PART
I
Item
1. Identity of Directors, Senior Management and Advisors
Not
Applicable to Bonso.
Item
2. Offer Statistics and Expected Timetable
Not
Applicable to Bonso.
Item
3. Key Information
|
A.
|
Selected
Financial
Data.
|
The
selected consolidated financial data as of March 31, 2012 and 2013 and for each of the three fiscal years ended March 31, 2013
are derived from the Audited Consolidated Financial Statements and notes which appear elsewhere in this Annual Report.
The
Financial Statements are prepared in accordance with generally accepted accounting principles in the United States of America
and expressed in United States Dollars. The selected consolidated financial data set forth below as of March 31, 2009, 2010 and
2011, and for each of the two fiscal years in the period ended March 31, 2010, have been derived from our audited consolidated
financial statements that are not included in this Annual Report. The selected consolidated financial data is qualified
in their entirety by reference to, and should be read in conjunction with, the Consolidated Financial Statements and related notes
included in the F pages of this Annual Report and Item 5. – “Operating and Financial Review and Prospects” included
in this Annual Report.
[REMAINDER
OF THIS PAGE LEFT BLANK INTENTIONALLY]
SELECTED CONSOLIDATED FINANCIAL DATA
5
Statement
of Operations Data
(in 000’s
US$ except for shares and per share data)
|
|
Year Ended March 31,
|
|
|
2009
(1)(2)(3)
|
|
2010
(1)(2)
|
|
2011
(1)(2)
|
|
2012
(1)(2)
|
|
2013
(1)(2)
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
Net sales
|
|
|
40,378
|
|
|
|
28,543
|
|
|
|
28,387
|
|
|
|
26,682
|
|
|
|
30,386
|
|
Cost of sales
|
|
|
(34,707
|
)
|
|
|
(23,693
|
)
|
|
|
(24,760
|
)
|
|
|
(22,782
|
)
|
|
|
(25,263
|
)
|
Gross margin
|
|
|
5,671
|
|
|
|
4,850
|
|
|
|
3,627
|
|
|
|
3,900
|
|
|
|
5,123
|
|
Selling expenses
|
|
|
(649
|
)
|
|
|
(375
|
)
|
|
|
(249
|
)
|
|
|
(267
|
)
|
|
|
(268
|
)
|
Salaries and related costs
|
|
|
(3,777
|
)
|
|
|
(2,539
|
)
|
|
|
(2,716
|
)
|
|
|
(2,526
|
)
|
|
|
(2,627
|
)
|
Research and development expenses
|
|
|
(792
|
)
|
|
|
(580
|
)
|
|
|
(334
|
)
|
|
|
(312
|
)
|
|
|
(396
|
)
|
Administration and general expenses
|
|
|
(4,602
|
)
|
|
|
(2,011
|
)
|
|
|
(1,959
|
)
|
|
|
(2,492
|
)
|
|
|
(2,402
|
)
|
Gain from liquidation of subsidiary
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,448
|
|
|
|
—
|
|
Loss from operations
|
|
|
(4,149
|
)
|
|
|
(655
|
)
|
|
|
(1,631
|
)
|
|
|
(249
|
)
|
|
|
(570
|
)
|
Interest income
|
|
|
127
|
|
|
|
103
|
|
|
|
6
|
|
|
|
7
|
|
|
|
7
|
|
Interest expenses
|
|
|
(209
|
)
|
|
|
(69
|
)
|
|
|
(56
|
)
|
|
|
(87
|
)
|
|
|
(68
|
)
|
Foreign exchange loss
|
|
|
(279
|
)
|
|
|
(522
|
)
|
|
|
(130
|
)
|
|
|
(703
|
)
|
|
|
(261
|
)
|
Gain on disposal of property
|
|
|
162
|
|
|
|
—
|
|
|
|
155
|
|
|
|
—
|
|
|
|
—
|
|
Gain on disposal of intangible assets
|
|
|
—
|
|
|
|
—
|
|
|
|
41
|
|
|
|
—
|
|
|
|
—
|
|
Other income
|
|
|
707
|
|
|
|
620
|
|
|
|
184
|
|
|
|
132
|
|
|
|
167
|
|
Loss before income taxes and minority interest
|
|
|
(3,641
|
)
|
|
|
(523
|
)
|
|
|
(1,431
|
)
|
|
|
(900
|
)
|
|
|
(725
|
)
|
Income tax (expense) benefit
|
|
|
(208
|
)
|
|
|
(9
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(29
|
)
|
Loss from continuing operations
|
|
|
(3,849
|
)
|
|
|
(532
|
)
|
|
|
(1,431
|
)
|
|
|
(902
|
)
|
|
|
(754
|
)
|
Loss from discontinued operations
|
|
|
(3,735
|
)
|
|
|
(126
|
)
|
|
|
(129
|
)
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
|
(7,584
|
)
|
|
|
(658
|
)
|
|
|
(1,560
|
)
|
|
|
(902
|
)
|
|
|
(754
|
)
|
Loss per share
- Continuing operations
- Discontinued operations
- Total
|
|
|
($0.73)
($0.72)
($1.45)
|
|
|
|
($0.10)
($0.03)
($0.13)
|
|
|
|
($0.27)
($0.02)
($0.29)
|
|
|
|
($0.17)
($0.00)
($0.17)
|
|
|
|
($0.14)
($0.00)
($0.14)
|
|
Weighted average shares
|
|
|
5,246,903
|
|
|
|
5,246,903
|
|
|
|
5,246,903
|
|
|
|
5,246,903
|
|
|
|
5,246,903
|
|
Diluted weighted average shares
|
|
|
5,246,903
|
|
|
|
5,246,903
|
|
|
|
5,246,903
|
|
|
|
5,246,903
|
|
|
|
5,246,903
|
|
(1)
The diluted net loss per share was the same as the basic net loss per share as all potential ordinary shares, including the stock
options, are anti-dilutive and therefore excluded from the computation of diluted net loss per share.
(2)
The statement of operations presents continuing and discontinued operations in conjunction with the Consolidated Financial Statements.
(3)
The statement of operations for fiscal year ended March 31, 2009 was restated in conjunction with the Consolidated Financial Statements.
6
Balance
Sheet Data
(in 000’s
US$ except for shares and per share data)
|
|
March 31,
|
|
|
|
2009
(1)
|
|
|
|
2010
(1)
|
|
|
|
2011
(1)
|
|
|
|
2012
(1)
|
|
|
|
2013
|
(1)
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
Cash and cash equivalents
|
|
|
8,044
|
|
|
|
8,085
|
|
|
|
5,407
|
|
|
|
3,014
|
|
|
|
2,154
|
|
Working capital of continuing operations
|
|
|
11,244
|
|
|
|
10,538
|
|
|
|
7,933
|
|
|
|
2,914
|
|
|
|
292
|
|
Total assets of continuing operations
|
|
|
25,620
|
|
|
|
23,489
|
|
|
|
21,807
|
|
|
|
23,168
|
|
|
|
27,123
|
|
Total assets of discontinued operations
|
|
|
3,819
|
|
|
|
200
|
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
Total assets
|
|
|
29,439
|
|
|
|
23,689
|
|
|
|
21,812
|
|
|
|
23,168
|
|
|
|
27,123
|
|
Current liabilities of continuing operations
|
|
|
6,993
|
|
|
|
6,789
|
|
|
|
6,285
|
|
|
|
9,293
|
|
|
|
13,942
|
|
Long-term debts and capital leases
|
|
|
52
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Deferred income tax assets
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total liabilities of continuing operations
|
|
|
9,654
|
|
|
|
9,403
|
|
|
|
8,899
|
|
|
|
11,890
|
|
|
|
16,537
|
|
Total liabilities of discontinued operations
|
|
|
5,787
|
|
|
|
1,098
|
|
|
|
1,086
|
|
|
|
—
|
|
|
|
—
|
|
Common stock
|
|
|
17
|
|
|
|
17
|
|
|
|
17
|
|
|
|
17
|
|
|
|
17
|
|
Shareholders’ equity
|
|
|
13,998
|
|
|
|
13,188
|
|
|
|
11,827
|
|
|
|
11,278
|
|
|
|
10,586
|
|
Dividends declared per share
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
(1)
The selected financial data for balance sheets presents continuing and discontinued operations in conjunction with the Consolidated
Financial Statements.
Risk
Factors
You
should carefully consider the following risks, together with all other information included in this Annual Report. The realization
of any of the risks described below could have a material adverse effect on our business, results of operations and future prospects.
Political,
Legal, Economic and Other Uncertainties of Operations in China and Hong Kong
We
Could Face Increased Currency Risks If China Does Not Maintain The Stability Of The Hong Kong Dollar or the
Chinese Renminbi.
The Hong Kong Dollar and the United States Dollar have been fixed at approximately 7.80 Hong Kong Dollars to 1.00 U.S. Dollar
since 1983. The market exchange rate has not deviated materially from the level of HK$7.80 to US$1.00 since the peg was first
established. However, in May 2005, the Hong Kong Monetary Authority broadened the trading band from the original rate of HK$7.80
per U.S. dollar to a rate range of HK$7.75 to HK$7.85 per U.S. dollar. The Hong Kong government has stated its intention to maintain
the link at that rate. From 1994 until July 2005, the Chinese Renminbi had remained stable against the U.S. Dollar at approximately
8.28 to 1.00 U.S. Dollar. On July 21, 2005, the Chinese currency regime was altered to link the RMB to a “basket of currencies,”
which includes
the U.S. Dollar, Euro, Japanese Yen and Korean Won.
Under the rules, the RMB
is allowed to move 0.3% on a daily basis against the U.S. Dollar.
The People's Bank of China, on May
21 2007, widened the RMB trading band from 0.3% daily movement against the U.S. Dollar to 0.5%.
Following the removal of
the U.S. Dollar peg, the RMB appreciated more than 20% against the U.S. Dollar over the following three years. Since July 2008,
however, the RMB has traded within a narrow range against the U.S. Dollar. As a consequence, the RMB has fluctuated significantly
since July 2008 against other freely traded currencies, in tandem with the U.S. Dollar. On June 20, 2010, the People’s
Bank of China (“PBOC”) announced that the government of the People’s Republic of China (“PRC”) would
further reform the RMB exchange rate regime and increase the flexibility of the exchange rate. It is difficult to predict how
this new policy may impact the RMB exchange rate. As of July 15, 2013, the RMB was valued at 6.17 per U.S. Dollar.
Any
significant revaluation of the RMB may materially and adversely affect our cash flows, revenues, earnings and financial position
and the value of our common shares and any dividends payable to our common shareholders in U.S. Dollars.
In
addition, the Chinese government continues to receive significant international pressure to further liberalize its currency policy
and as a result may further change its currency policy.
The Chinese government in the past has expressed its intention
in the Basic Law of the PRC to maintain the stability of the Hong Kong currency after the sovereignty of Hong Kong was transferred
to China in July 1997. However, there can be no assurance that the
Hong Kong Dollar will remain pegged against the U.S.
Dollar or that the Chinese Renminbi will not be allowed to fluctuate more than 0.5% on a daily basis. If the current exchange
rate mechanism is changed, we shall face increased currency risks, which could have a material adverse effect upon the Company.
7
We
Face Significant Risks If The Chinese Government Changes Its Policies, Laws, Regulations, Or Tax Structure Or Its Current Interpretations
Of Its Laws, Rules And Regulations Relating To Our Operations In China.
Our manufacturing facility and the new manufacturing
facility we are developing in Xinxing are located in China. As a result, our operations and assets are subject to significant
political, economic, legal and other uncertainties. Changes in policies by the Chinese government resulting in changes in laws
or regulations or the interpretation of laws or regulations, confiscatory taxation, changes in employment restrictions, restrictions
on imports and sources of supply, import duties, corruption, currency revaluation or the expropriation of private enterprise could
materially and adversely affect us. Over the past several years, the Chinese government has pursued economic reform policies,
including the encouragement of private economic activity and greater economic decentralization. If the Chinese government does
not continue to pursue its present policies that encourage foreign investment and operations in China, or if these policies are
either not successful or are significantly altered, then our business operations in China could be adversely affected. We could
even be subject to the risk of nationalization, which could result in the total loss of investment in that country. Following
the Chinese government’s policy of privatizing many state-owned enterprises, the Chinese government has attempted to augment
its revenues through increased tax collection. Continued efforts to increase tax revenues could result in increased taxation expenses
being incurred by us. Economic development may be limited as well by the imposition of austerity measures intended to reduce inflation,
the inadequate development of infrastructure and the potential unavailability of adequate power and water supplies, transportation
and communications. If for any reason we were required to move our manufacturing operations outside of China, our profitability
would be substantially impaired, our competitiveness and market position would be materially jeopardized and we might have to
discontinue our operations.
Continuing
Economic Weakness May Adversely Affect Our Earnings, Liquidity And Financial Position.
The Company’s business has been
challenging recently as a consequence of adverse worldwide economic conditions. In particular, there has been an erosion of global
consumer confidence from concerns over declining asset values, price instability, geopolitical issues, the availability and cost
of credit, rising unemployment and the stability and solvency of financial institutions, financial markets, businesses and sovereign
nations. These concerns slowed global economic growth and resulted in recessions in many countries, including in the U.S., Europe
and certain countries in Asia. The global economic weakness has negatively impacted our operating results since 2008. Overall,
the economic outlook is uncertain as a result of concerns about the general global economy, the decreased rate of growth in China
and the European Union. Recessionary conditions may return. If negative economic conditions return, a number of material adverse
effects on our business could occur and could have a negative impact upon our results of operations. Further, slower overall growth
of the Chinese economy may have a material adverse effect upon the Company and its results of operations.
8
The
Economy Of China Has Been Experiencing Significant Growth, Leading To Some Inflation and Increased Labor Costs.
The economy
in China has grown significantly over the past 20 years, which has resulted in inflation and an increase in the average cost of
labor, especially in the coastal cities. China’s consumer price index, the broadest measure of inflation, rose 2.7% in June
2013 from the level in June 2012. China’s overall economy and the average wage in the PRC are expected to continue to grow.
Continuing inflation and material increases in the cost of labor in China could diminish our competitive advantage. If the government
tries to control inflation, it may have an adverse effect on the business climate and growth of private enterprise in the PRC.
An economic slowdown may reduce our revenues. If inflation is allowed to proceed unchecked, our costs would likely increase, and
there can be no assurance that we would be able to increase our prices to an extent that would offset the increase in our expenses.
Changes
To PRC Tax Laws And Heightened Efforts By China’s Tax Authorities To Increase Revenues Are Expected To Subject Us To Greater
Taxes.
Under PRC law before 2008, we were afforded a number
of tax concessions by, and tax refunds from, China’s tax authorities on a substantial portion of our operations in China
by reinvesting all or part of the profits attributable to our PRC manufacturing operations. However, on March 16, 2007, the
Chinese government enacted a unified enterprise income tax law, or “EIT,” which became effective on January 1,
2008. Prior to the EIT, as a foreign invested enterprise, or “FIE,” located in Shenzhen of the PRC, our PRC subsidiaries
enjoyed a national income tax rate of 15% and were exempted from the 3% local income tax. The preferential tax treatment to our
subsidiaries in the PRC of qualifying for tax refunds as a result of reinvesting their profits earned in previous years in the
PRC also expired on January 1, 2008. Under the EIT, apart from those qualified as high-tech enterprises, most domestic enterprises
and FIEs will be subject to a single PRC enterprise income tax rate of 25%. We base our tax position upon the anticipated nature
and conduct of our business and upon our understanding of the tax laws of the various administrative regions and countries in
which we have assets or conduct activities. However, our tax position is subject to review and possible challenge by taxing authorities
and to possible changes in law, which may have retroactive effect. We cannot determine in advance the extent to which some jurisdictions
may require us to pay taxes or make payments in lieu of taxes.
We
Face Risks By Operating In China, Because The Chinese Legal System Relating To Foreign Investment And Foreign Operations Such
As Bonso’s Is Evolving And The Application Of Chinese Laws Is Uncertain.
The legal system of China relating to foreign
investments is continually evolving, and there can be no certainty as to the application of its laws and regulations in particular
instances. The Chinese legal system is a civil law system based on written statutes. Unlike common law systems, it is a system
in which decided legal cases have little precedential value. In 1979, the Chinese government began to promulgate a comprehensive
system of laws and regulations governing economic matters in general. Legislation over the past 30 years has significantly enhanced
the protections afforded to various forms of foreign investment in China. Enforcement of existing laws or agreements may be sporadic
and implementation and interpretation of laws inconsistent. The Chinese judiciary is relatively inexperienced in enforcing the
laws that exist, leading to a higher than usual degree of uncertainty as to the outcome of any litigation. Even where adequate
law exists in China, it may not be possible to obtain swift and equitable enforcement of that law. Further, various disputes may
be subject to the exercise of considerable discretion by agencies of the Chinese government, and forces and factors unrelated
to the legal merits of a particular matter or dispute may influence their determination. Continued uncertainty relating to the
laws in China and the application of the laws could have a material adverse effect upon us and our operations in China.
9
We
Could Be Adversely Affected If China Changes Its Economic Policies In The Shenzhen Special Economic Zone
Where We
Operate.
In August 1980, the Chinese government passed “Regulations for The Special Economy Zone of Guangdong Province”
and officially designated a portion of Shenzhen as The Shenzhen Special Economy Zone. Foreign enterprises in these areas benefit
from greater economic autonomy and special tax incentives than enterprises in other parts of China. Changes in the policies or
laws governing The Shenzhen Special Economy Zone could have a material adverse effect on us. Moreover, economic reforms and growth
in China have been more successful in certain provinces than others, and the continuation or increase of these disparities could
affect the political or social stability of China, which could have a material adverse effect on us and our operations near Shenzhen.
Controversies
Affecting China’s Trade With The United States Could Harm Our Results Of Operations Or Depress Our Stock Price.
While
China has been granted permanent most favored nation trade status in the United States through its entry into the World Trade
Organization, controversies between the United States and China may arise that threaten the status quo involving trade between
the United States and China. These controversies could materially and adversely affect our business by, among other things, causing
our products in the United States to become more expensive, resulting in a reduction in the demand for our products by customers
in the United States, which would have a material adverse effect upon us and our results of operations. Further, political or
trade friction between the United States and China, whether or not actually affecting our business, could also materially and
adversely affect the prevailing market price of our common shares.
If
Our Factories Were Destroyed Or Significantly Damaged As A Result of Fire, Flood Or Some Other Natural Disaster, We Would Be Adversely
Affected
. All of our products are manufactured at our manufacturing facilities located in Shenzhen, China, and Xinxing, Guangdong,
China. Fire-fighting and disaster relief or assistance in China may not be as developed as in Western countries. We currently
maintain property damage insurance aggregating approximately $33 million covering our stock in trade, goods and merchandise, furniture
and equipment and buildings. We do not maintain business interruption insurance. Investors are cautioned that material damage
to, or the loss of, our factories due to fire, severe weather, flood or other act of God or cause, even if insured, could have
a material adverse effect on our financial condition, results of operations, business and prospects.
10
Our
Results Could Be Harmed If We Have To Comply With New Environmental Regulations.
Our operations create some environmentally
sensitive waste that may increase in the future depending on the nature of our manufacturing operations. The general issue of
the disposal of hazardous waste has received increasing attention from China’s national and local governments and foreign
governments and agencies and has been subject to increasing regulation. Our business and operating results could be materially
and adversely affected if we were to increase expenditures to comply with any new environmental regulations affecting our operations.
Enforcement
Of The Labor Contract Law, Minimum Wage Increases And Future Changes In The Labor Laws In China May Result In The Continued Increase
In Labor Costs.
On June 29, 2007, the Standing Committee of the National People’s Congress of China enacted the
Labor Contract Law, which became effective on January 1, 2008. The Labor Contract Law introduces specific provisions related
to fixed-term employment contracts, part-time employment, probation, consultation with labor union and employee assemblies, employment
without a written contract, dismissal of employees, severance and collective bargaining, which together represent enhanced enforcement
of labor laws and regulations. According to the Labor Contract Law, an employer is obliged to sign an unlimited-term labor contract
with any employee who has worked for the employer for 10 consecutive years. Further, if an employee requests or agrees to renew
a fixed-term labor contract that has already been entered into twice consecutively, the resulting contract must have an unlimited
term, with certain exceptions. The employer must also pay severance to an employee in nearly all instances where a labor contract,
including a contract with an unlimited term, is terminated or expires. In addition, the government has continued to introduce
various new labor-related regulations after the Labor Contract Law. Among other things, new annual leave requirements mandate
that annual leave ranging from 5 to 15 days is available to nearly all employees and further require that the employer compensate
an employee for any annual leave days the employee is unable to take in the amount of three times his daily salary, subject to
certain exceptions. In addition, as the interpretation and implementation of these new regulations are still evolving, we cannot
assure you that our employment practices do not, or will not, violate the Labor Contract Law and other labor-related regulations.
Between the fiscal years ended March 31, 2009 and 2013, we experienced an increase in the cost of labor caused by the increase
in the minimum hourly rate. In accordance with the new minimum wage set by the local authorities, we increased the minimum wage
for labor from RMB 1,100 (or approximately $162) per month to RMB 1,320 (or approximately $206) per month beginning April 1, 2011.
The minimum wage was increased to RMB 1,500 (or approximately $238) per month beginning February 1, 2012. The minimum wage was
increased to RMB 1,600 (or approximately $254) per month beginning March 1, 2013. We believe that increased labor costs in China
will have a significant effect on our total production costs and results of operations and that we will not be able to continue
to increase our production at our manufacturing facilities without substantially increasing our non-production salaries and related
costs. This increase in minimum wage will increase our labor costs by 6.7%, or approximately $267,000, annually. If we are subject
to severe penalties or incur significant liabilities in connection with the enforcement of the Labor Contract Law, disputes or
investigations, our business and results of operations may be adversely affected. We started hiring workers to work in our Xinxing
factory during the fiscal year ended March 31, 2013. The minimum wage at Xinxing was RMB 1,010 (or approximately $160) beginning
May 1, 2013. Any future changes in the labor laws in the PRC could result in our having to pay increased labor costs. There can
be no assurance that the labor laws will not change, which may have a material adverse effect upon our business and our results
of operations.
11
If
We Were To Lose Our Existing Banking Facilities Or Those Facilities Were Substantially Decreased Or Less Favorable Terms Were
Imposed Upon Us, The Company Could Be Materially And Adversely Affected.
We maintain a banking facility with Hang Seng Bank
Limited, which is subject to renewal on an annual basis.
We use this banking facility to fund our working
capital requirements. In recent months, the credit markets in Hong Kong and throughout the world have tightened and experienced
extraordinary volatility and uncertainty. We have had discussions with several of our banks and believe that the availability
of our banking facility will continue on terms that are acceptable to us. However, as a result of changes in the capital or other
legal requirements applicable to
Hang Seng Bank Limited
or if our financial position and operations
were to deteriorate further, our costs of borrowing could increase or the terms of our banking facility could be changed so as
to impact our liquidity. If we are unable to obtain needed capital on terms acceptable to us, our business, financial condition,
results of operations and cash flows could be materially adversely affected.
Risk
Factors Relating to Our Business
We
Depend Upon Our Largest Customers For A Significant Portion Of Our Sales Revenue, And We Cannot Be Certain That Sales To These
Customers Will Continue. If Sales To These Customers Do Not Continue, Then Our Sales Will Decline And Our Business Will Be Negatively
Impacted.
We have relied upon three customers for a significant portion of our sales. During the fiscal years ended March
31, 2011, 2012 and 2013, these three customers accounted for approximately 74%, 81% and 83% of sales, respectively. During the
fiscal year ended March 31, 2013, 52% of our sales were to a single customer (66% during the fiscal year ended March 31, 2012).
