SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For February 26, 2004
BONSO ELECTRONICS INTERNATIONAL INC.
------------------------------------
(Translation of Registrant's name into English)
Unit 1106-1110, 11F, Star House 3 Salisbury Road,
Tsimshatsui Kowloon, Hong Kong
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(Address of principal executive offices)
[Indicate by check mark whether the Registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.]
Form 20-F [X] Form 40-F [ ]
[Indicate by check mark whether the Registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.]
Yes [ ] No [X]
BONSO ELECTRONICS INTERNATIONAL INC.
Information for the Quarter Ended December 31, 2003
2
TABLE OF CONTENTS
REPORT FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2003 ON FORM 6-K
Page
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Third Quarter FY2003 Shareholders Letter 4
Consolidated Financial Statements 7
Audited Consolidated Balance Sheets at March 31, 2003 and
Unaudited Consolidated Balance Sheets at December 31, 2003 7
Unaudited Consolidated Statements of Income and
Comprehensive Income for the Three and Nine Month Periods
Ended December 31, 2003 and 2002 8
Management Discussion and Analysis of Financial Conditions
and Results of Operations 9
3
[Bonso Electronics International Inc. Letterhead]
Dear Shareholders, 17 February 2004
You will find mostly good news in this report on Bonso Electronics for the
three and nine month periods ending December 31, 2003. We have full confidence
in the future and every reason to believe that we can continue to build stronger
returns for you in the future.
Net income for the nine months ended 31 December 2003 was approximately
$2,105,000 or $0.37 per share (diluted) on sales of approximately $58,340,000
when compared to net income of $1,037,000 or $0.19 per share (diluted) and sales
of approximately $34,581,000 posted in the same period last year. This
represents a 103% increase in net income and a 69% increase in sales when
compared to the same period last year.
Net income for the three months ended 31 December 2003 rose 23% to
approximately $601,000 or $0.11 per share over approximately $489,000 and $0.09
per share in the same period last year. Sales increased to approximately
$17,260,000 for the three months ended 31 December 2003, a 25% increase over
sales of approximately $13,853,000 during the same period last year.
I am pleased to report that our earnings and sales have grown substantially
in the nine-month period as well as, in the current quarter. The increase in
sales came from both our Telecom and Sensor based (scale) products. We feel the
nine-month and quarterly results continue to represent a significant positive
change in our business. The nine month and quarterly results further demonstrate
that we can significantly increase our sales volume while maintaining positive
cash flow from operations, thereby improving our cash and cash equivalents
position to approximately $15,100,000 or $2.64 per share with little long-term
debt.
Based upon the financial results of the past nine months, I am proud of
what the employees of Bonso have achieved. I thank them for the substantial
progress we have made so far this year. We continue to build a performance based
culture. We have created a competitive, rewarding environment where everyone has
the opportunity to play a meaningful role in achieving our goals. Today, as I
talk to our employees around the world, I hear renewed energy, confidence and
eagerness to show the world what Bonso can do.
The nine-month and quarterly comparisons with last year's results
demonstrate that Bonso is growing both the top and bottom lines. We believe that
comparing the second and third quarters of this fiscal year generally shows
positive short-term trends. As predicted in our last quarterly report, sales
during the quarter ended December 31, 2003 decreased when compared to the
quarter ended September 30, 2003, due to business seasonality; however during
this same period our gross profit margin increased by approximately 4.0%. This
demonstrates management's on-going commitment to increased profitability;
however, we believe we have more work to do on our path to improving our
profitability.
4
We also made progress in other strategic areas of our business. During this
fiscal year we continued to reinvigorate our product and service portfolio with
new introductions and upgrades. A list of some of these efforts follows:
o Landed several large distributors of bathroom and kitchen scales in
both North America and Europe.
o Dramatically reduced cost in scale and telecom production. Through the
reduction of material costs through vertical integration and process
improvements.
o Expanded scales & telecom product production.
o Expanded scales & telecom product portfolios.
