AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 19, 1999
POST-EFFECTIVE AMENDMENT TO
F-2 REGISTRATION NO. 33-84872 AND TO
F-3 REGISTRATION NO. 333-9002
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C
POST-EFFECTIVE AMENDMENT NO. 2 TO
FORM F-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AND
POST-EFFECTIVE AMENDMENT NO. 4
TO REGISTRATION STATEMENT ON FORM F-2
ON
FORM F-3
BONSO ELECTRONICS INTERNATIONAL INC.
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
British Virgin Islands None
------------------------------ ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Flat A-D, 8th Floor
Universal Industrial Centre
23-25 Shan Mei Street
Fo Tan, Shatin
New Territories, Hong Kong
(852) 2605-5822
------------------------------------------------------------------------
(Address and telephone number of Registrant's principal executive offices)
Henry F. Schlueter, Esq.
Schlueter & Associates, P.C.
1050 Seventeenth Street, Suite 1700
Denver, Colorado 80265
(303) 292-3883
(Name, address and telephone number of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
number of the earlier effective registration statement for the same offering.
[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
Pursuant to Rule 429 adopted under the Securities Act of 1933, as amended,
this registration statement also relates to an earlier registration
statement filed with the Commission (SEC File No. 33-84872).
<PAGE>
<TABLE>
<CAPTION>
Calculation of Registration Fee(1)
- -------------------------------------------------------------------------------------------------------------------
Proposed maximum Proposed maximum Amount of
Title of each class of Amount to be offering price aggregate offering registration
securities to be registered registered per unit(2) price(2) fee
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock issuable upon
exercise of outstanding registered
common stock purchase warrants 2,200,000(3) $7.35 $16,170,000 $ 0(4)
Representatives' warrants issued to
the representatives of the underwriters
of a secondary public offering conducted
in 1994 110,000 $0.00 $ 0 $ 0
Units issuable upon exercise of the
representatives' warrants; includes
110,000 shares of common stock and
220,000 warrants 110,000(3) $9.18 $ 1,010,625 $ 0(4)
Common stock issuable upon
exercise of the warrants
included in the units underlying the
representatives' warrants 220,000(3) $7.35 $ 1,617,000 $ 0(4)
----
Total registration fee $ 0(4)
==========================================================================================================================
</TABLE>
(1) In United States dollars.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) An indeterminate number of additional shares of common stock are
registered hereunder which may be issued, as provided in the public
warrants and the representatives' warrants, in the event provisions
against dilution become operative. No additional consideration will be
received by Bonso upon issuance of additional shares issued as a result
of the exercise of these warrants.
(4) Previously paid upon initial registration of these securities on Form
F-2 (registration no. 33-84872) or on Form F-3 (registration no.
333-9002), which are being updated by this post-effective amendment on
Form F-3.
The registrant hereby amends this registration statement on the date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on the date as the Commission, acting pursuant to said section 8(a),
may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which the offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of that state.
<PAGE>
BONSO ELECTRONICS INTERNATIONAL INC.
2,504,403 Shares of Common Stock
Issuable on Exercise of Common Stock Purchase Warrants
Including
330,000 Shares Offered by Selling Shareholders
Bonso Electronics International Inc. ("Bonso") is offering the following
shares of common stock:
o 2,174,403 shares issuable on exercise of certain publicly-held
warrants;
o 110,000 shares issuable on exercise of certain warrants issued to the
representatives of the underwriters of a public securities offering
conducted by Bonso in 1994; and
o 220,000 shares issuable on exercise of warrants which underlie the
warrants issued to the representatives of the underwriters.
The 330,000 shares of common stock which underlie the representatives'
warrants may be offered and sold from time to time by selling shareholders.
Prior to this offering, the common stock has traded on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") under
the symbol "BNSO." As of ______, 1999 (one day prior to the date of this
prospectus), the reported closing sales price of the common stock on
NASDAQ-National Market System was $______.
An investment in these securities involves a high degree of risk. See "Risk
Factors" beginning at page 9 of this prospectus for a discussion of certain
factors that you should consider before investing in these securities.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
Underwriting
Price to Discounts and Proceeds to
Public(1)(2) Commissions Company(2)(3)
----------- ------------- ------------
Per Share(4) $ 7.35 $ 0.147(5) $ 7.203
Per Share(6) $ 9.1875 $ 0.00 $ 9.1875
------------- ---------- -------------
Total Offering $18,609,487.05 $319,637.24 $18,289,849.81
The date of this prospectus is _________, 1999
<PAGE>
(1) The 2,504,403 shares of common stock underlying the warrants are being
offered by Bonso to the holders of the warrants. There is no minimum
purchase amount. The shares of common stock are offered for cash only. The
exercise prices of the warrants were arbitrarily determined and bear no
relationship to the value of Bonso or its assets, nor do the exercise
prices represent that the common stock has a value or could be resold at
those prices. The shares of common stock are being sold on a "best efforts"
basis by Bonso; consequently, no minimum number of shares is required to be
sold.
(2) The 330,000 shares offered by the selling shareholders, which underlie the
representatives' warrants and the warrants issuable upon exercise of the
representatives' warrants, are being registered for the benefit of, and may
be sold from time to time by, the selling shareholders. Bonso will receive
no proceeds from the sale of these shares by the selling shareholders.
(3) Before deducting other expenses of the offering payable by Bonso estimated
at $125,000, including, among others, registration and filing fees,
professional fees and printing expenses. All proceeds received upon
exercise of the warrants will be applied directly to Bonso's benefit. There
is no escrow of funds and no assurance that all or any portion of the
warrants will be exercised.
(4) Shares underlying the publicly-held warrants and the warrants contained in
units underlying the representatives' warrants.
(5) Applies only to exercises of publicly-held warrants which are solicited by
a member of the National Association of Securities Dealers, Inc.
(6) Shares contained in units underlying representatives' warrants.
You may exercise your warrants only if you live in a state where the common
stock has been qualified for issuance under applicable state laws, including
registration if required under your state's law. As a result, you may not be
permitted to exercise your warrants but may have to sell your warrants or let
them expire unexercised.
<PAGE>
TABLE OF CONTENTS
Page
Questions and Answers About Exercising Your Warrants ........................ 1
Prospectus Summary .......................................................... 2
Risk Factors ................................................................ 7
Forward-Looking Statements .................................................. 13
Enforceability of Certain Civil Liabilities and Certain
Foreign Issuer Considerations ........................................... 14
Financial Statements and Currency Presentation .............................. 15
The Company ................................................................. 15
Use of Proceeds ............................................................. 17
Taxation and Dividend Policy ................................................ 17
Price Range of Common Shares ................................................ 18
Capitalization .............................................................. 19
Selected Consolidated Financial Data ........................................ 20
Management's Discussion and Analysis of Financial
Condition and Results of Operations ..................................... 23
Business .................................................................... 31
Management .................................................................. 44
Principal Shareholders ...................................................... 49
Selling Shareholders ........................................................ 50
Description of Securities ................................................... 53
Shares Eligible for Future Sale ............................................. 56
Plan of Distribution ........................................................ 57
Legal Matters ............................................................... 59
Experts ..................................................................... 59
Additional Information ...................................................... 59
Incorporation of Certain Documents by Reference ............................. 60
<PAGE>
QUESTIONS AND ANSWERS
ABOUT EXERCISING YOUR WARRANTS
Q: How do I exercise my warrants?
A: For you to exercise warrants in this offering, you must send your warrant
subscription form with the required payment of the per share price to Bonso
or the participating NASD member broker/dealer firm and they must receive
both your warrant subscription form and the required payment prior to the
expiration of the warrants.
Q: What will happen to my warrants if I don't exercise or don't exercise
properly?
A: If your warrant subscription form is not received by Bonso or a
participating NASD member broker/dealer firm by the expiration date or if
it is executed defectively or received without full payment, your warrants
may expire unexercised.
Q: Can I amend or rescind my warrant exercise once it is sent?
A: Once Bonso has received your executed warrant subscription form, you may
modify, amend or rescind it only with Bonso's consent and only prior to the
end of the warrant exercise period.
Q: What if I am entitled to a fraction of a share of stock?
A: No fractional shares will be issued upon exercise of the warrants. Any
fractional shares will be paid in cash at the current market price, as
defined in the warrant agreement, of the common stock on the date of
exercise.
Q: Can Bonso change the exercise provisions of the warrants?
A: Bonso reserves the right to extend the warrant exercise period, to reduce
the exercise price or to waive or seek correction of defectively executed
forms but does not represent that it will do so.
Q: When and how will I get my stock certificates if I exercise my warrants?
A: Bonso's transfer agent, U. S. Stock Transfer Corporation, will mail
certificates representing the shares of common stock issued to the persons
entitled to them at the address of those persons appearing on the warrant
subscription form. The transfer agent will issue certificates as soon as
possible, on a weekly basis, after it has received your properly executed
warrant subscription form, together with surrender of your warrant
certificate and payment for the shares of common stock purchased. Bonso
will hold any certificates returned as undeliverable until the person
legally entitled to the certificates claims them or until they are
otherwise disposed of in accordance with applicable law. You may not be
able to sell the shares which you have purchased until you have received
certificates for the shares.
1
<PAGE>
Q: What will happen to the money I pay upon exercise of my warrants?
A: Payments for shares of common stock will be deposited in an operating
account of Bonso. No interest will be paid to warrant holders exercising
their right to subscribe for shares of common stock.
Q: If my exercise is solicited by a broker, will he be paid a commission?
A: Bonso has entered into an exclusive agency agreement with EBI Securities
Corporation, which was formerly Cohig & Associates, Inc. EBI is referred to
as the "selling agent." Under the agency agreement, the selling agent will
advise, direct, solicit and coordinate the solicitation of the exercise of
the publicly-held warrants. The agreement includes an agreement to pay a
fee equal to 2% of the gross U. S. dollars paid for the exercise of the
publicly-held warrants. The selling agent may enter into sub-agency
agreements with other NASD member broker/dealer firms under which it may
re-allow up to the full amount of its fee to those broker/dealer firms.
Q: Who can help answer my questions about exercising my warrants?
A: If you have any more questions about exercising your warrants, you should
contact
EBI Securities Corporation
6300 South Syracuse Way, Suite 645
Englewood, Colorado 80111
(303) 694-0295
PROSPECTUS SUMMARY
This summary highlights important information about Bonso's business and
about this offering. Because it's a summary, it doesn't contain all the
information you should consider before exercising your warrants. Therefore,
please read the entire prospectus.
As used in this prospectus, "China" refers to all parts of the People's
Republic of China other than the Special Administrative Region of Hong Kong. The
term "Bonso" refers to Bonso Electronics International Inc. and, where the
context requires or suggests, its direct and indirect subsidiaries. All
outstanding share data excludes 1,130,000 shares of common stock reserved for
issuance upon exercise of certain outstanding stock options and 30,000 shares
reserved for issuance upon exercise of stock options which may be granted in the
future under Bonso's 1996 Non-Employee Directors' Stock Option Plan. See
"Management--Stock Option Plans" and "Principal Shareholders."
2
<PAGE>
Background
Bonso presently has outstanding 2,174,403 publicly-held common stock
purchase warrants which were issued in December 1994 in a public offering of
units. Each warrant entitles the holder to purchase one share of Bonso's $0.003
par value common stock at $7.35 per share and is exercisable any time prior to
2:00 p.m. (Pacific Time) on January 31, 2000, unless extended by the board of
directors. The publicly-held warrants are redeemable by Bonso at any time at
$0.05 per warrant upon 30 to 45 days notice if the closing price of the common
stock for 20 consecutive trading days within the 30-day period before the date
the notice is given is at least $8.575 per share.
In addition, Bonso has outstanding 110,000 warrants which were issued to
the representatives of the underwriters of its 1994 public offering. Each
representatives' warrant entitles the holder to purchase one unit, consisting of
one share of common stock and two warrants, at $9.1875 per unit at any time
prior to 5:00 p.m. (Pacific Time) on December 14, 1999. The representatives'
warrants are not redeemable. The 220,000 warrants contained in the units are
exercisable on the same terms and conditions as the publicly-held warrants
described above.
The registration statement of which this prospectus is a part registers the
shares of common stock underlying the publicly-held warrants and the
representatives' warrants. The warrants and the representatives' warrants are
collectively referred to in this prospectus as the "warrants."
The exercise prices of the warrants as described above are wholly arbitrary
and there is no assurance that the price of the common stock will, at any time,
equal or exceed the exercise prices of the warrants. The warrants can be
exercised only if a current prospectus is in effect. See "Description of
Securities--Warrants."
The Company
Bonso designs, develops, manufactures and sells a comprehensive line of
electronic scales and weighing instruments and electronic consumer and health
care products. Bonso's electronic scales include bathroom, kitchen, office,
jewelry, laboratory, pocket, hanging, postal, industrial and parcel scales that
are used in consumer, commercial and industrial applications. Bonso's electronic
consumer and health care products include pedometers, chronographs, electronic
thermometers and blood pressure meters.
Bonso also plans to enter the digital telecommunications market, and
anticipates that its first telecommunications product will be a two-way radio.
Bonso has engaged a senior manager with experience in telecommunications
manufacturing. There can be no assurance, however, that development of any
telecommunications products will be successfully completed, that Bonso will
obtain customers for any of these products or that sales of any of these
products will be profitable.
Bonso's wholly-owned Hong Kong subsidiary - Bonso Electronics Limited
("Bonso Electronics") - is responsible for the design, development, manufacture
and sale of Bonso's products. Bonso Electronics has one active Hong Kong
subsidiary - Bonso Investment Limited ("BIL") - which has been used to acquire
3
<PAGE>
and hold Bonso's real estate investments in Hong Kong and China, and one
inactive subsidiary - Bonso Advance Technology Limited.
Bonso has manufactured all of its products in China since 1989 in order to
take advantage of lower overhead costs and competitive labor rates available
there. In January 1997, Bonso completed a new manufacturing facility in the
DaYang Synthetical Development District in Shenzhen, China, which approximately
tripled Bonso's production capacity. The leasehold, facilities, machinery,
furniture and equipment at that facility are owned and operated by Bonso
Electronics (Shenzhen) Co. Ltd. ("Shenzhen Bonso"), a 100% Company-owned Chinese
limited liability company which was formed in June 1994. The location of Bonso's
factory in Shenzhen, only about 50 miles from Hong Kong, permits Bonso to manage
easily manufacturing operations from Hong Kong, and facilitates transportation
of Bonso's products out of China through the port of Hong Kong.
For the fiscal year ended March 31, 1999, Bonso had sales of US$13,046,265
and net income of US$13,754. For the six months ended September 30, 1999, Bonso
had sales of US$7,854,730 and net income of US$621,536.
4
<PAGE>
<TABLE>
<CAPTION>
The Offering
<S> <C>
Securities offered ........................... 2,504,403 shares of common stock, $0.003 par
value, issuable upon exercise of warrants
330,000 shares of common stock, $.003 par
value, which are included in the shares
issuable upon exercise of the warrants, to be
offered from time to time by selling
shareholders
Exercise price per share ..................... $7.35 per share - warrants held by public
of common stock or unit $9.1875 per unit - representatives' warrants
Terms of the offering ........................ This offering is being made by Bonso solely
to the holders of Bonso's outstanding
warrants. Shares not issued in this offering
will not be offered or sold to the public.
However, shares issued upon exercise of the
warrants may be resold under this prospectus
from time to time.
Common stock outstanding ..................... 2,919,159 shares
prior to offering
Common stock outstanding ..................... 5,423,562 shares
after offering if all warrants exercised
Estimated net proceeds to Bonso if ........... $18,164,850
all warrants exercised
Use of proceeds .............................. Management intends to use the net proceeds
from this offering for working capital. See
"Use of Proceeds."
Risk factors ................................. Acquisition of shares of common stock through
the exercise of outstanding warrants entails
a high degree of risk and immediate
substantial dilution. See "Risk Factors."
Nasdaq symbols ............................... Common Shares..... BNSO
Warrants.......... BNSOW
</TABLE>
Summarized Consolidated Financial Data
The following summary of financial information is derived from the audited
consolidated financial statements of Bonso as of March 31, 1998 and 1999 and for
each of the three fiscal years in the period ended March 31, 1999, together with
the notes to those financial statements, included in other sections of this
prospectus. The financial information at and for the six months ended September
30, 1998 and 1999 is unaudited. This summary information is qualified in its
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<PAGE>
entirety by reference to, and should be read in conjunction with, the
consolidated financial statements, together with the notes to the consolidated
financial statements, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in other sections of this
prospectus.
The consolidated financial statements are prepared in accordance with
generally accepted accounted principles in the United States of America and are
stated in U.S. dollars. The "as adjusted" column, below, gives effect to the
sale of 2,504,403 shares of common stock consisting of 2,394,403 shares of
common stock to be issued upon exercise of all of the publicly-held warrants,
including the warrants included in the units underlying the representatives'
warrants, at $7.35 per share and 110,000 shares of common stock to be issued
upon exercise of all of the representatives' warrants at $9.1875 per share, with
estimated net proceeds to Bonso of $18,164,850.
<TABLE>
<CAPTION>
SUMMARIZED CONSOLIDATED FINANCIAL DATA
(In thousands of U.S. dollars, except per share data)
Six Months Ended
Year Ended March 31, September 30,
----------------------------------- -------------------
Income Statement Data 1997 1998 1999 1998 1999
- --------------------- ---- ---- ---- ---- ----
(Audited) (Audited) (Audited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Sales $ 16,989 $ 23,716 $ 13,046 $ 6,946 $ 7,855
Gross margin $ 4,893 $ 6,645 $ 4,234 $ 1,879 $ 2,581
Income from operations $ 916 $ 2,354 $ 244 $ 262 $ 730
Net income $ 547 $ 2,275 $ 14 $ 110 $ 622
Earnings per share - Basic $ 0.19 $ 0.80 0.45 cents $ 0.036 $ 0.20
- Diluted $ 0.19 $ 0.73 0.37 cents $ 0.032 $ 0.17
Weighted average shares outstanding 2,825,949 2,829,448 3,079,219 3,034,439 3,115,880
Incremental shares from assumed
exercise of:
Warrants -- 25,562 166,024 177,727 --
Stock options 20,095 279,362 429,060 218,960 539,950
--------- --------- --------- --------- ---------
Dilutive potential common shares 20,095 304,924 595,084 396,687 539,950
Adjusted weighted average shares 2,846,044 3,134,372 3,674,303 3,431,126 3,655,830
<CAPTION>
As of March 31, As of September 30,
--------------------- -------------------------
Balance Sheet Data 1998 1999 1999 As Adjusted
- ------------------ ---- ---- ---- -----------
(Audited) (Audited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Total Current Assets $ 9,109 $ 7,308 $ 6,624 $24,789
Total Assets $20,647 $18,660 $19,544 $37,709
Current Liabilities $ 5,925 $ 3,992 $ 3,972 $ 3,972
Debt $ 3,507 $ 1,945 $ 3,399 $ 3,399
Total Liabilities $ 6,168 $ 4,034 $ 4,299 $ 4,299
Shareholders' Equity $14,479 $14,626 $15,245 $33,410
Net Working Capital $ 3,184 $ 3,316 $ 2,652 $20,817
</TABLE>
6
<PAGE>
RISK FACTORS
Investment in the securities offered through this prospectus involves a high
degree of risk. Please carefully consider the following risk factors, along with
the other information contained in this prospectus, before deciding whether to
exercise your warrants.