We do not enter into long-term contracts with our customers but manufacture based upon purchase orders and therefore cannot be
certain that sales to these customers will continue. The loss of any of our largest customers would likely have a material negative
impact on our sales revenue and our business.
Defects
In Our Products Could Impair Our Ability To Sell Our Products Or Could Result In Litigation And Other Significant Costs.
Detection
of any significant defects in our products may result in, among other things, delay in time-to-market, loss of market acceptance
and sales of our products, diversion of development resources, injury to our reputation or increased warranty costs. Because our
products are complex, they may contain defects that cannot be detected prior to shipment. These defects could harm our reputation,
which could result in significant costs to us and could impair our ability to sell our products. The costs we may incur in correcting
any product defects may be substantial and could decrease our profit margins.
Since
certain of our products are used in applications that are integral to our customers’ businesses, errors, defects or other
performance problems could result in financial or other damages to our customers, which would likely result in adverse effects
upon our business with these customers. If we were involved in any product liability litigation, even if it were unsuccessful,
it would be time-consuming and costly to defend. Further, our product liability insurance may not be adequate to cover claims.
12
Our
Sales Through Retail Merchants Result In Seasonality, Susceptibility To A Downturn In The Retail Economy And Sales Variances Resulting
From Retail Promotional Programs.
Many of our other customers sell to retail merchants. Accordingly, these portions of our
customer base are susceptible to a further downturn in the retail economy. A greater number of our sales of scales products occur
between the months of July and October in preparation of the Christmas holiday. Throughout the remainder of the year, our products
do not appear to be subject to significant seasonal variation. However, past sales patterns may not be indicative of future performance.
Our
Customers Are Dependent On Shipping Companies For Delivery Of Our Products, And Interruptions To Shipping Could Materially And
Adversely Affect Our Business And Operating Results.
Typically, we sell our products either F.O.B. Hong Kong or Yantian (Shenzhen),
and our customers are responsible for the transportation of products from Hong Kong or Yantian (Shenzhen) to their final destinations.
Our customers rely on a variety of carriers for product transportation through various world ports. A work stoppage, strike or
shutdown of one or more major ports or airports could result in shipping delays materially and adversely affecting our customers,
which in turn could have a material adverse effect on our business and operating results. Similarly, an increase in freight surcharges
due to rising fuel costs or general price increases could materially and adversely affect our business and operating results.
Customer
Order Estimates May Not Be Indicative Of Actual Future Sales.
Some of our customers have provided us with forecasts of their
requirements for our products over a period of time. We make many management decisions based on these customer estimates, including
purchasing materials, hiring personnel and other matters that may increase our production capacity and costs. If a customer reduces
its orders from prior estimates after we have increased our production capabilities and costs, this reduction may decrease our
net sales and we may not be able to reduce our costs to account for this reduction in customer orders. Many customers do not provide
us with forecasts of their requirements for our products. If those customers place significant orders, we may not be able to increase
our production quickly enough to fulfill the customers’ orders. The inability to fulfill customer orders could damage our
relationships with customers and reduce our net sales.
Pressure
By Our Customers To Reduce Prices And Agree To Long-Term Supply Arrangements May Cause Our Net Sales Or Profit Margins To Decline.
Our customers are under pressure to reduce prices of their products. Therefore, we expect to experience increasing pressure
from our customers to reduce the prices of our products. Continuing pressure to reduce the price of our products could have a
material adverse effect upon our business and operating results. Our customers frequently negotiate supply arrangements with us
well in advance of placing orders for delivery within a year, thereby requiring us to commit to price reductions before we can
determine if we can achieve the assumed cost reductions. We believe we must reduce our manufacturing costs and obtain higher volume
orders to offset declining average sales prices. Further, if we are unable to offset declining average sales prices, our gross
profit margins will decline, which would have a material adverse effect upon our results of operations.
13
We
Depend Upon Our Key Personnel, And The Loss Of Any Key Personnel, Or Our Failure To Attract And Retain Key Personnel, Could Adversely
Affect Our Future Performance, Including Product Development, Strategic Plans, Marketing And Other Objectives.
The loss or
failure to attract and retain key personnel could significantly impede our performance, including product development, strategic
plans, marketing and other objectives. Our success depends to a substantial extent not only on the ability and experience of our
senior management, but particularly upon Anthony So, our Chairman of the Board. We do not have key man life insurance on Mr. So.
To the extent that the services of Mr. So would be unavailable to us, we would be required to obtain another person to perform
the duties Mr. So otherwise would perform. We may be unable to employ another qualified person with the appropriate background
and expertise to replace Mr. So on terms suitable to us.
Certain
Subsidiaries Of The Company Received On-going Enquiries From The Local Tax Authorities During The Year. If The Subsidiaries Were
Finally Held Liable For Such Additional Taxation, Our Consolidated Net Income And The Value Of Your Investment Could Be Substantially
Reduced.
During the fiscal years ended March 31, 2011, 2012 and 2013, certain of our subsidiaries were, and continue to be,
subject to enquiries from the local tax authorities. Upon the adoption of ASC 740 (formerly FIN 48), “Accounting for Uncertainty
in Income Taxes — An Interpretation of FASB Statement No. 109,” or FIN 48, the Company recorded a provision of
approximately $2,164,000 in relation to uncertain tax positions as of April 1, 2007. The assessment is subject to final determination
by the local tax authorities and may be different from what we have recorded as a provision. As such, there can be no assurance
that the inquiry will not result in the imposition of additional income tax expense on the Group, which could have a material
adverse effect upon the Group and its results of operations. According to the requirement from the local tax authorities, the
Company has purchased tax reserve certificates for approximately $1,710,000 for the fiscal years in review, for the potential
payment to the tax authority.
Contractual
Arrangements We Have Entered Into Among Us And Our Subsidiaries May Be Subject To Scrutiny By The Respective Tax Authorities,
And A Finding That Bonso And Its Subsidiaries Owe Additional Taxes Could Substantially Reduce Our Consolidated Net Income And
The Value Of Your Investment.
We could face material and adverse tax consequences if the respective tax authorities
determine that the contractual arrangements among our subsidiaries and Bonso do not represent an arm’s length price and
adjust Bonso’s, or any of its subsidiaries’, income in the form of a transfer pricing adjustment. Bonso did not consider
it necessary to make tax provision in this respect. However, there can be no assurance that the assessment performed by the local
tax authorities will result in the same position. A transfer pricing adjustment could, among other things, result in a reduction,
for tax purposes, of expense deductions recorded by Bonso or any of its subsidiaries, which could in turn increase its tax liabilities.
In addition, the tax authorities may impose late payment fees and other penalties on our affiliated entities for underpaid taxes.
Our consolidated net income may be materially and adversely affected if our affiliated entities’ tax liabilities increase
or if they are found to be subject to late payment fees or other penalties.
14
Increased
Prices For Raw Materials May Have A Negative Impact Upon Us.
The price level of raw materials remained stable in the fiscal
year ended March 31, 2013, compared to that in the fiscal year ended March 31, 2012. However, we experienced increased costs of
component parts due to the increase in the price of oil used in the production of components such as plastic resin, steel and
other raw materials during fiscal year ended March 31, 2012. If oil prices continue to increase in the future, it will likely
result in an increase in the costs of components to us, as well as an increase in our operating expenses, which may have a material
adverse effect upon our business and results of operations.
We
May Face An Increased Shortage Of Factory Workers.
During the fiscal years ended March 31, 2011, 2012 and 2013, we reduced
our full workforce in Shenzhen, PRC as we prepare to transit our operations to a new factory in Xinxing. See “Employees”
below. There can be no assurance that we will not experience an increased need for workers in China in the future or that we can
adequately staff our factories, including our new factory in Xinxing. The inability to adequately staff our factories could have
a material adverse impact on production, which could lead to delays in shipments or missed sales. In the event that we have delayed
or lost sales, we may need to deliver goods by air at our cost to ensure that our products arrive on time, which would likely
result in an increase in air freight costs and vendor fines and could result in missed sales, any of which could have a material
adverse effect upon our business and our results from operations.
Recent
Changes In The PRC’s Labor Law Could Penalize Bonso If It Needs To Make Additional Workforce Reductions
. In June 2007,
the National People’s Congress of the PRC enacted new labor law legislation called the Labor Contract Law, which became
effective on January 1, 2008. It formalizes workers’ rights concerning overtime hours, pensions, layoffs, employment contracts
and the role of trade unions. Considered as one of the strictest labor laws in the world, among other things, this new law requires
an employer to conclude an “open-ended employment contract” with any employee who either has worked for the employer
for 10 years or more or has had two consecutive fixed-term contracts. An “open-ended employment contract” is in effect
a lifetime, permanent contract, which is terminable only in specified circumstances, such as a material breach of the employer’s
rules and regulations, or for a serious dereliction of duty. Under the new law, downsizing by 20% or more of each individual entity
may occur only under specified circumstances, such as a restructuring undertaken pursuant to China’s Enterprise Bankruptcy
Law, or where a company suffers serious difficulties in production and/or business operations. Also, if we lay off more than 20
employees at one time, we have to communicate with the labor union of our Company and report to the District Labor Bureau. During
the fiscal year ended March 31, 2013, we recognized a write-back for severance payment of $98,000 in anticipation of reducing
our full workforce in Shenzhen, PRC as we transit our operations to a new factory in Xinxing, and the accumulated provision was
$743,000 as of March 31, 2013. (2012: $841,000). This accrued severance payment allowance is reviewed every year. We may incur
much higher costs under China’s labor laws if we are forced to downsize again, and accordingly, this new labor law may exacerbate
the adverse effect of the economic environment on our financial results and financial condition.
15
We
Face Increasing Competition In Our Industry And May Not Be Able To Successfully Compete With Our Competitors.
Our business
is in an industry that is becoming increasingly competitive, and many of our competitors, both local and international, have substantially
greater technical, financial and marketing resources than we have. As a result, we may be unable to compete successfully with
these competitors. We compete with scale manufacturers in the Far East, the United States, and Europe. We believe that our principal
competitors in the scale are other original equipment manufacturer (“OEM”) and original design manufacturer (“ODM”)
manufacturers, and all companies engaged in the branded, ODM and OEM business. The scale market is highly competitive, and we
face pressures on pricing and lower margins, as evidenced by the decline in margins that we have experienced with our scale products.
Lower margins may affect our ability to cover our costs, which could have a material negative impact on our operations and our
business.
We
Are Controlled By Our Management, Whose Interests May Differ From Those Of The Other Shareholders.
As of June 30, 2013, Mr.
Anthony So, our founder and Chairman, beneficially owns approximately 40.9% of the issued shares of our common stock. Due to his
stock ownership, Mr. So may be in a position to elect the board of directors and, therefore, to control our business and affairs,
including certain significant corporate actions such as acquisitions, the sale or purchase of assets and the issuance and sale
of our securities. Mr. So may be able to prevent or cause a change in control of the Company. We also may be prevented from entering
into transactions that could be beneficial to us without Mr. So’s consent. The interest of our largest shareholder may differ
from the interests of other shareholders.
Due
To Inherent Limitations, There Can Be No Assurance That Our System Of Disclosure And Internal Controls And Procedures Will Be
Successful In Preventing All Errors Or Fraud Or In Informing Management Of All Material Information In A Timely Manner.
Our
disclosure controls and internal controls and procedures may not prevent all errors and all fraud. A control system, no matter
how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system reflects that there are resource constraints, and the benefits of controls must
be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, within the company have been or will be detected.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur
simply because of error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion
of two or more people or by circumvention of the internal control procedures. The design of any system of controls also is based
in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed
in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations
in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
Compliance
Costs With The Securities Laws And Regulations Pursuant To The Sarbanes-Oxley Act of 2002 Will Increase Our Costs
. The Sarbanes-Oxley
Act of 2002 that became law in July 2002 has required changes in some of our corporate governance, securities disclosure, accounting
and compliance practices. In response to the requirements of that act, the Securities and Exchange Commission and NASDAQ have
promulgated new rules on a variety of subjects. Compliance with these rules, as well as with the Sarbanes-Oxley Act of 2002, including,
but not limited to, compliance with Section 404 that requires management to assess the effectiveness of its internal control over
financial reporting, has increased our legal, financial and accounting costs, and we expect the cost of compliance with these
new rules to be permanent. Further, the new rules may increase the expenses associated with our director and officer liability
insurance.
16
Our
Operating Results And Stock Price Are Subject To Wide Fluctuations.
Our quarterly and annual operating results are affected
by a wide variety of factors that could materially and adversely affect net sales, gross profit and profitability. This could
result from any one or a combination of factors, many of which are beyond our control. Results of operations in any period should
not be considered indicative of results to be expected in any future period, and fluctuations in operating results may also result
in fluctuations in the market price of our common stock.
Our
Results Could Be Affected By Changes In Currency Exchange Rates.
Changes in currency rates involving the Hong Kong Dollar
or Chinese Renminbi could increase our expenses. During the fiscal years ended March 31, 2011, 2012 and 2013, our financial results
were affected by currency fluctuations, resulting in a total foreign exchange loss of approximately $130,000, $703,000 and $261,000,
respectively. Generally, our revenues are collected in United States Dollars. Our costs and expenses are paid in United States
Dollars, Hong Kong Dollars, and Chinese Renminbi. We face a variety of risks associated with changes among the relative value
of these currencies. Appreciation of the Chinese Renminbi against the Hong Kong Dollar and the United States Dollar would increase
our expenses when translated into United States Dollars and could materially and adversely affect our margins and results of operations.
If the trend of Chinese Renminbi appreciation continues against the Hong Kong Dollar and the United States Dollar, our operating
costs will further increase and our financial results will be adversely affected. In addition, a significant devaluation in the
Chinese Renminbi or Hong Kong Dollar could have a material adverse effect upon our results of operations. If we determined to
pass onto our customers through price increases the effect of increases in the Chinese Renminbi relative to the Hong Kong Dollar
and the United States Dollar, it would make our products more expensive in global markets, such as the United States and the European
Union. This could result in the loss of customers, who may seek, and be able to obtain, products and services comparable to those
we offer in lower-cost regions of the world. If we did not increase our prices to pass on the effect of increases in the Chinese
Renminbi relative to the Hong Kong Dollar and the United States Dollar, our margins and profitability would suffer.
Protection
And Infringement Of Intellectual Property.
We have no patents, licenses, franchises, concessions or royalty agreements that
are material to our business. We have obtained a trademark registration in Hong Kong for the marks BONSO and MODUS in connection
with certain electronic apparatus. Unauthorized parties may attempt to copy aspects of our products or trademarks or to obtain
and use information that we regard as proprietary. Policing unauthorized use of our products is difficult. Our means of protecting
our proprietary rights may not be adequate. In addition, the laws of some foreign countries do not protect our proprietary rights
to as great an extent as do the laws of the United States. Our failure to adequately protect our proprietary rights may allow
third parties to duplicate our products or develop functionally equivalent or superior technology. In addition, our competitors
may independently develop similar technology or design around our proprietary intellectual property.
17
Further,
we may be notified that we are infringing patents, trademarks, copyrights or other intellectual property rights owned by other
parties. In the event of an infringement claim, we may be required to spend a significant amount of money to develop a non-infringing
alternative or to obtain licenses. We may not be successful in developing such an alternative or obtaining a license on reasonable
terms, if at all. Any litigation, even without merit, could result in substantial costs and diversion of resources and could have
a material adverse affect on our business and results of operations.
Cancellations
Or Delays In Orders Could Materially And Adversely Affect Our Gross Margins And Operating Income.
Sales to our OEM customers
are primarily based on purchase orders we receive from time to time rather than firm, long-term purchase commitments. Although
it is our general practice to purchase raw materials only upon receiving a purchase order, for certain customers we will occasionally
purchase raw materials based on such customers’ rolling forecasts. Further, during times of potential component shortages
we have purchased, and may continue to purchase, raw materials and component parts in the expectation of receiving purchase orders
for products that use these components. In the event actual purchase orders are delayed, are not received or are cancelled, we
would experience increased inventory levels or possible write-downs of raw material inventory that could materially and adversely
affect our business and operating results.
We
Generally Have No Written Agreements With Suppliers To Obtain Components, And Our Margins And Operating Results Could Suffer From
Increases In Component Prices.
We are typically responsible for purchasing components used in manufacturing products for our
customers. We generally do not have written agreements with our suppliers of components. This typically results in our bearing
the risk of component price increases because we may be unable to procure the required materials at a price level necessary to
generate anticipated margins from the orders of our customers. Prices of components may increase in the future for a variety of
reasons. Accordingly, additional increases in component prices could materially and adversely affect our gross margins and results
of operations.
Certain
Legal Consequences of Foreign Incorporation and Operations
Judgments
Against The Company And Management May Be Difficult To Obtain Or Enforce.
We are a holding corporation organized as an International
Business Company under the laws of the British Virgin Islands (“BVI”), and our principal operating subsidiaries are
organized under the laws of Hong Kong and the laws of the PRC. Our principal executive offices are located in Hong Kong and the
PRC. Outside the United States, it may be difficult for investors to enforce judgments obtained against us in actions brought
in the United States, including actions predicated upon the civil liability provisions of United States federal securities laws.
In addition, most of our officers and directors reside outside the United States, and the assets of these persons are located
outside the United States. As a result, it may not be possible for investors to effect service of process within the United States
upon these persons or to enforce against the Company or these persons judgments predicated upon the liability provisions of United
States federal securities laws. Our Hong Kong counsel and our British Virgin Islands counsel have advised that there is substantial
doubt as to the enforceability against us or any of our directors or officers in original actions or in actions for enforcement
of judgments of United States courts in claims for liability based on the civil liability provisions of United States federal
securities law.
18
Because
We Are Incorporated In The British Virgin Islands, You May Not Have The Same Protections As Shareholders Of U.S. Corporations.
We are organized under the laws of the British Virgin Islands. Principles of law relating to matters affecting the validity
of corporate procedures, the fiduciary duties of our management, directors and controlling shareholders and the rights of our
shareholders differ from, and may not be as protective of shareholders as, those that would apply if we were incorporated in a
jurisdiction within the United States. Our directors have the power to take certain actions without shareholder approval, including
amending our Memorandum or Articles of Association, which are the terms used in the British Virgin Islands for a corporation’s
charter and bylaws, respectively, and approving certain fundamental corporate transactions, including reorganizations, certain
mergers or consolidations and the sale or transfer of assets. In addition, there is doubt that the courts of the British Virgin
Islands would enforce liabilities predicated upon United States federal securities laws.
Future
Issuances Of Preference Shares Could Materially And Adversely Affect The Holders Of Our Common Shares Or Delay Or Prevent A Change
Of Control.
Our Memorandum and Articles of Association provide the ability to issue an aggregate of 10,000,000 shares of preferred
stock in four classes. While no preferred shares are currently issued or outstanding, we may issue preferred shares in the future.
Future issuance of preferred shares could materially and adversely affect the rights of the holders of our common shares, dilute
the common shareholders’ holdings or delay or prevent a change of control.
Our
Shareholders Do Not Have The Same Protections Or Information Generally Available To Shareholders Of U.S. Corporations Because
The Reporting Requirements For Foreign Private Issuers Are More Limited Than Those Applicable To Public Corporations Organized
In The United States.
We are a foreign private issuer within the meaning of rules promulgated under the Securities Exchange
Act of 1934 (the “Exchange Act”). We are not subject to certain provisions of the Exchange Act applicable to United
States public companies, including: the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on
Form 10-Q or current reports on Form 8-K, the sections of the Exchange Act regulating the solicitation of proxies, consents or
authorizations in respect to a security registered under the Exchange Act and the sections of the Exchange Act requiring insiders
to file public reports of their stock ownership and trading activities and establishing insider liability for profits realized
from any “short-swing” trading transaction (i.e., a purchase and sale, or sale and purchase, of the issuer’s
equity securities within six months or less). Because we are not subject to these rules, our shareholders are not afforded the
same protections or information generally available to investors in public companies organized in the United States.
Our
Board’s Ability To Amend Our Charter Without Shareholder Approval Could Have Anti-Takeover Effects That Could Prevent A
Change In Control.
As permitted by the laws of the British Virgin Islands, our Memorandum and Articles of Association may
be amended by our board of directors without shareholder approval. This includes amendments to increase or reduce our authorized
capital stock. Our board’s ability to amend our charter documents without shareholder approval could have the effect of
delaying, deterring or preventing a change in control of Bonso, including a tender offer to purchase our common shares at a premium
over the current market price.
19
We
Have Not Paid Dividends Since 2007 And May Not Pay Dividends In The Future.
We have not paid dividends on our Common Stock
since 2007, and we may not be able to declare dividends, or the board of directors may decide not to declare dividends, in the
future. We will determine the amounts of any dividends when and if they are declared, in the future at the time of declaration.
Item
4. Information on the Company
History
and Development of the Company
Bonso
Electronics International Inc. was formed on August 8, 1988 as a limited liability International Business Company under the laws
of the British Virgin Islands under the name “Golden Virtue Limited.” On September 14, 1988, we changed our name to
Bonso Electronics International, Inc. We operate under the BVI Business Companies Act.
Effective
as of May 1, 2001 we acquired 100% of the equity of Korona Haushaltswaren GmbH & Co. KG, a limited liability partnership registered
in Germany (“Korona”). Korona markets consumer scale products throughout Europe to retail merchandisers and distributors.
These products feature contemporary designs using the latest materials and attractive packaging. Effective March 31, 2009, we
sold assets of Korona to Beurer GmbH, including inventories, accounts receivable, toolings and intellectual property rights. Korona
completed its liquidation in February 2012.
Effective
as of August 1, 2002, we acquired 51% of the equity of Gram Precision Scales Inc. (“Gram Precision”). Gram Precision
was primarily engaged in the distribution and marketing of pocket scales in the United States, Canada and Europe. Effective November
1, 2008, we sold our 51% of the equity of Gram Precision to Mohan Thadani, the founder of Gram Precision.
In
April 2007, we formed a new wholly-owned subsidiary, Bonso USA, Inc., a Nevada corporation (“Bonso USA”), to focus
on the sales of industrial scales in the U.S. market. Bonso USA is dormant and no business activities are being conducted.
Our
corporate administrative matters are conducted through our registered agent, HWR Services Limited, P.O. Box 71, Road Town, Tortola,
British Virgin Islands. Our principal executive offices are located at Unit 1404, 14/F, Cheuk Nang Centre, 9 Hillwood Road, Tsimshatsui,
Kowloon, Hong Kong. Our telephone number is (852) 2605-5822, our facsimile number is (852) 2691-1724, our e-mail address is info@bonso.com
and our website is www.bonso.com.
20
Our
principal capital expenditures on property, plant and equipment over the last three years are set forth below:
|
|
2011
|
|
2012
|
|
2013
|
Property plant & equipment and land use rights
|
|
$
|
1,397,000
|
|
|
$
|
3,415,000
|
|
|
$
|
2,214,000
|
|
Our
capital expenditures include construction-in-progress and the purchase of machinery used in the production of certain of our products.
In
November, 2006,
Bonso entered into a land purchase agreement with
Xincheng Hi-Tech Industrial Estate to acquire the land use right of a piece of land consisting of 133,500 square meters for future
expansion of the Company’s operations in Xinxing.
This new piece of land is more than triple
the size of the land upon which the Company's facilities are located in Shenzhen, China. The land transfer was completed in 2009.
The first phase of construction of the new manufacturing facility was completed in calendar year 2012.
All
of the foregoing capital expenditures were financed principally from internally generated funds.