We will remain focused on generating sustainable profitable growth in
calendar 2004 and focused on long-term challenges and the opportunities they
present. We have identified pockets of opportunities that we believe could drive
near-term growth in markets such as strain gauge load cells. We intend to
continue to identify possible partnerships and alliances.
Further, we believe that manufacturing in China will continue to provide us
a competitive advantage. Recent reports suggest that China's low-cost
manufacturing base looks more attractive to companies in Taiwan, South Korea,
Europe and the United States. From our perspective, we see China diffusing the
world's concerns by speeding up their compliance with the WTO and developing a
widely accepted currency policy.
In the period since the beginning of last quarter, we have experienced some
enhancement of shareholder value as our share price went from $4.16 as of 30
September 2003 to $8.45 on 10 February 2004.
We invite you to track our progress by logging on to www.bonso.com and
selecting "Investor Relations". Further, Bonso's annual meeting of shareholders
will be held at 9:00 AM on 23 March 2004 at the Marriott Courtyard Hotel, 30
Hubbard Street, Chicago, IL 60611. All shareholders of record are invited to
attend.
I believe our best results are still ahead of us, and I look forward to
expanding our accomplishments in the coming months. You can be confident that
our management team is focused on improving the value of your company. We plan
to deliver on our commitments to create lasting shareholder value.
Best regards,
Bonso Electronics International, Inc.
/s/ Anthony So
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Anthony So
Chairman, President and Chief Executive Officer
U.S. Contact: George O'Leary (949)760-9611. (949)760-9607 (Fax)
Hong Kong Contact: Cathy Pang (852) 2605 5822. (852) 2691-1724 (Fax)
5
Attachments: 1. Balance Sheet 2. Income Statement
The statements contained in the letter, which are not historical fact are
forward-Looking statements that involve certain risks and uncertainties
including, but not limited to, risks associated with the uncertainty of future
financial results, seasonality of sales of certain products, additional
financing requirements, development of new products, government approval
processes, the impact of competitive products or pricing, technological changes,
currency fluctuations, estimates of market growth, the effect of economic
conditions and other uncertainties detailed in the company's filings with the
United States Securities and Exchange Commission.
6
BONSO ELECTRONICS INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
(In U.S. Dollars)
Dec 31 March 31
2003 2003
----------- -----------
(Unaudited) (Audited)
Assets
Current assets
Cash and cash equivalents 15,116,595 3,633,528
Restricted cash deposits -- 4,104,168
Trade receivables, net 7,949,851 6,191,627
Inventories 7,599,281 12,656,518
Notes receivable -- 358,188
Tax recoverable 356,532 52,087
Deferred income tax assets - current -- 38,348
Other receivables, deposits and prepayments 1,086,086 1,166,234
----------- -----------
Total current assets 32,108,345 28,200,698
----------- -----------
Deposits 551,399 551,399
Deferred income tax assets - non current 82,210 128,887
Goodwill 1,089,258 1,100,962
Brand name, net 2,576,578 2,597,392
Property, plant and equipment
Leasehold land and buildings 14,161,850 12,505,141
Plant and machinery 17,022,262 12,801,183
Furniture, fixtures and equipment 3,488,090 5,251,171
Motor vehicles 369,086 343,068
----------- -----------
35,041,288 30,900,563
Less : accumulated depreciation and amortization (17,894,857) (14,569,165)
Net property, plant and equipment 17,146,431 16,331,398
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Total assets 53,554,221 48,910,736
----------- -----------
Liabilities and shareholders' equity
Current liabilities
Bank overdraft 239,864 216,410
Notes payable 8,057,368 4,818,971
Accounts payable 5,284,814 6,350,527
Accrued charges and deposits 1,846,163 1,827,286
Short-term loans 4,486,711 4,727,988
Current portion of long-term debt and capital lease obligations 537,796 482,940
----------- -----------
Total current liabilities 20,452,716 18,424,122
----------- -----------
Long-term debt and capital lease obligations, net of current maturities
1,434,286 606,488
Commitments and contingencies
Minority Interests 100,370 55,275
Redeemable Common Stock
Redeemable Common Stock par value $0.003 per share 1,445,808 1,445,808
- issued and outstanding shares: March & December 2003 - 180,726
Shareholders' equity
Preferred stock par value $0.01 per share
- authorized shares - 10,000,000
- issued and outstanding shares: March & December 2003 - 0
Common stock par value $0.003 per share 16,480 16,583
- authorized shares - 23,333,334
- issued and outstanding shares: March 31, 2003 - 5,529,133;
December 31, 2003 - 5,494,844
Additional paid-in capital 21,394,136 21,458,376
Deferred consultancy fee
Retained earnings 8,353,660 6,533,224
Accumulated other comprehensive income 356,765 409,692
Common stock held in treasury, at cost (38,832)
----------- -----------
30,121,041 28,379,043
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Total liabilities and shareholders' equity 53,554,221 48,910,736
----------- -----------
7
BONSO ELECTRONICS INTERNATIONAL INC.