Political, Legal, Economic and Other Uncertainties of Operations in China and
Hong Kong
China's Sovereignty over Hong Kong Could Cause Instability. Bonso's
principal executive and corporate offices are located in Hong Kong, formerly a
British Crown Colony. Sovereignty over Hong Kong was transferred effective July
1, 1997 to China, and Hong Kong became a Special Administrative Region of China.
The National People's Congress of China enacted the Basic Law in 1990 as the
constitution of Hong Kong under China's sovereignty. While management does not
believe that the transfer of sovereignty over Hong Kong to China has had or will
have a material adverse effect on Bonso's business, there can be no assurance as
to the continued stability of political, economic or commercial conditions in
Hong Kong, and any instability could have an adverse impact on Bonso's business.
The Hong Kong dollar and the United States dollar have been fixed at
approximately 7.80 Hong Kong dollars to $1.00 since 1983. The Chinese government
expressed its intention in the Basic Law to maintain the stability of the Hong
Kong currency after the sovereignty of Hong Kong was transferred to China. There
can be no assurance that this will continue and Bonso could face increased
currency risks if the current exchange rate mechanism is changed.
Manufacturing in China Involves Risks Caused by Internal Political Factors.
Bonso's manufacturing facility is located in China. As a result, Bonso's
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, regulations or the interpretation of laws and regulations,
confiscatory taxation, restrictions on imports and sources of supply, import
duties, corruption, currency revaluation or the expropriation of private
enterprise could materially and adversely affect Bonso. Over the past several
years, the Chinese government has pursued economic reform policies including the
encouragement of private economic activity and greater economic
decentralization. There can be no assurance that the Chinese government will
continue to pursue these policies, that these policies will be successful if
pursued, that these policies will not be significantly altered from time to time
or that business operations in China would not become subject to the risk of
nationalization, which could result in the total loss of investment in that
country. 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 Bonso were
required to move its manufacturing operations outside of China, its
profitability would be substantially impaired, its competitiveness and market
position would be materially jeopardized and there can be no assurance that it
could continue its operations.
7
<PAGE>
If China Were to Lose Most Favored Nation Status, Bonso Could be Adversely
Affected. China currently enjoys most favored nation ("MFN") trade status, which
provides China with the trading privileges generally available to trading
partners of the United States. The United States annually reconsiders the
renewal of China's MFN status. Various interest groups continue to urge that the
United States not renew MFN for China and there can no assurance that
controversies will not arise that threaten the status quo involving trade
between the United States and China or that the United States will not revoke or
refuse to renew China's MFN status. In any of these eventualities, Bonso's
business could be adversely affected, by among other things, causing Bonso's
products in the United States to become more expensive, which could result in a
reduction in the demand for Bonso's products by customers in the United States.
Trade friction between the United States and China, whether or not actually
affecting Bonso's business, could also adversely affect the prevailing market
price of Bonso's common stock and warrants.
The Chinese Legal System and Application of Chinese Laws Are Uncertain. The
legal system of China relating to foreign investments is both new and
continually evolving, and currently there can be no certainty as to the
application of its laws and regulations in particular instances. China does not
have a comprehensive system of laws. 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.
China's Economic Policies Could Change. As part of its economic reform,
China has designated certain areas, including Shenzhen where Bonso's
manufacturing complex is located, as Special Economic Zones. Foreign enterprises
in these areas benefit from greater economic autonomy and more favorable tax
treatment than enterprises in other parts of China. Changes in the policies or
laws governing Special Economic Zones could have a material adverse effect on
Bonso. 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.
Bonso Is Dependent on a Single Factory. All of Bonso's products are
currently manufactured at its manufacturing facility located in Shenzhen, China.
Bonso does not own the land underlying its factory complex. It occupies the site
under an agreement with the local Chinese government under which Bonso is
entitled to use the land upon which its factory complex is situated until May
2044. This agreement and the operations of Bonso's Shenzhen factory are
dependent on Bonso's relationship with the local government. Bonso's operations
and prospects would be materially and adversely affected by the failure of the
local government to honor the agreement. In the event of a dispute, enforcement
of the agreement could be difficult in China.
Moreover, fire fighting and disaster relief or assistance in China may not
be as developed as in Western countries. Bonso currently maintains property
damage insurance aggregating approximately $13,900,000 covering its stock in
trade, goods and merchandise, furniture and equipment and buildings. Bonso does
not maintain business interruption insurance. Investors are cautioned that
material damage to, or the loss of, Bonso's factory due to fire, severe weather,
8
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flood or other act of God or cause, even if insured against, could have a
material adverse effect on Bonso's financial condition, results of operations,
business and prospects.
Asia Has Recently Experienced Significant Economic Problems. Recently,
several countries in Southeast Asia have experienced a significant devaluation
of their currencies and decline in the value of their capital markets. In
addition, several Asian countries have experienced a number of bank failures and
consolidations. Management believes that most Asian countries have recovered
from these declines and it does not believe that the declines in Southeast Asia
will affect the demand for Bonso's products, because virtually all of Bonso's
products are sold into developed countries not experiencing these declines.
Moreover, because most of Bonso's products are paid for in U.S. dollars,
management believes that Bonso is less susceptible to the effects of a
devaluation in the Hong Kong dollar or Chinese renminbi if either or both were
to occur despite assurances to the contrary by the Chinese government. However,
the decline in the currencies of other Southeast Asian countries could render
Bonso's products less competitive if competitors located in these countries are
able to manufacture competitive products at a lower effective cost. Investors
are cautioned that the decline in Southeast Asia may have a material adverse
effect on Bonso's business, financial condition, results of operations or market
price of its securities.
Risk Factors Relating to the Business of Bonso
The Loss of Any of Bonso's Major Customers Could Significantly Affect
Profitability. Four major customers accounted for approximately 62% of Bonso's
sales in the fiscal year ended March 31, 1998 and 51% of its sales during the
fiscal year ended March 31, 1999. The loss of any of these major customers could
have a material negative impact on Bonso's business. See "Business--Customers
and Marketing--Major Customers" and "Management's Discussion and Analysis of
Financial Condition--Overview."
Bonso Is Dependent on Its Key Personnel. Bonso's future performance will
depend to a significant extent upon the efforts and abilities of certain members
of senior management as well as upon Bonso's ability to attract and retain other
qualified personnel. In particular, Bonso is largely dependent upon the
continued efforts of Mr. Anthony So, its president, secretary, treasurer and
chairman of its board of directors, and Mr. Kim Wah Chung, its director of
engineering and research and development. To the extent that the services of Mr.
So or Mr. Chung would be unavailable to Bonso, Bonso would be required to obtain
other personnel to perform the duties that they otherwise would perform. There
can be no assurance that Bonso would be able to employ another qualified person
or persons, with the appropriate background and expertise, to replace Mr. So or
Mr. Chung on terms suitable to it. See "Management."
Bonso Faces Strong Competition. Bonso's business is in an industry that is
highly competitive, and many of its competitors, both local and international,
have substantially greater technical, financial and marketing resources than
Bonso. See "Business--Competition."
Bonso Needs Qualified Employees. Bonso's success is dependent on its
ability to attract and retain qualified technical, marketing and production
personnel. Bonso will have to compete with other larger companies for this type
9
<PAGE>
of personnel, and there can be no assurance that Bonso will be able to attract
or retain qualified personnel of this nature.
Bonso's Founder Controls the Company. At the present time, Mr. Anthony So,
Bonso's founder and president, beneficially owns approximately 37.5% of the
outstanding shares of common stock. Due to his stock ownership, Mr. So may be in
a position to elect the board of directors and, therefore, to control Bonso's
business and affairs including certain significant corporate actions such as
acquisitions, the sale or purchase of assets and the issuance and sale of
Bonso's securities. See "Principal Shareholders."
Bonso's Operating Results Are Subject to Wide Fluctuations. Bonso's
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 Bonso's 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 Bonso's common stock.
Certain Legal Consequences of Foreign Incorporation and Operations
Judgments Against Bonso and Its Management May Be Difficult to Obtain or
Enforce. Bonso is a holding corporation organized as an International Business
Company under the laws of the British Virgin Islands. Bonso's principal
operating subsidiary is organized under the laws of Hong Kong, where Bonso's
principal executive offices are also located. Outside the United States, it may
be difficult for investors to enforce judgments against Bonso obtained in the
United States in actions brought against Bonso, including actions predicated
upon civil liability provisions of federal securities laws. In addition, most of
Bonso's officers and directors reside outside the United States and the assets
of these persons and of Bonso are located outside of 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 Bonso or these
persons judgments predicated upon the liability provisions of U.S. securities
laws. Bonso has been advised by its Hong Kong counsel and its British Virgin
Islands counsel that there is substantial doubt as to the enforceability against
Bonso or any of its directors or officers located outside the United States in
original actions or in actions for enforcement of judgments of U.S. courts of
liabilities predicated solely on the civil liability provisions of federal
securities laws. See "Enforceability of Certain Civil Liabilities and Certain
Foreign Issuer Considerations."
Because Bonso Is Incorporated in the British Virgin Islands, Its
Shareholders May Not Have the Same Protections as Shareholders of U.S.
Corporations. Bonso is 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 Bonso's management, directors and
controlling shareholders and the rights of Bonso's shareholders differ from, and
may not be as protective of shareholders as, those that would apply if Bonso
were incorporated in a jurisdiction within the United States. Directors of Bonso
have the power to take certain actions without shareholder approval, including
an amendment of Bonso's Memorandum or Articles of Association and 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 U.S. securities laws.
10
<PAGE>
Bonso's Shareholders Do Not Have the Same Protections or Information
Generally Available to Shareholders of U.S. Corporations Because of Exemptions
for Foreign Private Issuers. Bonso is a foreign private issuer within the
meaning of rules promulgated under the Securities Exchange Act of 1934. As a
result, and though its common stock is registered under Section 12(g) of the
Exchange Act, it is exempt from certain provisions of the Exchange Act
applicable to United States public companies including: the rules under the
Exchange Act requiring the filing with the Securities and Exchange Commission 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 of the exemptions under the Exchange Act
applicable to foreign private issuers, shareholders of Bonso are not afforded
the same protections or information generally available to investors in public
companies organized in the United States.
Risks Relating to this Offering
You May Not be Able to Sell Your Shares of Common Stock for What You Paid
for Them. The exercise prices of the publicly held warrants and the
representatives' warrants have been arbitrarily determined through negotiations
between Bonso and the representatives of the underwriters of Bonso's 1994 public
offering. The exercise prices of the warrants do not necessarily bear any
relationship to the assets, operating results, book value or shareholders'
equity of Bonso or any other statistical criterion of value. The exercise prices
of the warrants should not under any circumstances be regarded as an indication
of any future market price of Bonso's common stock.
Bonso May Not Receive Enough Money From Warrant Exercises to Fund Its
Planned Operations. In 1998, Bonso solicited the exercise of the publicly held
warrants. Management intended to utilize a portion of the proceeds from the
exercises of these warrants to fund expansion of operations, including the
development and production of Bonso's proposed cordless telephone. However, only
25,597 warrants were exercised. There is no assurance that any more of the
warrants will be exercised. Accordingly, funding for the expansion of Bonso's
operations will be dependent on its ability to generate significant operating
revenue or procure additional financing. There can be no assurance that
sufficient operating revenue can be generated or that any additional financing
can be arranged on favorable terms and in the amounts required to fund Bonso's
operations.
You May Not Be Able to Exercise Your Warrants. Exercise of Bonso's
outstanding warrants is subject to its either maintaining the effectiveness of
its registration statement, or filing an effective registration statement with
the Securities and Exchange Commission and complying with the appropriate state
securities laws. No assurance can be given that at the time a warrant holder
11
<PAGE>
seeks to exercise the right to purchase Bonso's common stock an effective
registration statement will in fact be in effect or that Bonso will have
complied with all appropriate state securities laws.
Future Sales of Restricted Shares Into the Public Market Could Depress the
Market Price of the Common Stock. As of the date of this prospectus, 1,168,421
outstanding shares of Bonso common stock are restricted securities as that term
is defined in Rule 144 under the Securities Act of 1933. Although the Securities
Act and Rule 144 place certain prohibitions on the sale of restricted
securities, they may be sold into the public market under certain conditions.
Further, Bonso has issued options to purchase 1,130,000 shares of common stock
and has reserved an additional 30,000 shares for issuance upon exercise of stock
options which may be granted in the future under its existing stock option
plans, in addition to the 2,504,403 shares which could be issued under this
prospectus. It is possible that, when permitted, the sale to the public of these
shares, or shares acquired upon exercise of the options, could have a depressing
effect on the price of the common stock. Further, future sales of these shares
and the exercise of these options could adversely affect Bonso's ability to
raise capital in the future.
The Market Price of Bonso's Common Stock Fluctuates . The markets for
equity securities have been volatile and the price of Bonso's common stock has
been and could continue to be subject to wide fluctuations in response to
quarter to quarter variations in operating results, news announcements, trading
volume, sales of common stock by officers, directors and principal shareholders,
general market trends and other factors.
Shareholders Who Do Not Exercise Their Warrants Would Be Diluted By the
Exercise of Other Warrants. Current shareholders of Bonso who also hold warrants
will have their percentage of ownership in Bonso diluted if they choose to let
their warrants expire and other warrant holders choose to exercise their
warrants.
Bonso Might Decide to Redeem the Warrants. The publicly held warrants are
redeemable by Bonso at any time at $0.05 per warrant upon 30 to 45 days notice
if the closing price of the common stock for 20 consecutive trading days within
the 30-day period before the date the notice is given is at least $8.575 per
share. If Bonso calls the publicly held warrants for redemption, the holders of
the publicly held warrants must either (i) exercise the publicly held warrants
and pay the exercise price at a time when it may be disadvantageous for the
holders to do so; (ii) sell the public warrants at the then current market price
when they might otherwise wish to hold the publicly held warrants; or (iii)
accept the nominal redemption price, which is likely to be substantially less
than the market value of the publicly held warrants. No assurance can be given
that at the time of redemption an effective registration statement will be in
effect or that Bonso will have complied with all appropriate state securities
laws so that a publicly held warrant holder will be able to exercise his public
warrants rather than accepting the $0.05 per warrant redemption price.
The Market Price of the Common Stock Could Drop Because the Selling Agents
May Not Be Allowed to Make a Market For the Stock Until After This Solicitation.
The selling agents have advised Bonso that they may make a market in Bonso's
securities. Regulation M under the Securities Exchange Act of 1934 may prohibit
the selling agents from engaging in any market making activities with regard to
Bonso's securities for a specified period prior to any solicitation by the
selling agents of the exercise of the public warrants until the later of the
termination of any solicitation activity or the termination (by waiver or
12
<PAGE>
otherwise) of any right that the selling agents may have to receive a fee for
the exercise of the public warrants following a solicitation. As a result, the
selling agents may be unable to provide a market for Bonso's securities during
certain periods while the public warrants are exercisable. Any temporary
cessation of these market making activities could have an adverse effect upon
the market price of Bonso's securities.
FORWARD-LOOKING STATEMENTS
Some statements contained in this prospectus that are not statements of
historical facts are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements include, among others, statements regarding Bonso's future economic
performance and financial position and plans and objectives of management for
future operations including plans and objectives relating to the development and
sale of telecommunications products. Forward-looking statements are subject to
factors that could cause the actual results to differ materially from future
results expressed or implied by forward-looking statements. They are based on
assumptions, including the following:
o that political, economic and commercial conditions in Hong Kong and
China will not change materially or adversely
o that competitive conditions affecting Bonso will not change materially
or adversely
o that demand for Bonso's products will be strong
o that Bonso will retain existing key management personnel
o that Bonso's forecasts will accurately anticipate market demand
o that there will be no material adverse change in Bonso's operations or
business
Assumptions relating to these factors involve judgments with respect to,
among other things, future economic, competitive and market conditions and
future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond Bonso's control. Although management
believes that the assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could prove inaccurate and, therefore, there
can be no assurance that the results contemplated in forward-looking information
will be realized. Management intends that the forward-looking statements
contained in this prospectus be subject to the safe harbors created by Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934.
13
<PAGE>
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES AND
CERTAIN FOREIGN ISSUER CONSIDERATIONS
Bonso is a British Virgin Islands holding corporation. Bonso has appointed
Henry F. Schlueter, 1050 Seventeenth Street, Suite 1700, Denver, Colorado 80265
as its agent upon whom process may be served in any action brought against it
under the securities laws of the United States. However, outside the United
States, it may be difficult for investors to enforce judgments against Bonso
obtained in the United States in any of these actions, including actions
predicated upon civil liability provisions of the United States securities laws.
In addition, most of Bonso's officers and directors reside outside the United
States and the assets of these persons and of Bonso are located outside of 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 Bonso or these persons judgments obtained in United States courts
predicated upon the liability provisions of the United States securities laws.
Bonso has been advised by Harney, Westwood and Riegels ("HW&R"), its British
Virgin Islands counsel, and by Norman M.K. Yeung & Co., Solicitors ("Yeung &
Co."), its Hong Kong counsel, that there is substantial doubt as to the
enforceability against Bonso or any of its directors and officers located
outside the United States in original actions or in actions for enforcement of
judgments of United States courts of liabilities predicated solely on the civil
liability provisions of the United States securities laws.