Business
Overview
Bonso
Electronics International Inc. designs, develops, produces and sells electronic sensor-based and wireless products for private
label original equipment manufacturers (individually “OEM” or, collectively, “OEM's”), original brand
manufacturers (individually “OBM” or, collectively, “OBM's”) and original design manufacturers (individually
“ODM” or, collectively, “ODM's”).
Since
1989, we have manufactured all of our products in China in order to take advantage of the lower overhead costs and competitive
labor rates. Our factory is currently located in Shenzhen, China, about 50 miles from Hong Kong. The convenient location permits
us to easily manage manufacturing operations from Hong Kong and facilitates transportation of our products out of China through
the ports of Hong Kong and Yantian (Shenzhen).
The first phase of construction of our new manufacturing
facility in Xinxing was completed in calendar year 2012, and we began production in Xinxing factory during the fiscal year ended
March 31, 2013. We will move all production processes from our Shenzhen factory to Xinxing factory during the fiscal year ended
March 31, 2014, after which we will rent out the Shenzhen factory to a third party as a source of rental income.
Products
Our
sensor-based scale products include bathroom, kitchen, office, jewelry, laboratory, postal and industrial scales that are used
in consumer, commercial and industrial applications.
These products accounted for 91% of revenue for the fiscal year ended
March 31, 2011, 95% for 2012 and 90% for 2013. We believe that our bathroom and industrial scales will continue to be a major
portion of our scales revenue as we are able to secure orders from our major customers.
We
no longer produces wireless telecommunications products. Previously, our products included two-way radios and cordless telephones
that were used in consumer and commercial applications. These products accounted for 7% of revenue for the fiscal year ended March
31, 2011, 0% for 2012 and 0% for 2013. Our decision to stop manufacturing these telecommunications products was based upon the
decline in our profit margins associated with these products.
21
The
Company has begun to produce certain electrical pet care products, including a bark control device. These products accounted for
8% of revenue for the fiscal year ended March 31, 2013 (2012: 3%).
We
also receive revenue from certain customers for the development and manufacture of tooling and molding for scales, telecommunication
and pet electronics products. Generally, these tools and moulds are used by us for the manufacture of products. We also generate
some sales of scrap materials. These revenues accounted for approximately 2% of net sales for the fiscal years ended March 31,
2011, 2% for 2012 and 2% for 2013.
The
following table sets forth the percentage of net sales for each of the product lines mentioned above for the fiscal years ended
March 31, 2011, 2012, and 2013:
|
|
Year ended March 31,
|
Product Line
|
|
2011
|
|
2012
|
|
2013
|
Scales
|
|
|
91
|
%
|
|
|
95
|
%
|
|
|
90
|
%
|
Telecommunication Products
|
|
|
7
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Electronic Pet Products
|
|
|
0
|
%
|
|
|
3
|
%
|
|
|
8
|
%
|
Others
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
2
|
%
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
Business
Strategy
We
believe that our future growth depends upon our ability to strengthen our customer base by enhancing and diversifying our products,
increasing the number of customers and expanding into additional markets while maintaining or increasing sales of our products
to existing customers. Our future growth and our ability to become profitable are also dependent upon our ability to control production
costs and increase production capacity. Our strategy to achieve these goals is as follows:
Product
Enhancement And Diversification.
We continually seek to improve and enhance our existing products in order to provide a longer
product life-cycle and to meet increasing customer demands for additional features. Our research and development staff are currently
working on a variety of projects to enhance our existing scale products and in the postal scale/meter area. Further, we are developing
certain electrical pet care products. See “Products, Research and Development/Competition” below.
Maintaining
And Expanding Business Relations With Existing Customers.
We promote relationships with our significant customers through
regular communication, including visiting certain of our customers in their home countries and providing direct access to our
manufacturing and quality control personnel. This access, together with our concern for quality, has resulted in a relatively
low level of defective products. Moreover, we believe that our emphasis on timely delivery, good service and low cost has contributed,
and will continue to contribute, to good relations with our customers and increased orders. Further, we solicit suggestions from
our customers for product enhancement and when feasible, plan to develop and incorporate the enhancements suggested by our customers
into our products.
22
Controlling
Production Costs
. In 1989, recognizing that labor cost was a major factor permitting effective competition in the consumer
electronic products industry, we relocated all of our manufacturing operations to China to take advantage of the large available
pool of lower-cost manufacturing labor. We located our manufacturing facilities within 50 miles of Hong Kong in order to facilitate
transportation of our products to markets outside of China while benefiting from the advantages associated with manufacturing
in China
and in the
Shenzhen Special Economy Zone. As noted below under “Increasing Production
Capacity” we are moving our production from Shenzhen to Xinxing, and we expect to realize a reduction in our labor costs
as a result.
We
are actively seeking to control production costs by such means as redesigning our existing products in order to decrease material
and labor costs, controlling the number of our employees, increasing the efficiency of workers by providing regular training and
tools and redesigning the flow of our production lines.
Increasing
Production Capacity
. In November 2006, Bonso entered into a land purchase agreement to acquire 133,500 square meters of land
use right for future expansion in Xinxing, China. The construction of the new manufacturing facility began during the fiscal year
ended March 31, 2010 and the
first phase
was completed in calendar year 2012. We intend to carefully
monitor our capacity needs and to expand capacity as necessary.
Customers
and Marketing
We
sell our products primarily in the United States and Europe. Customers for our products are primarily OEM’s, OBM’s
and ODM’s which market the products under their own brand names. We continue to market our products to OEM’s, OBM’s
and ODM’s at trade shows and via e-mail, our website and facsimile.
Net
export sales to customers by geographic area constituting 10% or more of total sales of the Company, consisted of the following
for each of the three years ended March 31, 2011, 2012 and 2013.
|
|
Year ended March 31:
|
|
|
2011
|
|
2012
|
|
2013
|
|
|
$ in thousands
|
|
%
|
|
$ in thousands
|
|
%
|
|
$ in thousands
|
|
%
|
United States of America
|
|
|
18,893
|
|
|
|
67
|
|
|
|
19,940
|
|
|
|
75
|
|
|
|
23,804
|
|
|
|
78
|
|
Germany
|
|
|
5,557
|
|
|
|
20
|
|
|
|
4,985
|
|
|
|
18
|
|
|
|
5,121
|
|
|
|
17
|
|
Total
|
|
|
24,450
|
|
|
|
|
|
|
|
24,925
|
|
|
|
|
|
|
|
28,925
|
|
|
|
|
|
We
maintain a marketing and sales team of eight people. Also, our experienced engineering teams work directly with our customers
to develop and tailor our products to meet the customers’ specific needs. We market our products primarily through a combination
of direct contact by our experienced in-house technical sales staff and our sales representatives and through the use of direct
mail catalogues and product literature. During the fiscal years ended March 31, 2011, 2012 and 2013, we recorded total commission
payments of approximately $3,000, $4,000 and $1,000, respectively. In addition, our marketing teams contact existing and potential
customers by telephone, mail and facsimile and in person.
23
Our
major sensor-based electronic scale products customers and their percentage of sales for the prior three fiscal years are below:
Percent
of Sales – Year ended March 31:
Electronics Sensor Customers
|
|
2011
|
|
2012
|
|
2013
|
Sunbeam Products, Inc.
|
|
|
60
|
%
|
|
|
66
|
%
|
|
|
52
|
%
|
Fitbit, Inc.
|
|
|
0
|
%
|
|
|
1
|
%
|
|
|
18
|
%
|
Kern + Sohn GMBH
|
|
|
14
|
%
|
|
|
14
|
%
|
|
|
13
|
%
|
Component
Parts and Suppliers
We
purchase over 1,000 different component parts from more than 100 major suppliers and are not dependent upon any single supplier
for key components. We purchase components for our products primarily from suppliers in Japan, Taiwan, South Korea, Hong Kong
and China.
The
price of oil and other raw materials increased during the fiscal years ended March 31, 2011 and 2012 resulting in an increase
of our component part prices. We have taken steps to reduce our exposure to any inability to obtain components by forecasting
with an increased buffer rate and placing orders for components earlier and allowing for longer delivery lead times. Because of
these actions, we do not expect to experience any difficulty in obtaining needed component parts for our products. The price level
of raw materials remained stable in the fiscal year ended March 31, 2013, compared to that in the fiscal year ended March 31,
2012.
Quality
Control
We
have received ISO 9001:2000 certification from Det Norske Veritas Certification B.V., the Netherlands. The ISO 9001:2000 certification
was awarded to our subsidiary, Bonso Electronics Limited and to Bonso Electronics Limited’s subsidiary Bonso Electronics
(Shenzhen) Company Limited. We have also received certification according to the Environmental Management Standards of ISO 14001:2004,
the Occupational Health and Safety Management Standard of OHSAS 18001 and management system for medical devices of ISO13485:2003.
ISO
9001 is one of the ISO 9000 series of quality system standards developed by the International Organization for Standardization,
a worldwide federation of national standards bodies. ISO 9001 provides a model for quality assurance (and continuous improvement)
in product development, manufacturing, installation and servicing that focuses on meeting customer requirements.
By
integrating the Occupational Health and Safety Management Standard of OHSAS 18001 into our quality and environmental systems,
we have created a total Integrated Management System (IMS) - Quality, Environment and Health and Safety by combining ISO9001,
ISO 14001 and OHSAS 18001 into one Quality/Environment/Health and Safety registration.
24
ISO
13485 certification ensures that we have implemented and maintained a quality system for the design and manufacture of medical
devices and allows us to develop and manufacture safe and effective medical devices should we chose to do so in the future.
The
European Union has enacted the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive
(“RoHS”). RoHS prohibits the use of certain substances, including lead, in certain products. We believe that we are
in compliance with RoHS and have a supply of compliant components from suppliers.
The
Company provides to certain customers an additional one to two percent of certain products ordered in lieu of a warranty, which
are recognized as cost of sales when these products are shipped to customers from our facility. In addition, certain products
sold by the Company are subject to a limited product quality warranty. The Company accrues for estimated incurred but unidentified
quality issues based upon historical activity and known quality issues if a loss is probable and can be reasonably estimated.
The standard limited warranty period is one to three years. Quality returns, refunds, rebates and discounts are recorded net of
sales if they are within the warranty period. All sales are based upon firm orders with fixed terms and conditions, which generally
cannot be modified. Historically, we have not experienced material differences between our estimated amounts of quality returns,
refunds, rebates and discounts and the actual results. In all contracts, there is no price protection or similar privilege in
relation to the sale of goods.
Patents,
Licenses, Trademarks, Franchises, Concessions and Royalty Agreements
We
have obtained a trademark registration in Hong Kong and China for the marks BONSO and MODUS in connection with certain electronic
apparatus.
We
rely on a combination of patent, trademark and trade secret laws, employee and third party non-disclosure agreements and other
intellectual property protection methods to protect our proprietary rights. There can be no assurance that third parties will
not assert infringement or other claims against us with respect to any existing or future products. We cannot assure you that
licenses would be available if any of our technology was successfully challenged by a third party, or if it became desirable to
use any third-party technology to enhance the Company’s products. Litigation to protect our proprietary information or to
determine the validity of any third-party claims could result in a significant expense to us and divert the efforts of our technical
and management personnel, whether or not such litigation is determined in our favor.
25
While
we have no knowledge that we are infringing upon the proprietary rights of any third party, there can be no assurance that such
claims will not be asserted in the future with respect to existing or future products. Any such assertion by a third party could
require us to pay royalties, to participate in costly litigation and defend licensees in any such suit pursuant to indemnification
agreements, or to refrain from selling an alleged infringing product or service.
Product
Research and Development
The
major responsibility of the product design, research and development personnel is to develop and produce designs to the satisfaction
of, and in accordance with, the specifications provided by the OEM's, OBM's and ODM's. We believe our engineering and product
development capabilities are important to the future success of our business. As an ODM, we take specifications that are provided
to us by the customer and design a product to meet those specifications. Some of our product design, research and development
activities are customer funded and are under agreements with specific customers for specific products. To reduce costs, we conduct
our research and development at our facilities in China. We principally employ Chinese engineers and technicians at costs that
are substantially lower than those that would be required in Hong Kong. At March 31, 2013, we employed 25 individuals in Hong
Kong and China for our engineering staff, who are at various times engaged in research and development. The major responsibility
of the product design and research and development personnel is to develop and produce designs of scales products to the satisfaction
of, and in accordance with, the specifications provided by the ODM's and OEM's. We anticipate hiring additional research and development
personnel to meet the increased demand for scale products.
Competition
The
manufacture and sale of electronic sensor-based and wireless products is highly competitive. Competition is primarily based upon
unit price, product quality, reliability, product features and management’s reputation for integrity.
Accordingly,
reliance is placed on research and development of new products, line extensions and technological, quality and other continuous
product improvement. There can be no assurance that we will enjoy the same degree of success in these efforts in the future. Research
and development expenses aggregated approximately $334,000 during the fiscal year ended March 31, 2011, $312,000 during the fiscal
year ended March 31, 2012 and $396,000 during fiscal year ended March 31, 2013.
Seasonality
Generally,
the first calendar quarter of each year is typically the slowest sales period because our manufacturing facilities in China are
closed for two weeks for the Chinese New Year holidays to permit employees to travel to their homes in China. In addition, sales
during the first calendar quarter of scales products usually dip following the increase in sales during the Christmas season.
A greater number of our sales of scales products occur between the months of July and October for shipment in preparation of the
Christmas holiday. Throughout the remainder of the year, our products do not appear to be subject to significant seasonal variation.
However, past sales patterns may not be indicative of future performance.
26
Transportation
Typically,
we sell products either F.O.B. Hong Kong or Yantian (Shenzhen), which means that our customers are responsible for the transportation
of finished products from Hong Kong or Yantian (Shenzhen) to their final destination. Transportation of components and finished
products to and from the point of shipment is by truck. To date, we have not been materially affected by any transportation problems.
However, transportation difficulties affecting air cargo or shipping, such as an extended closure of ports that materially disrupts
the flow of our customers’ products into the United States, could materially and adversely affect our sales and margins
if, as a result, our customers delay or cancel orders or seek concessions to offset expediting charges they incurred pending resolution
of the problems causing the port closures.
Government
Regulation
We
are subject to comprehensive and changing foreign, federal, provincial, state and local environmental requirements, including
those governing discharges to the air and water, the handling and disposal of solid and hazardous waste and the remediation of
contamination associated with releases of hazardous substances. We believe that we are in compliance with current environmental
requirements. Nevertheless, we use hazardous substances in our operations and, as is the case with manufacturers in general, if
a release of hazardous substances occurs on or from our properties we may be held liable and may be required to pay the cost of
remediation. The amount of any resulting liability could be material.
Foreign
Operations
A
significant amount of our products are manufactured at our factories located in China. While China has been granted permanent
most favored nation trade status in the United States through its entry into the World Trade Organization, controversies between
the United States and China may arise that threaten the status quo involving trade between the United States and China. These
controversies could materially and adversely affect our business by, among other things, causing our products in the United States
to become more expensive, resulting in a reduction in the demand for our products by customers in the United States.
Sovereignty
over Hong Kong reverted to China on July 1, 1997. The 1984 Sino-British Joint Declaration, the 1990 Basic Law of Hong Kong, the
1992 United States-Hong Kong Policy Act and other agreements provide some indication of the business climate we believe will continue
to exist in Hong Kong. Hong Kong remains a Special Administrative Region (“SAR”) of China, with certain autonomies
from the Chinese government. Hong Kong is a full member of the World Trade Organization. It has separate customs territory from
China, with separate tariff rates and export control procedures. It has a separate intellectual property registration system.
The Hong Kong Dollar is legal tender in the SAR, freely convertible and not subject to foreign currency exchange controls by China.
The SAR government has sole responsibility for tax policies, though the Chinese government must approve the SAR’s budgets.
Notwithstanding the provisions of these international agreements, we cannot be assured of the continued stability of political,
legal, economic or other conditions in Hong Kong. No treaty exists between Hong Kong and the United States providing for the reciprocal
enforcement of foreign judgments. Accordingly, Hong Kong courts might not enforce judgments predicated on the federal securities
laws of the United States, whether arising from actions brought in the United States or, if permitted, in Hong Kong.
27
Organizational
Structure
We
have two wholly-owned Hong Kong subsidiaries, Bonso Electronics Limited (“BEL”) and Bonso Advanced Technology Limited
(“BATL”). Both BEL and BATL were organized under the laws of Hong Kong and are responsible for the design, development,
manufacture and sale of our products.
BEL
has one active Hong Kong subsidiary, Bonso Investment Limited (“BIL”). BIL was organized under the laws of Hong Kong
and has been used to acquire and hold our investment properties in Hong Kong and China.
BEL
also has one active PRC subsidiary, Bonso Electronics (Shenzhen) Company, Limited, which is organized under the laws of the PRC
and is used to manufacture our products.
BATL
has one active PRC subsidiary, Bonso Advanced Technology (Xinxing) Company, Limited, which is organized under the laws of the
PRC and is used to acquire and hold our new manufacturing facility that is being constructed in Xinxing, China.
We
also have another wholly-owned British Virgin Islands subsidiary, Modus Enterprise International Inc.
As
of March 31, 2009, Modus Enterprise International Inc. owned 100% of Korona. Korona was engaged in marketing, distributing and
retailing consumer bathroom and kitchen scale products throughout Europe. Effective March 31, 2009, we sold certain assets of
Korona to Beurer GmbH, and Korona completed its liquidation during the fiscal year ended March 31, 2012.
Effective
November 1, 2008, we sold our 51% of the equity of Gram Precision to Mohan Thadani, the founder of Gram Precision. Gram Precision
was primarily engaged in the distribution and marketing of pocket and industrial scales in the United States, Canada and Europe.
In
April 2007, we formed a wholly-owned subsidiary, Bonso USA, a Nevada corporation. Bonso USA is dormant and no business activities
are being conducted.
Property,
Plant and Equipment
British
Virgin Islands
Our
corporate administrative offices are located at Cragmuir Chambers, Road Town, Tortola, British Virgin Islands and corporate administrative
matters are conducted through our registered agent, HWR Services Limited, located at P.O. Box 71, Road Town, Tortola, British
Virgin Islands.
28
Hong
Kong
We
own a residential property in Hong Kong, which is located at Savanna Garden, House No. 27, Tai Po, New Territories, Hong Kong.
House No. 27 consists of approximately 2,475 square feet plus a 177 square foot terrace and a 2,308 square foot garden area. The
use of House No. 27 is provided as quarters to Mr. Anthony So, the Chairman and Chief Executive Officer of the Company.
China
Our
Shenzhen factory in China is located at Shenzhen in the DaYang Synthetical Development District, close to the border between Hong
Kong and China. This factory consists of two factory buildings, which contain approximately 186,000 square feet, two workers’
dormitories, containing approximately 103,000 square feet, a canteen and recreation center of approximately 26,000 square feet,
an office building, consisting of approximately 26,000 square feet, and two staff quarters for our supervisory employees, consisting
of approximately 34,000 square feet, for a total of approximately 375,000 square feet. The Group entered into a rental agreement
in June 2013 to rent out the Shenzhen factory to a third party from August 2013 to August 2019, and will receive rental income
starting from October 2013.
We
also own one residential property in Shenzhen, which is located at Lakeview Mansion, B-20C, Hujinju Building No. 63, Xinan Road,
Boacheng Baoan Shenzhen, China. It consists of approximately 1,591 square feet and is rented to an unaffiliated third party for
an aggregate monthly rental of RMB 2,300, or approximately $370.
We
also own two office units in Beijing, namely Units 12 and 13 on the third floor, Block A of Sunshine Plaza in Beijing, China.
Unit 12 consists of 1,102 square feet and Unit 13 consists of 1,860 square feet. One Unit is rented to an unaffiliated third party
for an aggregate monthly rental of approximately RMB 15,000, or approximately $2,430, while the other unit is rented to another
unaffiliated third party for an aggregate monthly rental of approximately RMB 9,000 or approximately $1,460.
Our
Xinxing factory is located in Xinxing High-Tech Industrial Estate, Xinxing, Yunfu City, Guangdong, China. This factory land area
is 1,448,000 square feet, with one factory building consisting of 225,000 square feet, one warehouse consisting of 62,000 square
feet, and three dormitories consisting of 85,000 square feet in total.
Adequacy
of Facilities
We
believe our manufacturing complexes will be adequate for our reasonably foreseeable needs.
Item
4A. Unresolved Staff Comments
Not
Applicable to Bonso.
29
Item
5. Operating and Financial Review and Prospects
The
following discussion and analysis should be read in conjunction with Item 3. – “Key Information – Selected Financial
Data” and the Consolidated Financial Statements and Notes to Consolidated Financial Statements included elsewhere in this
Annual Report.
Overview
During
the fiscal year ended March 31, 2013, the Company experienced increased revenues. Our overall sales increased due to higher demand
for our products.
We
derive our revenues principally from the sale of sensor-based scales manufactured in China, which represent 90% of total sales
for the fiscal year ended March 31, 2013. As mentioned in Item 3. – “Key Information – Risk Factors,”
we are dependent upon a limited number of major customers for a significant portion of our revenues. Our revenues and business
operation are subject to fluctuation if there is a loss of orders from any of our largest customers. Further, the pricing of our
scale products is becoming increasingly competitive, especially to our customers in the United States and Germany, who contributed
approximately 95% of our revenue during the fiscal year ended March 31, 2013.
During
the fiscal year ended March 31, 2011, net sales from continuing operations were approximately $28,387,000, and net loss was approximately
$1,560,000. During the fiscal year ended March 31, 2012, net sales from continuing operations were approximately $26,682,000,
and net loss was approximately $902,000. During the fiscal year ended March 31, 2013, net sales from continuing operations were
approximately $30,386,000, and net loss was approximately $754,000.
Labor
costs per worker are increasing in China. In accordance with the new minimum wage set by the local authorities, we increased the
minimum wage for labor from RMB 1,320 (or approximately $206) per month beginning April 1, 2011, to RMB 1,500 (or approximately
$238) per month beginning February 1, 2012, and then to RMB 1,600 (or approximately $254) per month beginning March 1, 2013. We
believe that increased labor costs in China will have a significant effect on our total production costs and results of operations
and that we will not be able to continue to increase our production at our manufacturing facilities without substantially increasing
our non-production salaries and related costs. This increase in minimum wage will increase our labor costs by 6.7%, or approximately
$267,000, annually. Our labor costs represented approximately 15.8% of our total production costs in the fiscal year ended March
31, 2013, compared to 17.8% in the fiscal year ended March 31, 2012. The decrease in overall labor costs were the result of transferring
production processes from our Shenzhen factory to our Xinxing factory. We started hiring workers to work in our Xinxing factory
during the fiscal year ended March 31, 2013. Management believes that we will be able to decrease our overall labor costs after
we have moved all of our operations to the new Xinxing facility, because the minimum wage at Xinxing was RMB 1,010 (or approximately
$160) beginning May 1, 2013. There can be no assurance that labor costs will not further increase or that any additional increase
in labor costs will not have a material adverse effect upon our results of operations.
30
We
have not experienced significant difficulties in obtaining raw materials for our products, and management does not anticipate
any such difficulties in the foreseeable future. Prices of raw materials increased during the fiscal year ended March 31, 2011,
but did not vary significantly during the fiscal years ended March 31, 2013 and 2012. There can be no assurance that raw material
costs will not fluctuate or that any additional increase in raw material costs will not have a material adverse effect upon our
results of operations.