CONSOLIDATED INCOME STATEMENT
(In Thousands of U.S. Dollars)
Unaudited
Three months ended Dec. 31 Nine months ended Dec. 31
-------------------------- -------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net sales 17,260 13,853 58,340 34,581
Cost of sales (13,234) (10,315) (46,485) (25,361)
---------- ---------- ---------- ----------
Gross margin 4,026 3,538 11,855 9,220
Selling expenses 635 564 2,117 1,566
Salaries and related costs 1,541 1,154 4,063 3,340
Research and development expenses 84 105 340 257
Administration and general expenses 1,067 922 2,781 2,399
Amortization of Brand Name 47 17 149 131
---------- ---------- ---------- ----------
Income from operations 652 776 2,405 1,527
Interest Income 81 15 105 45
Other income 106 73 270 349
Interest Expenses (192) (172) (657) (487)
Foreign exchange (loss)/ gains (35) (16) 45 --
Consultancy fee -- (95) -- (286)
---------- ---------- ---------- ----------
Income before income taxes and minority interest 612 581 2,168 1,148
Income tax benefit (3) (62) (18) (73)
---------- ---------- ---------- ----------
Net income before minority interest 609 519 2,150 1,075
Minority interests (8) (30) (45) (38)
---------- ---------- ---------- ----------
Net income 601 489 2,105 1,037
---------- ---------- ---------- ----------
Earnings per share
Basic & diluted 0.11 0.09 0.37 0.19
Weighted average shares Outstanding 5,675,570 5,529,133 5,675,570 5,529,133
8
Management Discussion and Analysis of Financial Conditions and Results of
Operations
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This section and other parts of this Form 6-K contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such differences include, but are not
limited to, those discussed in the section entitled "Risk Factors" contained in
the Company's Form 20-F that was filed with the Securities and Exchange
Commission for the Fiscal Year Ended March 31, 2003. The following discussion
should be read in conjunction with the Form 20-F for the fiscal year ended March
31, 2003, and the condensed consolidated financial statements included elsewhere
in this Form 6-K.
Results of Operations
Nine Month Period ended December 31, 2003 compared to the Nine Month period
ended December 31, 2002
Net Sales. Our sales increased 69% from approximately $34,581,000 for the
period ended December 31, 2002, to approximately $58,340,000 for the period
ended December 31, 2003, primarily as a result of strong demand from both our
scales & telecommunications products. Sales of our scales business increased
from approximately $22,769,000 for the period ended December 31, 2002, to
approximately $34,188,000 for the period ended December 31,2003, and sales for
telecommunications products were up 104% from approximately $11,812,000 for the
period ended December 31, 2002, to approximately $24,152,000 for the period
ended December 31,2003.
Gross Margin. Gross margin as a percentage of revenue declined to 20%
during the nine-month period ended December 31, 2003 as compared to 27% during
the same period in the prior year. This decline was primarily the result of
increased pressure on the sales price of our FRS telecommunication products and
as well as the result of increased sales of body scales to new customers, which
have a lower gross margin than other products. This change in our product mix
had a negative impact on gross margin.