Bonso has been advised by Yeung & Co. and HW&R that no treaty exists
between Hong Kong or the British Virgin Islands and the United States providing
for the reciprocal enforcement of foreign judgments. However, the courts of Hong
Kong and the British Virgin Islands are generally prepared to accept a foreign
judgment as evidence of a debt due. An action may then be commenced in Hong Kong
or the British Virgin Islands for recovery of this debt. A Hong Kong or British
Virgin Islands court will only accept a foreign judgment as evidence of a debt
due if:
(1) the judgment is for a liquidated amount in a civil matter;
(2) the judgment is final and conclusive and has not been stayed or
satisfied in full;
(3) the judgment is not directly or indirectly for the payment of foreign
taxes, penalties, fines or charges of a like nature (in this regard, a
Hong Kong or British Virgin Islands court is unlikely to accept a
judgment for an amount obtained by doubling, trebling or otherwise
multiplying a sum assessed as compensation for the loss or damage
sustained by the person in whose favor the judgment was given);
(4) the judgment was not obtained by actual or constructive fraud or
duress;
(5) the foreign court has taken jurisdiction on grounds that are
recognized by the common law rules as to conflict of laws in Hong Kong
or the British Virgin Islands;
(6) the proceedings in which the judgment was obtained were not contrary
to natural justice;
14
<PAGE>
(7) the proceedings in which the judgment was obtained, the judgment
itself and the enforcement of the judgment are not contrary to the
public policy of Hong Kong or the British Virgin Islands;
(8) the person against whom the judgment is given is subject to the
jurisdiction of the Hong Kong or the British Virgin Islands court; and
(9) the judgment is not on a claim for contribution in respect of damages
awarded by a judgment that does not satisfy the above requirements.
Enforcement of a foreign judgment in Hong Kong or the British Virgin
Islands may also be limited or affected by applicable bankruptcy, insolvency,
liquidation, arrangement, moratorium or similar laws relating to or affecting
creditors' rights generally and will be subject to a statutory limitation of
time within which proceedings may be brought.
Under United States law, majority and controlling shareholders generally
have certain "fiduciary" responsibilities to the minority shareholders.
Shareholder action must be taken in good faith and actions by controlling
shareholders that are obviously unreasonable may be declared null and void. The
British Virgin Islands law protecting the interests of the minority shareholders
may not be as protective in all circumstances as the law protecting minority
shareholders in United States jurisdictions. While British Virgin Islands law
does permit a shareholder of a British Virgin Islands company to sue its
directors derivatively, i.e. in the name of and for the benefit of the company
and to sue the company and its directors for his benefit and the benefit of
others similarly situated, the circumstances in which any of these actions may
be brought and the procedures and defenses that may be available in respect of
any of these actions may result in the rights of shareholders of a British
Virgin Islands company being more limited than those rights of shareholders in a
United States company.
FINANCIAL STATEMENTS AND CURRENCY PRESENTATION
Bonso prepares its consolidated financial statements in accordance with
generally accepted accounting principles in the United States of America. (See
note 1 to the consolidated financial statements.) Bonso publishes its financial
statements in United States dollar for the following reasons: (1) Bonso is
incorporated in the British Virgin Islands where the currency is the United
States dollar; (2) Bonso conducts substantially all of its sales transactions in
United States dollars; and (3) the exchange rate between the Hong Kong dollar
and the United States dollar has been fixed at 7.80 Hong Kong dollars to $1.00
since 1983. All dollar amounts ("$") set forth in this prospectus are in United
States dollars.
THE COMPANY
Bonso Electronics International Inc. was incorporated on August 8, 1988 as
a limited liability International Business Company under the laws of the British
Virgin Islands to serve as a holding company for Bonso's operating subsidiary,
which was formed in 1980. As an International Business Company, Bonso is
prohibited from doing business with persons resident in the British Virgin
15
<PAGE>
Islands, owning real estate in the British Virgin Islands or acting as a bank or
insurance company. Bonso was incorporated in the British Virgin Islands
principally to facilitate trading in its securities. The government of Hong Kong
imposes a stamp duty on the transfer of securities of Hong Kong corporations. No
duty of this kind is imposed by the British Virgin Islands, and Bonso is also
exempt from income tax in the British Virgin Islands. Bonso's corporate
administrative matters are conducted through its registered agent, HWR Services
Limited, P.O. Box 71, Road Town, Tortola, British Virgin Islands. Bonso's
principal executive offices are located at Flat A-D, 8th Floor, Universal
Industrial Centre, 23-25 Shan Mei Street, Fo Tan, Shatin, New Territories, Hong
Kong. Its telephone number is 852-2605-5822, its facsimile number is
852-2691-1724 and its E-mail address is [email protected].
Bonso Electronics Limited ("Bonso Electronics"), Bonso's wholly owned Hong
Kong subsidiary, is mainly responsible for the design, development, manufacture
and sale of a comprehensive line of electronic scales, weighing instruments and
electronic consumer and health care products. Bonso Electronics has one active
Hong Kong subsidiary - Bonso Investment Limited ("BIL"), which has been used to
acquire and hold Bonso's real estate investments in Hong Kong and China.
Since January 1997, Bonso's products have been manufactured at Bonso's
manufacturing facility in the DaYang Synthetical Development District in
Shenzhen, China. The leasehold, facilities, machinery, furniture and equipment
at that facility are owned and operated by Bonso Electronics (Shenzhen) Co. Ltd.
("Shenzhen Bonso"), a 100% company-owned Chinese limited liability company which
was formed in June 1994. See "Business--Properties--China."
16
<PAGE>
USE OF PROCEEDS
If all of the 2,504,403 warrants are exercised, of which there can be no
assurance, the maximum estimated net proceeds to Bonso will be approximately
$18,164,850 after deduction of fees and the expenses of this offering.
Bonso intends to use the net proceeds for working capital. Working capital
may be used for further expansion of Bonso's operations, on-going operations,
general and administrative expenses or any other use which the board of
directors deems appropriate.
Pending utilization, management intends to make temporary investments of
the proceeds in bank certificates of deposit, interest-bearing savings and
checking accounts, prime commercial paper or government obligations. An
investment in interest-bearing assets, if continued for an extensive period of
time within the definitions of the Investment Company Act of 1940, as amended,
could subject Bonso to classification as an "investment company" under the
Investment Company Act of 1940 and to registration and reporting requirements
thereunder, although Bonso does not intend this to be a result.
TAXATION AND DIVIDEND POLICY
Dividend Policy
Bonso has never paid any dividends on its common stock and does not
anticipate paying any dividends in the future. The board of directors has not
adopted a policy with respect to the payment of dividends. The declaration of
cash dividends may be considered by the board of directors from time to time
based on Bonso's results of operations. Bonso's dividend policy will be
dependent on its net income, financial position and capital requirements along
with economic and market conditions, industry standards and other factors. In
addition, dividend distribution and repatriation of profits or funds from
Bonso's operations in China are regulated by Chinese laws and regulations. No
profits are generated from China because Bonso's Chinese operations involve only
the manufacture and assembly of its products which are then shipped to Hong Kong
for sale and distribution. However, these laws could be interpreted differently
in the future, in which case Bonso's ability to pay dividends could be adversely
affected. In light of the above, no assurance can be given as to the amount or
timing of future dividend payments, if any. See "Description of
Securities--Exchange Controls and Other Limitations Affecting Shareholders."
Taxation
Under current British Virgin Islands law, Bonso is not subject to tax on
its income. Most of Bonso's subsidiaries' profits accrue in Hong Kong, where the
corporate tax rate is currently 16%. There is no tax payable in Hong Kong on
offshore profit or on dividends paid to Bonso Electronics Limited by its
subsidiaries or by Bonso Electronics Limited to Bonso. Therefore, the overall
effective tax rate of Bonso may be lower than that of most United States
corporations; however, this could be materially and adversely affected by
changes in the tax laws of the British Virgin Islands, Hong Kong or China.
17
<PAGE>
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 Bonso to individuals are not subject to
tax as long as the recipient is not a resident of the British Virgin Islands. If
Bonso were to pay a dividend, Bonso 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 would be treated as dividend income for United States federal income
tax purposes. These dividends would not be 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. Various Internal Revenue Code provisions impose special
taxes in certain circumstances on non-United States corporations and their
shareholders. Shareholders of Bonso are urged to consult their tax advisors with
regard to these possibilities and their 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.
PRICE RANGE OF COMMON SHARES
Bonso's common stock and publicly held warrants are traded only in the
United States over-the-counter market. The common stock is quoted on the
National Association of Securities Dealers, Inc. Automated Quotation System
("Nasdaq") National Market under the trading symbol BNSO; the publicly held
warrants are quoted under the trading symbol BNSOW on Nasdaq.
The table set forth below presents the range, on a quarterly basis, of high
and low closing sales prices per share of common stock and per publicly held
warrant as reported by Nasdaq for the last two fiscal years and for the first
quarter of the fiscal year ending March 31, 2000. The quotations represent
prices between dealers and do not include retail markup, markdown or commissions
and may not necessarily represent actual transactions.
Common Stock
Quarter Ended High Low
------------- ---- ---
Fiscal 1998
-----------
June 30, 1997 ............................ $ 2.25 $ 1.6875
September 30, 1997 ....................... $ 6.50 $ 2.0625
December 31, 1997 ........................ $ 8.375 $ 5.375
March 31, 1998 ........................... $ 10.125 $ 5.875
Fiscal 1999
-----------
June 30, 1998 ............................ $ 11.375 $ 9.0625
September 30, 1998 ....................... $ 11.125 $ 5.125
December 31, 1998 ........................ $ 6.125 $ 3.125
March 31, 1999 ........................... $ 7.50 $ 5.375
Fiscal 2000
----------
June 30, 1999 ............................ $ 7.625 $ 5.75
September 30, 1999 ....................... $ 7.50 $ 6.281
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Public Warrants
Quarter Ended High Low
------------- ---- ---
Fiscal 1998
-----------
June 30, 1997 ............................ $ 0.40625 $ 0.3125
September 30, 1997 ....................... $ 1.50 $ 0.40625
December 31, 1997 ........................ $ 2.375 $ 0.78125
March 31, 1998 ........................... $ 2.5625 $ 1.125
Fiscal 1999
-----------
June 30, 1998 ............................ $ 3.375 $ 2.125
September 30, 1998 ....................... $ 3.453 $ 0.063
December 31, 1998 ........................ $ 0.656 $ 0.156
March 31, 1999 ........................... $ 0.875 $ 0.313
Fiscal 2000
-----------
June 30, 1999 ............................ $ 0.688 $ 0.188
September 30, 1999 ....................... $ 0.469 $ 0.188
As of September 30, 1999, Bonso had 2,919,159 shares of common stock
outstanding. These shares were held by approximately 297 holders of record
worldwide, including 293 holders of record in the United States. On ___________,
1999, the closing sale price of the common stock as reported on the Nasdaq
National Market was $_____.
CAPITALIZATION
The following table sets forth the capitalization of Bonso at September 30,
1999 and as adjusted to reflect the sale by Bonso of (i) 2,174,403 shares of
common stock underlying the public warrants at an exercise price of $7.35 per
share; (ii) 110,000 shares of common stock underlying the representatives'
warrants at an exercise price of $9.1875 per unit; and (iii) 220,000 shares of
common stock underlying the public warrants contained in the units at an
exercise price of $7.35 per share. The table should be read in conjunction with
the unaudited consolidated financial statements appearing in other sections of
this prospectus. Figures in the "as adjusted" column assume the exercise of 100%
of the publicly held warrants and 100% of the representatives' warrants. Dollar
amounts are in thousands.
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<PAGE>
<TABLE>
<CAPTION>
September 30, 1999
Actual As Adjusted
------ -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Long-term debt and capital lease obligations,
net of current maturities .............................. $ 327 $ 327
Shareholders equity:
Common stock, $0.003 par value per share:
23,333,334 shares authorized; 2,919,159 shares
issued and outstanding as of September 30, 1999 ; and
5,423,562 shares to be issued and outstanding as
adjusted ............................................. $ 9 $ 16
Additional paid in capital ............................... $ 8,856 $27,014
Retained earnings ........................................ $ 6,147 $ 6,147
Accumulated other comprehensive income ................... $ 234 $ 234
Total long-term liabilities and shareholders' equity ....... $15,573 $33,738
</TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below as of March 31,
1998 and 1999 and for each of the three fiscal years in the period ended March
31, 1999 are derived from the audited consolidated financial statements and
notes to the consolidated financial statements, which are prepared in accordance
with generally accepted accounting principles in the United States of America in
United States dollars, and which appear in another section of this prospectus.
The selected consolidated financial data set forth below as of March 31, 1995,
1996 and 1997 and for each of the two fiscal years in the period ended March 31,
1996 have been derived from Bonso's audited consolidated financial statements
which do not appear in this prospectus. The financial data set forth below at
and for the six months ended September 30, 1998 and 1999 are unaudited and
include, in the opinion of management, all adjustments, consisting only of
normal recurring accruals, considered necessary for a fair presentation of
financial position and results of operations. Operating results for the six
months ended September 30, 1999 are not necessarily indicative of the results
that may be expected for the year ending March 31, 2000. The selected
consolidated financial data are qualified in their entirety by reference to, and
should be read in conjunction with, the consolidated financial statements and
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in another section of this prospectus.
20
<PAGE>
<TABLE>
<CAPTION>
Year ended March 31,
Income Statement Data 1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(In thousands of United States dollars, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales .......................................... $13,266 $14,248 $ 16,989 $ 23,716 $ 13,046
Cost of sales ...................................... (8,936) (9,412) (12,096) (17,071) 8,812
-------- -------- -------- -------- --------
Gross margin ....................................... 4,330 4,836 4,893 6,645 4,234
Selling expenses ................................... (265) (325) (433) (420) (197)
Salaries and related costs ......................... (1,561) (1,960) (1,973) (1,897) (1,626)
Research and development expenses .................. (108) (173 (122) (159) (566)
Administration and general expenses ................ 98 (1,234) (1,609) (1,815) (1,601)
Provision for permanent diminution in value
of investment in a joint venture company ......... -- (153) -- -- --
Net gain on liquidation of a joint venture
company .......................................... -- -- 160 -- --
-------- -------- -------- -------- --------
Income from operations ............................. 2,494 991 916 2,354 244
Interest income .................................... 75 127 64 73 63
Interest expenses .................................. (560) (607) (532) (503) (445)
Less: Interest capitalized ......................... -- 58 61 46 25
-------- -------- -------- -------- --------
(560) (549) (471) (457) (420)
Foreign exchange (losses)/gains .................... (146) (124) (136) 35 38
Other income ....................................... -- 76 102 243 53
-------- -------- -------- -------- --------
Income/(loss) before income taxes .................. 1,863 521 475 2,248 (22)
Income tax (expense)/benefit ....................... (67) 96 72 27 36
-------- -------- -------- -------- --------
Income before minority interests ................... 1,796 617 547 2,275 14
Minority interests ................................. 47 (10) -- -- --
-------- -------- -------- -------- --------
Net income ......................................... $ 1,843 $ 607 $ 547 $ 2,275 $ 14
-------- -------- -------- -------- --------
Earnings per share - Basic ....................... $ 0.95 $ 0.21 $ 0.19 $ 0.80 0.45 cents
- Diluted ..................... $ 0.95 $ 0.21 $ 0.19 $ 0.73 0.37 cents
<CAPTION>
Balance Sheet Data 1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Working capital .................................... $ 4,719 $ 3,801 $ 1,663 $ 3,184 $ 3,316
Total assets ....................................... 18,278 20,700 20,516 20,647 18,660
Long-term debt and capital lease obligations,
net of current maturities ........................ 68 744 787 243 42
Deferred income taxes(liabilities)/assets .......... (103) (49) 16 74 112
Shareholders' equity ............................... 10,764 11,433 12,142 14,479 14,626
21
<PAGE>
<CAPTION>
Six months ended September 30,
1998 1999
---- ----
(In thousands of United States dollars, except per share data)
<S> <C> <C>
Net sales .......................................... $ 6,946 $ 7,855
Cost of sales ...................................... (5,067) (5,274)
-------- --------
Gross margin ....................................... 1,879 2,581
Selling expenses ................................... (84) (90)
Salaries and related costs ......................... (816) (875)
Research and development expenses .................. (12) (98)
Administration and general expenses ................ (705) (788)
Provision for permanent diminution in value
of investment in a joint venture company ......... -- --
Net gain on liquidation of a joint venture
company .......................................... -- --
-------- --------
Income from operations ............................. 262 730
Interest income .................................... 20 29
Interest expenses .................................. (249) (125)
Less: Interest capitalized ......................... -- --
-------- --------
(249) (125)
Foreign exchange (losses)/gains .................... 37 (6)
Other income ....................................... 40 81
-------- --------
Income/(loss) before income taxes .................. 110 709
Income tax (expense)/benefit ....................... -- (87)
-------- --------
Income before minority interests ................... 110 622
Minority interests ................................. -- --
-------- --------
Net income ......................................... $ 110 $ 622
-------- --------
Earnings per share - Basuc ....................... $ 0.036 $ 0.20
- Diluted ..................... $ 0.032 $ 0.17
<CAPTION>
As of September 30,
Balance Sheet Data 1998 1999
----- ----
<S> <C> <C>
Working capital .................................... $ 3452 $ 2,652
Total assets ....................................... 19,176 19,544
Long-term debt and capital lease obligations,
net of current maturities ........................ 178 327
Deferred income taxes(liabilities)/assets .......... -- 112
Shareholders' equity ............................... 14,703 15,245
</TABLE>
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Bonso derives its revenues principally from the sale of electronic
scales and electronic consumer and health care products manufactured by it in
China. For the fiscal year ended March 31, 1998, Bonso had net sales of
$23,715,576 and net income of $2,274,645. However, in the fiscal year ended
March 31, 1999, net sales decreased to $13,046,265 and net income decreased to
$13,754. For thesix months ended September 30, 1999, Bonso had net sales of
$7,854,730 and net income of $621,536.
Bonso was operating at full capacity in its prior manufacturing facility
and, in January 1997, it moved its manufacturing operations to a new facility
which has approximately tripled Bonso's manufacturing capacity. Management
believes that Bonso will be able to increase sales to take advantage of its
increased manufacturing capacity and improve margins and financial performance.