Operating
Results
The
following table sets forth selected income data as a percentage of net sales for the periods indicated:
|
|
Fiscal Year Ended March 31,
|
Statement of Operations Data
|
|
2011
|
|
2012
|
|
2013
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
|
Net sales
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
Cost of sales
|
|
|
(87.2
|
)
|
|
|
(85.4
|
)
|
|
|
(83.1
|
)
|
Gross margin
|
|
|
12.8
|
|
|
|
14.6
|
|
|
|
16.9
|
|
Selling expenses
|
|
|
(0.9
|
)
|
|
|
(1.0
|
)
|
|
|
(0.9
|
)
|
Salaries and related costs
|
|
|
(9.6
|
)
|
|
|
(9.5
|
)
|
|
|
(8.6
|
)
|
Research and development expenses
|
|
|
(1.2
|
)
|
|
|
(1.2
|
)
|
|
|
(1.3
|
)
|
Administration and general expenses
|
|
|
(6.9
|
)
|
|
|
(9.3
|
)
|
|
|
(7.9
|
)
|
Gain from disposal of subsidiary
|
|
|
—
|
|
|
|
5.4
|
|
|
|
—
|
|
Loss from operations
|
|
|
(5.7
|
)
|
|
|
(1.0
|
)
|
|
|
(1.8
|
)
|
Interest income
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
Interest expenses
|
|
|
(0.2
|
)
|
|
|
(0.3
|
)
|
|
|
(0.2
|
)
|
Foreign exchange loss
|
|
|
(0.5
|
)
|
|
|
(2.6
|
)
|
|
|
(0.9
|
)
|
Other income
|
|
|
1.3
|
|
|
|
0.5
|
|
|
|
0.5
|
|
Loss before income taxes
|
|
|
(5.0
|
)
|
|
|
(3.4
|
)
|
|
|
(2.4
|
)
|
Income tax expenses
|
|
|
(0.0
|
)
|
|
|
(0.0
|
)
|
|
|
(0.1
|
)
|
Loss from continuing operations
|
|
|
(5.0
|
)
|
|
|
(3.4
|
)
|
|
|
(2.5
|
)
|
Loss from discontinued operations
|
|
|
(0.5
|
)
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
|
(5.5
|
)
|
|
|
(3.4
|
)
|
|
|
(2.5
|
)
|
Fiscal
year ended March 31, 2013 compared to fiscal year ended March 31, 2012
Net
Sales
. Our sales increased approximately $3,704,000, or 13.9%, from approximately $26,682,000 for the fiscal year ended March
31, 2012 to approximately $30,386,000 for the fiscal year ended March 31, 2013. The increase in sales was primarily due to an
increased demand for our scales products.
Gross
Margin
. Gross margin as a percentage of revenue increased to approximately 16.9% during the fiscal year ended March 31, 2013,
as compared to approximately 14.6% during the fiscal year ended March 31, 2012. The higher gross margin was primarily the result
of the reduced labor costs due to increase in efficiency and transfer of production processes to our Xinxing factory. Our labor
costs represented approximately 15.8% of our total production costs in the fiscal year ended March 31, 2013, compared to 17.8%
in the fiscal year ended March 31, 2012.
Selling
Expenses
. Selling expenses increased slightly by approximately $1,000 from approximately $267,000 for the fiscal year ended
March 31, 2012 to approximately $268,000 for the fiscal year ended March 31, 2013, or 0.4%.
31
Salaries
And Related Costs
. Salaries and related costs increased by approximately $101,000, or 4.0%, from approximately $2,526,000
for the fiscal year ended March 31, 2012 to approximately $2,627,000 for the fiscal year ended March 31, 2013. The increase in
salaries and related costs was primarily the result of increase in salary of staff in China in accordance with the increase in
minimum wage.
Research
And Development
. Research and development expenses increased approximately $84,000, or 26.9%, from approximately $312,000
for the fiscal year ended March 31, 2012 to approximately $396,000 for the fiscal year ended March 31, 2013. The increase in research
and development was primarily the result of increased headcount of engineers in accordance with increased projects during the
fiscal year ended March 31, 2013. Research and development expenses account for 1.3% of net revenue for the fiscal year ended
March 31, 2013, and for 1.2% of net revenue for the fiscal year ended March 31, 2012.
Administration
And General Expenses.
Administration and general expenses decreased by approximately $90,000, or 3.7%, from approximately
$2,492,000 for the fiscal year ended March 31, 2012 to approximately $2,402,000 for the fiscal year ended March 31, 2013. The
decrease is primarily attributable to the fact that for the fiscal year ended March 31, 2012, the Company paid approximately $565,000
to a bank under a bank guarantee that the Company had provided for Gram Precision, which was offset by significantly higher utility
costs associated with the operation of two factories during the fiscal year ended March 31, 2013.
Gain
from Liquidation of Subsidiary
. Since Korona was liquidated during the fiscal year ended March 31, 2012, the Company recorded
a gain of approximately $1,448,000. There was no gain from liquidation of a subsidiary during the fiscal year ended March 31,
2013.
Loss
From Operations
. As a result of the factors described above, loss from operations increased by 128.9% from a loss of approximately
$249,000 for the fiscal year ended March 31, 2012 to a loss of approximately $570,000 for the fiscal year ended March 31, 2013.
Interest
Income
. Interest income remained at approximately $7,000 for the fiscal years ended March 31, 2013 and 2012.
Interest
Expenses
.
Interest expenses decreased approximately $19,000, or 21.8%, from approximately $87,000 for the fiscal year
ended March 31, 2012 to approximately $68,000 for the fiscal year ended March 31, 2013. This decrease was primarily the result
of an increase in utilization of factoring with lower interest rate during the fiscal year ended March 31, 2013.
Foreign
Exchange Loss.
Foreign exchange loss decreased approximately $442,000, or 62.9%, from approximately $703,000 for the fiscal
year ended March 31, 2012 to approximately $261,000 for the fiscal year ended March 31, 2013. This decrease was primarily the
result of the decreased magnitude of appreciation of the Chinese Renminbi compared to the United States Dollar during the fiscal
year ended March 31, 2013.
32
Other
Income.
Other income increased approximately $35,000, or 26.5%, from approximately $132,000 for the fiscal year ended March
31, 2012 to approximately $167,000 for the fiscal year ended March 31, 2013. The increase was primarily the result of the increase
in rental income and gain from forward contracts during the fiscal year ended March 31, 2013.
Income
Tax Expense
. Income tax expense was $29,000 during the fiscal year ended March 31, 2013, as compared to $2,000 during the
fiscal year ended March 31, 2012. The income tax expense is primarily due to the under provision for taxation for fiscal year
ended March 31, 2012.
Net
Loss
. As a result of the factors described above, net loss decreased from a loss of approximately $902,000 for the fiscal
year ended March 31, 2012 to a loss of approximately $754,000 for the fiscal year ended March 31, 2013, a decrease in loss of
approximately $148,000, or 16.4%.
Foreign
Currency Translation Adjustments.
Foreign currency translation adjustments, net of tax, decreased from approximately $353,000
for the fiscal year ended March 31, 2012 to a gain of approximately $62,000 for the fiscal year ended March 31, 2013, a decrease
of approximately $291,000, or 82.4%. The decreased foreign currency translation adjustment, net of tax, was primarily the result
of reduced fluctuation of the Chinese Renminbi against the United States Dollar.
Comprehensive
Loss.
As a result of the factors described above, comprehensive loss increased from a loss of approximately $549,000 for
the fiscal year ended March 31, 2012 to a loss of approximately $692,000 for the fiscal year ended March 31, 2013, an increase
of approximately $143,000, or 26.0%.
Fiscal
year ended March 31, 2012 compared to fiscal year ended March 31, 2011
Net
Sales
. Our sales decreased approximately $1,705,000, or 6.0%, from approximately $28,387,000 for the fiscal year ended March
31, 2011 to approximately $26,682,000 for the fiscal year ended March 31, 2012. The decrease in sales was primarily the result
of the overall decrease in demand for our products.
Gross
Margin
. Gross margin as a percentage of revenue increased to approximately 14.6% during the fiscal year ended March 31, 2012,
as compared to approximately 12.8% during the fiscal year ended March 31, 2011. The higher gross margin was primarily the result
of reduced manufacturing cost due to increase in efficiency.
Selling
Expenses
. Selling expenses increased by approximately $18,000 from approximately $249,000 for the fiscal year ended March
31, 2011 to approximately $267,000 for the fiscal year ended March 31, 2012, or 7.2%. Local freight costs and related selling
expenses increased during the year due to increased shipping costs during the fiscal year ended March 31, 2012.
33
Salaries
And Related Costs
. Salaries and related costs decreased by approximately $190,000, or 7.0%, from approximately $2,716,000
for the fiscal year ended March 31, 2011 to approximately $2,526,000 for the fiscal year ended March 31, 2012. The decrease in
salaries and related costs was primarily the result of decreased headcount in Hong Kong and China.
Research
And Development
. Research and development expenses decreased approximately $22,000, or 6.6%, from approximately $334,000 for
the fiscal year ended March 31, 2011 to approximately $312,000 for the fiscal year ended March 31, 2012. The decrease in research
and development was primarily the result of decreased headcount of engineers during the fiscal year ended March 31, 2012.
Administration
And General Expenses.
Administration and general expenses increased by approximately $533,000, or 27.2%, from approximately
$1,959,000 for the fiscal year ended March 31, 2011 to approximately $2,492,000 for the fiscal year ended March 31, 2012. The
increase was primarily the result of a payment of approximately $565,000 to Gram Precision's bank as Gram Precision was under
liquidation and the Company had a guarantee to that bank to secure Gram Precision's banking facilities, which continued from the
fiscal year ended March 31, 2008 when Gram Precision was a subsidiary of the Company.
Gain
from Liquidation of Subsidiary
. Since Korona was liquidated during the fiscal year ended March 31, 2012, the Company recorded
a gain of approximately $1,448,000.
Loss
From Operations
. As a result of the factors described above, loss from operations decreased by 86.0% from a loss of approximately
$1,631,000 for the fiscal year ended March 31, 2011 to a loss of approximately $249,000 for the fiscal year ended March 31, 2012.
Interest
Income
. Interest income increased by $1,000, or 16.7%, from approximately $6,000 for the fiscal year ended March 31, 2011
to approximately $7,000 for the fiscal year ended March 31, 2012. The increase was the result of increased deposits in savings
accounts during the fiscal year ended March 31, 2012.
Interest
Expenses
.
Interest expenses increased approximately $31,000, or 55.4%, from approximately $56,000 for the fiscal year
ended March 31, 2011 to approximately $87,000 for the fiscal year ended March 31, 2012. This increase was primarily the result
of an increase in utilization of the Company’s banking facilities during the fiscal year ended March 31, 2012.
Foreign
Exchange Loss.
Foreign exchange loss increased approximately $573,000, or 440.8%, from approximately $130,000 for the fiscal
year ended March 31, 2011 to approximately $703,000 for the fiscal year ended March 31, 2012. This increase was primarily the
result of the appreciation of the Chinese Renminbi compared to the United States Dollar during the fiscal year ended March 31,
2012.
Other
Income.
Other income decreased approximately $52,000, or 28.3%, from approximately $184,000 for the fiscal year ended March
31, 2011 to approximately $132,000 for the fiscal year ended March 31, 2012. The decrease was primarily the result of the decrease
in recoverable bad debt from the sale of Gram Precision that was previously impaired. During the fiscal year ended March 31, 2011,
the Company recovered $45,000, while the Company recovered $0 during the fiscal year ended March 31, 2012.
34
Income
Tax Expense
. Income tax expense was $2,000 during the fiscal year ended March 31, 2012, as compared to $0 during the fiscal
year ended March 31, 2011. The income tax expense is a result of gains in a subsidiary during the fiscal year ended March 31,
2012.
Loss
from Discontinued Operations.
Loss from discontinued operations decreased approximately $129,000 from $129,000 for the fiscal
year ended March 31, 2011 to approximately $0 for the fiscal year ended March 31, 2012. The decrease was the result of no activities
for the discontinued operations, and the discontinued operations were liquidated during the fiscal year ended March 31, 2012.
Net
Loss
. As a result of the factors described above, net loss decreased from a loss of approximately $1,560,000 for the fiscal
year ended March 31, 2011 to a loss of approximately $902,000 for the fiscal year ended March 31, 2012, a decrease in loss of
approximately $658,000, or 42.2%.
Foreign
Currency Translation Adjustments.
Foreign currency translation adjustments, net of tax, increased from approximately $199,000
for the fiscal year ended March 31, 2011 to a gain of approximately $353,000 for the fiscal year ended March 31, 2012, an increase
of approximately $154,000, or 77.4%. The increased foreign currency translation adjustment, net of tax, was primarily the result
of fluctuation of the Chinese Renminbi against the United States Dollar.
Comprehensive
Loss.
As a result of the factors described above, comprehensive loss decreased from a loss of approximately $1,361,000 for
the fiscal year ended March 31, 2011 to a loss of approximately $549,000 for the fiscal year ended March 31, 2012, a decrease
of approximately $812,000, or 59.7%.
Impact
of Inflation
We
believe that inflation had an impact on our business during the fiscal years ended March 31, 2012 and 2013. The minimum wage increased
from RMB 1,100 (or approximately $162) per month beginning July 1, 2010 to RMB 1,320 (or approximately $206) per month beginning
April 1, 2011, and was later increased to RMB 1,500 (or approximately $238) per month beginning February 1, 2012, and to RMB 1,600
(or approximately $254) per month beginning March 1, 2013. As a result, we believe that inflation will continue to increase our
operating costs and cost of raw materials and have a significant impact upon us in the future. We have generally been able to
modify and improve our product designs so that we could either increase the prices of our products or lower the production costs
in order to keep pace with inflation. Oil prices have been volatile in recent years. If oil prices increase, it will likely result
in an increase in the cost of components to us, as well as an increase in our operating expenses, which will have a material adverse
effect upon our business and results of operations. Further, the increase in labor costs and operating costs in the PRC had a
material impact on our profitability.
35
Taxation
The
companies comprising the Group are subject to tax on an entity basis on income arising in, or derived from, Hong Kong, and the
PRC. The current rate of taxation of the subsidiary operating in Hong Kong is 16.5%. The Group is not subject to income taxes
in the British Virgin Islands.
The
tax rates for our subsidiary in PRC were 24% in 2011 and 25% in 2012 and beyond. There is no tax payable in Hong Kong on offshore
profit or on dividends paid to Bonso Electronics Limited by its subsidiaries or to us by Bonso Electronics Limited. Therefore,
our overall effective tax rate may be lower than that of most United States corporations; however, this advantage could be materially
and adversely affected by changes in the tax laws of the British Virgin Islands, Hong Kong or China.
On
March 16, 2007, the Chinese government enacted a unified enterprise income tax law, or “EIT,” which became effective
on January 1, 2008. Prior to the EIT, as a foreign invested enterprise, or “FIE,” located in Shenzhen of the
PRC, our PRC subsidiaries enjoyed a national income tax rate of 15% and were exempted from the 3% local income tax. The preferential
tax treatment to our subsidiaries in the PRC of qualifying for tax refunds as a result of reinvesting their profits earned in
previous years in the PRC also expired on January 1, 2008. Under the EIT, apart from those qualified as high-tech enterprises,
most domestic enterprises and FIEs will be subject to a single PRC enterprise income tax rate of 25% in year 2012 and afterward.
Efforts
by the Chinese government to increase tax revenues could result in decisions or interpretations of the tax laws by the Chinese
tax authorities that are unfavorable to us and which increase our future tax liabilities or deny our expected refunds. Changes
in Chinese tax laws or their interpretation or application may subject us to additional Chinese taxation in the future.
No
reciprocal tax treaty regarding withholding taxes exists between the United States and the British Virgin Islands. Under current
British Virgin Islands law, dividends, interest or royalties paid by us to individuals are not subject to tax as long as the recipient
is not a resident of the British Virgin Islands. If we were to pay a dividend, we would not be liable to withhold any tax, but
shareholders would receive gross dividends, irrespective of their residential or national status.
During
the fiscal years ended March 31, 2011, 2012 and 2013, certain of our subsidiaries were, and continue to be, subject to inquiries
from the local tax authorities. Upon the adoption of ASC 740 (formerly FIN 48), “Accounting for Uncertainty in Income Taxes
— An Interpretation of FASB Statement No. 109,” the Company recorded a provision of approximately $2,164,000
in relation to uncertain tax positions as of April 1, 2007. The assessment is subject to final determination by the local tax
authorities and may be different from what we have recorded as a provision. As such, there can be no assurance that the inquiry
will not result in imposing additional income tax expense on the Group, which could have a material adverse effect upon the Group
and its results of operations. According to the requirement from the local tax authorities, the Company has purchased tax reserve
certificates for approximately $1,710,000 for the fiscal years in review, for the potential payment to the tax authority.
36
Contractual
arrangements we have entered into among us and our subsidiaries in different locations may be subject to scrutiny by respective
tax authorities, and a finding against the Company and its subsidiaries may result in additional tax liabilities that could substantially
reduce our consolidated net income. We could face material and adverse tax consequences if respective tax authorities determine
that the contractual arrangements among our subsidiaries and Bonso do not represent an arm’s length price and adjust Bonso’s
or its subsidiaries’ income. Our consolidated net income may be materially and adversely affected if our affiliated entities’
tax liabilities increase.
Dividends,
if any, paid to any United States resident or citizen shareholder are treated as dividend income for United States federal income
tax purposes. Such dividends are not eligible for the 70% dividends-received deduction allowed to United States corporations on
dividends from a domestic corporation under Section 243 of the United States Internal Revenue Code of 1986, as amended (the “Internal
Revenue Code”). Various Internal Revenue Code provisions impose special taxes in certain circumstances on non-United States
corporations and their shareholders. You are urged to consult your tax advisor with regard to such possibilities and your own
tax situation.
In
addition to United States federal income taxation, shareholders may be subject to state and local taxes upon their receipt of
dividends.
Foreign
Currency Exchange Rates
We
sell most of our products to international customers. Our principal export markets are North America (mainly the United States),
Europe (mainly Germany) and Asia. Other markets are other European countries (such as the United Kingdom), Australia and Africa.
Sales to international customers are made directly by us to our customers. We sell all of our products in United States Dollars
and pay for our material components principally in United States Dollars and Hong Kong Dollars. A very small portion of the components
used are paid for in Japanese Yen. Most factory expenses incurred are paid in Chinese Renminbi. Because the Hong Kong Dollar is
pegged to the United States Dollar, in the past our only material foreign exchange risk previously arose from potential fluctuations
in the Chinese Renminbi and a devaluation in United States Dollars. For the reasons discussed in the paragraphs below, management
believes that it may be possible that there will be some fluctuation in the coming year. During the fiscal year ended March 31,
2013, we experienced a foreign currency loss of approximately $261,000.
A
summary of our debts from our banking facilities utilized as at March 31, 2012 and 2013 which was subjected to foreign currency
risk is as follows:
|
|
|
March 31, 2012
|
|
|
|
March 31, 2013
|
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
Hong Kong dollars
|
|
|
1,870
|
|
|
|
3,813
|
|
The
amount above is due within one year.
37
Fluctuations
in the value of the Hong Kong Dollar have not been significant since October 17, 1983, when the Hong Kong government tied the
value of the Hong Kong Dollar to that of the United States Dollar. However, there can be no assurance that the value of the Hong
Kong Dollar will continue to be tied to that of the United States Dollar. China adopted a floating currency system on January
1, 1994, unifying the market and official rates of foreign exchange. China approved current account convertibility of the Chinese
Renminbi on July 1, 1996, followed by formal acceptance of the International Monetary Fund’s Articles of Agreement on December
1, 1996. These regulations eliminated the requirement for prior government approval to buy foreign exchange for ordinary trade
transactions, though approval is still required to repatriate equity or debt, including interest thereon. From 1994 until July
2005, the Chinese Renminbi had remained stable against the U.S. Dollar at approximately 8.28 to 1.00 U.S. Dollar. On July 21,
2005, the Chinese currency regime was altered to link the RMB to a “basket of currencies,” which includes
the
United States Dollar, Euro, Japanese Yen and Korean Won.
Under the rules, the RMB is allowed to move 0.3% on a daily basis
against the United States Dollar.
The People's Bank of China, on May 21 2007, widened the RMB trading
band from 0.3% daily movement against the United States Dollar to 0.5%.
On June 20, 2010, the PBOC announced that
the PRC government would further reform the RMB exchange rate regime and increase the flexibility of the exchange rate. It is
difficult to predict how this new policy may impact the RMB exchange rate. As of July 15, 2013, the RMB was valued at 6.17 per
U.S. Dollar. There can be no assurance that these currencies will remain stable or will fluctuate to our benefit.
To
manage our exposure to foreign currency and translation risks, we may purchase currency exchange forward contracts, currency options,
or other derivative instruments, provided such instruments may be obtained at suitable prices.
Liquidity
and Capital Resources
We
have financed our growth and cash needs to date primarily from internally generated funds and bank debt. We do not use off-balance
sheet financing arrangements, such as securitization of receivables or obtaining access to assets through special purpose entities,
as sources of liquidity. Our primary uses of cash have been to fund expansions and upgrades of our manufacturing facilities.
Operating
activities used $187,000 of net cash for the fiscal year ended March 31, 2013, as compared to $474,000 of net cash generated from
operating activities during the fiscal year ended March 31, 2012. This increase in the amount of cash used by operating activities
was primarily attributable to the increase in trade receivables and income tax recoverable as of March 31, 2013, when compared
to that of March 31, 2012.
As
of March 31, 2013, we had approximately $2,154,000 in cash and cash equivalents, as compared to $3,014,000 in cash and cash equivalents
as of March 31, 2012. Working capital at March 31, 2013 was approximately $292,000, as compared to $2,914,000 at March 31, 2012.
The decrease in working capital is the result of an increase in investing activities for a total of approximately $2,214,000 for
acquisition of intangible assets and property, plant and equipment. We believe there are no material restrictions (including foreign
exchange controls) on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans, advances or
product/material purchases. We believe our working capital is sufficient for our present requirements.
38
As
of March 31, 2013, we had approximately $2,759,000 in net trade receivables, as compared to $2,081,000 as of March 31, 2012. This
increase of $678,000 was primarily attributable to increased sales close to the end of the fiscal year, compared to that of March
31, 2012.
As
of March 31, 2013, we had approximately $5,460,000 in inventories, as compared to $4,105,000 as of March 31, 2012. This increase
of $1,355,000 was primarily attributable to increase of inventory in projection of the higher sales amount after March 31, 2013
.
As
of March 31, 2013, we had a total of approximately $10,069,000 in notes payable and accounts payable, as compared to $6,902,000
as of March 31, 2012. The increase of $3,167,000 was primarily attributable to the increased accounts payable and notes payable
due to the increase in material purchases as a result of increased orders received as of March 31, 2013, compared to that of March
31, 2012.
As
of March 31, 2013, we had in place general banking facilities with one financial institution with amounts available aggregating
approximately $10,000,000 (2012: $8,183,000). Such facilities include the ability to obtain overdrafts, letters of credit, short-term
notes payable, factoring, short-term loans and long-term loans. As of March 31, 2013, we had utilized approximately $3,813,000
from these general banking facilities. Interest on this indebtedness fluctuates with the prime rate and the Hong Kong Interbank
Offer Rate as set by the Hong Kong Bankers Association. The bank credit facilities are collateralized by our bank guarantee. Our
bank credit facilities are due for renewal annually. We anticipate that the banking facilities will be renewed on substantially
the same terms and our utilization in the next year will remain at a similar level as that in the current year. During the fiscal
years ended March 31, 2012 and 2013, we paid a total of approximately $87,000 and $68,000, respectively, in interest on indebtedness
for continuing operations.
Our
current ratio decreased from 1.31 as of March 31, 2012 to 1.02 as of March 31, 2013. Our quick ratio decreased from 0.87 as of
March 31, 2012 to 0.63 as of March 31, 2013.