Selling Expenses. Selling expenses increased by 35% from approximately
$1,566,000 for the period ended December 31, 2002 to approximately $2,117,000
for the period ended December 31, 2003. This increase was attributable primarily
to the increased sales of both scale and telecommunications products. However,
selling expenses decreased as a percentage of revenue to 3.6% during the period
ended December 31, 2003 as compared to 4.5% during the prior year.
Salaries And Related Costs. Salaries and related costs increased by 22%
from approximately $3,340,000 for the period ended December 31 ,2002 to
approximately $4,063,000 for the period ended December 31 2003. This increase
was primarily due to the inclusion of an additional four months of Gram
Precision salaries, which was acquired by Bonso on August 1, 2002 and the
strength of the Euro and Canadian Dollar against the U.S. Dollar in translating
our overseas subsidiaries' expenses.
9
Research And Development. Research and development expenses increased 32%
from approximately $257,000 for the period ended December 31, 2002 to
approximately $340,000 for the period ended December 31, 2003 due to increased
research and development activities for telecommunications products and new
scale models. Research and Development as a percentage of revenue declined to
0.6% during the period ended December 31, 2003 as compared to 0.7% during the
prior year.
Administration And General Expenses. Administration and general expenses
increased by 16% from approximately $2,399,000 for the period ended December 31,
2002 to approximately $2,781,000 for the period ended December 31, 2003. This
increase was primarily derived from our overseas subsidiaries paying expenses in
Euros and Canadian Dollars as opposed to U.S. Dollars. Additionally, only four
months of administration cost was included for Gram Precision for the period
ended December 31, 2002. Further, there was an increase in professional services
relating to the upgrading our ERP (Enterprise Resource Planning) system.
Amortization Of Brand Names. We amortized approximately $149,000 relating
to the brand names acquired upon the acquisitions of Korona and Gram Precision
during the period ended December 31, 2003. Brand names are amortized using the
straight-line method over the related estimated useful life of 15 years.
Income From Operations. As a result of the above changes, income from
operations increased by 58% from approximately $1,527,000 for the period ended
December 31, 2002 to approximately $2,405,000 for the period ended December 31,
2003.
Interest Income. Interest income amounted to approximately $105,000 for the
period ended December 31, 2003, compared to $45,000 in the period ended December
31, 2002. This increase was mainly due to an increase in the interest rates we
have negotiated with our banks based upon the increased cash balances.
Other Income. Other income decreased 22% from approximately $349,000 for
the period ended December 31, 2003, to approximately $270,000 for the period
ended December 31, 2003. The decrease was primarily due to the decrease in
rental income from investment properties and the lower sales of scrap during the
period.
Interest Expenses. Interest expenses increased 35% from approximately
$487,000 for the period ended December 31, 2002 to approximately $657,000 for
the period ended December 31, 2003. This increase was primarily the result of
the Company using more of its banking facilities to support sales growth during
the current fiscal year.
Foreign Exchange Losses/Gains. Foreign exchange significantly improved from
a break even position for the period ended December 31, 2002 to a gain of
approximately $45,000 for the period ended December 31, 2003. The improvement
was primarily attributable to the increased strength of the Euro against the
U.S. Dollar.
10
Consultancy Fee. We entered into an agreement with a third party to provide
consulting/advisory services relating to our capital structure and fund-raising
activities. The period of service was from July 2000 to January 2003. A total
consultancy fee of $1,144,260 was capitalized in 2000 and was being amortized
over the three-year period of the contract. This resulted in a non-cash
consultancy fee of approximately $286,000 for the period ended December 31,
2002, relating to warrants issued to the consultant. There was no consultancy
fee for the nine-month period ended December 31, 2003.
Net Income. As a result of the above changes, net income increased from
approximately $1,037,000 for the period ended December 31, 2002 to $2,105,000
for the period ended December 31, 2003, an increase of approximately $1,068,000,
or 103%.
Three Month Period ended December 31, 2003 compared to the Three Month period
ended December 31, 2002
Net Sales. For the three months ended December 31, 2003, net sales of
approximately $17,260,000 represented an increase of approximately $3,407,000,
or 25%, from the same period in the prior year. The increase was primarily due
to the a general increase of demand for consumer products in Europe and U.S.A.
