NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2022 AND
2021
| 1. |
These financial statements, including the consolidated balance sheet as of March 31, 2022, which was derived from audited financial statements, do not include all of the information and notes required by U.S. Generally Accepted Accounting Principles for complete financial statements and should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s annual report on Form 20-F for the fiscal year ended March 31, 2022. |
| 2. |
In the opinion of management, all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year ending March 31, 2023. |
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Overview
Bonso Electronics designs,
develops, manufactures, assembles and markets a comprehensive line of electronic scales, weighing instruments, health care products and
pet electronic products.
During the six-month period
ended September 30, 2022, our net revenue decreased approximately $633,000, or 10.5%, as compared to the six-month period ended September
30, 2021. The primary reason for the decrease in net revenue was the decreased overall demand for our pet electronic products during the
period. We recognized a net loss of approximately $1,599,000 for the six-month period ended September 30, 2022, as compared to a net loss
of approximately $2,114,000 for the six-month period ended September 30, 2021.
Our net revenue during the
six-month period ended September 30, 2022 decreased as a result of decreased sales of pet electronic products through online sales channels.
We are continuing electronic scale and pet electronic product development efforts and increasing our efforts to market our products..
The redevelopment of our
Shenzhen factory has been delayed and we are continuing to work with our development partner to obtain the remaining governmental approvals
for the redevelopment of the Shenzhen factory. As the pandemic is over, we expect the redevelopment project will move forward.
On March 30, 2023, the Company
issued a press release disclosing its results of operations for the six-month period ended September 30, 2022. A copy of this press release
is attached to this Form 6-K as exhibit 99.1.
Results of Operations
Six-Month Period Ended September 30, 2022
Compared to the Six-Month Period Ended September 30, 2021
Net Revenue. During
the six-month period ended September 30, 2022, our net revenue decreased 10.5%, or approximately $633,000, from approximately $6,006,000
for the six-month period ended September 30, 2021 to approximately $5,373,000. The decreased revenue was primarily the result of a decrease
in overall demand for our pet electronic products.
Cost of Revenue. During
the six-month period ended September 30, 2022, cost of revenue increased to approximately $4,103,000 from approximately $3,353,000 during
the six-month period ended September 30, 2021, an increase of approximately $750,000, or 22.4%. As a percentage of revenue, the cost of
revenue increased from 55.8% to 76.4%. The increase was primarily the result of increased material costs and reduced selling prices during
the six-month period ended September 30, 2022.
Gross Margin. As a
result of the factors noted above, gross margin decreased by $1,383,000 from $2,653,000 in the six months ended September 30, 2021 to
$1,270,000 during the six months ended September 30, 2022. As a percentage of revenue, gross margin decreased to 23.6% during the six-month
period ended September 30, 2022 as compared to 44.2% during the same period in the prior year.
Selling, General and Administrative Expenses.
Selling, general and administrative expenses decreased by 42.7%, or approximately $2,021,000, from approximately $4,736,000 for the six-month
period ended September 30, 2021 to approximately $2,715,000 for the six-month period ended September 30, 2022. The decrease was primarily
the result of reduced selling expenses due to decreased sales of pet electronic products sold through online channel, and a one-off provision
of loss in financial instruments at an amortized cost of approximately $523,000 during the six-month period ended September 30, 2021 but
there was no such loss accrued during the six-month period ended September 30, 2022.
Other Income, Net. Other
income, net decreased approximately $128,000, or 84.8%, from approximately $151,000 for the six-month period ended September 30, 2021
to approximately $23,000 for the six-month period ended September 30, 2022. The decrease was a result of decreased government subsidy
received during the six-month period ended September 30, 2022.
Loss From Operations.
As a result of the above changes, loss from operations was approximately $1,422,000 for the six-month period ended September 30, 2022,
compared to a loss from operations of approximately $1,932,000 for the six-month period ended September 30, 2021, a decrease in loss of
approximately $510,000.
Non-operating Expenses,
Net. Non-operating expenses, net decreased from approximately $182,000 for the six-month period ended September 30, 2021 to approximately
$177,000 for the six-month period ended September 30, 2022. The decrease in net non-operating expenses was primarily the result of increased
interest income received during the six-month period ended September 30, 2022.
Net Loss. As a result
of the above changes, net loss decreased from approximately $2,114,000 for the six-month period ended September 30, 2021 to approximately
$1,599,000 for the six-month period ended September 30, 2022, a decrease of approximately $515,000.
Foreign Currency Translation
Adjustments, Net of Tax. Foreign currency translation adjustments, net of tax increased from a loss of approximately $285,000
for the six-month period ended September 30, 2021 to a loss of approximately $1,945,000 for the six-month period ended September 30, 2022,
an increase of approximately $1,660,000. The loss was primarily attributable to the result of the revaluation of assets denominated
in Chinese Yuan (“CNY”) due to different CNY/USD exchange rates at the balance sheet dates of March 31, 2022 and September
30, 2022.
Comprehensive Loss. As
a result of the factors described above, comprehensive loss increased from approximately $2,399,000 for the six-month period ended September
30, 2021, to approximately $3,544,000 for the six-month period ended September 30, 2022.
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 operations, expansions and upgrades of our manufacturing facilities.
As of September 30, 2022,
we had approximately $5,544,000 in cash and cash equivalents as compared to approximately $6,740,000 as of March 31, 2022. As of September
30, 2022, working capital was approximately $4,952,000, compared to approximately $6,874,000 as of March 31, 2022. The decrease was the
result of loss generated from operations and repayment of bank loans, during the six-month period ended September 30, 2022.
We believe that our cash
flows from operations, our current cash balance and funds available under our working capital and credit facilities will be sufficient
to meet our working capital needs and planned capital expenditures for the next twelve months.
Stock Repurchase Program
The following table contains
the Company’s purchases of equity securities during the six-month period ended September 30, 2022.
| Issuer Purchases of Equity Securities |
| Period | |
(a) Total Number of Shares (or Units) Purchased | |
(b) Average Price Paid per Share (or Unit) | |
(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | |
(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |
April 1, 2022 to
April 30, 2022 | |
| — | | |
| — | | |
| — | | |
$ | 2,825,537 | |
May 1, 2022 to
May 31, 2022 | |
| — | | |
| — | | |
| — | | |
$ | 2,825,537 | |
June 1, 2022 to
June 30, 2022 | |
| — | | |
| — | | |
| — | | |
$ | 2,825,537 | |
July 1, 2022 to
July 31, 2022 | |
| — | | |
| — | | |
| — | | |
$ | 2,825,537 | |
August 1, 2022 to
August 31, 2022 | |
| — | | |
| — | | |
| — | | |
$ | 2,825,537 | |
September 1, 2022 to
September 30, 2022 | |
| — | | |
| — | | |
| — | | |
$ | 2,825,537 | |
| TOTAL | |
| — | | |
| — | | |
| — | | |
| | |
During the six-month period ended September 30, 2022, the Company
has not purchased any shares of its common stock under the share repurchase program. As of September 30, 2022, the Company (through its
subsidiary) had repurchased an aggregate of 1,005,018 shares of its common stock. The Company may from time to time repurchase additional
shares of its Common Stock under this program.
Exhibits