Increased revenue and net income in future periods will depend on Bonso's
ability to
o strengthen its customer base by enhancing and diversifying its
products
o increase the number of its customers
o expand into additional markets
o maintain or increase sales of its products to existing customers
o increase production
o control all of its costs.
Although labor costs are increasing in China, Bonso's labor costs continue
to represent a relatively small percentage of its total production costs.
Management believes that increased labor costs in China will not have a
significant effect on its total production costs or results of operations, and
that Bonso will be able to continue to increase its production at its new
facility without substantially increasing its non-production salaries and
related costs. In addition, Bonso has not experienced significant difficulties
in obtaining raw materials for its products, and management does not anticipate
any such difficulties in the foreseeable future.
Results of Operations
The following table sets forth selected income data as a percentage of net
sales for the periods indicated.
<TABLE>
<CAPTION>
Six months ended
Year ended March 31, September 30,
Income Statement Data 1997 1998 1999 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales ............................................ 100.0% 100.0% 100.0% 100% 100%
Cost of sales ........................................ (71.2) (72.0) (67.5) (72.9) (67.1)%
----- ----- ----- ----- -----
Gross margin ......................................... 28.8 28.0 32.5 27.1 32.9
Selling expenses ..................................... (2.5) (1.8) (1.5) (1.2) (1.1)
Salaries and related costs ........................... (11.6) (8.0) (12.5) (11.8) (11.2)
Research and development expenses .................... (0.7) (0.7) (4.3) (0.2) (1.3)
Administration and general expenses .................. (9.5) (7.6) (12.3) (10.2) (10.0)
Net gain on liquidation of a joint venture company ... 0.9 -- -- -- --
----- ----- ----- ----- -----
Income from operations ............................... 5.4 9.9 1.9 3.7 9.3
Interest income ...................................... 0.4 0.3 0.4 0.3 0.4
Interest expense ..................................... (3.1) (2.1) (3.4) (3.6) (1.6)
----- ----- ----- ----- -----
Less: Interest capitalized ........................... 0.3 0.2 0.2 -- --
----- ----- ----- ----- -----
(2.8) (1.9) (3.2) (3.6) (1.6)
Foreign exchange (losses)/gains ...................... (0.8) 0.2 0.3 0.6 (0.1)
Other income ......................................... 0.6 1.0 0.4 0.6 1.0
----- ----- ----- ----- -----
Income before income taxes ........................... 2.8 9.5 (0.2) 1.6 9.0
Income tax benefit/(cost) ............................ 0.4 0.1 0.3 -- (1.1)
Net income ........................................... 3.2% 9.6% 0.1% 1.6% 7.9%
===== ===== ===== ===== =====
</TABLE>
23
<PAGE>
Six months ended September 30, 1999 compared to six months ended September 30,
1998
Net Sales. Bonso's sales increased 13.1% from $6,945,587 for the six months
ended September 30, 1998, to $7,854,730 for the six months ended September 30,
1999, primarily as a result of increased orders from new and existing customers.
Gross Margin. Gross margin increased from 27.1% for the six months ended
September 30, 1998 to 32.9% for the six months ended September 30, 1999,
primarily due to the introduction of new, higher profit margin pocket and glass
scales.
Selling Expenses. Selling expenses increased by 6.6% from $84,450 for the
six months ended September 30, 1998 to $90,050 for the six months ended
September 30, 1999. This increase was attributable primarily to increased
transportation expenses as a result of increased sales.
Salaries and Related Costs. Salaries and related costs increased by 7.2%
from $816,247 for the six months ended September 30, 1998 to $874,806 for the
six months ended September 30, 1999. This increase was primarily due to an
increase in the number of employees.
Research and Development. Research and development expenses increased 733%
from $11,802 during the six months ended September 30, 1998 to $98,314 for the
six months ended September 30, 1999, primarily as a result of increasing
emphasis on new product development, such as new industrial and kitchen scales.
Administration and General Expenses. Administration and general expenses
increased by 11.7% from $705,228 for the six months ended September 30, 1998, to
$787,787 for the six months ended September 30, 1999. This increase was
attributable primarily to increased advertising for product promotion and
overseas travel to visit customers.
Income from Operations. Income from operations increased by 178.8% from
$261,930 for the six months ended September 30, 1998 to $730,151 for the six
months ended September 30, 1999, primarily as a result of the factors described
above.
Other Income. Other income increased by 83.3% from $40,910 for the six
months ended September 30, 1998 to $81,065 for the six months ended September
30, 1999, primarily as a result of the write off of a long outstanding payable
in the amount of $31,208.
Foreign Exchange Losses/Gains. Foreign exchange rates produced a gain of
$36,946 for the six months ended September 30, 1998 and a loss of $6,446 for the
six months ended September 30, 1999. This difference was primarily attributable
to the difference between the pegged exchange rate and the actual transaction
rate.
Interest Expenses. Interest expenses decreased by 49.7% from $248,897 in
the six months ended September 30, 1998 to $125,121 in the six months ended
September 30, 1999, as a result of reduced bank borrowings.
Net Income. Net income increased by 465.1% from $109,989 for the six months
ended September 30, 1998 to $621,536 for the six months ended September 30,
1999, primarily as a result of increased sales and an improved gross margin.
24
<PAGE>
Fiscal year ended March 31, 1999 compared to fiscal year ended March 31, 1998
Net Sales. Bonso's sales decreased 45.0% from $23,715,576 for the fiscal
year ended March 31, 1998, to $13,046,265 for the fiscal year ended March 31,
1999, primarily as a result of decreased orders from two major customers and
from various smaller customers.
Gross Margin. Gross margin increased from 28.0% to 32.5% primarily due to
the fact that Bonso was able to utilize existing inventory by modifying it to
fill orders and the fact that Bonso manufactured over 80% of the strain gauges
which it used in its products. Implementation of a "just-in-time" inventory
system, which resulted in a reduction in inventory, also contributed to this
increase.
Selling Expenses. Selling expenses decreased by 53.1% from $419,755 for the
fiscal year ended March 31, 1998 to $196,974 for the fiscal year ended March 31,
1999. This decrease was attributable primarily to the decrease in sales.
Salaries and Related Costs. Salaries and related costs decreased by 14.3%
from $1,897,412 for the fiscal year ended March 31, 1998 to $1,625,731 for the
fiscal year ended March 31, 1999. This decrease was primarily due to Bonso's
efforts to control the number of employees in light of the reduction in orders
from two major customers as well as a temporary reduction in management's
salaries.
Research and Development. Research and development expenses increased
256.7% from $158,706 during the fiscal year ended March 31, 1998 to $566,030 for
the fiscal year ended March 31, 1999, primarily as a result of Bonso's increased
emphasis on developing new products to diversify its customer base and
particularly the expenditure of $392,454 on development of Bonso's proposed
cordless telephone.
Administration and General Expenses. Administration and general expenses
decreased by 11.8% from $1,814,535 for the fiscal year ended March 31, 1998, to
$1,601,186 for the fiscal year ended March 31, 1999. This decrease was
attributable primarily to various cost saving programs such as negotiating with
the owner of the Universal Industrial Centre property for a reduction of rental
expenses. Bonso subsequently purchased its office space in an attempt to control
this expense in the long run.
Income from Operations. Income from operations decreased by 89.6% from
$2,354,079 for the fiscal year ended March 31, 1998 to $244,171 for the fiscal
year ended March 31, 1999, primarily as a result of reduced sales and a
resulting increase in research and development efforts.
Other Income. Other income decreased by 78.3% from $242,669 for the fiscal
year ended March 31, 1998 to $52,662 for the fiscal year ended March 31, 1999,
primarily as a result of reduced orders for scrap and increased efficiency which
resulted in a reduction of scrap for resale.
25
<PAGE>
Foreign Exchange Losses/Gains. Foreign exchange rates produced a gain of
$35,187 for the fiscal year ended March 31, 1998 and a gain of $37,882 for the
fiscal year ended March 31, 1999. This difference was primarily attributable to
the difference between the pegged exchange rate and the actual transaction rate.
Interest Expenses. Interest expenses decreased by 8.1% from $457,838 in the
fiscal year ended March 31, 1998 to $420,536 in the fiscal year ended March 31,
1999, as a result of reduced bank borrowings.
Income Taxes. Bonso received an income tax credit of $27,117 for the fiscal
year ended March 31, 1998 and $36,087 for the fiscal year ended March 31, 1999.
The increase in tax credit is basically due to approved tax losses of certain of
Bonso's subsidiaries during the year.
Net Income. Net income decreased by 99.4% from $2,274,645 for the fiscal
year ended March 31, 1998 to $13,754 for the fiscal year ended March 31, 1999,
primarily as a result of decreased turnover and the other factors described
above.
Fiscal year ended March 31, 1998 compared to fiscal year ended March 31, 1997
Net Sales. Bonso's sales increased 39.6% from $16,989,019 for the fiscal
year ended March 31, 1997, to $23,715,576 for the fiscal year ended March 31,
1998, primarily as a result of increased orders received from two major
customers. Increased shipments to Bonso's two largest customers accounted for
32.6% of the net increase in sales. The addition of new products also
contributed to the increase in net sales. A new model built-in scale and glass
body scale accounted for approximately 2.4% of the net increase, and the balance
of 4.6% is the result of increased orders from various existing customers.
Gross Margin. Gross margin decreased from 28.8% to 28.0% primarily due to
increased production costs and decreased selling prices for certain products.
Selling Expenses. Selling expenses decreased by 3.0% from $432,518 for the
fiscal year ended March 31, 1997 to $419,755 for the fiscal year ended March 31,
1998. This decrease was attributable primarily to better control over freight
costs by shipping out larger lots of goods.
Salaries and Related Costs. Salaries and related costs decreased by 3.9%
from $1,973,021 for the fiscal year ended March 31, 1997 to $1,897,412 for the
fiscal year ended March 31, 1998. This decrease was primarily due to Bonso's
efforts to control the number of employees.
Research and Development. Research and development expenses increased 29.8%
from $122,263 during the fiscal year ended March 31, 1997 to $158,706 for the
fiscal year ended March 31, 1998, primarily as a result of the increase in new
product development, such as a series of low profile body scales, a generic LCD
scale and a new pocket scale.
Administration and General Expenses. Administration and general expenses
increased by 12.8% from $1,609,217 for the fiscal year ended March 31, 1997, to
$1,814,535 for the fiscal year ended March 31, 1998. This increase was
attributable primarily to a write-off of deposits on property in the amount of
26
<PAGE>
$78,436 and an increase in depreciation expense of $134,401 as a result of
placing additional depreciable assets into service.
Income from Operations. Income from operations increased by 157.1% from
$915,569 for the fiscal year ended March 31, 1997 to $2,354,079 for the fiscal
year ended March 31, 1998, primarily as a result of the factors described above.
Other Income. Other income increased by 138.3% from $101,843 for the fiscal
year ended March 31, 1997 to $242,669 for the fiscal year ended March 31, 1998,
primarily as a result of increased assembly subcontracting work for a third
party.
Foreign Exchange Losses/Gains. Foreign exchange rates produced a loss of
$135,780 for the fiscal year ended March 31, 1997 and a gain of $35,187 for the
fiscal year ended March 31, 1998. This difference was primarily attributable to
the difference between the pegged exchange rate and actual transaction rate.
Interest Expenses. Interest expenses decreased by 2.7% from $470,655 in the
fiscal year ended March 31, 1997 to $457,838 in the fiscal year ended March 31,
1998, as a result of reduced bank borrowings.
Income Taxes. Bonso received an income tax credit of $71,368 for the fiscal
year ended March 31, 1997 and $27,117 for the fiscal year ended March 31, 1998.
The decrease in tax credit is basically due to the increase in tax expense of
$35,926
Net Income. Net income increased by 316.2% from $546,589 for the fiscal
year ended March 31, 1997 to $2,274,645 for the fiscal year ended March 31, 1998
primarily as a result of increased turnover, better control of administrative
overhead and other factors described above.
Seasonality
The first calendar quarter of each year is typically the slowest sales
period as Bonso's manufacturing facilities in China are closed for two weeks for
Chinese New Year holidays to permit employees to travel to their homes in China.
Throughout the remainder of the year, Bonso's products do not appear to be
subject to significant seasonal variation.
Employee incentive compensation is conditioned on the employee's return to
work following the Chinese New Year and is paid to employees following the
reopening of the factory after the holidays. Management believes that this
method has resulted in lower employee turnover than might otherwise have
occurred.
Liquidity and Capital Resources
Bonso has traditionally relied on borrowings to meet its working capital
requirements. These borrowings have been supplemented by internally generated
funds and trade credits from suppliers. As of March 31, 1999, Bonso had in place
general banking facilities with three financial institutions aggregating
$6,217,949. These facilities include the ability to obtain overdrafts, letters
of credit, notes payable and fixed loans. As of March 31, 1999, Bonso had
utilized $2,059,357 under its general banking facilities. Interest on this
27
<PAGE>
indebtedness fluctuates with the prime rate and HIBOR as set by the Hong Kong
Bankers Association. The bank credit facilities are collateralized by certain
bank deposits of Bonso, by Bonso's real property located at Savanna Garden in
Hong Kong and by a bank guarantee in the amount of $150,000. Bonso's bank credit
facilities are due for renewal annually. Management of Bonso anticipates that
the banking facilities will be renewed on substantially the same terms.
Excluding the current portion of long term debt and capital lease obligations,
the amount of total short-term bank borrowings outstanding as of March 31, 1998
was $3,199,737, and as of March 31, 1999 it was $1,944,756. During the fiscal
year ended March 31, 1999, Bonso paid a total of $445,644 in interest on
indebtedness (including capitalized interest), and during the six months ended
September 30, 1999, it paid $125,121 (unaudited).
Operating activities provided $2,644,612 of net cash for the fiscal year
ended March 31, 1999 compared to $3,262,259 of net cash for the fiscal year
ended March 31, 1998. The decrease from the fiscal year ended March 31, 1998 to
the fiscal year ended March 31, 1999, was primarily due to the decrease in sales
and in net income. Investing activities used $926,312 of net cash for the fiscal
year ended March 31, 1999 and used $1,604,013 of net cash for the fiscal year
ended March 31, 1998. The decrease in net cash used in investing activities from
the fiscal year ended March 31, 1998 to the fiscal year ended March 31, 1999 was
primarily due to a decrease in the acquisition of property, plant and equipment.
Financing activities used $1,892,619 of net cash for the fiscal year ended March
31, 1999 and used $1,294,420 for the fiscal year ended March 31, 1998. This
increase was primarily due to the repayment of banking facilities.
As of March 31, 1999, Bonso had $271,447 in cash and cash equivalents as
opposed to $448,454 as of March 31, 1998. As of September 30, 1999, it had
$383,747 (unaudited). There are no other material unused sources of liquid
assets. Bonso believes that there are no material restrictions (including
foreign exchange controls) on the ability of Bonso's subsidiaries to transfer
funds to Bonso in the form of cash dividends, loans, advances or
product/material purchases.
Bonso's current ratio (current assets divided by current liabilities)
increased from 1.54 as of March 31, 1998 to 1.83 as of March 31, 1999. Its quick
ratio (cash and cash equivalents, restricted cash deposits and receivables
divided by current liabilities) increased from 0.53 as of March 31, 1998 to 0.65
as of March 31, 1999.
As of March 31, 1999, Bonso had contingent liabilities to banks for
outstanding letters of credit of $114,601 as opposed to $502,270 as of March 31,
1998.
Impact of Inflation
Management does not believe that inflation has had a material effect on
Bonso's its business between 1998 and 1999. Bonso has generally been able to
modify and improve its product designs so that it could either increase the
prices of its products or lower the production cost in order to keep pace with
inflation. All of Bonso's manufacturing is being done in China, and China is
experiencing deflation. If this trend continues, Bonso could incur decreased
labor costs with regard to its Chinese operations, resulting in lower production
28
<PAGE>
costs. Although the costs to Bonso of certain components used in the manufacture
of its products have increased significantly over the past few years, management
believes that any possible significant increase in material costs would affect
the entire electronics industry and thus would not have a negative material
impact on Bonso's competitive position.
Year 2000
Bonso, like many owners of computer software, will be required to modify
portions of its software so that it will function properly in the year 2000.
Bonso's information technology systems are maintained under a maintenance
arrangement with the primary vendor of its information technology software. The
vendor has advised that it does not anticipate any problems in making the
necessary modifications to Bonso's software. Bonso's inventory and purchasing
software, as well as its accounting system, have been updated for Year 2000
compliance, including upgrading of hardware. The total expected costs in
relation to these upgrades are immaterial to Bonso. Management anticipates that
all necessary changes to Bonso's software will be completed before December 31,
1999, and that it will not experience any significant impact with respect to
Year 2000 compliance with Bonso's non-information technology systems and
equipment.
Taxation
Under current British Virgin Islands law, Bonso is not subject to tax on
its income. Most of Bonso's profits accrue in Hong Kong, where the corporate tax
rate is currently 16%. There is no tax payable in Hong Kong on offshore profit
or on dividends paid to Bonso Electronics Limited by its subsidiaries or by
Bonso Electronics Limited to Bonso. Therefore, the overall effective tax rate of
Bonso may be lower than that of most United States corporations; however, this
could be materially and adversely affected by changes in the tax laws applicable
to Bonso.
Exchange Rates
Bonso sells most of its products to international customers. Bonso's
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 from Bonso to its customers. Bonso sells all of its products in
United States dollars and pays for its material components principally in United
States and Hong Kong dollars. A very small portion of the components used by
Bonso are paid for in Japanese yen. Most factory expenses incurred by Bonso are
paid in Chinese renminbi. Because the Hong Kong dollar is pegged to the United
States dollar, the only material foreign exchange risk to Bonso arises from
potential fluctuations in the Chinese renminbi; however, the Chinese renminbi
was very stable in the past fiscal year and it is unlikely that there will be
material fluctuations in the coming year. Bonso does not currently engage in
hedging transactions, and does not intend to do so in the future.
29
<PAGE>
Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued certain pronouncements
which are effective as indicated below with respect to the fiscal years
presented in the consolidated financial statements.
SFAS No. 130, "Reporting Comprehensive Income," is effective for fiscal
years beginning after December 15, 1997. Reclassification of financial
statements for earlier periods provided for comparative purposes is required.