Sales from our scales business increased from approximately $8,069,000 for the
three months ended December 31, 2002, to approximately $11,188,000 for the three
months ended December 31,2003, and sales for telecommunications products
increased from approximately $5,812,000 for the three months ended December 31,
2002, to approximately $6,052,000 for the three months ended December 31,2003.
Gross Margin. Gross margin as a percentage of revenue declined to 23%
during the three-month period ended December 31, 2003 as compared to 26% during
the prior year. This decline was primarily the result of increased pressure on
the sales price of our FRS telecommunication products and as well as the result
of increased sales of body scales to new customers, which have a lower gross
margin than other products. This change in our product mix had a negative impact
on gross margin.
Selling Expenses. Selling expenses increased by 13% from approximately
$564,000 for the three months ended December 31, 2002 to approximately $635,000
in the three months ended December 31, 2003. This increase was attributable to
the increased sales volume experienced during the three-month period when
compared to the same period in the prior year. However, selling expenses
decreased as a percentage of revenue to 3.6% during the period ended December
31, 2003 as compared to 4.0% during the same period in the prior year.
Salaries And Related Costs. Salaries and related costs increased by 34%
from approximately $1,154,000 for the three months ended December 31, 2002 to
approximately $1,541,000 for the three months ended December 31, 2003. This
increase was primarily due to the payment of bonuses by the Hong Kong subsidiary
in December 2003 whereas in the prior fiscal year the bonus was paid in January
2003.
Research And Development. Research and development expenses decreased 20%
from approximately $105,000 for the three months ended December 31, 2002 to
approximately $84,000 for the three months ended December 31, 2003 due to less
decreased research and development during the three months ended December 31,
2003.
11
Administration And General Expenses. Administration and general expenses
increased by 16% from approximately $922,000 for the three months ended December
31, 2002 to approximately $1,067,000 for the three months ended December 31,
2002. This increase was primarily derived from our overseas subsidiaries paying
expenses in Euros and Canadian Dollars as opposed to U.S. Dollars. Further,
there was an increase in professional services relating to the upgrading our ERP
(Enterprise Resource Planning) system.
Amortization Of Brand Names. Brand names are amortized using the
straight-line method over the related estimated useful life of 15 years. We
amortized approximately $47,000 relating to the brand names acquired upon the
acquisitions of Korona and Gram Precision during the period ended December 31,
2003.
Income From Operations. As a result of the above changes, income from
operations decreased by 16% from approximately $776,000 for the three months
ended December 31, 2002 to $652,000 for the three months ended December 31,
2003.
Interest Income. Interest income increased to approximately $81,000 for the
three months ended December 31, 2003, compared to $15,000 in the three months
ended December 31, 2002. This increase was mainly due to an increase in the
interest rates we have negotiated with our banks based upon the increased cash
balances.
Other Income. Other income increased 45% from approximately $73,000 for the
three months ended December 31, 2002, to approximately $106,000 for the three
months ended December 31, 2003. The increase was primarily due to an increase in
sales of scrap.
Interest Expenses. Interest expenses increased 12% from approximately
$172,000 for the three months ended December 31, 2002 to approximately $192,000
for the three months ended December 31, 2003. This increase was primarily the
result of the increased use of our banking facilities to support the growth in
sales.
Foreign Exchange Losses/Gains. Foreign exchange losses increased from
approximately $16,000 for the three months ended December 31, 2002 to
approximately $35,000 for the three months ended December 31, 2003. The increase
was primarily attributable the increased strength of the Euro against the U.S.
Dollar.
Consultancy Fee. We entered into an agreement with a third party to provide
consulting/advisory services relating to our capital structure and fund-raising
activities. The period of service was from July 2000 to January 2003. A total
consultancy fee of $1,144,260 was capitalized in 2000 and was being amortized
over the three-year period of the contract. This resulted in a non-cash
consultancy fee of approximately $95,000 for the three months ended December 31,
2002, relating to warrants issued to the consultant. There was no consultancy
fee for the three-month period ended December 31, 2003.
