to contribute 5% of their monthly salary.
The contribution by BEL is as follows:
Years of service % of salary as BEL's contribution
---------------- ---------------------------------
Less than 5 years 5.0%
5 to 10 years 7.5%
More than 10 years 10.0%
Members' and employers' contributions to the MPF are both at 5% of the
members' monthly salaries and are subject to a maximum contribution of
HK$1,000 monthly.
(b) At normal retirement age, death or ill health, the member shall be entitled
to receive from the Plan a lump sum equal to the total of the member's and
BEL's contributions plus a return on their investment. On resignation prior
to normal retirement age, a member shall be entitled to receive from the
Plan a lump sum equal to the member's contributions plus a percentage of
the employer's balance determined in accordance with a predetermined set
scale.
On resignation or at normal retirement age, death or ill health, the member
of the MPF shall be entitled to a lump sum equal to the total of the
member's and BEL's contributions plus a return on their investment.
(c) BEL's total contributions to the Plan and the MPF for the years ended March
31, 2000, 2001 and 2002 amounted to $64,921, $53,704 and $78,995
respectively.
29
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
10 Business acquisition
Effective May 1, 2001, the Group acquired 100% of the equity of Korona from
Augusta. Korona is a German company engaged in the distribution of
electronic scales in Europe.
The acquisition was accounted for using the purchase method of accounting.
Under purchase accounting, the total purchase price has been allocated to
the acquired assets and liabilities of Korona based on management's best
estimate of the fair value of assets acquired and the liabilities assumed
as of May 1, 2001. Due to legal restrictions on the timing of the transfer
of the title of certain assets, the net assets purchased included a
warehouse and an investment in a wholly owned subsidiary of Korona. As
required under the terms of the sale and purchase agreement, in June and
July 2001, respectively, Augusta repurchased the warehouse and the
investment from Korona at their approximate net book values for cash.
The purchase consideration included cash consideration of $2,730,000 and
common stock consideration by issuance of 180,726 shares of restricted
common stock based on an agreed-upon price of $8.00 per share pursuant to
the Stock Purchase Agreement (the "Agreement") with Augusta. For accounting
purposes, the issue of the shares was originally recorded at the value of
$5.00 per share, based on the average price per share for a total of 5 days
before and after the completion date of the acquisition. Under the terms of
the Agreement the Company had an obligation to register the common stock
with the United States Securities and Exchange Commission (the "SEC"). The
Agreement gave Augusta the right to redeem the common stock if the
registration of the stock had not cleared the SEC by January 31, 2002. The
Company 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 the Company 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 result in an interest cost of approximately $50,000 for the
whole period of the promissory note.
After seeking advice from its legal counsel, the Company believes that it
has strong grounds for rejecting the request for the return of the shares
and is currently in negotiations with Augusta regarding this matter . The
common shares originally issued have not yet been redeemed.
As the redemption option was exercised by Augusta prior to March 31, 2002,
the Group has adjusted the carrying amount of the redeemable common stock
to the full redemption amount, The adjustment of $542,178 accrete to the
value of the promissory note of $1,445,808, was treated as an adjustment to
the original purchase price and resulted in the recognition of goodwill.
Any final amendment to the redemption amount resulting from the current
negotiations with Augusta will result in a subsequent adjustment to this
goodwill amount.
30
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
10 Business acquisition (continued)
The allocation of the purchase price is as follows:
$
Cash consideration 2,730,000
Common stock consideration 1,445,808
Less: Fair value of net assets acquired (1,294,512)
Less: Fair value of brand name (3,000,000)
Less: Cash received for the warehouse and investment (1,176,975)
Plus: Book value of warehouse and investment 1,176,975
Plus: Transaction and closing costs 322,921
----------
Goodwill 204,217
==========
The goodwill above arose on March 31,2002 and no amortization charge was
incurred during the current financial year.