This statement establishes guidelines for the reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. It requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements; it does not
address issues of recognition of measurement. The primary element of
comprehensive income applicable to Bonso is the foreign currency cumulative
translation adjustment. The adoption of SFAS No. 130 in fiscal 1999 has had no
impact on Bonso's consolidated results of operations, financial position or cash
flows.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. This statement establishes guidelines for the
way that public business enterprises report information about operating segments
in financial statements. This statement also establishes guidelines for related
disclosures about products and services, geographic areas and major customers.
The adoption of SFAS No. 131 in fiscal 1999 has had no impact on Bonso's
consolidated results of operations, financial position or cash flows.
SFAS No. 132, "Employers' Disclosures about Pensions and Other
Post-retirement Benefits" is effective for fiscal years beginning after December
15, 1997. Restatement of disclosures for earlier periods provided for
comparative purposes is required. This statement revises employers' disclosures
about pension and other post-retirement benefit plans. It does not change the
measurement or recognition of those plans. It standardizes the disclosure
requirements for pensions and other post-retirement benefits to the extent
practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures that are no longer useful. The
statement suggests combined formats for presentation of pension and other
post-retirement benefit disclosures.The adoption of SFAS No. 132 in fiscal 1999
has had no impact on Bonso's consolidated results of operations, financial
position or cash flows.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," is effective for fiscal years beginning after June 15, 2000.
Restatement of disclosures for earlier periods provided for comparative purposes
is required. This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. The statement requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
Bonso has evaluated the disclosure requirements of SFAS No. 133 and believes
that implementation of the new standard will have no impact on its results of
operations and financial position.
30
<PAGE>
BUSINESS
Overview
Bonso designs, develops, manufactures and sells a comprehensive line of
electronic scales and weighing instruments and electronic consumer and health
care products. Bonso manufactures all of its products in the People's Republic
of China. Bonso's electronic scales include bathroom, kitchen, office, jewelry,
laboratory, pocket, hanging, postal, industrial and parcel scales that are used
in consumer, commercial and industrial applications. Bonso's electronic consumer
and health care products include pedometers, chronographs, electronic
thermometers and blood pressure meters.
Bonso also plans to enter the digital telecommunications market, and
anticipates that its first telecommunications product will be a two-way radio.
Bonso has engaged a senior manager with experience in telecommunications
manufacturing. There can be no assurance, however, that development of any
telecommunications products will be successfully completed, that Bonso will
obtain customers for any of these products or that sales of any of these
products will be profitable.
Business Strategy
Bonso experienced dramatic growth from 1994 to 1998, with net sales
increasing from $12,548,770 in 1994 to $23,715,576 in the fiscal year ended
March 31, 1998, and profitability increasing from net income of $1,023,821 in
the fiscal year ended March 31, 1994 to net income of $2,274,645 in the fiscal
year ended March 31, 1998. However, net sales decreased to $13,046,265 for the
fiscal year ended March 31, 1999 and net income decreased to $13,754. For the
six months ended September 30, 1999, Bonso had net sales of $7,854,730
(unaudited) and net income of $621,536 (unaudited). Management attributes these
decreases primarily to decreased orders from two major customers, as well as
various smaller customers of Bonso. Management believes that Bonso's continued
growth depends on its ability to strengthen its customer base by enhancing and
diversifying its products, increasing the number of customers and expanding into
additional markets, while maintaining or increasing sales of its products to
existing customers. Bonso's continued growth and profitability is also dependent
upon its ability to control production costs and increase production capacity.
Bonso's strategy to achieve these goals is as follows:
Product Enhancement and Diversification. Bonso continually seeks to improve
and enhance its existing products in order to provide a longer product
life-cycle and to meet increasing customer demands for additional features.
Bonso's research and development staff are currently working on these types of
projects such as redesigning the existing pedometer, bicycle computer and blood
pressure monitor, redesigning Bonso's bicycle accelerator in response to a
change in the requirements of the Japanese government, expanding the health care
line and attempting to make Bonso's products more competitive in price and
features. During the last fiscal year, Bonso has completed development of a
31
<PAGE>
waterproof digital thermometer, a chronograph, an ear protector and two newly
designed body scales. In addition, Bonso plans to enter the digital
communications market and it also has, in varying stages of development, a
bicycle accelerator and postal, kitchen and Gem scales, which are being
developed to the specifications of OEM customers. See "Products," below.
Maintaining and Expanding Business Relations with Existing Customers. Bonso
promotes its relationships with its significant customers through regular
communication with them, visits to its customers in their home countries and by
providing direct access to Bonso's manufacturing and quality control personnel.
This access, together with Bonso's concern for quality, has resulted in a
relatively low level of defective products. Moreover, management believes that
Bonso's emphasis on timely delivery, good service and low cost has contributed
and will continue to contribute to good relations with its customers and
increased orders. Further, management of Bonso solicits suggestions from its
customers for product enhancement and will develop and incorporate the
enhancements suggested by its customers into its products when feasible.
Market Expansion. In 1998, Bonso expanded its marketing efforts in the
United States and Europe. Management intends to continue increasing its
marketing efforts with the use of its Web page and mailing product brochures. In
addition, Bonso intends to increase the frequency of its direct and
telemarketing contacts with both existing and potential customers and is
negotiating with an individual to represent it in Hamburg, Germany, in order to
expand Bonso's marketing efforts in the European Union.
Controlling Production Costs. In 1989, recognizing that labor cost is a
major factor permitting effective competition in the consumer electronic
products industry, Bonso relocated all of its manufacturing operations to China
to take advantage of the large available pool of relatively inexpensive
manufacturing labor. Bonso has made an effort to locate and operate its
manufacturing facilities consistent with the exigencies of manufacturing in
China. For example, the location of Bonso's plant in China is in close
proximity, approximately 50 miles, to Hong Kong thereby facilitating
transportation of Bonso's products to markets outside of China.
Bonso is currently attempting to control production costs by such means as
redesigning its existing scales in order to decrease material and labor costs,
controlling the number of employees, increasing the efficiency of workers by
providing regular training and tools and redesigning the flow of the production
line.
Increasing Production Capacity. Since January 1997, Bonso's products have
been manufactured at Bonso's new manufacturing facility in the DaYang
Synthetical Development District in Shenzhen, China. This new facility has
triple the capacity of Bonso's old manufacturing plant. The floor area of this
new facility is not fully utilized.
Products
The following table sets forth the percentage of net sales of each of
Bonso's product lines for the fiscal years ended March 31, 1998 and 1999.
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Year ended March 31,
Product Line 1998 1999
------------ ---- ----
Scales 77% 79%
Health care products 13 15
Electronic consumer products 3 2
Other products and services 7 4
---- ----
Total 100% 100%
Scales
Bonso's weighing equipment ranges from the simplest spring scales to high
precision electronic scales that translate weight readings into corresponding
price and postage calculations.
All of Bonso's electronic scales use strain gauge sensors, which management
believes are one of the most reliable and accurate weight sensing systems
currently available. A strain gauge sensor is a thin metal foil resistor which
is bonded to a metal block, and which undergoes a change in electrical
resistance as weight is loaded onto the metal block. The measurement of change
in electrical resistance yields a measure of the applied weight.
Bonso offers a variety of scales for diverse consumer, commercial and
industrial applications. Scales currently offered by Bonso include bathroom,
kitchen, office, jewelry, laboratory, pocket, hanging, postal, industrial and
parcel scales. The following table sets forth the net sales of each type of
scale as a percentage of total scale sales for the fiscal years ended March 31,
1998 and 1999:
Year ended March 31,
Type of Scale 1998 1999
------------- ---- ----
Postal and office 45% 29%
Kitchen 6 8
Jewelry and laboratory 18 20
Bathroom 14 15
Pocket and hanging 11 19
Industrial and parcel 6 9
---- ----
Total scale sales 100% 100%
Bonso's electronic scales offer many advanced features such as a talking
feature, automatic power off, automatic range, audio signal, digital
auto-calibration, automatic zero tracking and multiple measuring units. The
scales are built with either metal or plastic housings and come in various
models and case designs. Bonso's scales are described in more detail below.
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Postal Scales. Bonso's postal scales are used primarily by businesses for
weighing letters and parcels of up to 2,000 grams (4.4 lbs.) and are accurate to
1 gram. Postal scales are calibrated to give postal or franking cost for the
various classes of delivery service available to various destinations. The
scales are marketed primarily in Europe and the United States and are customized
for the postal system of the country of destination.
Office Scales. Bonso sells several models of office scales with capacities
ranging from 2,000 grams (4.4 lbs.) to 5,000 grams (11 lbs.), and the scales are
accurate to 1 gram. The scales are used in offices to weigh small packages and
letters. Bonso's office scales are sold principally in the United States,
Europe, Australia, Hong Kong and China.
Kitchen Scales. Bonso's kitchen scales are used in households and
restaurants to weigh ingredients for cooking and portions for dieting, with
capacities ranging from 1,000 grams (2.2 lbs.) to 5,000 grams (11 lbs.), and the
scales are accurate to 1 gram. Bonso's kitchen scales are marketed principally
in the United States and Europe.
Jewelry and Laboratory Scales. Jewelry and laboratory scales are used to
weigh precious metals and stones. In the laboratory, the scales are used to
weigh various chemicals and chemical compounds. Bonso's jewelry and laboratory
scales are principally sold in the United States and Europe. The capacities of
these scales range from 120 grams (0.25 lb.) to 1,200 grams (2.6 lbs.), and
these scales are accurate to 0.01 gram or 0.1 gram, respectively.
Bathroom Scales. Bonso's bathroom scales are used by consumers to monitor
weight, with capacities up to 150 kilograms (330 lbs.). Bonso's bathroom scales
are marketed primarily in the United States, Europe and Japan.
Pocket and Hanging Scales. Pocket and hanging scales are small electronic
scales that can be carried by a business person in his or her attache or brief
case. The capacities of Bonso's pocket scales range from 80 grams (2.8 oz.) to
320 grams (11.2 oz.), and the scales are accurate to 0.1 gram. The hanging
scales range from 15 kilograms (33 lbs.) to 25 kilograms (55 lbs.), and the
scales are accurate to 10 grams. The pocket scales are principally used in the
jewelry business for weighing low value metals and stones and the hanging scales
are primarily used in fishing. Bonso's pocket and hanging scales are marketed
primarily in the United States and Europe.
Industrial/Parcel Scales. Bonso manufactures different models of
industrial/ parcel scales, which are used in business or industry to weigh
heavier parcels or objects (i.e., objects whose weight exceeds the capacity of
Bonso's office scales). Industrial/parcel scales have a capacity ranging from 25
kilograms (55 lbs.) to 150 kilograms (330 lbs.). Bonso's industrial/parcel
scales are marketed primarily in Europe.
Health Care Products
Electronic Thermometers. Bonso's electronic thermometers, which include
both Fahrenheit and centigrade versions, measure body temperature. Bonso's
electronic thermometer is classified as a medical device under United States
law. Medical devices are required to be approved by the United States Food and
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<PAGE>
Drug Administration (the FDA) prior to being marketed, unless the law provides a
legal exemption from FDA approval. Bonso's electronic thermometer has received
pre-market approval from the FDA. Sales of electronic thermometers were
approximately 10% of Bonso's net sales in the fiscal year ended March 31, 1998,
and 12% of net sales in the fiscal year ended March 31, 1999.
Blood Pressure Meters. Bonso introduced electronic blood pressure meters to
its line of products in November 1994. Bonso's electronic blood pressure meters
have digital displays for highest blood pressure (systolic), lowest blood
pressure (diastolic) and pulse rate (number of pulses per minute), as well as
mean blood pressure. The meters have automatic power off, automatic pressure
release, manual rubber bulb pump and many other standard features. Bonso has
obtained FDA approval for marketing blood pressure meters in the United States.
Sales of blood pressure meters were approximately 3% of Bonso's net sales in
each of the fiscal years ended March 31, 1998 and 1999.
Electronic Consumer Products
Chronographs. Bonso began shipping chronographs in 1998. A chronograph is a
device for measuring the speed of a projectile by measuring the time it takes
for it to go between two infra-red sensors. Sales of chronographs were
approximately 0.9% of Bonso's net sales in the fiscal year ended March 31, 1999.
Pedometers. Bonso began shipping electronic pedometers in 1993. A pedometer
is worn by a walker or jogger to measure the distance traveled by recording the
steps taken. Bonso's pedometer can be adjusted for varying stride lengths, and
will keep track of distance traveled, elapsed time and average speed. Sales of
pedometers were approximately 0.7% of Bonso's net sales in the fiscal year ended
March 31, 1998, and 0.9% of net sales in the fiscal year ended March 31, 1999.
Distance Meters. Bonso began shipping distance meters in 1998. Sales of
distance meters were less than 0.1% of Bonso's net sales in the fiscal year
ended March 31, 1999.
Other Electronic Consumer Products. In the past, Bonso also manufactured
joysticks and bicycle computers. Sales of joysticks were approximately 1.9% of
Bonso's net sales in the fiscal year ended March 31, 1998 and sales of Bonso's
bicycle computers were approximately 0.014% of its net sales in the fiscal year
ended March 31, 1998. Bonso did not manufacture any joysticks or bicycle
computers during the fiscal year ended March 31, 1999.
Other Products and Services
Bonso also receives revenue from customer funded research and development
for products subsequently produced and sold to them, the sale of semi-completed
units and the sale of spare parts for repair work by its customers and from
repair work performed by Bonso for its customers. These revenues constituted
approximately 7% of net sales for the fiscal year ended March 31, 1998 and 4% of
net sales for the fiscal year ended March 31, 1999.
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<PAGE>
Product Development, Design and Research
The major responsibility of the product design and research and development
personnel is to develop and produce designs to the satisfaction of and in
accordance with the specifications provided by the OEMs. Management believes its
engineering and product development capabilities are important to the future
success of Bonso's business. Some of Bonso's product design, research and
development activities are customer funded and are initiated under verbal
agreements with specific customers for specific products. Bonso has successfully
lowered its costs for its research and development team by moving most research
and development activities to its facility in China and principally employing
Chinese engineers and technicians at costs that are substantially lower than
would be required in Hong Kong.
At March 31, 1999, Bonso employed two individuals in Hong Kong and 16
individuals in China on its engineering staff, who are at various times engaged
in research and development. Bonso also contracted with a firm in Germany to
develop the software for its proposed cordless telephone. Bonso spent $158,706
and $566,030 on research and development during the fiscal years ended March 31,
1998 and 1999, respectively. Management intends to increase the number of
research and development personnel to approximately 25.
Bonso has, in varying stages of development, a bicycle accelerator and
postal, kitchen, industrial and Gem scales, which are being developed to the
specifications of OEM customers, and has recently commenced production of an ear
protector and newly designed body scales.
Manufacturing
Bonso currently manufactures and assembles all of its products in China.
Generally, raw materials, electronic components and other parts are transported
to Bonso's manufacturing plant in China where the finished products are
assembled. The finished goods are then transported back to Hong Kong for sale by
Bonso.
Bonso manufactures some of its own components, metal parts and casings and
plastic parts at its facility in China. In 1997, Bonso commenced manufacturing
its own strain gauges, and it currently produces over 80% of the strain gauges
utilized in its scales. Management believes that Bonso will realize a
substantial cost saving from producing its own strain gauges in the future.
Management's objective is to eventually produce 100% of the strain gauges
utilized by Bonso; however, management may decide not to produce some low-demand
strain gauges if it determines that to produce them would not be cost effective.
To take advantage of lower overhead costs and competitive labor rates
available in China, Bonso constructed a manufacturing facility in Shenzhen,
China in 1989. The location of that factory in Shenzhen, only about 30 miles
from Hong Kong, permitted Bonso to manage easily manufacturing operations from
Hong Kong, and facilitated transportation of Bonso's products out of China
through the port of Hong Kong, the busiest seaport for containerized shipping in
the world. As sales increased since the year ended March 31, 1990, Bonso's use
of available factory capacity increased. In planning for its future growth,
Bonso entered into a contract to acquire a land lease for construction of a new
manufacturing complex which, when completed, would approximately triple Bonso's
production capacity. The construction of phase one of the new manufacturing
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<PAGE>
complex was completed in December 1996 and Bonso commenced operations in the new
complex in January 1997. The second, and final, phase was completed in May 1998.
The new manufacturing complex is located in the DaYang Synthetical Development
District in Shenzhen, China and is approximately 50 miles from Hong Kong. See
"Properties--China," below.
Because Bonso primarily sells and ships its products "F.O.B. Hong Kong,"
most of its customers are responsible for the transportation of finished
products from Hong Kong to their final destination and bear the risk of loss
from transportation. Components and finished products are transported to and
from China primarily with Bonso's own truck. The majority of Bonso's component
parts purchased from Japan, Taiwan and Korea are transported by ship or by air
to Hong Kong. In recent years, Bonso has not been materially affected by any
transportation problems.
Management believes that it has sufficient water and power supplies for
daily usage at its new manufacturing complex. Bonso has drilled two water wells
to obtain additional water and to minimize cost.
The availability of adequate power to run Bonso's factory is one of the
difficulties of having a factory located in China. In order to minimize
potential power problems that could develop in the Shenzhen factory, the
factory, like most Chinese factories, is equipped with power generators capable
of providing adequate electric power to operate the assembly line.
Component Parts and Suppliers
Bonso purchases over 1,000 different component parts from more than 100
major suppliers and is not dependent upon any single supplier for any key
component. Bonso purchases components for its products from suppliers in Japan,
Taiwan, South Korea, Hong Kong and elsewhere. Bonso has not experienced, and
management does not expect to experience, any difficulty in obtaining needed
component parts for its products.
The major component parts purchased by Bonso are integrated circuits
(chips), LEDs, LCDs, strain gauges, force sensors, resistors, capacitors,
transistors, diodes, printed circuit boards and batteries. Bonso purchases both
stock or off the shelf chips and custom chips. There are many suppliers of both
stock and custom chips in Japan and Taiwan. At the present time, Micro Chips in
Taiwan, Samsung in South Korea and Hitachi, Toshiba and NEC in Japan provide
most of Bonso's chips. Chips are one of the most expensive component parts
purchased by Bonso.
Strain gauges are the second most expensive components purchased by Bonso.