The
minimum wage was increased to RMB 1,320 (or approximately $206) beginning April 1, 2011, and was later increased to RMB 1,500
(or approximately $238) per month beginning February 1, 2012, and to RMB 1,600 (or approximately $254) per month beginning March
1, 2013. This increase in minimum wage will increase our labor costs by 6.7%, or approximately $267,000, annually. Management
expects that we will have lower labor costs once our entire manufacturing operation has been moved to Xinxing.
During
the fiscal year ending March 31, 2014, we expect we will need to expend approximately $260,000 on the leasehold improvement
of our facility in Xinxing, China.
39
We
believe that our cash flows from operations, our current cash balance and funds available under our working capital and credit
facilities will be sufficient to meet our working capital needs and planned capital expenditures for at least the next 12 to 24
months. However, a decrease in the demand for our products or increase in our costs of goods sold or expenses may affect our internally
generated funds, and we would further look to our banking facilities to meet our working capital demands.
Commitments
The
following table sets forth information with respect to our commitments as of March 31, 2013:
|
|
|
Payments due by Period
|
|
|
|
Total
|
|
|
|
Within 1 year
|
|
|
|
Within 1 to 3 years
|
|
|
|
Within 3 to 5 years
|
|
|
|
More than 5 years
|
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
Notes payable and bank overdrafts and loans
(1)
|
|
$
|
3,813
|
|
|
$
|
3,813
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Operating leases
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Capital leases
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Construction in Xinxing
|
|
$
|
260
|
|
|
$
|
260
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Interest on capital leases
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Income tax liabilities
(2)
|
|
$
|
2,595
|
|
|
$
|
0
|
|
|
$
|
2,595
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Total
|
|
$
|
6,668
|
|
|
$
|
4,073
|
|
|
$
|
2,595
|
|
|
$
|
0
|
|
|
$
|
0
|
|
(1)
Represents amounts due within one year under our banking facilities agreement.
(2)
Effective April 1, 2007, the Company adopted ASC 740. As a result of the adoption of ASC 740, the Company recognized an approximately
$1,170,000 increase in the liability for unrecognized tax benefits and penalties of approximately $994,000, which were accounted
for as a reduction to the April 1, 2007 balance of retained earnings. The Company assessed its tax position during the fiscal
year ended March 31, 2013 and concluded that the same tax liability was carried forward.
For
a discussion of interest rates on our notes payable and short-term loans, see “Item 11. - Qualitative and Quantitative Disclosures
About Market Risk” below.
Critical
Accounting Policies
The
methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results
we report in our financial statements. The SEC has defined the most critical accounting policies as the ones that are most important
to the portrayal of our financial condition and results and require us to make our most difficult and subjective judgments, often
as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our most critical
policies include inventories, impairment, trade receivables and deferred income taxes.
40
Below,
we discuss these policies further, as well as the estimates and judgments involved. We believe that our other policies either
do not generally require us to make estimates and judgments that are as difficult or as subjective, or it is less likely that
they would have a material impact on our reported results of operations for a given period. For a discussion of all our significant
accounting policies, see footnote 1 to the Consolidated Financial Statements included elsewhere in this Annual Report.
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. The Company continuously reviews slow-moving and obsolete inventory and assesses any inventory obsolescence based on
inventory levels, material composition and expected usage as of that date.
Revenue
Recognition
No
revenue is recognized unless there is persuasive evidence of an arrangement, the price to the buyer is fixed or determinable,
delivery has occurred and collectability of the sales price is reasonably assured. Revenue is recognized when title and risk of
loss transfers to the customer, which is generally when the product is leaving the ports of Hong Kong or Shenzhen as designated
by our customers. Shipping costs billed to our customers are included within revenue. Associated costs are classified in cost
of sales.
The
Company provides to certain customers an additional one to two percent of certain products ordered in lieu of a warranty, which
are recognized as cost of sales when these products are shipped to customers from our facilities. In addition, certain products
sold by the Company are subject to a limited product quality warranty. The Company accrues for estimated incurred but unidentified
quality issues based upon historical activity and known quality issues if a loss is probable and can be reasonably estimated.
The standard limited warranty period is one to three years. Quality returns, refunds, rebates and discounts are recorded net of
sales if they are within the warranty period. All sales are based upon firm orders with fixed terms and conditions, which generally
cannot be modified. Historically, we have not experienced material differences between our estimated amounts of quality returns,
refunds, rebates and discounts and the actual results. In all contracts, there is no price protection or similar privilege in
relation to the sale of goods.
Due
to similar contractual terms, the Company’s revenue recognition policies do not differ among its significant product lines
(i.e., sensor based scales versus wireless products) and among various marketing venues used by the Company (i.e., distributors
and direct sales force) and do not vary in different parts of the world.
Long-Lived
Assets Including Goodwill and Other Acquired Intangible Assets
Long-lived
assets held and used by the Group and intangible assets, excluding goodwill, are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of such assets may not be recoverable. The Group 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 loss 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.
41
Trade
Receivables
Provision
is made against trade receivables to the extent that collection is considered to be doubtful. This provision is primarily determined
from our monthly aging analysis. It also requires judgment regarding the collectability of certain receivables, as certain receivables
may be identified as collectible that are subsequently uncollectible and which could result in a subsequent write-off of the related
receivable to the statement of operations. Most of the Company’s trade receivables are generally unsecured, except for two
customers with receivables covered by credit insurance. To determine the necessity of a provision, the Company analyzes the age
of the receivables and the customer’s ability to pay based on past payment history, financial statements and various information
of the customer. Any change in the collectability of accounts receivable that were not previously provided for could significantly
change the calculation of such provision and the results of our operations.
Income
Taxes, Deferred Income Taxes
The
Company complies with ASC 740 which prescribes a recognition threshold and measurement attributes for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Only tax positions
that meet the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized
upon adoption of ASC 740. The Company’s accounting policy is to treat interest and penalties as a component of income taxes.
Amounts
in the consolidated financial statements related to income taxes are calculated using the principles of ASC 740. ASC 740 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 the 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 as deferred tax assets. Recognized deferred tax assets are reduced by a valuation allowance if, based
on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be
realized.
Research
and Development, Patents and Licenses, Etc.
We
believe that our engineering and product development capabilities are important to the future success of our business. We have
successfully lowered the costs of our research and development team by moving most research and development activities to our
facility in China and principally employing Chinese engineers and technicians at costs that are substantially lower than those
that would be required in Hong Kong. Research and development costs are expensed in the financial period during which they are
incurred.
42
Trend
Information
Although
we are optimistic about our future in the manufacture and sale of sensor-based scales products, we are dependent upon a limited
number of customers for a significant portion of our revenues, and the loss of any of these customers could have a material adverse
effect upon us and our results of operations. As of March 31, 2013, our backlog of manufacturing orders was $8,033,000 as compared
to $8,459,000 as of March 31, 2012. We expect that the demand for our products will increase in the fiscal year ending March 31,
2014, compared with that in the fiscal year ended March 31, 2013.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our
financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures
or capital resources that are material to investors.
Recent
Accounting Pronouncements
The
new accounting pronouncements in the United States that may be relevant to the Group are as follows:
In
July 2012, the FASB issued Accounting Standard Update No. 2012-02, “Intangibles—Goodwill and Other (Topic 350)
Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU 2012-02”), which affords an entity the option
to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely
than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances,
an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity
is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value
of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying
amount. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September
15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27,
2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued. The
Company does not believe that adoption of ASU 2012-02 will have a significant impact on its financial position, results of operations
or cash flows.
43
Item
6. Directors, Senior Management and Employees
Directors
and Senior Management
Our
board of directors and executive officers are listed below:
Name
|
Age
|
|
Position with Bonso
|
|
|
|
|
Anthony So
|
|
70
|
|
|
Chairman of the Board, Chief Executive Officer and
|
|
|
|
|
|
Director, President and Treasurer
|
Andrew So
|
|
27
|
|
|
Director, Chief Operating Officer
|
Kim Wah Cuung
|
|
55
|
|
|
Director of Engineering and Research and Development
|
|
|
|
|
|
and Director
|
Woo-Ping Fox
|
|
64
|
|
|
Director
|
Henry F. Schlueter
|
|
62
|
|
|
Director
and Assistant Secretary
|
Albert So
|
|
35
|
|
|
Director, Chief Financial Officer and Secretary
|
ANTHONY
SO is the founder of Bonso. He has been our Chairman of the Board of Directors since July 1988. He was appointed as the Chief
Executive Officer and President on November 16, 2006. Mr. So received his BSE degree in civil engineering from National Taiwan
University in 1967 and a Master 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 years. Mr. So has served as a trustee of the
Chinese University of Hong Kong, New Asia College since 1994.
ANDREW
SO joined the Company in August 2009 and has been a director since February 25, 2012. Mr. So currently holds the position
of Chief Operating Officer and oversees the Company’s daily operations. Mr. So graduated with distinctions in
2008 from the University of Toronto, Canada, with a Bachelor of Commerce degree (BComm). From 2008 to 2009, prior to his employment
with the Company, Mr. So worked as a Derivatives Analyst at State Street Trust Company Canada, Toronto, Canada.
KIM
WAH CHUNG has been a director since September 21, 1994. Mr. Chung has been employed by us 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.
WOO-PING
FOK was elected to our Board of Directors on September 21, 1994. Mr. Fok has practiced law in Hong Kong since 1991 and is a Consultant
with Messrs. C.K. Mok & Co. Mr. Fok’s major areas of practice include conveyancing and real property law, corporations
and business law, commercial transactions and international trade with a special emphasis in China trade matters. 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.
HENRY
F. SCHLUETER 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 and
Denver Bar Associations, and the Wyoming State Bar.
44
ALBERT
SO was appointed as the Chief Financial Offer of the Company in March 2009. Mr. So was first employed as the Financial Controller
of the Company in January 2008 and as a management trainee of the Company in November 2004. Mr. So has been a director since
March 1, 2013. Prior to his employment as a management trainee of the Company, Mr. So was a student. Mr. So is a Certified
Management Accountant, Financial Risk Manager, and received a Master degree in Business Administration from Heriot-Watt University,
Edinburgh, United Kingdom, and a Bachelor degree in Mathematics from Simon Fraser University in Burnaby, British Columbia, Canada.
Anthony
So, the Company’s President, Chief Executive Officer and Chairman of the Board of Directors is the father of Andrew So,
the Company’s Chief Operating Officer, and Albert So, the Company’s Chief Financial Officer.
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.
Compensation
The
aggregate amount of compensation paid by us and our subsidiaries during the year ended March 31, 2013 to all directors, former
directors and officers as a group for services in all capacities was $1,339,000. Total compensation for the benefit of Anthony
So was $857,000, for the benefit of Kim Wah Chung was $160,000, for the benefit of Andrew So was $124,000, for the benefit of
Albert So was $124,000 and for the benefit of Henry F. Schlueter was an aggregate of $74,000. The $74,000 listed as having been
paid for the benefit of Mr. Schlueter was paid to his law firm, Schlueter & Associates, P.C., for legal services rendered.
The amount for the year ended March 31, 2013, included unpaid vacation payments of $57,000, $9,000, $5,000 for Anthony So, Kim
Wah Chung, and Albert So, respectively.
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, 2013, other than contributions to our Provident Fund Plan, which aggregated
$16,000 for officers
and directors.
Employment
Agreements
We
have employment agreements with Anthony So and Kim Wah Chung. Mr. So’s employment agreement provides for a maximum yearly
salary of approximately $800,000 per year plus bonus, and Mr. Chung’s employment agreement provides for a maximum yearly
salary of approximately $200,000 per year plus bonus, as stated in their respective employment agreements, which expired on March
31, 2013. One of the properties of the Group in Hong Kong is also provided to Mr. So as part of his compensation. Mr. So’s
employment agreement contained a provision under which we would have been obligated to pay Mr. So all compensation for the remainder
of his employment agreement and five times his annual salary and bonus compensation if a change of control, as defined in his
employment agreement occurs. Both employment agreements with Anthony So and Kim Wah Chung were renewed automatically, and the
respective employment agreements will expire on March 31, 2014.
45
Options
of Directors and Senior Management
The
following table provides information concerning options owned by the directors and senior management at March 31, 2013.
Name
|
|
Number of Common Shares Subject to
Stock Options
|
|
Exercise Price
Per Share
|
|
Expiration
Date
|
|
|
|
|
|
|
|
|
|
|
|
Woo-Ping Fok
|
|
|
10,000
|
|
|
$
|
6.12
|
|
|
March 25, 2014
|
|
|
|
10,000
|
|
|
$
|
6.20
|
|
|
September 12, 2014
|
|
|
|
10,000
|
|
|
$
|
4.50
|
|
|
December 4, 2015
|
Henry F. Schlueter
|
|
|
10,000
|
|
|
$
|
6.12
|
|
|
March 25, 2014
|
|
|
|
10,000
|
|
|
$
|
6.20
|
|
|
September 12, 2014
|
|
|
|
10,000
|
|
|
$
|
4.50
|
|
|
December 4, 2015
|
Directors
Except
as mentioned above, our directors do not receive any additional monetary compensation for serving in their capacities. All directors
are reimbursed for all reasonable expenses incurred in connection with their services as a director.
Employee
retirement benefits
|
(a)
|
With
effect
from
January
1,
1988,
BEL,
a wholly-owned
foreign
subsidiary
of
the
Company
in
Hong
Kong,
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.
Eligible
employees
of
the
Plan
are
required
to
contribute
5%
of
their
monthly
salary,
while
BEL
is
required
to
contribute
from
5%
to
10%
based
on
the
eligible
employee’s
salary,
depending
on
the
number
of
years
of
the
eligible
employee’s
service.
|
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 on or after December 2000, excluding factory workers, are eligible to join the MPF. Eligible employees’ and
the employer’s contributions to the MPF are both at 5% of the eligible employee’s monthly salary and are subject to
a maximum mandatory contribution of HK$1,000 (US$128) monthly. The maximum mandatory contribution was increased to HK$1,250 (US$160)
monthly starting from June 1, 2012.
46
Pursuant
to the relevant PRC regulations, the Group is required to make contributions for each employee, at rates based upon the employee’s
standard salary base as determined by the local Social Security Bureau, to a defined contribution retirement scheme organized
by the local Social Security Bureau in respect of the retirement benefits for the Group’s employees in the PRC.
|
(b)
|
The
contributions
to
each
of
the
above
schemes
are
recognized
as
employee
benefit
expense
when
they
are
due
and
are
charged
to
the
consolidated
statement
of
income
(loss).
The
Group’s
total
contributions
to
the
above
schemes
for
the
years
ended
March
31,
2011,
2012
and
2013
amounted
to
approximately
$318,000,
$239,000
and
$225,000,
respectively.
The
Group
has
no
other
obligation
to
make
payments
in
respect
of
retirement
benefits
of
the
employees.
|
Board
Practices
All
directors hold office until our next annual meeting of shareholders or until their respective successors are duly elected and
qualified or their positions are earlier vacated by resignation or otherwise. All executive officers are appointed by the Board
and serve at the pleasure of the Board. There are no director service contracts providing for benefits upon termination of employment
or directorship.
NASDAQ
Exemptions and Home Country Practices
NASDAQ
Marketplace Rule 4350 provides that foreign private issuers may elect to follow certain home country corporate governance practices
so long as they provide NASDAQ with a letter from outside counsel in its home country certifying that the issuer 's corporate
governance practices are not prohibited by home country law.
On
July 19, 2005, we submitted a letter to NASDAQ certifying that certain of Bonso’s corporate governance practices are not
prohibited by the relevant
laws of the British Virgin Islands. We
will follow British Virgin Island law in respect to the following requirements:
|
•
|
A
majority
of
Bonso’s
board
of
directors
will
not
be
independent;
|
|
•
|
Bonso
will
not
have
a
nominating
committee;
|
|
•
|
Bonso
will
not
have
a
compensation
committee;
|
|
•
|
Bonso’s
independent
directors
will
not
meet
in
executive
session;
and
|
|
•
|
Bonso’s
audit
committee
may
have
only
one
member.
|
Audit
Committee
Mr.
Woo Ping Fok and Mr. Henry F. Schlueter are the members of the Audit Committee. Mr. Fok is “independent” as defined
in the NASDAQ listing standards, and Mr. Schlueter may not be considered “independent” since his law firm serves as
Bonso’s United States counsel.
47
The
Audit Committee was established to: (i) review and approve the scope of audit procedures employed by our independent auditors;
(ii) review and approve the audit reports rendered by our 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 of Directors. Effective
as of August 17, 2000, the Board of Directors adopted a formal charter for its Audit Committee, which was amended effective June
30, 2005.
Employees
At
March 31, 2013, we employed a total of 1,127 persons, as compared to 1,299 persons at March 31, 2012 and 1,487 persons at March
31, 2011; 13 employees in Hong Kong (12 in 2012 and 14 in 2011), 1,114 employees in China (1,287 in 2012 and 1,473 in 2011). Employees
are not covered by collective bargaining agreements. We consider our global labor practices and employee relations to be good.
Share
Ownership
The
following table shows the number of shares of common stock beneficially owned by our directors and executive officers as of June
30, 2013:
Name
|
|
|
Shares of Common Stock Owned of Record
|
|
|
|
Options Held
|
|
|
|
Total Number of Shares of Common Stock Beneficially Owned
|
|
|
|
Percent of Beneficial Ownership
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony So
|
|
|
2,281,770
(1)
|
|
|
|
0
|
|
|
|
2,281,770
|
|
|
|
40.9
|
%
|
Kim Wah Chung
|
|
|
93,700
|
|
|
|
0
|
|
|
|
93,700
|
|
|
|
1.7
|
%
|
Henry F. Schlueter
|
|
|
34,000
|
|
|
|
30,000
(2)
|
|
|
|
64,000
|
|
|
|
1.1
|
%
|
Woo-Ping Fok
|
|
|
66,507
|
|
|
|
30,000
(3)
|
|
|
|
96,507
|
|
|
|
1.7
|
%
|
Andrew So
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
%
|
Albert So
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
%
|
All Directors and Officers as a group (6 persons)
|
|
|
2,475,977
|
|
|
|
60,000
|
|
|
|
2,535,977
|
|
|
|
45.0
|
%
|
Note: The number of shares outstanding is 5,246,903 shares, with 5,577,639 total number of shares issued, which includes 330,736 shares in treasury. The calculations above are based upon the number of shares issued of 5,577,639.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
10,000
shares
of
common
stock
at
an
exercise
price
of
$6.12
expiring
on
March
25,
2014,
options
to
purchase
10,000
shares
of
common
stock
at
an
exercise
price
of
$6.20
per
share
expiring
on
September
12,
2014
and
options
to
purchase
10,000
shares
of
common
stock
at
an
exercise
price
of
$4.50
per
share
expiring
on
December
4,
2015.
|
|
(3)
|
Includes
options
to
purchase
10,000
shares
of
common
stock
at
an
exercise
price
of
$6.12
expiring
on
March
25,
2014,
options
to
purchase
10,000
shares
of
common
stock
at
an
exercise
price
of
$6.20
per
share
expiring
on
September
12,
2014
and
options
to
purchase
10,000
shares
of
common
stock
at
an
exercise
price
of
$4.50
per
share
expiring
on
December
4,
2015.
|
48
Stock
Option and Bonus Plans
The 1996
Stock Option Plan
In
October 1996, our stockholders adopted the 1996 Stock Option Plan (the “Employees’ Plan”), which provides for
the grant of options to purchase an aggregate of not more than 400,000 shares of our common stock. In January 2000, our shareholders
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 under the Employees’ Plan. The purpose of the Employees’ Plan is to make options available to
management and employees in order to encourage them to secure or increase on reasonable terms their stock ownership and to encourage
them to remain with the Company.
The
Employees’ Plan is administered by a committee appointed by the Board of Directors which determines the persons to be granted
options under the Employees’ 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 ten years after the date of grant. The exercise
price of an option may be less than the fair market value of the underlying shares of common stock. No options granted under the
Employees’ Plan are 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 such optionee.
The
exercise price of an option granted pursuant to the Employees’ 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 our discretion.
During
the fiscal year ended March 31, 2013, no options were granted under the Employees’ Plan.
The
2004 Stock Option Plan
On
March 23, 2004, our stockholders adopted the 2004 Stock Option Plan (the “2004 Plan”), which provides for the grant
of up to six hundred thousand (600,000) shares of the Company’s common stock in the form of stock options, subject to certain
adjustments as described in the 2004 Plan.
The
purpose of the 2004 Plan is to secure key employees to remain in the employ of the Company and to encourage such employees to
secure or increase on reasonable terms their common stock ownership in the Company. The Company believes that the 2004 Plan promotes
continuity of management and increased incentive and personal interest in the welfare of the Company.
49
The
2004 Plan is administered by a committee appointed by the Board of Directors, which consists of at least two but not more than
three members of the Board, one of whom shall be a non-employee of the Company. The committee members currently are Anthony So
and Woo-Ping Fok. The committee determines the specific terms of the options granted, including the employees to be granted options
under the plan, the number of shares subject to each option grant, 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 the 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 2004 Plan may be paid in cash, by the surrender of options, in common stock,
in other property, including a promissory note from the optionee, or by a combination of the above, at the discretion of the Committee.
As
of March 31, 2013, no options had been granted under the 2004 Plan.
2004
Stock Bonus Plan
On
September 7, 2004, our stockholders adopted the 2004 Stock Bonus Plan (the “Stock Bonus Plan”), which authorizes the
issuance of up to five hundred thousand (500,000) shares of the Company’s Common Stock in the form of stock a stock bonus.
The
purpose of this Stock Bonus Plan is to: (i) induce key employees to remain in the employ of the Company or of any subsidiary of
the Company; (ii) encourage such employees to secure or increase their stock ownership in the Company; and (iii) reward employees,
non-employee directors, advisors and consultants for services rendered, or to be rendered, to or for the benefit of the Company
or any of its subsidiaries. The Company believes that the Stock Bonus Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company.
The
Stock Bonus Plan shall be administered by a committee appointed by the Board of Directors which consists of at least two but not
more than three members of the Board, one of whom shall be a non-employee of the Company. The Committee members currently are
Anthony So and Woo-Ping Fok. The Committee has the authority, in its sole discretion: (i) to determine the parties to receive
bonus stock, the times when they shall receive such awards, the number of shares to be issued and the time, terms and conditions
of the issuance of any such shares; (ii) to construe and interpret the terms of the Stock Bonus Plan; (iii) to establish, amend
and rescind rules and regulations for the administration of the Stock Bonus Plan; and (iv) to make all other determinations necessary
or advisable for administering the Stock Bonus Plan.
As
of March 31, 2013, no shares had been granted under the Stock Bonus Plan.
50
Item
7. Major Shareholders and Related Party Transactions
Major
shareholders
We
are not directly or indirectly owned or controlled by any foreign government or by another corporation. The following table sets
forth, as of June 30, 2013, beneficial ownership of our common stock by each person, to the best of our knowledge, known to own
beneficially 5% or more of our common stock outstanding as of such date. Except as otherwise indicated, all shares are owned directly
and hold equal voting rights.
Name
|
|
|
Shares of Common Stock Owned
|
|
|
|
Options to Purchase Common Stock
|
|
|
|
Percent of Beneficial Ownership
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony So
|
|
|
2,281,770
(2)
|
|
|
|
—
|
|
|
|
40.9
|
%
|
W. Douglas Moreland
|
|
|
501,400
|
|
|
|
—
|
|
|
|
8.99
|
%
|
CAS Corporation
|
|
|
290,654
|
|
|
|
—
|
|
|
|
5.21
|
%
|
|
(1)
|
Based
on
beneficial
ownership
of
both
shares
of
common
stock
and
of
options
to
purchase
common
stock
that
are
immediately
exercisable.