The following unaudited pro forma consolidated summary of operations
presents information of the Group's results as if the acquisition occurred
on April 1, 2000:
2001 2002
$ $
(unaudited)
Net sales 44,544,079 54,251,315
Net income 309,297 2,016,267
Basic earnings per share 0.05 0.36
Diluted earnings per share 0.05 0.35
Shares used in per share calculation:
Basic 5,745,262 5,624,448
Diluted 5,860,637 5,690,380
These unaudited pro forma results have been prepared for comparative
purposes only. They do not purport to be indicative of the results of
operations which actually would have been resulted had the acquisition
occurred on April 1, 2000 or of future results of operations of the
consolidated entities.
11 Commitments and contingencies
(a) As of March 31, 2002, the Group had commitments to acquire plant and
machineries from third parties for an aggregate consideration of $17,820
(2001: $198,164) of which $16,038 (2001: $70,511) had been paid as
deposits.
(b) Apart from the dispute with Augusta as discussed in Note 10, the Group has
no other contingent liabilities as at March 31, 2002.
31
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
12 Earnings per share
Year ended March 31
----------------------------------
2000 2001 2002
$ $ $
Income available to common
shareholders 347,698 1,603,799 1,805,606
Weighted average shares outstanding 3,515,690 5,564,536 5,586,920
Incremental shares from assumed
exercise of:
Warrants 33,838 48,547 -
Stock options 428,551 66,828 65,932
--------- --------- ---------
Dilutive potential common shares 462,389 115,375 65,932
--------- --------- ---------
Diluted weighted average shares 3,978,079 5,679,911 5,652,852
========= ========= =========
Basic earnings per share $0.10 $0.29 $0.32
Diluted earnings per share $0.09 $0.28 $0.32
Basic earnings per share are computed by dividing net income available to
common shareholders by the weighted average number of shares of common
stock issued and outstanding. Diluted earnings per share is computed in a
manner consistent with that of basic earnings per share while giving effect
to all potentially dilutive shares of common stock that were outstanding
during the period, including warrants and stock options.
Options to purchase 30,000 shares, 228,000 shares and 20,000 shares of
common stock at $7.875, $8.00 and $8.125 per share respectively were
outstanding during the fiscal year ended March 31, 2002 but were not
included in the calculation of diluted earnings per share during the year
ended March 31, 2002 due to their anti-dilutive effect.
Warrants to purchase 1,087,201 shares and 200,000 shares of common stock at
$17.35 and $8.00 per share respectively were outstanding during the fiscal
year ended March 31, 2002 but were not included in the calculation of
diluted earnings per share during the year ended March 31, 2002 due to
their anti-dilutive effect.
13 Shareholders' equity
(a) Repurchase of common stock
In June 2000, the Board of Directors authorized the repurchase of the
common stock of the Company up to a total consideration of $1,000,000. The
Board of Directors believed that the common stock was undervalued, and that
the repurchase of common stock would be beneficial to the Company's
shareholders. At various times from July 2000 to November 2000, the Company
repurchased 123,500 shares of the Company's common stock, at an average
cost of $7.78 per share, for a total cost of $960,249.
In December 2000, the Board of Directors further authorized the repurchase
of 25,000 shares of the common stock of the Company. The Board of Directors
believed that the common stock was undervalued, and that the repurchase of
common stock would be beneficial to the Company's shareholders.
Subsequently in December 2000, the Company repurchased 25,000 shares of the
Company's common stock, at an average cost of $9.00 per share, for a total
cost of $225,000.
In March 2001, 73,500 shares of the repurchased common stock have been
cancelled, and returned to the status of authorized but unissued shares.
The remaining 75,000 repurchased shares of the common stock were cancelled
and returned to the status of authorized but unissued shares in May 2001.
32
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
13 Shareholders' equity (continued)
(a) Repurchase of common stock (continued)
In April 2001, the Board of Directors authorized the repurchase of the
common stock of the Company up to a total consideration of $500,000. The
Board of Directors believed that the common stock was undervalued, and that
the repurchase of common stock would be beneficial to the Company's
shareholders. During April 2001 to October 2001, the Company repurchased
17,000 shares of the Company's common stock at an average cost of $6.05 per
share, for a total cost of $102,934.
In October 2001 and March 2002, 15,000 shares and 2,000 shares of the
repurchased common stock have been cancelled, and returned to the status of
authorized but unissued shares respectively.