Bonso currently produces over 80% of the strain gauges utilized in its scales,
and obtains the remainder principally from a Japanese manufacturer. However,
Bonso could also purchase strain gauges from suppliers located in the United
States and China. LEDs and LCDs are generally custom made to match the chip
design and are principally supplied by companies in Taiwan, Korea and Japan. The
circuit boards can be purchased from circuit board manufacturers in Hong Kong.
Resistors, capacitors, transistors, diodes and batteries are standard stock
items and are generally purchased in Hong Kong and Taiwan.
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Bonso produces metal and plastic casings and parts for use in its products.
Plastic resin and metal sheet can be purchased from suppliers in Hong Kong and
Japan.
Quality Control
Management maintains strict quality control procedures for every product
manufactured by Bonso throughout the manufacturing process. Incoming raw
materials and components are checked by Bonso's quality control personnel.
Moreover, during the production stage, Bonso's quality control personnel monitor
each operation in the manufacturing process, including the bonding of the chips,
component insertion and assembly of the printed circuit boards and casings. All
work in process is also checked during the manufacturing and assembly processes.
After the assembly stage, every product is checked for proper functioning and
cosmetic appearance. After packing and before shipment, the quality control
personnel randomly check goods according to product specifications.
Historically, Bonso's level of defective products has been low, and not material
to its financial statements. Bonso's products are generally covered by a
one-year limited warranty which provides for repair or replacement of defective
products. In certain circumstances, an extended warranty may be offered. To
date, claims against Bonso under its warranty program have been negligible.
In April 1995, Bonso received an ISO 9001 certificate from Det Norske
Veritas Industry B.V., The Netherlands. Bonso passed a reviewed audit by Det
Norske Veritas, processed in March 1999, and is qualified to maintain the ISO
9001 certificate.
The ISO 9000 is a program developed initially by the International
Organization for Standardization in Geneva, Switzerland, to provide quality
control registration standards that could be relied upon to provide assurances
with regard to a registrant's quality control and manufacturing operations.
Management believes that ISO 9000 registration provides its customers with
quality control assurances that are recognized internationally, and that this
registration also provides Bonso with a competitive advantage over many other
manufacturers in the Far East who have not registered for ISO 9000
certification. In addition, Bonso has submitted applications for the CE mark for
some products and, at the present time, over 36 product groups have been
approved, including the electromagnetic compatibility directive (EMC) and the
medical devices directive (MDD). A CE mark serves as confirmation to the
European authorities that the marked product complies with all European Union
directives relevant to the product and that the product may be traded freely in
the European market.
Customers and Marketing
Bonso sells its products in the United States, Europe, Asia, Australia and
Africa. Customers for Bonso's scales are primarily original equipment
manufacturers, which market the products under their own brand names.
Net export sales to customers by geographic area consisted of the following
for each of the three years ended March 31, 1997, 1998 and 1999.
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<TABLE>
<CAPTION>
Year ended March 31,
---------------------------------------------------------
1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
North America $ 7,537,401 44% $12,598,672 53% $5,597,402 43%
Europe 5,492,294 33 8,129,063 34 6,248,263 48
Asia 3,454,505 20 2,117,914 9 1,041,377 8
Australia 425,314 3 756,354 3 130,173 1
Africa 79,505 -- 113,573 1 29,050 --
------------ ---- ------------- ---- ------------ ----
Total Net Sales $16,989,019 100% $23,715,576 100% 13,046,265 100%
</TABLE>
Bonso maintains a marketing team in Hong Kong. Bonso markets its products
primarily through use of its Web page, advertising in trade publications such as
Hong Kong Enterprise and the use of direct mail catalogues and product
literature. In addition, Bonso's marketing team contacts existing and potential
customers by telephone, mail, fax and in person.
Major Customers. Sales of Bonso's products to OEMs accounted for
approximately 87% of Bonso's total net sales during each of the years ended
March 31, 1997, 1998 and 1999. Bonso's principal OEM customers include the
following entities which market Bonso's products under the brand name indicated
opposite their respective names:
<TABLE>
<CAPTION>
Percent of Company's Sales
Year ended March 31,
Customer Brand Name Products 1997 1998 1999
-------- ---------- -------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Pitney Bowes, Inc. (USA) Pitney Bowes Postal scales 18% 30% 15%
Werner Dorsch Gmbh & Co. WEDO Postal, office and
(Germany) parcel scales 11% 9% 15%
Globaltec Corporation ACCULAB Jewelry, educational and
(USA) high precision scales 13% 15% 11%
Omron Health Care OMRON Digital thermometers 11% 8% 10%
Gottl Kern & Sohn Gmbh KERN Laboratory, hanging, 3% 4% 7%
pocket and parcel scales
</TABLE>
Werner Dorsch Gmbh & Co. and Globaltec Corporation have been customers of
Bonso for fourteen and twelve years, respectively. Management believes that
Bonso offers its customers superior quality of products and superior product
design and development capabilities, together with the low costs of production
associated with its operations in China.
If Bonso were to lose any customers who account for a material portion of
total sales, or if any of these customers were to substantially decrease their
purchases from Bonso, Bonso's revenues, earnings and financial position would be
materially and adversely affected. With the exception of Globaltec Corporation,
Bonso's dependence on the above-listed customers is expected to continue in the
foreseeable future. Bonso follows normal and customary business practices in the
acceptance of orders from its customers. Orders from the above-listed customers
are generally supported by bank guarantees, letters of credit or insurance from
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<PAGE>
the Hong Kong Export Credit Insurance Corporation. For updated information with
respect to a decrease in orders from two of Bonso's major customers, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
Sales of Bonso's products directly by Bonso under its own brand name
accounted for approximately 13% of Bonso's total net sales during the years
ended March 31, 1997, 1998 and 1999.
Backlog. Bonso's backlog consists of orders from major customers and
purchase orders from other customers of products scheduled for shipment within
three to twelve months. It is Bonso's practice to charge customers 50% of the
total order price when orders are cancelled and, as a result, Bonso has
experienced nominal cancellations. This practice is not represented by a written
agreement, and Bonso may not be able to enforce this arrangement in every case
in the future. Bonso generally has not experienced any difficulty in shipping
orders by the dates requested by its customers or in material returns of its
products. The amount of backlog that is manufactured and shipped during any
period is dependent on various factors, including the timing and scheduling of
orders from material customers and accordingly, the amount of backlog at any
date is not necessarily indicative of actual shipments and sales. Bonso's
backlog was $3,040,771 at March 31, 1999, compared to a backlog of $4,386,485 at
March 31, 1998
Competition
The electronic products business is highly competitive. Bonso's major
competitors in the scale market include Management Investment & Technology Co.,
Ltd. in Hong Kong and Charder Electronic Company, Ltd. in Taiwan. In the blood
pressure meter market, Bonso's major competitor is AnD Co. Ltd of Japan. In the
electronic thermometer market, its major competitors are Citizen Company and
Terumo, both of Japan. Competition is primarily based upon unit price, product
quality, reliability, product features and management's reputation for
integrity. Management believes that Bonso competes favorably with respect to
each of these factors.
Employees
At September 30, 1999, Bonso employed 950 persons on a full-time basis. All
of Bonso's 30 employees located in Hong Kong held administrative, clerical,
sales and marketing positions. Of the 920 employees located in China, 810 were
engaged in manufacturing and 110 were engaged in administrative and clerical
positions. Bonso is not a party to any labor contract or collective bargaining
agreement. Bonso has experienced no significant labor stoppages in recent years,
and management believes that relations with its employees are satisfactory.
Bonso currently houses all 920 employees located in China at the Shenzhen
facility, including administrative staff. The facility is able to house up to
2,180 employees.
Patents, Licenses, Trademarks, Franchises, Concessions and Royalty Agreements
Bonso has no patents, licenses, franchises, concessions or royalty
agreements that are material to its business as a whole. Bonso has obtained a
trademark registration in Hong Kong and China for the marks BONSO and MODUS in
connection with certain electronic apparatus and intends to file an application
in the United States for registration of these trademarks.
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Government Regulation
In the United States, the Medical Device Amendments of 1976 to the federal
Food, Drug and Cosmetic Act and the regulations issued or proposed thereunder
provide for regulation by the Food and Drug Administration of the marketing,
manufacturing, labeling, packaging and distribution of medical devices. These
regulations include requirements that manufacturers of medical devices register
with the FDA and furnish lists of devices manufactured by them. Certain
pre-market requirements must be met prior to the marketing of medical devices
introduced after May 28, 1976. These range from a minimum requirement to wait 90
days after notification to the FDA before introduction of medical devices
substantially similar to devices already on the market to a maximum requirement
to comply with the potentially expensive and time consuming process of
pre-market analysis and testing necessary to obtain FDA approval prior to the
commercial marketing of new medical devices. In addition, the FDA also has the
authority to prescribe performance standards for the types of health care
products manufactured by Bonso. Should standards of this nature be prescribed,
Bonso's products would be required to conform to them. To date, no standards of
this nature have been adopted and Bonso cannot predict what changes, if any, may
be necessitated in its products should these type of performance standards be
issued in the future. In addition to the Amendments, there are also certain
requirements of other federal laws and of state, local and foreign governments
that may apply to the manufacture and marketing of Bonso's health care products.
The only products of Bonso that are subject to material government
regulation are its electronic thermometers and electronic blood pressure meters,
which are subject to qualifying procedures with the FDA. The qualifying
procedures set forth by the FDA for pre-market approval with respect to the
electronic thermometers and blood pressure meters have been satisfied.
In the European Union, Medical Devices Approval is required for the sale of
Bonso's electronic thermometers and blood pressure meters. Bonso has obtained
Medical Devices Approval for its electronic thermometers. A customer is
currently seeking Medical Devices Approval, on behalf of Bonso, for Bonso's
blood pressure meters and management expects such approval to be granted within
six months to a year.
Properties
British Virgin Islands
The offices of Bonso are located at Cragmuir Chambers, Road Town, Tortola,
British Virgin Islands. Only corporate administrative matters are conducted at
these offices, through Bonso's registered agent, HWR Services Limited.
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Hong Kong
Bonso owns approximately 9,185 square feet in the Universal Industrial
Centre, 23-25 Shan Mei Street, Fo Tan, Shatin, New Territories, Hong Kong. This
facility is used primarily as Bonso's principal executive office. Bonso
purchased the property from an unaffiliated third party in May 1999 for
approximately $743,590.
Bonso owns 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 to Mr. Anthony So
as part of his compensation. See "Management-- Certain Transactions."
China
Bonso's existing 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 194,990 square feet, two workers' quarters, containing
approximately 115,050 square feet, a canteen and recreation center of
approximately 25,270 square feet, an office building, consisting of
approximately 25,230 square feet, and staff quarters for Bonso's supervisory
employees, consisting of approximately 35,110 square feet, for a total of
approximately 395,650 square feet. The facility is utilized pursuant to a
Contract on the Use of Land and Supply of Workers with Shenzhen Baoan Fuan
Industrial Company. The agreement provides that Bonso will use approximately
269,000 square feet of land for a period of 50 years, commencing May 10, 1994.
To obtain the land lease, Bonso agreed to pay $1,810,344 plus a monthly
management fee in the amount of $2,750. Bonso used part of the proceeds of a
$1,500,000 loan it received in July 1994 to pay a portion of the initial
acquisition cost; the balance of the initial acquisition cost was paid out of
the net proceeds of a public offering of Bonso's securities conducted in
December 1994. The facility is wholly-owned by Bonso. The agreement provides
that at the expiration of the land lease, Bonso will be given priority for
negotiation of a new agreement for the use of the land. Bonso's total investment
in the facility is approximately $8,000,000. Phase one of the facility was
completed in December 1996, and manufacturing commenced in the new facility in
January 1997. The second, and final, phase of the facility was completed in May
1998.
Bonso also owns two residential properties, one consisting of approximately
1,000 square feet, located at Lijingge Court, Unit F, 15th Floor, Hai Li
Building, Shenzhen, China, and one consisting of approximately 1,125 square feet
located at the 12th floor, Yuk Yui Court, Gui Hua Garden, Shenzhen Bay, China.
Both properties are utilized by management staff and directors when they require
accommodations in China.
On June 18, 1998, Bonso purchased Units 12 and 13 on the 3rd floor, Block A
of Sunshine Plaza in Beijing, China for an aggregate purchase price of $600,999,
payable as follows: $383,468 was paid before June 18, 1998; and the balance of
$217,531, plus interest in the amount of $30,241, is payable on or before May
18, 2000. Unit 12 consists of 102.38 square meters. Unit 13 consists of 172.77
square meters. Both Units are rented to unaffiliated third parties for an
aggregate monthly rental of $3,353.
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Adequacy of Facilities. Management believes that Bonso's new manufacturing
complex will be adequate for its reasonably foreseeable needs.
Legal Proceedings
On August 28, 1998, a lawsuit was filed in the United States District Court
for the Central District of California against Bonso and Bonso's warrant agent
alleging that Bonso had committed securities fraud, common law fraud and breach
of contract arising out of the original sale of the public warrants in 1994 and
the issuance on July 22, 1998 of a notice to redeem those warrants on September
4, 1998 for $0.05 per warrant. The lawsuit was dismissed, without prejudice, on
September 2, 1998, and Bonso rescinded the redemption of the warrants that was
noticed on July 22, 1998.
Management is not aware of any legal proceedings contemplated by any
governmental authority involving Bonso, its subsidiaries or their property. No
director, officer or affiliate of Bonso, or any associate of a director, officer
or affiliate of Bonso: (1) is a party adverse to Bonso or its subsidiaries in
any legal proceedings; or (2) has an adverse interest to Bonso or its
subsidiaries in any legal proceedings. Except as described herein, Bonso and its
subsidiaries are not parties to any legal proceedings and there are no other
material legal proceedings pending with respect to the property of Bonso and its
subsidiaries.
Certain Foreign Issuer Considerations
Transfer of Sovereignty over Hong Kong to China. The principal executive
offices of Bonso and all manufacturing operations and assets of Bonso are
located in Hong Kong and China. Prior to July 1, 1997, Hong Kong was a British
Crown Colony with responsibility for administering its own internal affairs.
After several years of negotiations concerning Hong Kong's future, Great Britain
and China signed (December 1984) and ratified (May 1985) the Sino-British Joint
Declaration on the Future of Hong Kong (the "Sino-British Agreement"). Pursuant
to the Sino-British Agreement, Hong Kong was restored to China on July 1, 1997.
Ownership of Real Property. All land in Hong Kong is owned by the
government of the Hong Kong Special Administrative Region. Prior to July 1,
1997, the government granted Crown Leases to persons, firms and corporations on
the basis of an annual crown rental payment and other terms and conditions
therein contained. Crown Leases were freely assignable during their term. In
implementation of the Sino-British Agreement, the New Territories Leases
(Extension) Ordinance was enacted and came into effect on April 25, 1988.
Pursuant to that Ordinance, all leases in the New Territories of Hong Kong were
extended up to June 30, 2047. This extension was at no premium but was subject
to an annual fee equivalent to 3% of the ratable value of the property to be
charged with effect from the date on which the original lease would have
expired.
The land ownership system in China is similar to Hong Kong, in which all
land is owned by the government. The Chinese government and its various
government instrumentalities grant leases to persons, firms and corporations on
the basis of an annual rental payment and other terms and conditions. These
leases are generally freely transferable during their term.
43
<PAGE>
MANAGEMENT
Directors and Executive Officers
The directors, executive officers and a key employee of Bonso are as
follows:
Name Age Position with Bonso
- ---- --- -------------------
Anthony So 55 President, Chief Executive Officer, Secretary,
Treasurer, Chief Financial Officer, Chairman
of the Board and Director
Kim Wah Chung 41 Director of Engineering and Research and
Development and Director
Kam Sun Luk 54 General Manager and Director
Cathy, Kit Teng Pang 36 Director of Finance and Director
Henry F. Schlueter 48 Assistant Secretary
Woo-Ping Fok 50 Director
George O'Leary 61 Director
ANTHONY SO is the founder of Bonso. He has been president, chairman of the
board of directors and treasurer of Bonso since its inception and has been
secretary of Bonso since July 1991. Mr. So received his BSE degree in civil
engineering from National Taiwan University in 1967 and a masters degree in
business administration from the Hong Kong campus of the University of Hull,
Hull, England in 1994. Mr. So has been chairman of the Hong Kong GO Association
since 1986, and also served as chairman of the Alumni Association of National
Taiwan University for the 1993-1994 academic year. Mr. So has served as a
trustee of the Chinese University of Hong Kong, New Asia College since 1994.
KIM WAH CHUNG has been a director of Bonso since September 21, 1994. Mr.
Chung has been employed by Bonso since 1981 and currently holds the position of
director of engineering and research and development. Mr. Chung is responsible
for all research projects and product development of Bonso. Mr. Chung's entire
engineering career has been spent with Bonso, and he has been involved with
every major product development made by Bonso. Mr. Chung was graduated with
honors in 1981 from the Chinese University of Hong Kong with a bachelor of
science degree in electronics.
KAM SUN LUK was elected to the board of directors of Bonso on September 21,
1994 and has been employed by Bonso as director of new projects and quality
control since October 1993. Mr. Luk obtained his bachelors degree in electrical
engineering from National Taiwan University in 1968. Mr. Luk is also a member of
the Institute of Electrical Engineers United Kingdom and a chartered engineer in
electrical engineering. Mr. Luk was employed by Semiconductor Devices Ltd. of
Hong Kong in a variety of positions between 1970 and 1992 when he joined Bonso,
including serving as Semiconductor Devices' general manager and senior vice
president.
44
<PAGE>
CATHY, KIT TENG PANG has been a director of Bonso since January 1, 1998.
Ms. Pang was first employed by Bonso as financial controller in December 1996
and was promoted to director of finance on January 1, 1998. Ms. Pang was
employed as an auditor in an international audit firm from 1987 to 1991, at
which time she joined a Hong Kong Listed company in the field of magnetic
industry as assistant financial controller. From 1994 until she joined Bonso in
1996, she was employed as deputy chief accountant in a management and property
development company in Hong Kong and China. Ms. Pang has a bachelor of business
administration degree from York University in Toronto, Canada. She is a member
of the American Institute of Certified Public Accountants and of the Hong Kong
Society of Accountants.
HENRY F. SCHLUETER has served as assistant secretary of Bonso 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. From 1989 to 1991, prior to
establishing Schlueter & Associates, P.C., Mr. Schlueter was a partner in the
Denver, Colorado office of Kutak Rock (formerly Kutak, Rock & Campbell), and
from 1984 to 1989, he was a partner in the Denver office of Nelson & Harding.