12
Net Income. As a result of the above changes, net income increased from
approximately $489,000 for the three month ended December 31, 2002 to $601,000
for the three months ended December 31, 2003, a increase of approximately
$112,000, or 23%.
Liquidity and Capital Resources
-------------------------------
We have financed our growth and cash needs to date primarily from
internally generated funds and bank debt. We do not use off-balance sheet
financing arrangements, such as securitization of receivables or obtaining
access to assets through special purpose entities, as sources of liquidity. Our
primary uses of cash have been to fund expansions and upgrades of our
manufacturing facilities, to make strategic acquisitions and to fund increases
in inventory and accounts receivable resulting from increased sales.
We believe that our cash flows from operations, our current cash balance
and funds available under our working capital and credit facilities will be
sufficient to meet our working capital needs and planned capital expenditures
for the next 12 months. As of December 31, 2003, we had $15,116,595 in cash and
cash equivalents. Working capital at December 31, 2003 was $11,655,629. We
believe our working capital is sufficient for our present requirements.
Legal Proceedings
-----------------
In May of 2001, Bonso acquired KORONA Haushaltswaren GmbH & Co. KG
("Korona") from Augusta Technologie AG ("Augusta"). Part of the purchase price
paid to Augusta was the issue of 180,726 shares of Bonso's restricted common
stock. The Stock Purchase Agreement ("Agreement") gave Augusta the right to
exchange the common stock for a promissory note in the amount of $1,445,808 if
the registration of the stock had not been declared effective by the Securities
and Exchange Commission on or before January 31, 2002. Bonso filed a
registration statement to register the common stock held by Augusta, which was
declared effective by the Securities and Exchange Commission on March 7, 2002.
In March 2002, Augusta demanded that Bonso deliver the promissory note to it in
exchange for the common stock. Bonso refused to exchange the Note for the common
stock because management believes that Augusta hindered the registration process
by refusing to allow Korona's auditors to update and certify Korona's financial
statements for approximately two months. The promissory note is in the amount of
$1,445,808, repayable in nine monthly payments which would have commenced April
1, 2002 and bearing interest at a rate of 8% per annum.
On October 22, 2002, Augusta filed a request for arbitration in New York
asserting breach of the Agreement and registration rights agreement. On January
13, 2003, we filed our answer to Augusta's request for arbitration asserting
that Augusta breached the Agreement and the implied duty of good faith and fair
dealing by withholding consent from Korona's auditors to assist Bonso in
preparing the audited financial statements necessary for the registration of
common stock. In September 2003, a three-member panel of the arbitration
tribunal heard testimony from Bonso and Augusta during a two-day hearing.
On January 13, 2004, the arbitration tribunal issued a partial award in
favor of Augusta, finding that while Augusta did cause the accountants to delay
beginning work on the reconciliation of Korona's financials to U.S. GAAP, that
delay was not the cause of Bonso's failure to get the stock registered by the
deadline. The arbitration tribunal awarded Augusta reasonable costs associated
with the arbitration. On February 5, 2004, we filed a notice of intent to pursue
further defenses not resolved in the partial award.
13
Management intends to continue to defend these claims vigorously. However,
the outcome of the arbitration is uncertain and there can be no assurance that
we will be successful in our defenses. If we are unsuccessful with our
additional defenses in the arbitration, we may be obligated to exchange the
stock for the promissory note, to be repaid with accrued interest, and may be
required to reimburse Augusta its attorneys fees and expenses incurred in the
arbitration.
On or about August 20, 2003, Bonso and three of Bonso's directors were
served with a copy of a Complaint filed on July 23, 2003 in District Court of
Jefferson County, State of Colorado, Case No. 03CV2505. Plaintiffs Doug
Moreland, William Pinard, Richard Pinard, Leigh Investment Company, LP, Patricia
Johnson, Jason Pinard and Larry Rowe (collectively the "Plaintiffs") named
Anthony So, George O'Leary, Henry F. Schlueter, Cathy Pang, and John Stewart
Jackson (the "Individual Defendants") and Bonso as defendants in the case.