(b) Preferred stock
On October 10, 2001, the Company's Memorandum and Articles of Association
were amended such that the authorized share capital of the Company was
increased by $100,000 by the creation of 10,000,000 shares of preferred
stock, with par value of $0.01 each, divided into 2,500,000 shares each of
class A preferred stock, class B preferred stock, class C preferred stock
and class D preferred stock. Shares may be issued within each class from
time to time by the Company's board of directors in its sole discretion
without the approval of the shareholders with such designations, power,
preferences, rights, qualifications, limitation and restrictions as the
Board of Directors shall fix and as have not been fixed in the Company's
Memorandum of Association. The Company has not issued any shares of
preferred stock up to March 31, 2002.
14 Stock option plan
(a) In October 1996, the Board of Directors approved the 1996 Stock Option Plan
and 1996 Non-Employee Directors' Stock Option Plan. Under the 1996 Stock
Option Plan, the Company may grant options of common stock to certain
employees and directors of the Company for a maximum of 400,000 shares. The
1996 Stock Option Plan is administered by a committee appointed by the
Board of Directors which determines the terms of options granted, including
the exercise price, the option periods and the number of shares to be
subject to each option. The exercise price of options granted under the
1996 Stock Option Plan may be less than the fair market value of the common
shares on the date of grant. The maximum term of options granted under the
1996 Stock Option Plan is 10 years. The right to acquire the common shares
is not assignable except for certain conditions stipulated in the 1996
Stock Option Plan.
In January 1997, the Company granted options to three directors to purchase
an aggregate of 375,000 shares of common stock of the Company at an
exercise price of $2.00 per share, which was equal to the market value on
the date of grant, in accordance with the 1996 Stock Option Plan. The
options shall expire on January 31, 2007 and can be exercised at any time
immediately after granting. All of the options were exercised during the
year ended March 31, 2000 to purchase 337,264 shares of common stock of the
Company.
In January 1998, the Company granted options to an employee to purchase an
aggregate of 25,000 shares of common stock of the Company at an exercise
price of $6.20 per share which was greater than the market value on the
date of grant, in accordance with the 1996 Stock Option Plan. The options
shall expire on January 1, 2008 and can be exercised at any time
immediately after granting. All of the options were exercised during the
year ended March 31, 2000 to purchase 17,201 shares of common stock of the
Company.
In January 2000, the maximum number of share options which can be granted
under the 1996 Stock Option Plan was increased from 400,000 units to
900,000 units.
33
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
14 Stock option plan (Continued)
(a) (Continued)
In January 2000, the Company granted options to certain employees to
purchase an aggregate of 23,700 shares of common stock of the Company at an
exercise price of $8.00 per share, which was equal to the market value on
the date of grant, in accordance with the 1996 Stock Option Plan. The
options shall expire on January 6, 2010 and can be exercised at any time
immediately after granting. None of the options were exercised during the
year ended March 31, 2000, and 13,700 stock options were exercised to
purchase 7,023 shares of common stock of the Company during the year ended
March 31, 2001. None of the options have been exercised during the year
ended March 31, 2002.
The stock options outstanding in respect of the 1996 Stock Option Plan as
of March 31, 2002 is summarized as follows:
Average per share
-------------------
Number Exercise Market
of shares price price
Balance, March 31, 1999 400,000 $2.26 $2.26
Exercised during the year (400,000) $2.26 $2.26
Granted 23,700 $8.00 $8.00
-------- -------- --------
Balance, March 31, 2000 23,700 $8.00 $8.00
Exercised during the year (13,700) $8.00 $8.00
-------- -------- --------
Balance March 31, 2001 and 2002 10,000 $8.00 $8.00
======== ======== ========
Under the 1996 Non-Employee Directors' Stock Option Plan, the non-employee
directors are automatically granted stock options on the third business day
following the day of each annual general meeting of the Company to purchase
an aggregate of 100,000 shares of common stock. The exercise price of all
options granted under the 1996 Non-Employee Directors' Stock Option Plan
shall be one hundred percent of the fair market value per share of the
common shares on the date of grant. The maximum term of options granted
under the 1996 Non-Employee Directors' Stock Option Plan is 10 years. No
stock option may be exercised during the first six months of its term
except for certain conditions provided in the 1996 Non-Employee Directors'
Stock Option Plan. The right to acquire the common shares is not assignable
except for under certain conditions stipulated in the 1996 Non-Employee
Directors' Stock Option Plan.