Mr. Schlueter is a member of the American Institute of Certified Public
Accountants, the Colorado Society of CPA's, the Colorado and Denver Bar
Associations and the Wyoming State Bar. Mr. Schlueter received his law degree
from the University of Wyoming College of Law in 1978.
WOO-PING FOK was elected to the board of directors of Bonso on September
21, 1994. Mr. Fok and his firm, Norman M.K. Yeung & Co., have served as Hong
Kong counsel to Bonso since 1993. Mr. Fok was admitted to the Canadian Bar as a
Barrister & Solicitor in December 1987 and was a partner in the law firm of Woo
& Fok, a Canadian law firm with its head office in Edmonton, Alberta, Canada. In
1991, Mr. Fok was qualified to practice as a Solicitor of England & Wales, a
Solicitor of Hong Kong and a Barrister & Solicitor of Australian Capital
Territory. Mr. Fok practices law in Hong Kong and is a partner with Norman M.K.
Yeung & Co. Mr. Fok's major areas of practice include conveyancing or real
property law, corporations and business law, commercial transactions and
international trade with a special emphasis in China trade matters.
GEORGE O'LEARY has been a director of Bonso since January 1997. From
November 1994 to the present time, Mr. O'Leary has been president of Pacific Rim
Products, Newport Beach, California, a trading company that provides offshore
sourcing alternatives to U.S. based electronics companies. For eight years prior
to 1994, Mr. O'Leary was president, CEO and a director of Micro General
Corporation, Santa Ana, California, a manufacturer and distributor of mechanical
and electronic scale products. For eight years prior to that, Mr. O'Leary was
vice president and general manager of Lanier Business Products, Atlanta,
Georgia, a manufacturer and distributor of office products. Mr. O'Leary has a
bachelor of science degree in electrical engineering from Northeastern
University, Boston, Massachusetts.
45
<PAGE>
At the present time no family relationship exists among any of the named
directors and executive officers; however, Mr. Cham Some So, who served as a
director until his resignation on April 30, 1998, is the father of Anthony So.
No arrangement or understanding exists between any of these directors or
officers and any other persons pursuant to which any director or executive
officer was elected as a director or executive officer of Bonso. The directors
of Bonso 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 of Bonso.
Compensation
Executive Officers and Directors. The following table sets forth certain
information as to the compensation paid to certain of Bonso's executive officers
and directors and for all directors and executive officers as a group for the
year ended March 31, 1999:
<TABLE>
<CAPTION>
Cash Non-Cash
Name of Individual Capacities in Which Served Compensation Compensation
- ------------------ -------------------------- ------------ ------------
<S> <C> <C> <C>
Anthony So President, Chief Executive Officer,
Secretary, Treasurer, Chief Financial
Officer, Chairman of the Board and
Director $346,153(1) $ 95,385(1)
Kim Wah Chung Director of Engineering and Research
and Development and Director $ 59,615(2) $ 53,974(2)
Kam Sun Luk Director of New Projects and Quality
Control and Director $ 86,539(3) $ 4,615(3)
Cathy Pang Director of Finance and Director $ 85,817(4) $ 4,577(4)
Henry F. Schlueter Assistant Secretary $ -- $ --
Woo Ping Fok Director $ -- $ --
George O'Leary Director $115,342(5) $ --
Cham Some So Director $ 13,000(6) $ --
All directors and
officers as a group (8 persons)(7) $706,466(7) $158,551
</TABLE>
- ----------------------
(1) Cash compensation consists of emoluments of $346,153. Non-cash compensation
consists of a $15,385 contribution to Bonso's Provident Fund Plan and the
value of housing provided to Mr. So valued at $80,000 during fiscal 1999.
See "Provident Fund Plan," below, and "Management--Certain Transactions."
(2) Cash compensation consists of emoluments of $59,615. Non-cash compensation
consists of a $10,461 contribution to Bonso's Provident Fund Plan, life
insurance of $5,051 and a housing allowance of $38,462. See "Provident Fund
Plan," below, and "Management--Certain Transactions."
(3) Cash compensation consists of emoluments of $86,539. Non-cash compensation
consists of a $4,615 contribution to Bonso's Provident Fund Plan. See
"Provident Fund Plan," below.
(4) Cash compensation consists of emoluments of $85,817. Non-cash compensation
consists of a $4,577 contribution to Bonso's Provident Fund Plan. See
"Provident Fund Plan," below.
(5) Consists of payments made pursuant to a sales commission arrangement with
Bonso. See "Management-- Certain Transactions."
(6) Consists of $13,000 paid as a director's fee. Mr. Cham Some So resigned
from the Board of Directors as of April 30, 1998.
(7) Includes Mr. Cham Some So who resigned as a director as of April 30, 1998.
46
<PAGE>
Bonso 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, 1999, other than contributions to Bonso's Provident Fund Plan
which aggregated $35,038 for officers and directors in 1999.
Directors. Except for Cham Some So, who was paid a director's fee of
$13,000 during the fiscal year ended March 31, 1999, directors do not receive
any additional monetary compensation for serving as directors of Bonso. However,
outside directors receive stock options pursuant to the 1996 Non-Employee
Directors' Stock Option Plan and have been granted other options. (See "--Stock
Option Plans--The 1996 Non-Employee Directors' Stock Option Plan," and "Options
to Purchase Securities from Bonso or its Subsidiaries," below.) All directors
are reimbursed for all reasonable expenses incurred in connection with services
as a director.
Provident Fund Plan. On January 1, 1988, Bonso started a provident fund
plan with a major international assurance company to provide life insurance and
retirement benefits to its employees. All permanent full-time employees,
excluding employees of the China subsidiaries, are eligible to join the plan.
Each participant is required to contribute 5% of his salary, which amount
is deducted monthly from the participant's salary. The contribution by Bonso is
either 5%, 7.5% or 10% of the participant's salary, depending on whether the
length of the participant's service is less than five years, between five and
ten years or more than ten years, respectively.
At normal retirement age or "ill health" (defined essentially as
disability), the participant is entitled to receive from the plan a lump sum
equal to the total of the participant's and Bonso's balances. On resignation
prior to normal retirement age, a participant is entitled to receive from the
plan a lump sum equal to his balance plus a percentage of the employer's balance
determined in accordance with a predetermined scale. Upon the death of a
participant, the benefit (calculated as at normal retirement age) is paid to the
employer to be held in trust for the participant's beneficiaries and paid to
them as the employer determines.
Bonso's aggregate contributions to the Provident Fund Plan amounted to
$54,924 for the year ended March 31, 1997, $45,227 for the year ended March 31,
1998 and $54,046 for the year ended March 31, 1999.
Options to Purchase Securities from Bonso or its Subsidiaries
The following table sets forth all options to purchase common stock granted
by Bonso which are outstanding as of the date of this prospectus:
Number of Exercise Price Expiration
Options per Share Date
---------- -------------- ----------
20,000 $2.25 October 16, 2006
420,000 $2.00 January 31, 2007
40,000 $5.06 September 8, 2007
220,000 $6.20 January 2008
415,000 $3.60 October 2008
15,000 $3.70 October 2008
47
<PAGE>
Stock Option Plans
The 1996 Stock Option Plan. In August 1996, the board of directors of Bonso
adopted the 1996 Stock Option Plan which provides for the grant of options to
purchase an aggregate of not more than 400,000 shares of Bonso's common stock.
The purpose of the 1996 Stock Option Plan is to make options available to
management and employees of Bonso in order to encourage them to secure or
increase on reasonable terms their stock ownership in Bonso and to encourage
them to remain in the employ of Bonso.
The 1996 Stock Option Plan is administered by a committee appointed by the
board of directors which determines the persons to be granted options under the
plan, the number of shares subject to each option, the exercise price of each
option and the option period, subject to the requirement that no option may be
exercisable more than 10 years after the date of grant. The exercise price of an
option may be less than fair market value of the underlying shares of common
stock. No options granted under the plan will be transferable by the optionee
other than by will or the laws of descent and distribution and each option will
be exercisable, during the lifetime of the optionee, only by the optionee.
The exercise price of an option granted pursuant to the 1996 Stock Option
Plan may be paid in cash, by the surrender of options, in common stock, in other
property, including the optionee's promissory note, or by a combination of the
above.
The 1996 Non-Employee Directors' Stock Option Plan. In August 1996, the
board of directors of Bonso adopted a 1996 Non-Employee Directors' Stock Option
Plan which provides for the grant of options to purchase an aggregate of not
more than 100,000 shares of Bonso's common stock. The purpose of the 1996
Non-Employee Directors' Plan is to promote the long-term success of Bonso by
creating a long-term mutuality of interests between the non-employee directors
and the stockholders of Bonso, to provide an additional inducement for the
non-employee directors to remain with Bonso and to provide a means through which
Bonso may attract able persons to serve as directors of Bonso. The 1996
Non-Employee Directors' Plan is administered by a committee appointed by the
board of directors.
Under the 1996 Non-Employee Directors' Plan, on the third business day
following each annual meeting of the stockholders, each director who is not then
an employee of Bonso or any of its subsidiaries will automatically be granted a
stock option to purchase 10,000 shares of common stock. The exercise price of
all options granted under the 1996 Non-Employee Directors' Plan will be equal to
the fair market value of the underlying shares on the date of grant, based on
guidelines set forth in the plan. The exercise price may be paid in cash, by the
surrender of options, in common stock, in other property, including the
optionee's promissory note, or by a combination of the above. The term of each
option granted pursuant to the 1996 Non-Employee Directors' Plan will be ten
years from the date of grant; however, no option may be exercised during the
48
<PAGE>
first six months of its term. The term of an option granted pursuant to the 1996
Non-Employee Directors' Plan may be reduced in the event that the optionee
ceases to be a director of Bonso. No option granted pursuant to the plan will be
transferable otherwise than by will or the laws of descent and distribution.
Certain Transactions
Over the years, Bonso has provided to and received from its officers and
directors cash advances. In October 1994, the board of directors adopted a
policy resolution prohibiting Bonso from making any loan or advance of money or
property, or guaranteeing the obligation of any directors of Bonso, and limiting
Bonso's ability to make these loans, advances or guarantees to officers of Bonso
or its subsidiaries unless a majority of independent, disinterested outside
directors determine that the loan, advance or guarantee may reasonably be
expected to benefit Bonso. Further, all future material affiliated transactions,
loans and loan guarantees, if any, will be made on terms that are no less
favorable to Bonso than those that are generally available from unaffiliated
third parties. Bonso has neither provided nor received any cash advances to it
officers or directors since this policy resolution was adopted.
It is common practice in Hong Kong, the location of Bonso's principal
executive offices, to provide a housing allowance or living accommodations for
senior executives as part of their compensation. Bonso provides Mr. Anthony So
with living accommodations consisting of a company-owned townhouse, for which
Bonso paid a total purchase price of approximately $1,337,000. Bonso valued this
benefit at $80,000 during the fiscal year ended March 31, 1999. Bonso also
provides Mr. Kim Wah Chung, its director of engineering and research and
development and a director of Bonso, with a housing allowance which amounted to
$38,462 during the fiscal year ended March 31, 1999.
Mr. George O'Leary, a director of Bonso, is paid a commission on orders
placed by customers which he obtains for Bonso. The amount of the commission is
negotiated on a deal-by-deal basis, without a written agreement. During the
fiscal year ended March 31, 1998, Mr. O'Leary was paid an aggregate of $354,835
in commissions and during the fiscal year ended March 31, 1999, he was paid an
aggregate of $115,342 in commissions.
PRINCIPAL SHAREHOLDERS
Bonso is not directly or indirectly owned or controlled by any foreign
government or by another corporation. The following table sets forth, as of
September 30, 1999, the beneficial ownership of Bonso's common stock by each
person known by Bonso to own beneficially more than 5% of the common stock of
Bonso outstanding as of that date and by the officers and directors of Bonso as
a group. Except as otherwise indicated, all shares are owned directly.
Person or Group Amount Owned
--------------- ------------------------------------------------
Shares of Options to Purchase Percent of
Common Stock Common Stock Class
------------ ------------------- ----------
Anthony So 1,168,421 567,000 47.1%
Officers and directors 1,168,421 1,021,000 52.9%
as a group (7 persons)
49
<PAGE>
The above percentages are based on beneficial ownership of both shares of
common stock and options to purchase common stock which are immediately
exercisable. All of the shares beneficially owned by Mr. Anthony So are owned of
record by a corporation that is wholly owned by a trust of which Mr. So is the
sole beneficiary.
There are no arrangements known to Bonso the operation of which may at a
subsequent date result in a change in control of Bonso.
SELLING SHAREHOLDERS
The following table sets forth the number of warrants owned of record and
beneficially by the selling shareholders as of the date of this prospectus, the
number of shares of common stock that are to be offered and sold by the selling
shareholders from time to time under this prospectus, assuming exercise of all
of the representatives' warrants and all of the public warrants underlying the
representatives' warrants, and the amount of Bonso's shares of common stock to
be owned by the selling shareholders after the offering, assuming the sale of
all 330,000 of the shares of common stock by the selling shareholders. The
shares listed below represent the number of shares issuable upon exercise of
representatives' warrants issued in 1994 and the public warrants underlying
those representatives' warrants.
50
<PAGE>
<TABLE>
<CAPTION>
Selling Shares Owned Shares to be Shares Owned
Shareholder Prior to Offering Offered After Offering
----------- ------------------ ------------ --------------
<S> <C> <C> <C>
H.J. Meyers & Associates, Inc. 152,700 152,700 0
EBI Securities Corporation 54,120 54,120 0
(formerly Cohig & Associates, Inc.)
Harold Meyers 22,650 22,650 0
Gene McColley 17,160 17,160 0
Rick Rappaport 15,855 15,855 0
Steve Bathgate 13,200 13,200 0
Fred Birner 12,540 12,540 0
Steven R. Hinkle 10,560 10,560 0
Dennis Gentry 8,580 8,580 0
F.B. Rodgers 6,795 6,795 0
James Hosch 6,600 6,600 0
Ed Larkin 5,280 5,280 0
David Drennen 2,640 2,640 0
Rike Wooten 1,320 1,320 0
</TABLE>
It is anticipated that H.J. Meyers & Associates, Inc. and EBI Securities
Corporation will transfer representatives' warrants exercisable for the number
of shares of common stock indicated below, including the shares of common stock
issuable upon exercise of the public warrants underlying the representatives'
warrants, to the following individuals immediately after they indicate a desire
to exercise the representatives' warrants.
<TABLE>
<CAPTION>
Selling Shares Owned Shares to be Shares Owned
Shareholder Prior to Offering Offered After Offering
----------- ----------------- ------------ --------------
<S> <C> <C> <C>
Aaron Gurewitz 2,100 2,100 0
Myrna Domingo 2,100 2,100 0
Steven R. Hinkle 14,859 14,859 0
Richard Lawrence 6,315 6,315 0
Clarence Bixler, Jr. 4,875 4,875 0
Joseph Lavigne 4,275 4,275 0
Ralph Olson 4,275 4,275 0
Terri E. Lowe 1,206 1,206 0
Jacob Kuijper 2,232 2,232 0
David Lavigne 1,578 1,578 0
Gary Gossett 465 465 0
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
Selling Shares Owned Shares to be Shares Owned
Shareholder Prior to Offering Offered After Offering
----------- ----------------- ------------ --------------
<S> <C> <C> <C>
Kathleen N. Gavin 555 555 0
Gregory Norton 2,787 2,787 0
Kelly McCarthy 648 648 0
Russell Bean 537 537 0
Harold Golz 1,395 1,395 0
</TABLE>
Bonso will not receive any proceeds from the sale of the shares by the
selling shareholders. The selling shareholders will not participate in Bonso's
offering of common stock. The selling shareholders have no agreement with the
selling agents with respect to the sale of their shares of common stock. The
common stock may be sold from time to time to purchasers directly by the selling
shareholders. Alternatively, the selling shareholders may from time to time
offer the common stock through underwriters, dealers or agents, which may
receive compensation in the form of underwriting discounts, concessions or
commissions from the selling shareholders and/or the purchasers of the common
stock for whom they may act as agents. The selling shareholders and any agents,
dealers or underwriters that participate in the distribution of the common stock
may be deemed to be "underwriters" under the Securities Act of 1933, and any
profit on the sale of the common stock by them and any discounts, commissions or
concessions received by any person deemed to be underwriters, dealers or agents
might be determined to be underwriting discounts and commissions under the
Securities Act.
At the time a particular offer of the shares is made by or on behalf of the
selling shareholders, to the extent required, a prospectus supplement will be
distributed which will set forth the number of shares of common stock being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, the purchase price paid by any underwriter for
common stock purchased from the selling shareholders, any discounts, commissions
and other items constituting compensation from the selling shareholders and any
discounts, commissions or concessions allowed or re-allowed or paid to dealers,
and the proposed selling price to the public.
The shares may be sold from time to time in one or more transactions at a
fixed offering price, which may be changed, at varying prices determined at the
time of sale or at negotiated prices. These prices will be determined by the
selling shareholders or by agreement between the selling shareholders and any
underwriters.
In order to comply with the applicable securities laws of certain states,
if any, the shares will be offered or sold through registered or licensed
brokers or dealers in those states. In addition, in certain states the shares
may not be offered or sold unless they have been registered or qualified for
sale in those states or an exemption from the registration or qualification
requirement is available and is complied with.
52
<PAGE>
Under applicable rules and regulations promulgated under the Securities
Exchange Act of 1934, any person engaged in a distribution of securities may not
simultaneously engage in any market making activities with regard to Bonso's
securities for a period from five business days (or any other applicable period
as Regulation M may provide) prior to the commencement of the distribution. See
"Plan of Distribution."
DESCRIPTION OF SECURITIES
Common Stock
Bonso's authorized capital consists of 23,333,334 shares of common stock,
$0.003 par value per share.
Holders of 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 common stock do not have cumulative voting rights in the
election of directors. All shares of common stock are equal to each other with
respect to liquidation and dividend rights. Holders of common stock are entitled
to receive dividends if and when declared by Bonso's board of directors out of
funds legally available therefor under British Virgin Islands law. In the event
of the liquidation of Bonso, all assets available for distribution to the
holders of the common stock are distributable among them according to their
respective holdings. Holders of common stock have no preemptive rights to
purchase any additional, unissued shares of common stock. All of the outstanding
shares of common stock of Bonso are, and those to be issued pursuant to this
offering will be, fully paid and non-assessable.