The Complaint alleged that the Individual Defendants breached their
fiduciary duties for insider trading and misappropriation of information by
selling shares of Bonso's common stock while in possession of. material adverse
non-public information pertaining to Bonso's financial outlook. The Complaint
also alleged that the Individual Defendants breached their fiduciary duties of
care, loyalty, and good faith by causing Bonso, through its directors, to
disseminate to the market materially misleading and inaccurate information and
its failure to correct such information. In addition, further the Complaint
alleged that each of the Individual Defendants failed to disclose materially
adverse information so the stock price would trade at artificially inflated
prices. The Complaint also alleged the Defendants committed corporate waste by
possessing confidential proprietary information and using such information for
their personal benefit by selling shares of Bonso's common stock while providing
no consideration to the Company for such benefit. The Complaint also alleged
negligent misrepresentations and fraud by Bonso and the Individual Defendants
for misrepresenting information concerning Bonso's financial outlook and its
intention to conduct a share buyback. The Complaint sought unspecified damages
in an amount to be determined at trial, plus pre- and post-judgment interest,
and attorneys' fees costs.
On September 26, 2003, Bonso and the Individual Defendants filed a motion
to dismiss the Complaint for lack of standing, failure to state a claim, and
failure to comply with the appropriate procedural requirements for out of state
defendants instituting and maintaining a legal action in the state of Colorado.
On October 30, 2003, the Plaintiff's filed an amended complaint (the
"Amended Complaint") with the substantially the same factual allegations as
asserted in the original Complaint. The Amended Complaint alleged derivative
claims (the "Derivative Claims") against the Individual Defendants for breaches
of fiduciary duties for: (i) insider selling and misappropriation of
information, (ii) dissemination of misleading and inaccurate information and
(iii) waste of corporate assets. The Derivative Claims allege that Bonso has
sustained damages as a result of the Individual Defendants actions. The Amended
Complaint sought disgorgement of all profits realized by the Individual
Defendants, the imposition of a constructive trust in favor of Bonso for the
amount of profits received by the Individual Defendants as a result of their
sales of Bonso stock and damages in favor of Bonso for breaches of the
Individual Defendants fiduciary duties. In response, Bonso engaged an
independent counsel to review the validity and appropriateness of the Derivative
Claims.
14
The Amended Complaint also alleged individual claims (the "Individual
Claims") against the Individual Defendants for breach of fiduciary duty against
the individual defendants for: (i) insider selling and misappropriation of
information, (ii) dissemination of misleading and inaccurate information, (iii)
negligent misrepresentations, and (iv) fraud.
On November 20, 2003, Bonso and the Individual Defendants filed a motion to
dismiss the Amended Complaint for lack of standing and failure to comply with
the appropriate procedural requirements for out of state defendants instituting
and maintaining a legal action in the state of Colorado. On January 8, 2004, the
Court entered an Order denying Defendants' motion to dismiss but requiring the
non-resident Plaintiff to file a cost bond.
Thereafter, Defendants filed a Verified Second Amended Complaint (the
"Second Amended Complaint") on January 21, 2004. While the Second Amended
Complaint asserts essentially the same derivative and direct claims as the
Amended Complaint, it includes new factual allegations concerning Bonso's
December 17, 2003 announcement to extend the expiration date of its December 31,
2003 warrants (the "Warrants") and reduce the exercise price. Specifically,
Plaintiffs allege, upon information and belief, that one or more of the
Individual Defendants purchased Warrants between November 11, 2003 and December
17, 2003 based on information that the Warrants would be extended and the strike
price reduced. As with each of the previous complaints filed by Plaintiffs,
Bonso and the Individual Defendants believe there is no basis for the claims
asserted in the Second Amended Complaint and both intend to defend this action
vigorously.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BONSO ELECTRONICS INTERNATIONAL INC.
(Registrant)
Date: February 26, 2004 By: /s/ Henry F. Schlueter
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Henry F. Schlueter, Assistant Secretary
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