In October 1996, the Company issued options to three non-employee directors
in accordance with the 1996 Non-Employee Directors' Stock Option Plan to
purchase an aggregate of 30,000 shares of common stock of the Company at an
exercise price of $2.25 per share, which was equal to the market value on
the date of grant. The options shall expire October 16, 2006 and can be
exercised at any time after granting. During the years ended on March 31,
2000 and 2001, 10,000 and 20,000 stock options were exercised to purchase
10,000 and 18,868 shares of common stock of the Company respectively.
In September 1997, the Company issued options to four non-employee
directors in accordance with the 1996 Non-Employee Directors' Stock Option
Plan to purchase an aggregate of 40,000 shares of common stock of the
Company at an exercise price of $5.06 per share, which was equal to the
market value on the date of grant. The options shall expire on September 8,
2007 and can be exercised at any time after granting. During the year ended
March 31, 2000, 30,000 stock options were exercised to purchase 22,362
shares of common stock of the Company. The remaining 10,000 stock options
was cancelled following the resignation of Mr Ray Mehra as a director of
the Company on January 2, 1998.
34
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
14 Stock option plan (Continued)
(a) (Continued)
No annual general meeting was held by the Company for the year 1998 and
therefore no stock option was granted in accordance with the 1996
Non-Employee Directors' Stock Option Plan during the year ended March 31,
1999.
In January 2000, the maximum number of share options which can be granted
under the 1996 Non-Employee Directors' Stock Option Plan was increased from
100,000 units to 600,000 units.
In January 2000, the Company issued options to two non-employee directors
in accordance with the 1996 Non-Employee Directors' Stock Option Plan to
purchase an aggregate of 20,000 shares of the common stock of the Company
at an exercise price of $8.125 per share, which was equal to the market
value on the date of grant. The options shall expire on January 12, 2010
and can be exercised at any time immediately after granting. None of the
options has been exercised during the years ended March 31, 2001 and 2002.
In January 2001, the Company issued options to three non-employee directors
in accordance with the 1996 Non-Employee Directors' Stock Option Plan to
purchase an aggregate of 30,000 shares of the common stock of the Company
at an exercise price of $7.875 per share, which was equal to the market
value on the date of grant. The options shall expire on January 9, 2011 and
can be exercised at any time after granting. None of the options has been
exercised during the years ended up to March 31, 2001 and 2002.
The stock options activity in respect of the 1996 Non-Employee Directors'
Stock Option Plan as of March 31, 2002 is summarized as follows:
Average per share
--------------------
Number Exercise Market
f shares price price
Balance, March 31, 1999 60,000 $4.12 $4.12
Exercised during the year (50,000) $3.936 $3.936
Granted 20,000 $8.125 $8.125
------- ------- -------
Balance, March 31, 2000 30,000 $7.103 $7.103
Granted 30,000 $7.875 $7.875
------- ------- -------
Balance, March 31, 2001 and 2002 60,000 $7.489 $7.489
======= ======= =======
35
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
14 Stock option plan (Continued)
(b) In January 1997, the Company granted options to three non-employee
directors to purchase an aggregate of 100,000 shares of common stock of the
Company. The exercise price is $2.00 per share, which equaled the market
value of the Company's common stock on the date of grant. The options shall
expire on January 31, 2007 and can be exercised at any time immediately
after granting. During the years ended March 31, 1999 and March 31, 2000,
55,000 and 45,000 options were exercised to purchase 55,000 and 41,981
shares of common stock of the Company respectively.