The
calculations
above
are
based
upon
the
number
of
shares
issued
of
5,577,639.
|
|
(2)
|
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.
Effective
March
31,
2011,
John
Stewart
Jackson,
IV,
a
former
director
of
the
Company
sold
455,575
shares
of
$0.003
par
value
of
the
Company
in
a
private
sale
of
stock
to
Anthony
So
for
gross
proceeds
of
One
Million
One
Hundred
Thirty
Eight
Thousand
Nine
Hundred
Thirty
Seven
Dollars
and
Fifty
cents
(USD$1,138,937.50),
or
$2.50
per
share. Effective
March
31,
2011,
Anthony
So
purchased
200,000
shares
of
$0.003
par
value
common
stock
of
Bonso
in
a
private
purchase
of
stock
from
an
individual
for
gross
proceeds
of
Three
Hundred
and
Twenty
Thousand
Dollars
(USD$320,000),
or
$1.60
per
share.
|
There
are no arrangements known to us which may at a subsequent date result in a change in control of the Company.
Related
Party Transactions
During
the fiscal years ended March 31, 2011, 2012 and 2013, we paid Schlueter & Associates, P.C. an aggregate of $87,000, $68,000
and $74,000, respectively for legal fees. Mr. Henry F. Schlueter, a director of the Company, is the Managing Director of Schlueter
& Associates, P.C.
Interests
of Experts and Counsel
Not
Applicable to Bonso.
Legal
Proceedings
Not
Applicable to Bonso.
51
Item
8. Financial Information
Financial
Statements
Our
Consolidated Financial Statements are set forth under Item 18. - Financial Statements.
Item
9. The Offer and Listing
Offer
and Listing Details
Our
common stock is traded only in the United States over-the-counter market. It is quoted on the NASDAQ Capital Market under the
trading symbol “BNSO.” The following table sets forth, for the periods indicated, the range of high and low closing
sales prices per share reported by NASDAQ. The quotations represent prices between dealers and do not include retail markup, markdown
or commissions and may not necessarily represent actual transactions.
The
following table sets forth the high and low sale prices for each of the last five years:
Period
|
|
|
|
High
|
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2008 to March 31, 2009
|
|
|
$
|
2.45
|
|
|
$
|
0.03
|
|
April 1, 2009 to March 31, 2010
|
|
|
$
|
1.42
|
|
|
$
|
0.63
|
|
April 1, 2010 to March 31, 2011
|
|
|
$
|
2.44
|
|
|
$
|
0.86
|
|
April 1, 2011 to March 31, 2012
|
|
|
$
|
2.80
|
|
|
$
|
1.07
|
|
April
1, 2012 to March 31, 2013
|
|
|
$
|
1.88
|
|
|
$
|
0.88
|
|
The
following table sets forth the high and low sale prices during each of the quarters in the two-year period ended June 30, 2013.
Period
|
|
High
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2011 to September 30, 2011
|
|
|
$
|
2.80
|
|
|
$
|
1.33
|
|
|
October 1, 2011 to December 31, 2011
|
|
|
$
|
1.51
|
|
|
$
|
1.07
|
|
|
January 1, 2012 to March 31, 2012
|
|
|
$
|
1.35
|
|
|
$
|
1.13
|
|
|
April 1, 2012 to June 30, 2012
|
|
|
$
|
1.88
|
|
|
$
|
0.92
|
|
|
July 1, 2012 to September 30, 2012
|
|
|
$
|
1.10
|
|
|
$
|
0.88
|
|
|
October 1, 2012 to December 31, 2012
|
|
|
$
|
1.72
|
|
|
$
|
0.97
|
|
|
January 1, 2013 to March 31, 2013
|
|
|
$
|
1.66
|
|
|
$
|
1.25
|
|
|
April 1, 2013 to June 30, 2013
|
|
|
$
|
1.56
|
|
|
$
|
1.33
|
|
52
The
following table sets forth the high and low sale prices during each of the most recent six months.
|
Period
|
|
|
|
High
|
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2013
|
|
|
$
|
1.55
|
|
|
$
|
1.25
|
|
|
February 2013
|
|
|
$
|
1.66
|
|
|
$
|
1.34
|
|
|
March 2013
|
|
|
$
|
1.61
|
|
|
$
|
1.31
|
|
|
April 2013
|
|
|
$
|
1.48
|
|
|
$
|
1.34
|
|
|
May 2013
|
|
|
$
|
1.49
|
|
|
$
|
1.33
|
|
|
June 2013
|
|
|
$
|
1.56
|
|
|
$
|
1.38
|
|
On
July 15, 2013, the closing price of our common stock was $1.55. Of the 5,577,639 shares of common stock issued as of June 30,
2013, 5,246,903 shares were outstanding, 3,161,877 shares were held in the United States by 177 holders of record and 330,736
shares were held by the Company as treasury stock. We have 185 shareholders of record and estimate that we have 511 shareholders
holding their stock in street name (who have not objected to their names being disclosed to us).
Transfer
and Warrant Agent
The
transfer agent and registrar for the common stock is Computershare, 1745 Gardena Avenue #200, Glendale, California 91204.
Item
10. Additional Information
Share
Capital
Our
authorized capital is $170,000, consisting of 23,333,334 shares of common stock, $0.003 par value per share, and 10,000,000 authorized
shares of preferred stock, $0.01 par value, 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. Information with respect to the number of shares of common stock outstanding
at the beginning and at the end of the last three fiscal years is presented in the Consolidated Statements of Changes in Shareholders’
Equity for the fiscal years ended March 31, 2011, 2012 and 2013 included herein in Item 18.
At
June 30, 2013, there were 5,577,639 shares of our common stock issued, 5,246,903 shares were outstanding, and 330,736 shares were
held by the Company in treasury. All shares were fully paid. In addition, we had outstanding 110,000 options to purchase common
stock as follows:
|
Number of Options
|
|
|
|
Exercise Price per Share
|
|
|
Expiration Date
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
$
|
6.12
|
|
|
March 25, 2014
|
|
40,000
|
|
|
$
|
6.20
|
|
|
September 12, 2014
|
|
30,000
|
|
|
$
|
4.50
|
|
|
December 4, 2015
|
At
June 30, 2013, there were no shares of our preferred stock outstanding.
53
Memorandum
and Articles of Association
We
are registered in the British Virgin Islands and have been assigned company number 9032 in the register of companies. Our registered
agent is HWR Services Limited at Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, British Virgin Islands. The object or purpose
of the Company is to engage in any act or activity that is not prohibited under British Virgin Islands law as set forth in Paragraph
4 of our Memorandum of Association. As an International Business Company, we are prohibited from doing business with persons resident
in the British Virgin Islands, owning real estate in the British Virgin Islands or acting as a bank or insurance company. We do
not believe that these restrictions materially affect our operations.
Paragraph
57(c) of our Amended Articles of Association (the “Articles”) provides that a director may be counted as one of a
quorum in respect of any contract or arrangement in which the director is materially interested; however, if the agreement or
transaction cannot be approved by a resolution of directors without counting the vote or consent of any interested director, the
agreement or transaction may only be validated by approval or ratification by a resolution of the members. Paragraph 53 of the
Articles allows the directors to vote compensation to themselves in respect of services rendered to the Company. Paragraph 66
of the Articles provides that the directors may by resolution exercise all the powers of the Company to borrow money and to mortgage
or charge its undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever
money is borrowed or as security for any debt, liability or obligation of ours or of any third party. Such borrowing powers can
be altered by an amendment to the Articles. There is no provision in the Articles for the mandatory retirement of directors. Directors
are not required to own shares of the Company in order to serve as directors.
Our
authorized share capital is $170,000, divided into 23,333,334 shares of common stock, $0.003 par value, and 10,000,000 authorized
shares of preferred stock, $0.01 par value. Holders of our common stock are entitled to one vote for each whole share on all matters
to be voted upon by shareholders, including the election of directors. Holders of our common stock do not have cumulative voting
rights in the election of directors. All of our common shares are equal to each other with respect to liquidation and dividend
rights. Holders of our common shares are entitled to receive dividends if and when declared by our board of directors out of funds
legally available therefor under British Virgin Islands law. In the event of our liquidation, all assets available for distribution
to the holders of our common shares are distributable among them according to their respective holdings. Holders of our common
stock have no preemptive rights to purchase any additional unissued common shares. No shares of our preferred stock have been
issued; however, the board of directors has the ability to determine the rights, preferences and restrictions of the preferred
stock at their discretion.
Paragraph
7 of the Memorandum of Association provides that without prejudice to any special rights previously conferred on the holders of
any existing shares, any share may be issued with such preferred, deferred or other special rights or such restrictions, whether
in regard to dividend, voting, return of capital or otherwise, as the directors may from time to time determine.
Paragraph
10 of the Memorandum of Association provides that if at any time the authorized share capital is divided into different classes
or series of shares, the rights attached to any class or series may be varied with the consent in writing of the holders of not
less than three-fourths of the issued shares of any other class or series of shares which may be affected by such variation.
54
Paragraph
105 of the Articles of Association provides that our Memorandum and Articles of Association may be amended by a resolution of
members or a resolution of directors. Thus, our board of directors without shareholder approval may amend our Memorandum and Articles
of Association. This includes amendments to increase or reduce our authorized capital stock. Our ability to amend our Memorandum
and Articles of Association without shareholder approval could have the effect of delaying, deterring or preventing a change in
control of the Company, including a tender offer to purchase our common shares at a premium over the then current market price.
Provisions
in respect of the holding of general meetings and extraordinary general meetings are set out in Paragraphs 68 through 77 of the
Articles and under the International Business Companies Act. The directors may convene meetings of the members at such times and
in such manner and places as the directors consider necessary or desirable, and they shall convene such a meeting upon the written
request of members holding more than 30% of the votes of our outstanding voting shares.
British
Virgin Islands law and our Memorandum and Articles of Association impose no limitations on the right of nonresident or foreign
owners to hold or vote our securities. There are no provisions in the Memorandum and Articles of Association governing the ownership
threshold above which shareholder ownership must be disclosed.
A
copy of our Memorandum and Articles of Association, as amended, was filed as an exhibit to our Registration Statement on Form
F-2 (SEC File No. 333-32524).
Material
Contracts
The
following summarizes each material contract, other than contracts entered into in the ordinary course of business, to which Bonso
or any subsidiary of Bonso is a party, for the two years immediately preceding the filing of this report:
We
signed a Banking Facility Letter dated February 1, 2013 with Hang Seng Bank for an HK$78,000,000 letter of credit, trust receipt
facility, export D/P bills, export trade loan, factoring and overdraft facility. A copy of this Banking Facilities Letter is attached
to this Annual Report on Form 20-F as Exhibit 4.1 and is incorporated herein by this reference.
We
signed a rental agreement dated June 28, 2013 with Shenzhen Mei Ya Print Co, Ltd., for renting out the Shenzhen factory for six
years. An abridged, English translation of the rental agreement is attached to this Annual Report on Form 20-F as Exhibit 4.2
and is incorporated herein by this reference.
Exchange
Controls
There
are no exchange control restrictions on payments of dividends on our common stock or on the conduct of our operations either in
Hong Kong, where our principal executive offices are located, or the British Virgin Islands, where we are incorporated. Other
jurisdictions in which we conduct operations may have various exchange controls. Taxation and repatriation of profits regarding
our China operations are regulated by Chinese laws and regulations. With respect to our PRC subsidiaries, with the exception of
a requirement that approximately 11% of profits be reserved for future developments and staff welfare, there are no restrictions
on the payment of dividends and the removal of dividends from China once all taxes are paid and assessed and losses, if any, from
previous years have been made good. To date, these controls have not had, and are not expected to have, a material impact on our
financial results. There are no material British Virgin Islands laws that impose foreign exchange controls on us or that affect
the payment of dividends, interest or other payments to holders of our securities who are not residents of the British Virgin
Islands. British Virgin Islands law and our Memorandum and Articles of Association impose no limitations on the right of nonresident
or foreign owners to hold or vote our securities.
55
Taxation
No
reciprocal tax treaty regarding withholding exists between the United States and the British Virgin Islands. Under current British
Virgin Islands law, dividends, interest or royalties paid by us to individuals are not subject to tax as long as the recipient
is not a resident of the British Virgin Islands. If we were to pay a dividend, we would not be liable to withhold any tax, but
shareholders would receive gross dividends, if any, irrespective of their residential or national status.
Dividends,
if any, paid to any United States resident or citizen shareholder are treated as dividend income for United States federal income
tax purposes. Such dividends are not eligible for the 70% dividends-received deduction allowed to United States corporations on
dividends from a domestic corporation under Section 243 of the Internal Revenue Code. Various Internal Revenue Code provisions
impose special taxes in certain circumstances on non-United States corporations and their shareholders. You are urged to consult
your tax advisor with regard to such possibilities and your own tax situation.
A
foreign corporation will be treated as a passive foreign investment company (“PFIC”) for United States federal income
tax purposes if, after applying relevant look-through rules with respect to the income and assets of subsidiaries, 75% or more
of its gross income consists of certain types of passive income or 50% or more of the gross value of its assets is attributable
to assets that produce passive income or are held for the production of passive income. For this purpose, passive income generally
includes dividends, interest, royalties, rents (other that rents and royalties derived in the active conduct of a trade or business),
annuities and gains from assets that produce passive income. We presently believe that we are not a PFIC and do not anticipate
becoming a PFIC. This is, however, a factual determination made on an annual basis and is subject to change. If we were to be
classified as a PFIC in any taxable year, (i) U.S. holders would generally be required to treat any gain on sales of our
shares held by them as ordinary income and to pay an interest charge on the value of the deferral of their United States federal
income tax attributable to such gain and (ii) distributions paid by us to our United States holders could also be subject
to an interest charge. In addition, we would not provide information to our United States holders that would enable them to make
a “qualified electing fund” election under which, generally, in lieu of the foregoing treatment, our earnings would
be currently included in their United States federal income.
In
addition to United States federal income taxation, shareholders may be subject to state and local taxes upon their receipt of
dividends.
56
Documents
on Display
You
may read and copy documents referred to in this Annual Report on Form 20-F that have been filed with the SEC at the SEC’s
Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. You may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. You can also obtain copies of our SEC filings by going to the SEC’s website at
http://www.sec.gov.
The
SEC allows us to “incorporate by reference” the information we file with the SEC. This means that we can disclose
important information to you by referring you to another document filed separately with the SEC. The information incorporated
by reference is considered to be part of this Annual Report on Form 20-F.
Item
11. Quantitative and Qualitative Disclosures About Market Risk
We
are exposed to a certain level of interest rate risk and foreign currency exchange risk.
Interest
Rate Risk
Our
interest rate risk primarily arises from our long-term debt and our general banking facilities. As at March 31, 2013, there was
no long-term debt. We had utilized approximately $3,813,000 of our total banking facilities of $10,000,000. Based on the maturity
profile and composition of our long-term debt and general banking facilities, including the fact that our banking facilities are
at variable interest rates, we estimate that changes in interest rates will not have a material impact on our operating results
or cash flows. We intend to manage our interest rate risk through appropriate borrowing strategies. We have not entered into interest
rate swap or risk management agreements; however, it is possible that we may do so in the future.
A
summary of our debts as at March 31, 2013 which were subjected to variable interest rates is as below:
|
|
|
March 31,
|
|
|
|
Interest
|
|
|
|
|
2013
|
|
|
|
Rate
|
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
$
|
2,276,000
|
|
|
|
HIBOR + 2.5%
|
|
Bank overdraft - secured
|
|
$
|
180,000
|
|
|
|
PRIME + 1%
|
|
Factoring
|
|
$
|
332,000
|
|
|
|
HIBOR + 1.5%
|
|
Short-term loan
|
|
$
|
1,025,000
|
|
|
|
HIBOR + 2.25%
|
|
(Note:
HIBOR is the Hong Kong Interbank Offer Rate)
All
the balances above are due within one year.
57
A
change in the interest rate of 1% will increase or decrease the interest expense of the Company by approximately $21,000.
For
further information concerning our banking facilities, the interest rates payable and repayment terms, please see Note 7 to our
Consolidated Financial Statements included elsewhere in this Annual Report.
Foreign
Currency Exchange Rates
For
a discussion of our Foreign Currency Exchange Risk, See
Item 5. - Operating and Financial Review and Prospects, “Foreign
Currency Exchange Rates.”
Item
12. Description of Securities Other Than Equity Securities
Not
applicable to Bonso.
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 (collectively,
the “Group”) are engaged in the designing, manufacturing and selling of a comprehensive line of electronic scales and
weighing instruments, telecommunications products, pet electronics products and other products.
|
|
|
|
|
|
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 allowances made against inventories
and trade receivables, and the valuation of long-lived assets. Actual results could differ from those estimates.
|
The Group sustained operating
losses in fiscal years ended March 31, 2011, 2012 and 2013, including a net loss of $754,000 in the fiscal year ended March 31,
2013.
Notwithstanding the operating
losses sustained in the last three fiscal years, the accompanying consolidated financial statements have been prepared on a going
concern basis. Management believes the Group will have sufficient working capital to meet its financing requirements based upon
their experience and their assessment of the Group’s projected performance, credit facilities and banking relationships.
|
|
Pursuant to an agreement signed on March 30, 2009,
Korona Haushaltswaren GmbH & Co. KG (“Korona”), an indirect subsidiary of the Company, agreed to sell all of
its major assets, comprising trade receivables, inventories, intellectual property rights and toolings, to a third party
purchaser at a consideration of approximately EUR 1,990,000 (or USD 2,606,000). The Group decided to liquidate Korona after
the completion of the sale. As a result, the figures of Korona are included as discontinued operations (see note 11). The
liquidation of Korona was completed in February 2012.
|
The significant accounting policies
are as follows:
|
(a)
|
Principles of consolidation
|
|
|
The consolidated financial statements include the financial statements of the Company and its subsidiaries
after elimination of inter-company accounts and transactions.
|
|
|
Acquisitions of companies have been consolidated from the date on which control of the net assets
and operations was transferred to the Group.
|
|
|
Acquisitions of companies are accounted for using the purchase method of accounting.
|
|
(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.
|
-F-6-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
1
|
Description of business and significant accounting policies (Continued)
|
|
|
Inventories are stated at the lower of cost, as determined on a first-in, first-out basis, or
market. Costs of inventories include purchase and related costs incurred in bringing the products to their present location
and condition. Market value is determined by reference to the selling price after the balance sheet date or to management estimates
based on prevailing market conditions. The Company routinely reviews its inventories for their salability and for indications of
obsolescence to determine if inventory carrying values are higher than market value. Some of the significant factors the Company
considers in estimating the market value of its inventories include the likelihood of changes in market and customer demand and
expected changes in market prices for its inventories. As of March 31, 2012, inventories were stated at market value, which is
lower than their costs by approximately $283,000.
|
Trade receivables are recorded
at the invoiced amount, net of allowances for doubtful accounts and sales returns. The allowance for doubtful accounts is the Group’s
best estimate of the amount of probable credit losses in the Group’s existing trade receivables. Bad debt expense is included
in the administrative and general expenses.
The Group recognizes an allowance
for doubtful receivables to ensure accounts and other receivables are not overstated due to uncollectibility. Allowance for doubtful
receivables is maintained for all customers based on a variety of factors, including the length of time the receivables are past
due, significant one-time events and historical experience. An additional allowance for individual accounts is recorded when the
Group becomes aware of customers’ or other debtors’ inability to meet their financial obligations, such as bankruptcy
filings or deterioration in the customer’s or other debtor’s operating results or financial position. If circumstances
related to customers or debtors change, estimates of the recoverability of receivables will be further adjusted.
|
(e)
|
Deferred income taxes
|
Amounts in the consolidated financial
statements related to income taxes are calculated using the principles of ASC 740 “Income Taxes”. ASC 740 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 bases and tax bases 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 as deferred tax assets. Recognized deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
-F-7-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
1
|
Description of business and significant accounting policies (Continued)
|
Lease prepayments represent the
cost of land use rights in the People’s Republic of China (“PRC”). Land use rights held by the Company are included
in intangible assets, reclassified from property, plant and equipment. The granted useful life of the land use rights is 50 years.
They are stated at cost and amortized on a straight-line basis over the period of rights of 30 years, in accordance with the business
licenses with 30 years of useful life.
|
|
|
|
(g)
|
Other tangible assets
|
|
|
Other intangible assets represented taxi licenses which were stated at cost and are amortized on
a straight-line basis over the related granted useful life of 50 years, the shorter of the remaining term of the license period
or the expected useful life to the Group. Taxi licenses entitle the Group to operate five taxis for 50 years in Shenzhen, PRC.
The purpose of holding these licenses is to generate additional income. All five taxi licenses were disposed of in July 2010, for
a total consideration of $513,000, resulting in a gain on disposal of $41,000.
|
|
|
|
|
(h)
|
Property,
plant and
equipment
|
(i)
|
|
Property, plant and equipment
are stated at cost less accumulated depreciation. Leasehold land and buildings are depreciated 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 categories of property,
plant and equipment 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
|
-10%
|
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 when they are incurred.
|
(iv)
|
|
Any gain or loss on disposal
is included in the consolidated statements of operations and comprehensive loss.
|
-F-8-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
1
|
Description of business and significant accounting policies (Continued)
|
|
|
|
|
(i)
|
Impairment
of long-lived
assets
including
other intangible
assets
|
Long-lived assets held and used
by the Group 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 Group 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 loss 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. Provisions for impairment made
on other long-lived assets are disclosed in the consolidated statements of operations and comprehensive loss. The Group is
going to transfer all its production process to the factory in Xinxing, PRC. As a result, the Group performed an assessment
of the value of the land and buildings of the factory in Shenzhen, PRC, and no provision for
impairment was made by the Group (2012: $nil; 2011: $nil) based on the assessment.
|
(j)
|
Capital and operating leases
|
Costs in respect of operating leases
are charged against income on a straight-line basis over the lease term. Leasing agreements, which transfer to the Group substantially
all the benefits and risks of ownership of an asset, are treated as if the asset had been purchased outright. The assets are included
in property, plant and equipment (“capital leases”) and the capital element of the lease commitments is shown as an
obligation under capital leases. The lease rentals are treated as consisting of capital and interest elements. The capital element
is applied to reduce the outstanding obligation and the interest element is charged against profit so as to give a consistent
periodic rate of charge on the remaining balance outstanding at the end of each accounting period. Assets held under capital leases
are depreciated over the useful lives of the equivalent owned assets.
No revenue is recognized unless
there is persuasive evidence of an arrangement, the price to the buyer is fixed or determinable, delivery has occurred and collectibility
of the sales price is reasonably assured. Revenue is recognized when title and risk of loss are transferred to customers, which
is generally the point at which products are leaving the ports of Hong Kong or Shenzhen as designated by our customers. Shipping
costs billed to the Company’s customers are included within revenue. Associated costs are classified as part of cost of sales.
The Company provides to certain
customers an additional one to two percent of the quantity of certain products ordered in lieu of a warranty, which are recognized
as cost of sales when these products are shipped to customers from the Company’s facilities. In addition, certain products
sold by the Company are subject to a limited product quality warranty. The Company accrues for estimated incurred but unidentified
quality issues based upon historical activity and known quality issues if a loss is probable and can be reasonably estimated. The
standard limited warranty period is one to three years. Quality returns, refunds, rebates and discounts are recorded net of sales
at the time of sale and estimated based on past history. All sales are based upon firm orders with fixed terms and conditions,
which generally cannot be modified. Historically, the Company has not experienced material differences between its estimated amounts
of quality returns, refunds, rebates and discounts and the actual results. In all contracts, there is no price protection or similar
privilege in relation to the sale of goods.