The stock options summary as of March 31, 2002 is summarized as follows:
Average per share
-------------------
Number Exercise Market
of shares price price
Balance, March 31, 1999 45,000 $2.00 $2.00
Exercised during the year (45,000) $2.00 $2.00
------- ------- -------
Balance, March 31, 2000, 2001 and
2002 - - -
======= ======= =======
(c) At various times in January 1998, the Company issued options to the
directors and an employee of the Company to purchase an aggregate of
195,000 shares of common stock of the Company at an exercise price of $6.20
per share. The options shall expire in January 2008 and can be exercised at
any time after granting. The exercise prices of these options were equal to
or greater than the fair market value at the time of grant. No options were
exercised during the years ended March 31, 1998 and 1999, and all of the
195,000 options were exercised to purchase 134,174 shares of common stock
of the Company during the year ended March 31, 2000.
The stock options summary as of March 31, 2002 is summarized as follows:
Average per share
-------------------
Number Exercise Market
of shares price Price
Balance, March 31, 1999 195,000 $6.20 $6.20
Exercised during the year (195,000) $6.20 $6.20
-------- -------- --------
Balance, March 31, 2000, 2001 and
2002 - - -
======== ======== ========
36
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
14 Stock option plan (Continued)
(d) In October 1998, the Company issued options to the directors, non-employee
directors and certain employees of the Company to purchase an aggregate of
430,000 shares of common stock of the Company at an exercise price of $3.60
to $3.70. The options shall expire in October 2008 and can be exercised at
any time after granting. The exercise prices of these options were greater
than the market value on the time of grant. No options were exercised
during the year ended March 31, 1999, and all of the 430,000 stock options
were exercised to purchase 347,825 shares of common stock of the Company
during the year ended March 31, 2000.
The stock options summary as of March 31, 2002 is summarized as follows:
Average per share
-------------------
Number Exercise Market
of shares price price
Balance, March 31, 1999 430,000 $3.60 $3.60
Exercise during the year (430,000) $3.60 $3.60
----- ---- ----
Balance, March 31, 2000, 2001 and
2002 - - -
----- ---- ----
(e) In January 2000, the Company issued options to the directors and an
employee to purchase an aggregate of 218,000 shares of common stock of the
Company at an exercise price of US$8.00. The options shall expire on
January 6, 2010 and can be exercised at any time after granting. The
exercise prices of these options were equal to the fair market value at the
time of grant. No options have been exercised during the years ended March
31, 2001 and 2002.
The stock options summary as of March 31, 2002 is summarized as follows:
Average per share
--------------------
Number Exercise Market
of shares price price
Balance, March 31, 1999 - - -
Granted 218,000 $8.00 $8.00
----- ----- -----
Balance, March 31, 2000, 2001 and
2002 218,000 $8.00 $8.00
----- ----- -----
(f) In April 2001, the Company issued options to certain directors and certain
employees of the Company to purchase an aggregate of 196,000 shares of
common stock of the Company at an exercise price of US$3.65. The options
shall expire on April 9, 2011 and can be exercised at any time after
granting. The exercise prices of these options were equal to the fair
market value at the time of grant. No options have been exercised during
the year ended March 31, 2002.
37
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
14 Stock option plan (Continued)
(f) (Continued)
In October 2001, the Company issued options to certain non-employee
directors to purchase an aggregate of 30,000 shares of common stock of the
Company at an exercise price of US$2.55. The options shall expire on
October 15, 2011 and can be exercised at any time after granting. The
exercise prices of these options were equal to the fair market value at the
time of grant. No options have been exercised during the year ended March
31, 2002.
In March 2002, the Company issued options to certain directors to purchase
an aggregate of 168,000 shares of common stock of the Company at an
exercise price of US$2.50. The options shall expire on March 6, 2012 and
can be exercised at any time after granting. The exercise prices of these
options were equal to the fair market value at the time of grant. No
options have been exercised during the year ended March 31, 2002.
The stock options summary as of March 31, 2002 for those granted during the
year is summarized as follows:
Average per share
-----------------
Number Exercise Market
of shares price price
Balance, March 31, 1999, 2000 and 2001
- - -
Granted 196,000 $3.65 $3.65
Granted 30,000 $2.55 $2.55
Granted 168,000 $2.50 $2.50
------- ------- -------
Balance, March 31, 2002 394,000 $3.08 $3.08
======= ======= =======
(g) The following table summarizes the information about all stock options of
the Company outstanding at March 31, 2002:
Weighted
Number average Exercisable
Weighted average outstanding at remaining life shares at
exercise price March 31, 2002 (years) March 31, 2002
-------------- -------------- ------- --------------
$2.50 168,000 9.9 168,000
$2.55 30,000 9.5 30,000
$3.65 196,000 9.0 196,000
$7.875 30,000 9.8 30,000
$8.00 228,000 8.8 228,000
$8.125 20,000 8.8 20,000
------- -------
$5.11 672,000 8.8 672,000
======= =======
38
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
14 Stock option plan (Continued)
(h) The Company applies Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its employee stock options. Under APB Opinion No. 25, as the
exercise price of all the options issued by the Company equals or is higher
than the market price of the underlying stock on the date of grant, no
compensation expense has been recognized for the years ended March 31,
2000, 2001 and 2002.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123 "Accounting for Stock-Based Compensation", and has
been determined as if the Company had accounted for its employee stock
options under the fair value method of SFAS No. 123. The weighted average
fair value of options granted during the years ended March 31, 2000, 2001
and 2002 were $1,880,621, $153,988 and $939,314, respectively. The fair
value for these options was estimated at the date of grant using a
Black-Scholes Option Valuation model with the following weighted-average
assumptions for the year ended March 31, 2000, 2001 and 2002 are as
follows:
2000 2001 2002
$ $ $
Weighted risk-free interest rate 6.30% 4.70% 4.55%
Dividend yield - - -
Weighted volatility factor of the expected
market
price of the Company's common share 93.00% 76.30% 102.35%
Weighted average expected life of the option 10 years 5 years 5 years
For purposes of pro forma disclosure, the estimated fair value of the
options is charged to net income of respective years. The Group pro forma
information follows:
2000 2001 2002
$ $ $
Net income
As reported 347,698 1,603,799 1,805,606
Pro forma (1,532,923) 1,449,811 866,292
Basis earnings/(losses) per share
As reported $0.10 $0.29 $0.32
Pro forma $(0.44) $0.26 $0.16
Diluted earnings/(losses) per share
As reported $ 0.09 $0.28 $0.32
Pro forma $(0.39) $0.26 $0.15
39
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
15 Warrants
(a) As a result of the Company's second public offering in December 1994, the
Company issued 2,200,000 five-year warrants to its public shareholders.
Each warrant entitled the holder thereof to purchase one share of common
stock of the Company at $7.35 per share, which was equal to the market
price on the date. The warrants should expire on January 31, 2001. The
warrants were redeemable by the Company at $0.05 per warrant upon 30 to 45
days notice at any time after December 14, 1995, or such earlier date as
the representatives of the underwriters may determine, if the closing price
per share of common stock of the Company for 20 consecutive trading days
within the 30-day period prior to the date of notice of redemption is given
equals or exceeds $8.575 per share. A total of 25,597 warrants and
1,673,776 warrants were exercised to purchase 25,597 shares and 1,673,776
shares of common stock of the Company at $7.35 per share during the years
ended March 31, 1999 and March 31, 2000 respectively. The remaining 500,627
warrants expired on January 31, 2001.
(b) In conjunction with the second public offering, the Company issued warrants
to the representatives of the underwriters (the "Representatives'
Warrants") to purchase from the Company up to an aggregate of 110,000 units
at an exercise price of $9.1875 per unit which was equal to the market
price on that date; each unit consists of one share of common stock and two
five-year warrants of the Company. The Representatives' Warrants expired on
January 31, 2000. Upon any transfer to a person other than an officer,
shareholder or director of the representatives of the underwriters, the
transferred or exercised five-year warrants must be exercised immediately
or they will lapse. No warrants were transferred and exercised and the
warrants expired on January 31, 2000.
(c) On January 5, 2000, the Company declared a one-for-one warrant dividend on
all warrants which either were outstanding as of the close of trading on
January 19, 2000 or which were exercised during the period commencing on
November 22, 1999 and ending at the close of trading on January 19, 2000. A
total of 2,174,403 new warrants were issued accordingly on June 1, 2000. No
warrants have been exercised during the year ended March 31, 2001. Each two
new warrants were exercisable to purchase 1 share of common stock of the
Company at an exercise price of $17.50, which was equal to the market price
on that date. The warrants originally expired on December 31, 2001 but the
board of directors, in October 2001, extended the expiration date until
December 31, 2002. No warrants have been exercised during the years ended
March 31, 2001 or 2002.