-F-9-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
1
|
Description of business and significant accounting policies
(Continued)
|
|
(l)
|
Research and development costs
|
Research and development costs include
salaries, utilities and contractor fees that are directly attributable to the conduct of research and development progress primarily
related to the development of new design of products. Research and development costs are expensed in the financial period in which
they are incurred.
|
|
Advertising costs are expensed as incurred and are included within selling expenses. Advertising
costs were approximately $2,000, $5,000 and $26,000 for the fiscal years ended March 31, 2011, 2012 and 2013, respectively.
|
The Company complies with ASC
740 for uncertainty in income taxes recognized in financial statements. ASC 740 prescribes a recognition threshold and
measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. The Company’s accounting policy is to treat interest and penalties as
components of income taxes.
|
(o)
|
Foreign currency translations
|
|
(i)
|
The
Group’s functional currency is the United States dollar. The financial statements of foreign subsidiaries where the United
States dollar is the functional currency and which have transactions denominated in non-United States dollar currencies are translated
into United States dollars at the exchange rates existing on that date. The translation of local currencies into United States
dollars creates transaction adjustments which are included in net loss. Exchange differences are recorded in the statements of
operations and comprehensive loss.
|
|
|
|
|
(ii)
|
The financial statements of foreign subsidiaries, where non-United States dollar currencies are
the functional currencies, 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 operations. Adjustments resulting from translation
of these financial statements are reflected as a separate component of shareholders’ equity in accumulated other comprehensive
income.
|
|
(p)
|
Stock options and warrants
|
Stock options have been granted
to employees, directors and non-employee directors. Upon exercise of the options, a holder can acquire shares of common stock 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 agreements or plan.
The Company follows the
guidance of ASC 718, Accounting for Stock Options and Other Stock-Based Compensation. ASC 718 requires companies to record
compensation expense for share-based awards issued to employees and directors in exchange for services provided. The amount
of the compensation expense is based on the estimated fair value of the awards on their grant dates and is recognized over
the required service periods. Our share-based awards include stock options and restricted stock awards. The estimated fair
value underlying our calculation of compensation expense for stock options is based on the Black-Scholes pricing
model. Forfeitures of share-based awards are estimated at the time of grant and revised, if necessary, in subsequent periods
if our estimates change based on the actual amount of forfeitures we have experienced.
-F-10-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
1
|
Description of business and significant accounting policies
(Continued)
|
|
(q)
|
Recent accounting pronouncements
|
In July 2012, the FASB issued
Accounting Standard Update No. 2012-02, “Intangibles—Goodwill and Other (Topic 350) Testing Indefinite-Lived Intangible
Assets for Impairment” (“ASU 2012-02”), which affords an entity the option to first assess qualitative factors
to determine whether the existence of events and circumstances indicates that it is more likely than not that an indefinite-lived
intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not
more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action.
However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset
and perform the quantitative impairment test by comparing the fair value with the carrying amount. The amendments are effective
for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted,
including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial
statements for the most recent annual or interim period have not yet been issued. The Company does not believe that adoption of
ASU 2012-02 will have a significant impact on its financial position, results of operations or cash flows.
We believe there is no additional new accounting guidance adopted, but not yet effective that is relevant to the readers of our
financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant
impact on our financial reporting.
|
(r)
|
Fair value of financial instruments
|
The Group complies with ASC
820, “Fair Value Measurements” (“ASC 820”). ASC 820 clarifies the definition of fair value,
prescribes methods for measuring fair value and establishes a fair value hierarchy to classify the inputs used in measuring
fair value as follows:
Level 1-Inputs are unadjusted
quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2-Inputs are unadjusted
quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities
in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by
observable market data.
Level 3-Inputs are unobservable
inputs which reflect the reporting entity's own assumptions on what assumptions the market participants would use in pricing the
asset or liability based on the best available information.
-F-11-
Bonso Electronics
International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
2
|
Allowance for doubtful accounts
|
|
|
Changes in the allowance for doubtful accounts as of March 31,
2011, 2012 and 2013 comprise:
|
|
|
|
2011
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
$
in thousands
|
|
|
|
$
in thousands
|
|
|
|
$
in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
April 1
|
|
|
1,460
|
|
|
|
1,415
|
|
|
|
1,415
|
Write
back for the year
|
|
|
(45
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March
31
|
|
|
1,415
|
|
|
|
1,415
|
|
|
|
1,415
|
Most of the Company’s trade
receivables are generally unsecured, except for two customers with receivables covered by credit insurance under a factoring agreement.
As of March 31, 2011, the Company
had collected $45,000 from Gram Precision Scales Inc. (“Gram”). The Company believed that the recoverability of the
remaining $1,415,000 was doubtful, and continued to include this amount in allowance for doubtful accounts as of March 31, 2012
and March 31, 2013.
|
|
The components of inventories as of March 31, 2012 and 2013 are as follows:
|
|
|
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
|
$
in thousands
|
|
|
|
$
in thousands
|
|
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
|
1,477
|
|
|
|
1,904
|
|
Work
in progress
|
|
|
1,512
|
|
|
|
2,487
|
|
Finished
goods
|
|
|
1,116
|
|
|
|
1,069
|
|
|
|
|
───────
|
|
|
|
───────
|
|
|
|
|
4,105
|
|
|
|
5,460
|
|
|
|
|
═══════
|
|
|
|
═══════
|
|
During the year ended March
31, 2013, the Company has disposed of obsolete inventories of approximately $1,303,000 together with an allowance for
inventories of approximately $1,303,000, which resulted in no extra charge to the
consolidated statements of operations under cost of sales. During the year ended March 31, 2012, based upon material
composition and expected usage, the Company established an allowance for obsolete inventories of approximately $283,000,
which was charged to the consolidated statements of operations under cost of sales.
-F-12-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
4
|
Property, plant and equipment, net
|
During the fiscal years ended
March 31, 2011, 2012 and 2013, depreciation expenses charged to the consolidated statements of operations amounted to approximately
$99,000, $54,000 and $120,000 respectively. As at March 31, 2011, 2012 and 2013, fully depreciated assets that were still in use
by the Group amounted to $31,222,000, $32,280,000, and $32,858,000 respectively.
Property, plant and equipment
in Shenzhen were assessed for impairment according to the policy described in note 1(i). The Company concluded that no impairment
to property, plant and equipment in Shenzhen was required for the fiscal years ended March 31, 2012 and 2013.
|
5
|
Interests in subsidiaries
|
Particulars of principal subsidiaries as of March 31,
2012 and 2013 are as follows:
Name
of company
|
|
Place
of
incorporation
and kind of
legal
entity
|
|
Particulars
of
issued
capital/
registered
capital
|
|
Percentage
of capital held by the Company
|
|
Principal activities
|
|
|
|
|
|
|
2012
|
|
2013
|
|
|
Bonso
Electronics Limited *
(“BEL”)
|
|
Hong
Kong,
limited liability
company
|
|
HK$5,000,000
(US$641,026)
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Investment
holding, and trading of scales and pet electronics products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonso Investment
Limited
(“BIL”)
|
|
Hong Kong,
limited
liability company
|
|
HK$3,000,000 (US$384,615)
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Investment
holding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonso Electronics
(Shenzhen) Company Limited
(“BESCL”)
|
|
PRC,
limited
liability company
|
|
US$12,621,222
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Production
of scales and pet electronics products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonso Advanced Technology
Limited *
(“BATL”)
|
|
Hong Kong,
limited
liability company
|
|
HK$1,000,000
(US$128,205)
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Investment
holding, and trading of scales and pet electronics products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonso Advanced Technology
(Xinxing) Limited
(“BATXXCL”)
|
|
PRC,
limited
liability company
|
|
US$8,995,324
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Production
of scales and pet electronics products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modus Enterprise
International Inc. *
(“MEII”)
|
|
British Virgin Island,
limited liability company
|
|
HK$7,800
(US$1,000)
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Investment
holding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonso
USA, Inc. (“Bonso USA”)
|
|
USA, limited liability
company
|
|
US$ 1,000
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Dormant
|
|
|
|
|
|
|
|
|
* Shares directly held by the Company
|
-F-13-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
6
|
Other intangible assets
|
|
|
Other intangible assets are analyzed as follows:
|
|
|
|
|
|
Other
intangible assets
|
|
|
March
31,
|
|
|
2012
|
|
2013
|
|
|
$
in thousands
|
|
$
in thousands
|
|
|
|
|
|
Cost
|
|
|
5,927
|
|
|
|
6,769
|
|
Less:
accumulated amortization
|
|
|
(1,937
|
)
|
|
|
(2,179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
3,990
|
|
|
|
4,590
|
|
The components of other intangible
assets are as follows:
|
|
March 31,
|
|
|
2012
|
|
2013
|
|
|
$ in thousands
|
|
$ in thousands
|
|
|
|
|
|
Land use right of factory land in Shenzhen, Guangdong, PRC
|
|
|
1,577
|
|
|
|
2,215
|
|
Land use right of factory land in Xinxing, Guangdong, PRC
|
|
|
2,413
|
|
|
|
2,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,990
|
|
|
|
4,590
|
|
Amortization expense in relation
to other intangible assets was approximately $208,000, $176,000 and $226,000 for each of the fiscal years ended March 31, 2011,
2012 and 2013, respectively.
As of March 31, 2013, future minimum
amortization expenses in respect of other intangible assets are as follows:
|
|
|
|
$
in thousands
|
|
2014
|
|
|
|
244
|
|
2015
|
|
|
|
244
|
|
2016
|
|
|
|
244
|
|
2017
|
|
|
|
244
|
|
2018
|
|
|
|
244
|
|
Thereafter
|
|
|
|
3,370
|
|
|
|
|
|
|
|
Total
|
|
|
|
4,590
|
|
-F-14-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
|
As of March 31, 2013, the Group had general banking facilities for bank overdrafts, letters of
credit, notes payable, factoring, short-term loans and long-term loans. The facilities are interchangeable with total amounts available
of $10,000,000 (2012: $8,183,000). The general banking facilities utilized by the Group are denominated in United States dollars
and Hong Kong dollars.
|
|
|
The Group’s general banking facilities, expressed in United States dollars, are further detailed
as follows:
|
|
|
|
|
|
Amount available
|
|
Amount utilized
|
|
Amount unutilized
|
|
Terms of banking
facilities as of
|
|
|
March 31,
|
|
March 31,
|
|
March 31,
|
|
March 31, 2013
|
|
|
2012
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
2013
|
|
Interest
|
|
Repayment
|
|
|
$ in thousands
|
|
$ in thousands
|
|
$ in thousands
|
|
rate
|
|
terms
|
Import and export facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined limit
|
|
|
6,154
|
|
|
|
6,154
|
|
|
|
1,870
|
|
|
|
2,788
|
|
|
|
4,284
|
|
|
|
3,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Including sub-limit of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
|
4,487
|
|
|
|
4,487
|
|
|
|
1,870
|
|
|
|
2,276
|
|
|
|
2,617
|
|
|
|
2,211
|
|
|
HIBOR* +2.5%
|
|
Repayable in full within
120 days
|
Bank overdrafts
|
|
|
641
|
|
|
|
641
|
|
|
|
—
|
|
|
|
180
|
|
|
|
641
|
|
|
|
461
|
|
|
Prime rate
+ 1%
|
|
Repayable on demand
|
Factoring
|
|
|
2,400
|
|
|
|
2,400
|
|
|
|
—
|
|
|
|
332
|
|
|
|
2,400
|
|
|
|
2,068
|
|
|
HIBOR* +1.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Export Documentary Credits
|
|
|
1,923
|
|
|
|
1,923
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,923
|
|
|
|
1,923
|
|
|
|
|
|
Term
Loan
|
|
|
106
|
|
|
|
1,923
|
|
|
|
—
|
|
|
|
1,025
|
|
|
|
106
|
|
|
|
898
|
|
|
HIBOR* +2.25%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,183
|
|
|
|
10,000
|
|
|
|
1,870
|
|
|
|
3,813
|
|
|
|
6,313
|
|
|
|
6,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* HIBOR is the Hong Kong Interbank Offer
Rate
-F-15-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
7
|
Banking facilities (Continued)
|
|
|
The United States Dollar equivalent amounts of banking facilities utilized by the Group are denominated
in the following currencies:
|
|
|
Amount utilized
|
|
|
March 31,
|
|
|
2012
|
|
2013
|
|
|
$ in thousands
|
|
$ in thousands
|
|
|
|
|
|
Hong Kong dollars
|
|
|
1,870
|
|
|
|
3,813
|
|
|
|
|
|
|
|
|
|
|
The Prime Rate and HIBOR were
5.00% and 0.54% per annum, respectively, as of March 31, 2013. The Prime Rate is determined by the Hong Kong Bankers Association
and is subject to revision from time to time. Interest rates are subject to change if the Company defaults on the amount due under
the facility or draws in excess of the facility amounts, or at the discretion of the banks.
Average amount of bank borrowings
were $1,386,000 and $2,076,000 for the fiscal years ended March 31, 2012 and 2013, respectively.
The weighted
average interest rates of short-term borrowings of the Group are as follows:
|
|
As of March 31,
|
|
|
2012
|
|
2013
|
|
|
|
|
|
Bank overdrafts
|
|
|
6.00
|
%
|
|
|
6.00
|
%
|
Notes payable
|
|
|
2.80
|
%
|
|
|
2.92
|
%
|
-F-16-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
(a)
|
The companies comprising the Group are subject to tax on an entity basis on income arising in or
derived from Hong Kong, Germany, the PRC, and the United States of America (“USA”). The tax rate of the subsidiaries
operating in Hong Kong was 16.5% for the year ended March 31, 2013 (2012: 16.5%, 2011: 16.5%). The subsidiary of the Group in Germany
was registered as a partnership in Germany, which was subject to a statutory tax rate of 14.17% during each of the three years
in the period ended March 31, 2010. The Group is not subject to income taxes in the British Virgin Islands. The statutory tax rate
in the USA was 34% for the three years ended March 31, 2013.
|
Hong Kong Tax
BEL, BATL and BIL are subject
to the Hong Kong profits tax rate of 16.5% (2012: 16.5%). Management of BEL has determined that all income and expenses are offshore
and not subject to Hong Kong profits tax. As a result, BEL did not incur any Hong Kong profits tax during the years presented.
BATL has no assessable profits for the year, and no current year provision for taxation has been made.
PRC Tax
BESCL is registered and operates
in Shenzhen, the PRC, and is subject to a tax rate of 24%, 25% and 25% for the tax years ended December 31, 2011, 2012 and 2013,
respectively. BATXXCL is registered in Xinxing, Guangdong, PRC, and was entitled to a 50% reduction in PRC income tax for the
three tax years ended December 31, 2011 and 2012. BATXXCL is subject to a tax rate of 25% thereafter.
|
(b)
|
On March 16, 2007, the PRC Enterprise Income Tax Law (the “EIT
Law”) was enacted by the PRC government. The EIT Law, effective January 1, 2008, imposes a uniform tax rate of 25% for both
domestic and foreign-invested enterprises and revokes the then current tax exemption, reduction and preferential treatments applicable
to foreign-invested enterprises. However, there is a transition period for enterprises, whether foreign-invested or domestic, that
were receiving preferential tax treatments granted by relevant tax authorities at the time the EIT Law became effective. Under
the grandfathering rules of the EIT Law, enterprises that are subject to an enterprise income tax (“EIT”) rate lower
than 25% will continue to enjoy lower rates with gradual transition to the new tax rate of 25% in five years from the effective
date of the EIT Law. Enterprises that are currently entitled to exemptions or reductions from the standard income tax rate for
a fixed term may continue to enjoy such treatment until the fixed term expires.
|
During
the period from January 1, 2008 to March 31, 2010, the Company’s subsidiaries operating in the PRC were subject to the EIT
Law and its standard tax rate of 25%, but the PRC subsidiaries are entitled to the grandfathering incentives. For the tax years
ended December 31, 2007, 2008 and 2009, BECSL, the Company’s PRC subsidiary, was subject to a tax rate of 15%, 18% and 20%,
respectively. BESCL is subject to tax rates of 22% and 24% for the tax years ended December 31, 2010 and 2011, respectively, and
a uniform tax rate of 25% for the tax year ended December 31, 2012 and thereafter.
BATXXCL was entitled to an exemption
from PRC income tax for the two tax years ended December 31, 2008 and 2009. BATXXCL is subject to a tax rate of 12.5% for the tax
years ended December 31, 2010, 2011 and 2012 and will be subject to a tax rate of 25% thereafter.
-F-17-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
(c)
|
Income is subject to taxation in the various countries in which the Company and its subsidiaries
operate. The loss before income taxes by geographical location is analyzed as follows:
|
|
|
|
2011
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hong Kong
|
|
|
2,451
|
|
|
|
(2,171
|
)
|
|
|
(3,509
|
)
|
PRC
|
|
|
(3,876
|
)
|
|
|
(181
|
)
|
|
|
2,832
|
|
Others
|
|
|
(6
|
)
|
|
|
1,452
|
|
|
|
(48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(1,431
|
)
|
|
|
(900
|
)
|
|
|
(725
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others mainly include the (loss) / profit from BVI and the United States.
|
|
|
|
2011
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax
|
|
|
—
|
|
|
|
17
|
|
|
|
2
|
|
Current income tax expense
|
|
|
—
|
|
|
|
(19
|
)
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of the income tax expense by geographical location are as follows:
|
|
|
|
2011
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hong Kong
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(29
|
)
|
PRC
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Others
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At the end of the accounting period, the income tax liabilities are as follows:
|
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
|
|
|
|
2,595
|
|
|
|
2,595
|
|
Current
|
|
|
|
44
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
2,639
|
|
|
|
2,602
|
|
-F-18-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
(e)
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax assets
|
|
|
|
—
|
|
|
|
—
|
|
Deferred income tax liabilities
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
Deferred
tax
assets
comprise
the
following:
|
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
Total loss carryforwards
|
|
|
|
784
|
|
|
|
700
|
|
Others
|
|
|
|
—
|
|
|
|
—
|
|
Less: Valuation allowance
|
|
|
|
(784
|
)
|
|
|
(700
|
)
|
|
|
|
|
—
|
|
|
|
—
|
|
Less: current portion
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Non-current portion
|
|
|
|
—
|
|
|
|
—
|
|
As
of March 31, 2012 and 2013, the Group had accumulated tax losses amounting to $3,136,000 and $2,811,000 (the
tax effect thereon is $784,000 and $700,000), respectively, subject to the final agreement by the relevant tax authorities,
which may be carried forward and applied to reduce future taxable income which is earned in or derived from Hong Kong and other
countries. 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. As of March 31, 2013, the Group’s accumulated tax losses
of $174,000 will expire in 2016, $299,000 will expire in 2017 and $1,773,000 will expire in 2018.
|
(f)
|
Changes
in
valuation
allowance
are
as
follows:
|
|
|
|
2011
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 1
|
|
|
122
|
|
|
|
485
|
|
|
|
784
|
|
Charged / (credited) to income tax expense
|
|
|
363
|
|
|
|
299
|
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31
|
|
|
485
|
|
|
|
784
|
|
|
|
700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-F-19-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
(g)
|
The actual income tax expense attributable to earnings for the fiscal years ended March 31, 2011,
2012 and 2013 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:
|
|
|
|
2011
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(1,431
|
)
|
|
|
(900
|
)
|
|
|
(725
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit on pretax income at statutory rate
|
|
|
236
|
|
|
|
148
|
|
|
|
120
|
|
Effect of different tax rates of subsidiary
operating in other jurisdictions
|
|
|
215
|
|
|
|
176
|
|
|
|
(249
|
)
|
Profit not subject to income tax
|
|
|
4,657
|
|
|
|
4,369
|
|
|
|
3,600
|
|
Expenses not deductible for income tax purposes
|
|
|
(5,116
|
)
|
|
|
(4,715
|
)
|
|
|
(3,469
|
)
|
(Increase) / decrease in valuation allowance
|
|
|
(363
|
)
|
|
|
(299
|
)
|
|
|
84
|
|
Reversal of provision as a result of development of tax rules
|
|
|
7
|
|
|
|
20
|
|
|
|
—
|
|
Under provision of prior year
|
|
|
—
|
|
|
|
—
|
|
|
|
(31
|
)
|
Tax losses not yet recognized / (utilization of tax losses not previously recognized)
|
|
|
364
|
|
|
|
299
|
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(29
|
)
|
The
statutory rate of 16.5% used above is that of Hong Kong, where the Company’s main business is located.
|
(h)
|
The
Company complies
with ASC
740
and
recognized
a
$1,170,000
increase
in
the
liability
for
unrecognized
tax
benefits
and
penalties
of
$994,000,
which
were
accounted
for
as
a
reduction
to
the
April
1,
2007
balance
of
retained
earnings.
The
Company
assessed
the
tax
position
during
the
fiscal
year
ended
March
31,
2013
and
concluded
that
the
same
tax
liability
was
to
be
carried
forward.
Included
in
the
total
tax
liabilities
of
$2,602,000
(2012:
$2,639,000,
2011:
$2,619,000),
the
uncertain
tax
liabilities
in
respect
of
this
for
the
years
ended
March
31,
2011,
2012
and
2013
are
as
follows:
|
|
|
|
2011
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 1
|
|
|
2,164
|
|
|
|
2,164
|
|
|
|
2,164
|
|
Changes in uncertain tax
liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31
|
|
|
2,164
|
|
|
|
2,164
|
|
|
|
2,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company’s accounting
policy is to treat interest and penalties as components of income taxes. As of March 31, 2013, the Company had accrued penalties
related to uncertain tax positions of $nil.
-F-20-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
The Company files income tax returns
in Hong Kong, the PRC and various foreign tax jurisdictions. There are two subsidiaries which operate within each of the Company’s
major jurisdictions, resulting in a range of open tax years. The open tax years for the Company and its significant subsidiaries
range between the fiscal year ended March 31, 2006 and the fiscal year ended March 31, 2010. The provisions made as a result of
these open tax cases are subject to a final agreement by the relevant tax authorities.
-F-21-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
|
The Group leases three investment properties
under
rental agreements to third parties, and the Group will need to pay a cancellation fee of approximately $9,000 if the Group decides
to
terminate
all the rental agreements before their expiry.
|
|
|
Rental expense for all operating leases amounted to approximately $191,000, $108,000 and $nil for
the fiscal years ended March 31, 2011, 2012 and 2013, respectively.
|
|
|
Capital expenditures contracted at the balance sheet date but not yet provided for are as follows:
|
|
|
March 31,
|
|
|
2012
|
|
2013
|
|
|
$ in thousands
|
|
$ in thousands
|
|
|
|
|
|
Construction in Xinxing, Guangdong, PRC
|
|
|
757
|
|
|
|
260
|
|
|
|
|
|
|
|
|
|
|
As of March
31, 2013, the Company entered into contractor agreements to construct factory building and leasehold improvements on the land in
Xinxing, the PRC for total consideration of $1,823,000. $1,563,000 has been paid, and the remaining balance of $260,000 is to be
paid in accordance with the progress of the construction.
-F-22-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
11
|
Discontinued Operations
|
On March 31, 2009, the Company’s
German subsidiary, Korona, sold its assets (accounts receivable, inventories, toolings and intellectual property rights) to a third
party. Korona had no operations since April 1, 2009 and was liquidated in February 2012.
The following table summarizes the result
of these discontinued operations, net of income taxes.