(d) On January 14, 2000, the Company has entered into an agreement with Profit
Concepts Limited ("Profit Concepts"), which provides consulting services to
the Company. The agreement provides for the issuance by the Company to
Profit Concepts of non-callable warrants to purchase 250,000 shares of the
Company's common stock at $8.00 per share, which was equal to the market
price on that date. Profit Concepts is engaged in the provision of advisory
services for equity fund raising exercise of the Company and the warrants
are exercisable for a period of three years from January 14, 2000. No
warrants were exercised up to March 31, 2000 and 50,000 warrants were
exercised to purchase 50,000 shares of common stock of the Company at $8.00
per share during the year ended March 31, 2001. No warrants have been
exercised during the year ended March 31, 2002.
The fair value of the warrants on the date of issue was US$1,144,260 and is
being recognized as consultancy fee in the Consolidated Statements of
Income and Comprehensive Income on a straight-line basis over the period of
services by Profit Concepts which commenced on July 1, 2000 and concludes
on January 13, 2003. The consultancy fee charged to the Consolidated
Statements of Income and Comprehensive Income amounted to $0, $381,420 and
$381,420 for the years ended March 31, 2000, 2001 and 2002 respectively.
40
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
16 Business segment information
(a) The Group is organized based on the products it offers. Under this
organizational structure, the Group's operation can be classified into four
business segments, Scales, Telecommunications products, Health care
products and Other.
Scales operations principally involve production and marketing of sensor
based scales products. These included bathroom, kitchen, office, jewellery,
laboratory, postal and industrial scales that are used in consumer,
commercial and industrial applications.
Telecommunications products operation principally involved production and
modification of two-way radios and cordless telephones that are used in
consumer and commercial applications.
Health care products operation principally involved production of
thermometers and blood pressure meters used by consumers.
The company established the "Other" segment which principally includes the
activities of (i) tooling and mould charges for scales and
telecommunication products, (ii) supporting service to customer including
perform repairing work for customers and sales of spare parts.
The accounting policies of the Group's reportable segments are the same as
those described in description of business and significant accounting
policies.
41
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
16 Business segment information (continued)
Summarized financial information by business segment for 2000, 2001 and
2002 is as follows:
Identifiable Depreciation
Net Operating assets as of and Capital
sales profit/(loss) March 31 amortization expenditure
----- ------------- -------- ------------ -----------
$ $ $ $ $
2002
Scales 33,451,978 6,990,999 21,403,551 1,266,122 919,550
Telecommunication products 17,359,570 821,153 6,677,075 1,109,584 610,533
Health care products 81,660 1,110 2,499 233 202
Other 2,409,893 1,762,854 3,967,575 370,670 320,493
---------- ---------- ---------- ---------- ----------
Total operating segments 53,303,101 9,576,116 32,050,700 2,746,609 1,850,778
Corporate - (6,862,124) 12,400,377 541,306 934,993
---------- ---------- ---------- ---------- ----------
Group 53,303,101 2,713,992 44,451,077 3,287,915 2,785,771
========== ========== ========== ========== ==========
2001
Scales 19,119,293 4,396,476 14,797,805 1,152,366 1,242,650
Telecommunication products 8,679,253 760,968 5,728,041 784,610 2,639,195
Health care products 460,817 11,123 37,439 2,916 3,144
Other 1,307,317 815,139 2,743,622 213,657 230,396
---------- ---------- ---------- ---------- ----------
Total operating segments 29,566,680 5,983,706 23,306,907 2,153,549 4,115,385
Corporate - (4,241,853) 14,189,763 195,636 2,242,955
---------- ---------- ---------- ---------- ----------
Group 29,566,680 1,741,853 37,496,670 2,349,185 6,358,340
========== ========== ========== ========== ==========
2000
Scales 12,608,415 2,889,663 12,552,235 980,122 1,228,865
Telecommunication products 700,777 108,981 4,553,394 226,190 2,603,456
Health care products 1,246,305 40,071 174,062 13,591 17,041
Other 824,789 589,994 2,562,840 200,116 250,903
---------- ---------- ---------- ---------- ----------
Total operating segments 15,380,286 3,628,709 19,842,531 1,420,019 4,100,265
Corporate - (3,359,157) 13,950,185 199,154 898,661
---------- ---------- ---------- ---------- ----------
Group 15,380,286 269,552 33,792,716 1,619,173 4,998,926
========== ========== ========== ========== ==========
Operating profit by segment equals total operating revenues less expenses
which are related to the segment's operating revenues. Operating loss of
the corporate segment consists principally of salaries and related costs of
administrative staff, and administration and general expenses of the Group.