Discontinued Operations (Korona)
|
|
|
2011
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cost of Sales
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Administrative expenses
|
|
|
(129
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss and net loss
|
|
|
(129
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The carrying values of the assets
and liabilities of the disposal group classified as held for sale as at March 31, 2012 and 2013 were as follows:
|
|
|
March 31, 2012
|
|
|
|
March 31, 2013
|
|
Assets:
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
Total assets of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
|
══════════
|
|
|
|
══════════
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Liabilities of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
|
══════════
|
|
|
|
══════════
|
|
|
|
|
|
|
|
|
|
|
-F-23-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
|
(a)
|
Repurchase of common stock
|
In August of 2001, the
Company's Board of Directors authorized a program for the Company to repurchase up to $500,000 of its common stock. This
repurchase program does not obligate the Company to acquire any specific number of shares or acquire shares over any
specified period of time. No stock had been repurchased when, on November 16, 2006, the Company's Board of Directors
authorized another $1,000,000 for the Company to repurchase its common stock under the same repurchase program. This
authorization to repurchase shares increased the amount authorized for repurchase from $500,000 to $1,500,000. 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. No shares were repurchased during the fiscal year ended March 31, 2008. During the fiscal year ended
March 31, 2009, 70,019 shares ($134,000) were purchased under this program. No shares were repurchased during the
three fiscal years ended March 31, 2011, 2012 and 2013. The Company may from time to time repurchase shares of its common
stock under this program.
|
|
The Company has authorized share capital of $100,000 for 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 as of March 31, 2013.
|
No dividends were declared by
the Company for each of the fiscal years ended March 31, 2011, 2012 and 2013, respectively.
-F-24-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
13
|
Stock
option
and
bonus
plans
|
|
(a)
|
On September 7, 2004, the Company’s stockholders adopted the 2004 Stock Bonus Plan (the “Stock
Bonus Plan”) which authorizes the issuance of up to five hundred thousand (500,000) shares of the Company’s common stock
in the form of stock bonus.
|
The purpose of this Stock Bonus
Plan is to (i) induce key employees to remain in the employment of the Company or of any subsidiary of the Company; (ii) encourage
such employees to secure or increase their stock ownership in the Company; and (iii) reward employees, non-employee directors,
advisors and consultants for services rendered or to be rendered to or for the benefit of the Company or any of its subsidiaries.
The Company believes that the Stock Bonus Plan will promote continuity of management and increase incentive and personal interest
in the welfare of the Company.
The Stock Bonus Plan shall be administered
by a committee appointed by the Board of Directors which consists of at least two but not more than three members of the Board,
one of whom shall be a non-employee of the Company. The existing Committee members are Mr. Anthony So and Mr. Woo Ping Fok. The
Committee has the authority, in its sole discretion: (i) to determine the parties to receive bonus stock, the times when they
shall receive such awards, the number of shares to be issued and the time, terms and conditions of the issuance of any such shares;
(ii) to construe and interpret the terms of the Stock Bonus Plan; (iii) to establish, amend and rescind rules and regulations
for the administration of the Stock Bonus Plan; and (iv) to make all other determinations necessary or advisable for administering
the Stock Bonus Plan.
|
|
On March 23, 2004, the Company’s stockholders adopted the 2004 Stock Option Plan (the “2004
Plan”) which provides for the grant of up to six hundred thousand (600,000) shares of the Company’s common stock in
the form of stock options, subject to certain adjustments as described in the Plan.
|
The purpose of the 2004 Plan is
to secure key employees to remain in the employment of the Company and to encourage such employees to secure or increase on reasonable
terms their common stock ownership in the Company. The Company believes that the 2004 Plan promotes continuity of management and
increased incentive and personal interest in the welfare of the Company.
The 2004 Plan is administered
by a committee appointed by the Board of Directors which consists of at least two but not more than three members of the Board,
one of whom shall be a non-employee of the Company. The current committee members are Mr. Anthony So and Mr. Woo Ping Fok. The
committee determines the specific terms of the options granted, including the employees to be granted options under the plan, the
number of shares subject to each option grant, 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
the 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 2004 Plan may be paid in cash, by the surrender of options, in common stock, in other property, including
a promissory note from the optionee, or by a combination of the above, at the discretion of the Committee.
-F-25-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
13
|
Stock
option
and
bonus
plans
(Continued)
|
|
|
|
|
(a)
|
(Continued)
|
In October 1996, the Company’s
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 900,000 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.
|
|
Under the 1996 Non-Employee Directors’ Stock Option Plan, the non-employee directors were
automatically granted stock options on the third business day following the day of each annual general meeting of the Company to
purchase shares of common stock. The maximum number of authorized shares under the 1996 Non-Employee Director’s Stock Option
Plan was 600,000. 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 April 2003, the Company issued options to certain directors and non-employee directors of the
Company to purchase an aggregate of 372,500 shares of common stock of the Company at an exercise price of $1.61. The options expired
on March 31, 2013. The exercise prices of these options were equal to the fair market value at the time of grant. No such options
have been exercised during the years ended March 31, 2011, 2012 and 2013.
|
|
|
In March 2004, the Company issued options to certain non-employee directors of the Company to purchase
an aggregate of 40,000 shares of common stock of the Company at an exercise price of $6.12. The options shall expire on March 25,
2014 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 such options were exercised during the years ended March 31, 2011, 2012 and 2013.
|
-F-26-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
13
|
Stock
option
and
bonus
plans
(Continued)
|
|
|
(a)
|
(Continued)
|
In September 2004, the Company
issued options to certain non-employee directors of the Company to purchase an aggregate of 40,000 shares of common stock of the
Company at an exercise price of $6.20. The options shall expire on September 12, 2014 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 such option was exercised during
the years ended March 31, 2011, 2012 and 2013.
In December 2005, the Company
issued options to certain non-employee directors of the Company to purchase an aggregate of 30,000 shares of common stock of the
Company at an exercise price of $4.50. The options shall expire on December 4, 2015 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 such options had been exercised
during the years ended March 31, 2011, 2012 and 2013.
On November 16, 2006, the Board
of Directors of the Company voted to rescind the Company’s 1996 Non-Employee Directors’ Stock Option Plan (the “Non-Employee
Directors’ Plan”). All options previously granted under the Non-Employee Directors’ Plan continue in full force
and effect pursuant to their terms of grant.
During the fiscal year ended March
31, 2013, no shares or share options were granted under the 1996 Stock Option Plan.
|
(b)
|
The stock options summary as of March 31, 2013 is as follows:
|
|
|
|
|
|
Number
|
|
|
|
Weighted
average
exercise
|
|
|
|
|
|
|
of options
|
|
|
|
price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2011
|
|
|
|
826,500
|
|
|
$
|
2.83
|
|
|
Expired
|
|
|
|
(374,000
|
)
|
|
$
|
3.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2012
|
|
|
|
452,500
|
|
|
$
|
2.61
|
|
|
Expired
|
|
|
|
(342,500
|
)
|
|
$
|
1.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2013
|
|
|
|
110,000
|
|
|
$
|
5.71
|
|
|
|
|
|
|
|
|
|
|
|
|
-F-27-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
13
|
Stock
option
and
bonus
plans
(Continued)
|
|
(c)
|
The following table summarizes information about all stock options of the Company outstanding as
at March 31, 2013:
|
|
|
|
|
Weighted
|
|
|
|
|
Number
|
|
average
|
|
Exercisable
|
Weighted average
|
|
outstanding at
|
|
remaining life
|
|
shares at
|
exercise price
|
|
March 31, 2013
|
|
(years)
|
|
March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4.50
|
|
|
|
30,000
|
|
|
|
2.8
|
|
|
|
30,000
|
|
$
|
6.12
|
|
|
|
40,000
|
|
|
|
1.0
|
|
|
|
40,000
|
|
$
|
6.20
|
|
|
|
40,000
|
|
|
|
1.5
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5.71
|
|
|
|
110,000
|
|
|
|
1.7
|
|
|
|
110,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The intrinsic
value of options outstanding and exercisable was $nil, $nil and $nil on March 31, 2011, 2012 and 2013, respectively. The intrinsic
value represents the pre-tax intrinsic value (the difference between the closing stock price of the Company’s common stock
on the balance sheet date and the exercise price for both the outstanding and exercisable options) that would have been received
by the option holders if all options had been exercised on March 31, 2011, 2012 and 2013.
New shares
will be issued by the Company upon future exercise of stock options.
-F-28-
Bonso Electronics
International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
14
|
Related party transactions
|
|
(a)
|
The Group paid emoluments, commissions and/or consultancy fees to its directors, officers and former
directors as follows:
|
|
Year Ended
March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Anthony So
|
|
Mr. Kim Wah Chung
|
|
Mr. Woo-Ping For
|
|
|
Mr. Andrew So
|
|
|
|
|
|
Director, Chief Executive
|
|
Director
|
|
Director
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
|
$ in thousands
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
$915 (i), (iii)
|
|
$165 (iii)
|
|
Nil
|
|
|
—
|
|
|
2012
|
|
|
$857 (i), (iii)
|
|
$161 (iii)
|
|
Nil
|
|
$
|
88
|
|
|
2013
|
|
|
$857 (i), (iii)
|
|
$160 (iii)
|
|
Nil
|
|
$
|
124
|
|
|
|
|
|
|
|
Mr. J. Stewart Jackson. IV
|
|
Mr. Henry Schlueter
|
|
|
Mr. Albert So
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Director
|
|
Director and Assistant Secretary
|
|
|
Director, Chief Financial Officer and Secretary
|
|
|
|
|
|
|
|
$ in thousands
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
|
|
Nil
|
|
$87 (ii)
|
|
|
$118
|
|
|
2012
|
|
|
|
|
Nil
|
|
$68 (ii)
|
|
|
$118
|
|
|
2013
|
|
|
|
|
Nil
|
|
$74 (ii)
|
|
|
$124 (iii)
|
|
|
|
The emoluments paid to the Group’s directors and officers were included in the salaries and
related costs, while the consultancy fees or professional fees paid to Schlueter & Associates, P.C., were included in the administration
and general expenses.
|
|
(i)
|
Apart
from the emoluments paid by the Group as shown above, one of the properties of the Group in Hong Kong is also provided to Mr.
Anthony So for his accommodation.
|
|
(ii)
|
The amounts for the years ended March 31,
2011, 2012 and 2013 represented professional fees paid to Schlueter & Associates, P.C., the Group’s SEC counsel, in which
Mr. Henry Schlueter is one of the principals.
|
|
(iii)
|
The
amount for the year ended March 31, 2011, included unpaid vacation payments of $115,000 and $14,000 for Mr. Anthony So, and
Mr. Kim Wah Chung, respectively. The amount for the year ended March 31, 2012, included unpaid vacation
payments of $57,000 and $10,000 for Mr. Anthony So, and Mr. Kim Wah Chung, respectively. The amount for the year
ended March 31, 2013, included unpaid vacation payments of $57,000, $9,000, $5,000 for Mr. Anthony So, Mr. Kim Wah Chung, and
Mr. Albert So, respectively.
|
-F-29-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
15
|
Concentrations and Credit Risk
|
The Group operates principally
in the PRC (including Hong Kong) and grants credit to its customers in this geographic region. Although the PRC is economically
stable, it is always possible that unanticipated events in foreign countries could disrupt the Group’s operations.
Financial
instruments that potentially subject the Group to a concentration of credit risk consist of cash, trade and notes receivables.
At
March 31, 2012 and 2013, the Company had credit risk exposure of uninsured cash in banks of approximately $3,014,000 and $2,154,000,
respectively.
A
substantial portion, 60%, 66% and 52% of revenue, was generated from one customer for the years ended March 31, 2011, 2012 and
2013, respectively.
The net sales to customers
representing at least 10% of net total sales are as follows:
|
|
Year Ended March 31,
|
|
|
2011
|
|
2012
|
|
2013
|
|
|
$ in thousands
|
|
%
|
|
$ in thousands
|
|
%
|
|
$ in thousands
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sunbeam Products, Inc.
|
|
|
16,934
|
|
|
|
60
|
|
|
|
17,499
|
|
|
|
66
|
|
|
|
15,818
|
|
|
|
52
|
|
Fitbit, Inc.
|
|
|
—
|
|
|
|
—
|
|
|
|
106
|
|
|
|
1
|
|
|
|
5,493
|
|
|
|
18
|
|
Gottl Kern + Sohn GMBH
|
|
|
3,970
|
|
|
|
14
|
|
|
|
3,744
|
|
|
|
14
|
|
|
|
3,814
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74
|
|
|
|
|
|
|
|
81
|
|
|
|
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following customers had
balances greater than 10% of the total trade receivables at the respective balance sheet dates set forth below:
|
|
March 31,
|
|
|
2012
|
|
2013
|
|
|
$ in thousands
|
|
%
|
|
$ in thousands
|
|
%
|
|
|
|
|
|
|
|
|
|
Sunbeam Products, Inc.
|
|
|
1,230
|
|
|
|
59
|
|
|
|
1,152
|
|
|
|
42
|
|
Fitbit, Inc.
|
|
|
17
|
|
|
|
1
|
|
|
|
884
|
|
|
|
32
|
|
Pitney Bowes Inc.
|
|
|
455
|
|
|
|
22
|
|
|
|
347
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
March 31, 2012 and 2013, these customers accounted for 82% and 87%, respectively, of net trade receivables. The trade receivables
have repayment terms of not more than twelve months. Trade receivables for two customers (Sunbeam Products, Inc. and Fitbit, Inc.)
accounted for 74% of net sales for the fiscal year ended March 31, 2013 (2012: 60%), and they were covered by credit
insurance under a factoring agreement with a bank. The Group does not require collateral to support financial instruments that
are subject to credit risk.
-F-30-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
16
|
Employee retirement benefits and
severance payment allowance
|
|
(a)
|
With effect from January
1, 1988, BEL, a wholly-owned foreign subsidiary of the Company in Hong Kong, implemented a defined contribution plan (the “Plan”)
with a major international insurance 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. Each eligible
employee that chooses to participate in the Plan is required to contribute 5% of their monthly salary, while BEL is required to
contribute from 5% to 10% depending on the eligible employee’s salary and number of years in service.
|
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 insurance company. All permanent Hong Kong full time employees
who joined BEL on or after December 2000, excluding factory workers, must join the MPF, except for those who joined the Plan before
December 2000. Both the employee’s and employer’s contributions to the MPF are 5% of the eligible employee’s
monthly salary and are subject to a maximum mandatory contribution of HK$1,000 (US$128) per month. The maximum mandatory employee’s
and employer’s contributions per month increased to HK$1,250 (US$160) respectively since June 1, 2012.
Pursuant
to the relevant PRC regulations, the Group is required to make contributions for each employee, at rates based upon the employee’s
standard salary base as determined by the local Social Security Bureau, to a defined contribution retirement scheme organized by
the local Social Security Bureau in respect of the retirement benefits for the Group’s employees in the PRC.
|
(b)
|
The contributions to each of the above schemes are recognized as employee benefit expenses when
they are due and are charged to the consolidated statement of operations. The Group’s
total
contributions to the above schemes for the years ended March 31, 2011, 2012 and 2013 amounted to $318,000, $239,000 and $225,000
respectively.
The Group has no other obligation to make payments in respect of retirement benefits of the employees.
|
|
(c)
|
According to the New Labor Law in the PRC which was effective
on January 1, 2009, a company is required to provide one month’s salary for each year of service as a severance payment.
As such, the Group recognized a provision of $743,000 in the fiscal year ended March 31, 2013 for severance payments for staff
in the PRC (2012: $841,000). The accrued severance payment allowance is reviewed every year.
|
-F-31-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
|
Year ended March 31
|
|
|
2011
|
|
2012
|
|
2013
|
|
|
$ in thousands
|
|
$ in thousands
|
|
$ in thousands
|
|
|
|
|
|
|
|
Loss applicable to common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
– continuing operations
|
|
($
|
1,431
|
)
|
|
($
|
902
|
)
|
|
($
|
754
|
)
|
– discontinued operations
|
|
($
|
129
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
($
|
1,560
|
)
|
|
($
|
902
|
)
|
|
($
|
754
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
5,246,903 shares
|
|
|
|
5,246,903 shares
|
|
|
|
5,246,903 shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share – continuing operations
|
|
($
|
0.27
|
)
|
|
($
|
0.17
|
)
|
|
($
|
0.14
|
)
|
Loss per share – discontinued operations
|
|
($
|
0.02
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted
|
|
($
|
0.29
|
)
|
|
($
|
0.17
|
)
|
|
($
|
0.14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share is computed
by dividing net loss available to common shareholders by the weighted average number of shares of common stock 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 stock options.
The diluted net loss per share
is the same as the basic net loss per share for the years ended March 31, 2011, 2012 and 2013, as all potential ordinary shares
(826,500 shares on March 31, 2011, 452,500 shares on March 31, 2012 and 110,000 shares on March 31, 2013) from the exercise of
stock options are anti-dilutive and are therefore excluded from the computation of diluted net loss per share.
-F-32-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
18
|
Business segment information
|
|
(a)
|
The Group is organized based on the products it offers. Under this organizational structure, the
Group’s operations can be classified into four business segments, Scales, Telecommunications Products, Pet Electronics and
Others for the fiscal years ended March 31, 2012 and 2013.
|
Scales operations principally
involve production and marketing of sensor-based scales products. These include bathroom, kitchen, office, jewelry, laboratory,
postal and industrial scales that are used in consumer, commercial and industrial applications.
Telecommunication Products operations
principally involve production and modification of two-way radios and cordless telephones that are used in consumer and commercial
applications. The Group no longer manufactures and sells telecommunications products.
Pet Electronics Products principally
involve development and production of pet-related electronics products that are used in consumer applications.
The “Others” segment
is a residual, which principally includes the activities of (i) tooling and mould charges for scales, telecommunications products
and pet electronics products, and (ii) sales of scrap materials.
The accounting policies of the
Group’s reportable segments are the same as those described in the description of business and significant accounting policies.
Summarized financial information
by business segment as of March 31, 2011, 2012 and 2013 is as follows:
|
|
|
Net sales
|
|
|
|
Operating
profit /(loss)
|
|
|
|
Identifiable
assets as of
March 31
|
|
|
|
Depreciation
and
amortization
|
|
|
|
Capital
expenditure
|
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scales & Pet Electronics Products
|
|
|
30,386
|
|
|
|
(570
|
)
|
|
|
20,097
|
|
|
|
120
|
|
|
|
1,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating segments
|
|
|
30,386
|
|
|
|
(570
|
)
|
|
|
20,097
|
|
|
|
120
|
|
|
|
1,412
|
|
Corporate
|
|
|
—
|
|
|
|
—
|
|
|
|
7,026
|
|
|
|
226
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
30,386
|
|
|
|
(570
|
)
|
|
|
27,123
|
|
|
|
346
|
|
|
|
1,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scales & Pet Electronics Products
|
|
|
26,682
|
|
|
|
(249
|
)
|
|
|
17,147
|
|
|
|
54
|
|
|
|
3,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating segments
|
|
|
26,682
|
|
|
|
(249
|
)
|
|
|
17,147
|
|
|
|
54
|
|
|
|
3,415
|
|
Corporate
|
|
|
—
|
|
|
|
—
|
|
|
|
6,021
|
|
|
|
176
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
26,682
|
|
|
|
(249
|
)
|
|
|
23,168
|
|
|
|
230
|
|
|
|
3,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-F-33-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
18
|
Business segment information
(Continued)
|
|
|
|
|
(a)
|
(Continued)
|
|
|
Net sales
|
|
Operating
profit / (loss)
|
|
Identifiable
assets as of
March 31
|
|
Depreciation
and
amortization
|
|
Capital
expenditure
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scales
|
|
|
25,903
|
|
|
|
(554
|
)
|
|
|
9,166
|
|
|
|
—
|
|
|
|
584
|
|
Telecommunications Products
|
|
|
2,056
|
|
|
|
(202
|
)
|
|
|
4,328
|
|
|
|
—
|
|
|
|
691
|
|
Others
|
|
|
428
|
|
|
|
104
|
|
|
|
102
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating segments
|
|
|
28,387
|
|
|
|
(652
|
)
|
|
|
13,596
|
|
|
|
—
|
|
|
|
1,275
|
|
Corporate
|
|
|
—
|
|
|
|
(979
|
)
|
|
|
8,211
|
|
|
|
307
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
28,387
|
|
|
|
(1,631
|
)
|
|
|
21,807
|
|
|
|
307
|
|
|
|
1,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
|
|
|
|
|
|
|
|
21,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit / (loss) by segment equals total operating revenues less expenses directly attributable to the generation of 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.
|
(b)
|
The Group primarily operates in Hong Kong and the PRC. The manufacture of components and their
assembly into finished products and research and development are carried out in the PRC. Subsidiaries in Germany was responsible
for the distribution of electronic scales products in Europe. As the operations are integrated, it is not practicable to distinguish
the net income derived among the activities in Hong Kong, and the PRC.
|
Total property,
plant and equipment, net by geographical areas are as follows:
|
|
|
March 31,
|
|
|
|
March 31,
|
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
|
$ in thousands
|
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
Hong Kong
|
|
|
1,046
|
|
|
|
1,115
|
|
The PRC
|
|
|
5,925
|
|
|
|
7,184
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
6,971
|
|
|
|
8,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-F-34-
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
|
18
|
Business segment information
(Continued)
|
|
|
|
|
(c)
|
The following is a summary of net export sales by geographical areas, which are defined by the
final shipment destination, constituting 10% or more of total sales of the Company for the years ended March 31, 2011, 2012 and
2013:
|
|
|
Year ended March 31,
|
|
|
2011
|
|
2012
|
|
2013
|
|
|
$ in thousands
|
|
%
|
|
$ in thousands
|
|
%
|
|
$ in thousands
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
18,893
|
|
|
|
67
|
|
|
|
19,940
|
|
|
|
75
|
|
|
|
23,804
|
|
|
|
78
|
|
Germany
|
|
|
5,557
|
|
|
|
20
|
|
|
|
4,985
|
|
|
|
18
|
|
|
|
5,121
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,450
|
|
|
|
|
|
|
|
24,925
|
|
|
|
|
|
|
|
28,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d)
|
The details of sales made to customers constituting 10% or more of total sales of the Company are
as follows:
|
|
|
|
|
Year ended March 31,
|
|
|
Business segment
|
|
2011
|
|
2012
|
|
2013
|
|
|
|
|
|
$
|
|
|
|
%
|
|
|
|
$
|
|
|
|
%
|
|
|
|
$
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sunbeam Products, Inc.
|
|
Scales
|
|
|
16,934
|
|
|
|
60
|
|
|
|
17,499
|
|
|
|
66
|
|
|
|
15,818
|
|
|
|
52
|
|
Fitbit, Inc.
|
|
Scales
|
|
|
—
|
|
|
|
—
|
|
|
|
106
|
|
|
|
1
|
|
|
|
5,493
|
|
|
|
18
|
|
Gottl Kern + Sohn GMBH
|
|
Scales
|
|
|
3,970
|
|
|
|
14
|
|
|
|
3,744
|
|
|
|
14
|
|
|
|
3,814
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,904
|
|
|
|
74
|
|
|
|
21,349
|
|
|
|
81
|
|
|
|
25,125
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group established a wholly-owned subsidiary,
Xinxing An Bang Metal and Plastic Manufacturing Company Limited, in PRC after fiscal year ended March 31, 2013,
for
production
of
metal
and
plastic products for other factories. The Group also established another wholly-owned subsidiary, Bonso Technology
(Shenzhen)
Company Limited, in PRC after fiscal year ended March 31, 2013, to provide product design and distribution services
for
the
Group.
|
|
|
|
|
|
The
Group
entered into a rental agreement in June 2013 to rent out the Shenzhen factory to third party from August 2013 to August
2019,
and will receive rental income starting from October 2013.
|
-F-35-