Identifiable assets by segment are those assets that are used in the
operation of that segment. Corporate assets consist principally of cash and
cash equivalents, deferred income tax assets and other identifiable assets
not related specifically to individual segments.
42
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
16 Business segment information (Continued)
(b) The Group primarily operates in Hong Kong, the PRC and Germany. The
manufacture of components and their assembly into finished products is
carried out in the PRC. The Hong Kong office is mainly responsible for the
purchase of raw materials, arrangement of shipments and research and
development. A German subsidiary in the Group is responsible for the
distribution of electronics scales in Europe. As the operations are
integrated, it is not practicable to distinguish the net income derived
among the activities in Hong Kong, the PRC and Germany.
Identifiable assets by geographical areas are as follows:
2001 2002
$ $
Hong Kong 17,561,478 14,784,311
The PRC 19,935,192 18,959,106
Germany - 10,707,660
---------- ----------
Total assets 37,496,670 44,451,077
========== ==========
(c) The following is a summary of net export sales by geographical areas
constituting 10% or more of total sales of the Group for the years ended
March 31, 2000, 2001 and 2002:
Year ended March 31
-------------------------------------------------------------------------------
2000 % 2001 % 2002 %
$ $ $
United States of
America 6,274,612 41 10,945,310 37 23,578,878 44
Europe 6,330,064 41 14,160,371 48 25,641,446 48
Others 2,775,610 18 4,460,999 15 4,082,777 8
---------- --- ---------- --- ---------- ---
15,380,286 100 29,566,680 100 53,303,101 100
========== === ========== === ========== ===
(d) The details of sales made to customers constituting 10% or more of total
sales of the Group is as follows:
Year ended March 31
Business 2000 % 2001 % 2002 %
segment $ $ $
Werner Dorsch Gmbh & Co. Scales 1,780,572 12 1,819,116 6 2,163,530 4
Gottl Kern & Sohn Gmbh Scales 1,735,355 11 2,337,665 8 2,019,407 4
Ohaus Corporation Scales 1,725,343 11 2,875,027 10 2,078,647 4
Telson Tele-
Telecommunication communication
and Technology Company products
Limited 375,252 3 3,505,516 12 - -
Telson Information and Tele-
Communication Company communication
Limited products 403,386 3 3,657,135 12 210,978 0
Gram Precision Scales, Scales 1,142,182 7 2,919,960 10 3,245,184 6
Inc.
Trisquare Communications Tele-
(HK) Company communication
Limited products - - - - 11,497,223 22
--------- -- ---------- -- ---------- ---
7,162,090 47 17,114,419 58 21,214,969 40
========= == ========== == ========== ===
43
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
17 Fair value of financial instruments
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments",
defines the fair value of a financial instrument at which the instrument
could be exchanged in a current transaction between willing parties.
The carrying value of all of the Group's financial instruments classified
as current assets or current liabilities are deemed to approximate fair
value because of the short maturity of these instruments. These would
include cash and cash equivalents, accounts receivable, accounts payable
and accrued and other liabilities, which are reflected on the consolidated
balance sheets.
In the opinion of management, the carrying amount of the Group's long-term
debt approximates fair value as the interest rate applicable is believed to
approximate the market rates that would be offered to Group for debt of the
same remaining maturities.
44
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: November 8, 2002 By: /s/ Henry F. Schlueter
----------------- --------------------------------
Henry F. Schlueter,
Assistant Secretary
45