Under Bonso's Memorandum and Articles of Association and the laws of the
British Virgin Islands, Bonso's Memorandum and Articles of Association may be
amended by the board of directors without shareholder approval. This includes
amendments increasing or reducing the authorized capital stock of Bonso and
increasing or reducing the par value of its shares. The board of directors may
also increase the capital of Bonso without shareholder approval by transferring
a portion of Bonso's surplus to capital or reduce the capital of Bonso by
transferring a portion of Bonso's capital to surplus. The ability of Bonso to
amend its Memorandum and Articles of Association without shareholder approval
could have the effect of delaying, deterring or preventing a change in control
of Bonso without any further action by the shareholders, including but not
limited to a tender offer to purchase the common stock at a premium over then
current market prices.
Under United States law, majority and controlling shareholders generally
have certain fiduciary responsibilities to the minority shareholders.
Shareholder action must be taken in good faith and actions by controlling
shareholders that are obviously unreasonable may be declared null and void. The
British Virgin Islands law protecting the interests of the minority shareholders
may not be as protective in all circumstances as the laws protecting minority
shareholders in United States jurisdictions. While British Virgin Islands law
does permit a shareholder of a British Virgin Islands company to sue its
53
<PAGE>
directors derivatively, i.e., in the name of and for the benefit of the company,
and to sue the company and its directors for his benefit and the benefit of
others similarly situated, the circumstances in which any action may be brought
and the procedures and defenses that may be available with respect to any action
may result in the rights of shareholders of a British Virgin Islands company
being more limited than those rights of shareholders in a United States company.
Warrants
Public Warrants. Bonso issued and sold 2,200,000 publicly registered
warrants (the "public warrants") in a public offering of units conducted in
1994. The warrants originally expired on December 14, 1999; however, the board
of directors has extended the exercise period to 2:00 P.M. (Pacific Time) on
January 31, 2000. Each public warrant entitles the holder to purchase one share
of common stock at a price of $7.35 per share at any time, or from time to time,
until January 31, 2000, unless further extended by the board of directors. An
aggregate of 25,597 of the public warrants have been exercised. The public
warrants are redeemable by Bonso, at $0.05 per warrant, upon 30 to 45 days
notice, at any time if the closing price per share of common stock for 20
consecutive trading days within the 30-day period prior to the date notice of
redemption is given equals or exceeds $8.575 per share. Establishment of the
exact number of days for the redemption period will be based upon a number of
factors including the time of year, the day of the week upon which the decision
to redeem the public warrants is made, the day of the week upon which the notice
of redemption is sent to holders, the number of intervening holidays during the
redemption period and other similar practical considerations that may affect the
time within which holders may elect to exercise the public warrants or accept
the redemption price. In the event Bonso gives notice of its intention to
redeem, a holder would be forced either to exercise his or her public warrants
within the 30 to 45 days specified in the notice of redemption or accept the
redemption price. Bonso may, in the sole discretion of its board of directors,
reduce the exercise price and/or extend the expiration date of the public
warrants should it deem that action to be in the best interests of Bonso.
Bonso's board of directors has no present intention to extend the expiration
date of, or to reduce the exercise price of, the public warrants. At this time,
the board of directors is unable to predict whether or not it may at any time in
the future take these types of actions. In addition, the board of directors has
not determined the criteria that it may use in making this type of decision in
the future. In the event that the board of directors determines, at some future
date, to reduce the exercise price of the public warrants (as to which there can
be no assurance), the board of directors may or may not determine to refund all
public warrant holders the difference between the exercise price immediately
prior to the reduction and the exercise price immediately following the
reduction. This determination will be made solely in the absolute discretion of
the board of directors. Any modification of the terms of the public warrants
will be made in compliance with Rules 13e-4 and 14e under the Securities
Exchange Act of 1934 to the extent applicable.
The public warrants are in registered form. They are detachable from the
units and may be traded separately in the over-the-counter market. The shares of
common stock underlying the public warrants, when issued upon exercise of a
public warrant, will be fully paid and non- assessable, and Bonso will pay any
transfer tax incurred as a result of the issuance of common stock to the holder
upon its exercise.
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<PAGE>
The public warrants contain provisions that protect the holders against
dilution by adjustment of the exercise price in certain events, such as stock
dividends and distributions, stock splits, recapitalizations, mergers or
consolidations. Bonso is not required to issue fractional shares upon the
exercise of a public warrant, and any fractional shares will be paid in cash at
the current market price of the common stock on the date of exercise. The
current market price is defined in the warrant agreement as the average for the
30 consecutive trading days immediately preceding the date of exercise of the
daily per share closing prices of the common stock in the National Market. The
holder of a public warrant will not possess any rights as a shareholder of Bonso
until the holder exercises the public warrant. A copy of the form of warrant
agreement was filed as an exhibit to the registration statement under which the
public warrants were registered.
Exercise of Public Warrants. The public warrants may be exercised on
surrender of the applicable warrant certificate on or prior to expiration of the
warrant exercise period, with the "Purchase Form" on the reverse side of the
certificate executed as indicated, and accompanied by payment of the full
exercise price for the number of public warrants being exercised. Payment must
be by cash or by certified or official bank check payable in United States
currency to the order of the warrant agent.
Tax Consequences of Public Warrants. For federal income tax purposes, no
gain or loss will be realized by any holder of public warrants who, upon
exercise of his public warrants, receives common stock in exchange for his
public warrants and payment of the exercise price. The holder's basis in the
common stock received will be equal to his basis in the public warrants
exercised, plus the amount of the exercise price. If the public warrants being
exercised have been purchased by the holder as part of a Unit, the basis of the
holder in the public warrants for the purposes of the preceding sentence will be
determined by separately allocating the consideration paid for the Unit to the
underlying common stock and public warrants, in proportion to the fair market
values of the common stock and public warrants at the time the Unit was
purchased. Any loss realized by a public warrant holder due to a failure to
exercise the public warrants prior to their expiration will be treated for
federal income tax purposes as a loss from the sale or exchange of property
which has the same character as would the common stock if acquired by the
holder. Whether the loss realized by the holder is long-term or short-term
capital loss or ordinary loss will be determined by the length of the period for
which the holder has held the public warrants and by whether the common stock
would have been a capital asset if it had been acquired by the public warrant
holder.
Public warrant exercise price adjustments, or the omission of these
adjustments, may under certain circumstances be deemed to be distributions that
could be taxable as dividends for federal income tax purposes to the public
warrant holders or to the holders of the common stock.
The United States Internal Revenue Code provides that a corporation does
not recognize gain or loss upon the issuance, lapse or repurchase of a warrant
to acquire its own stock.
55
<PAGE>
Therefore, Bonso will not recognize income upon the expiration of any
unexercised public warrants.
Representatives' Warrants. Bonso has outstanding 110,000 representatives'
warrants which were issued to the representatives of the underwriters of its
1994 public offering. Each representatives' warrant entitles the holder thereof
to purchase one unit, consisting of one share of common stock and two public
warrants, at $9.1875 per unit at any time prior to 5:00 p.m. (Pacific Time) on
December 14, 1999. The representatives' warrants are not redeemable. Upon any
transfer of the representatives' warrants to a person other than an officer,
shareholder or director of the representatives, the transferred representatives'
warrants must be exercised immediately or they will lapse.
Transfer and Warrant Agent
The transfer agent and registrar for the common stock and the warrant agent
for the public warrants is U.S. Stock Transfer Corporation, 1745 Gardena Avenue
#200, Glendale, California 91204.
Reports to Shareholders
Bonso intends to furnish annual reports to shareholders which include
audited financial statements reported on by its independent accountants and
quarterly reports for each of its first three quarters which contain unaudited
financial statements. Bonso will continue to comply with the periodic reporting
requirements imposed on foreign issuers by the Exchange Act. Bonso plans to
furnish the same annual and quarterly reports to holders of its public warrants.
Exchange Controls and Other Limitations Affecting Shareholders
There are no exchange control restrictions on payments of dividends on
Bonso's common stock or on the conduct of Bonso's operations either in Hong
Kong, where Bonso's principal executive offices are located, or the British
Virgin Islands, where Bonso is incorporated. Other jurisdictions in which Bonso
conducts operations may have various exchange controls. Taxation and
repatriation of profits regarding Bonso's China operations are regulated by
Chinese laws and regulations. To date, these controls have not had and are not
expected to have a material impact on Bonso's financial results. There are no
material British Virgin Islands laws that impose foreign exchange controls on
Bonso or that affect the payment of dividends, interest or other payments to
nonresident holders of Bonso's securities. British Virgin Islands law and
Bonso's Memorandum and Articles of Association impose no limitations on the
right of nonresident or foreign owners to hold or vote Bonso's securities.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, Bonso will have 5,423,562 shares of
common stock outstanding. Of these, approximately 4,255,141 shares of common
stock, other than shares held by affiliates of Bonso, will be freely
transferable and tradable without restriction under the Securities Act. This
includes the 2,504,403 shares to be issued upon exercise of the public warrants
and the representatives' warrants. The remaining 1,168,421 shares of common
56
<PAGE>
stock are beneficially owned by Anthony So and may only be sold in the public
United States market pursuant to an effective registration statement or in
accordance with Rule 144 promulgated under the Securities Act.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated) who has beneficially owned his or
her shares for at least one year, including affiliates of Bonso, would be
entitled to sell within any three-month period a number of shares equal to the
greater of 1% of the then outstanding shares of common stock of Bonso
(approximately 54,236 shares immediately after this offering if all of the
warrants are exercised) or the average weekly trading volume of Bonso's common
stock during the four calendar weeks preceding the filing of the required notice
of the sale. Sales under Rule 144 also are subject to certain manner of sale
restrictions, notice requirements and the availability of current public
information about Bonso. Under Rule 144(k), a person who is not deemed to have
been an affiliate of Bonso at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two
years, is entitled to sell the shares without regard to the requirements
described above. Sales of substantial numbers of shares of common stock pursuant
to a registration statement, Rule 144 or otherwise, whether in the United States
or abroad, could adversely affect the market price of the common stock.
Bonso also has reserved 1,130,000 shares of common stock for issuance upon
exercise of certain outstanding options and 30,000 shares for issuance upon
exercise of stock options which may be granted in the future under Bonso's stock
option plans. If the holders of the options exercise the options, the shares of
common stock to be issued will constitute restricted securities, subject to Rule
144.
PLAN OF DISTRIBUTION
Warrant Solicitation
Bonso has entered into an exclusive agency agreement with EBI Securities
Corporation (formerly Cohig & Associates, Inc.) pursuant to which it will
advise, direct, solicit and coordinate the solicitation of the exercise of the
public warrants. This type of agreement includes an agreement to pay a fee equal
to 2% of the gross U. S. dollars paid pursuant to the exercise of the public
warrants. EBI Securities Corporation is referred to in this prospectus as the
"selling agent." The selling agent may enter into sub-agency agreements with
other NASD member broker/dealer firms pursuant to which it may re-allow up to
the full amount of its fee to the broker/dealer firms.
No NASD member broker/dealers will be entitled to receive a solicitation
fee if (1) the exercise of the public warrants is made at a time when the market
price of Bonso's common stock is lower than the exercise price of the public
warrants; or (2) the public warrants to be exercised are held in a discretionary
account. Each NASD member broker/dealer will be required to commit to an
undertaking to the effect that as a participating dealer (1) it did not, within
the 10 business days immediately preceding the exercise of the public warrants,
57
<PAGE>
bid for or purchase Bonso's common stock or any security of Bonso which is
immediately convertible into or exchangeable for Bonso's common stock, including
the warrants; and (2) it did not, within the 10 business days immediately
preceding the date of exercise of the public warrants, otherwise engage in any
activity that would be prohibited by Rule 10b-6 under the Securities Act of 1934
to one engaged in the distribution of Bonso's securities.
The selling agent acted as a representative of the underwriters of the 1994
public offering. Other than the securities underlying the representatives'
warrants granted to the selling agent, Bonso is not aware of any other
securities of Bonso owned by the selling agent. Regulation M may prohibit the
selling agent from engaging in any market making activities with regard to
Bonso's securities for a period from five business days (or any other applicable
period as Regulation M may provide) prior to any solicitation by the selling
agent of the exercise of the public warrants until the later of the termination
of the solicitation activity or the termination (by waiver or otherwise) of any
right that the selling agent may have to receive a fee for the exercise of
public warrants following the solicitation. As a result, the selling agent may
be unable to provide a market for Bonso's securities during certain periods,
including while the public warrants are exercisable.
Sales by Selling Shareholders
Bonso has been advised that the shares of common stock offered hereby by
the Selling Shareholders may be sold by the Selling Shareholders or by their
transferees or other successors in interest. The distribution of the shares may
be effected from time to time in one or more transactions on the Nasdaq National
Market or on other exchanges on which the common stock may be traded, in the
over-the-counter market, in negotiated transactions, through the writing of
options on the common stock or a combination of the methods of sale, or through
other means. Sales may be effected at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to the
prevailing market prices or at negotiated prices. The Selling Shareholders are
not restricted as to the price or prices at which they may sell their
securities. Sales of shares by Selling Shareholders may depress the market price
of the common stock.
Transactions may be effected by sales to or through broker-dealers and the
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the sellers or the purchasers of the shares for whom the
broker-dealers may act as agent or to whom they sell as principal, or both
(which compensation to a particular broker-dealer might be in excess of
customary commissions). The Selling Shareholders and any broker-dealers or
agents who participate in the distribution of common stock hereunder may be
deemed to be "underwriters" as that term is defined in the Securities Act, and
any commissions received by them and profit on any resale of the common stock as
principal might be deemed to be underwriting discounts and commissions under
that Act. No underwriter is being utilized in connection with this offering.
Certain of the Selling Shareholders are subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including without
limitation Regulation M, which provisions may limit the timing of purchases and
sales of shares of common stock.
58
<PAGE>
Bonso has agreed to pay the expenses of registration in connection with
this offering.
At the time a particular offer of common stock is made, to the extent
required, a supplement to this prospectus will be distributed which will
identify and set forth the aggregate amount of common stock being offered and
the terms of the offering.
In order to comply with certain states' securities laws, if applicable, the
common stock may be sold in those jurisdictions only through registered or
licensed brokers or dealers. In certain states the common stock may not be sold
unless it has been registered or qualified for sale in any of those states, or
unless an exemption from registration or qualification is available and is
obtained.
LEGAL MATTERS
The validity of the common stock underlying the warrants will be passed
upon by Harney, Westwood & Riegels, Tortola, British Virgin Islands, who have
also advised Bonso on all matters of BVI law disclosed in this prospectus.
Schlueter & Associates, P.C., Denver, Colorado has acted as United States
counsel for Bonso in connection with this offering. Norman M.K. Yeung & Co.,
Solicitors, Hong Kong, has acted as Hong Kong counsel with respect to all
matters herein concerning the Hong Kong subsidiaries and Hong Kong law.
EXPERTS
The financial statements as of March 31, 1999 and 1998, and for each of the
three years in the period ended March 31, 1999, included in this prospectus,
have been so included in reliance on the report of PricewaterhouseCoopers, Hong
Kong, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
Bonso is subject to the reporting requirements of the Securities Exchange
Act of 1934 and in accordance with that Act it files reports and other
information with the Securities and Exchange Commission. Reports and other
information filed by Bonso can be inspected and copied at the public reference
facilities maintained by the Securities and Exchange Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Regional
Offices of the Securities and Exchange Commission located at Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621-2511 and 7
World Trade Center, Suite 1300, New York, New York 10048. Furthermore, copies of
those materials can be obtained from the Public Reference Section of the
Securities and Exchange Commission, Washington, D.C., at prescribed rates.
Bonso intends to furnish to its shareholders annual reports containing
audited financial statements certified by independent accountants.
Bonso has filed a registration statement under the Securities Act of 1933,
as amended, with the U.S. Securities and Exchange Commission with respect to the
common stock offered by this prospectus. This prospectus, which constitutes part
of the registration statement, omits certain of the information contained in the
registration statement and the exhibits to the registration statement on file
with the Securities and Exchange Commission in accordance with the Securities
Act and the rules and regulations of the Securities and Exchange Commission.
Statements contained in this prospectus such as the contents of any contract or
59
<PAGE>
other document referred to are not necessarily complete and in each instance
that reference is made to the copy of a contract or other document filed as an
exhibit to the registration statement, each statement is qualified in all
respects by any reference to the exhibits. A copy of the registration statement,
including the exhibits to the registration statement, may be inspected without
charge at the Commission's principal office at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and copies of all or any part of the registration
statement, may be obtained from the Commission upon the payment of certain fees
prescribed by the Commission. The Commission also maintains a World Wide Web
site that contains reports, proxy and information statements and other
information regarding registrants, such as Bonso, that file electronically with
the Commission. The address of the site is http://www.sec.gov. Bonso does not
file electronically with the Commission since it is a foreign private issuer and
is not required to do so. Accordingly, copies of Bonso's filings are not
available on the Commission's web site.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated herein by reference:
1. Bonso's Annual Report on Form 20-F for the fiscal year ended March 31,
1999 filed with the Commission on August 4, 1999; and
2. Bonso's Form 6-K filed with the Commission on August 3, 1999.
All subsequent annual reports filed on Form 20-F, Form 40-F or Form 10-K,
and all subsequent filings on Forms 10-Q and 8-K filed by Bonso with the
Commission under the Exchange Act, prior to the termination of the offering,
shall be deemed to be incorporated by reference into this prospectus. Bonso may
incorporate by reference into this prospectus certain Forms 6-K subsequently
submitted to the Commission by identifying in the forms that they are being
incorporated by reference into this prospectus. Any statement incorporated
herein shall be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes the statement. Any statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus. Bonso hereby undertakes to provide without
charge to each person, including any beneficial owner, to whom a copy of this
prospectus has been delivered, upon written or oral request of the person, a
copy of any or all of the foregoing documents incorporated herein by reference
(other than exhibits to those documents, unless the exhibits are specifically
incorporated by reference into the documents). Requests for the documents should
be submitted to Bonso, C/O Schlueter & Associates, P.C., 1050 Seventeenth
Street, Suite 1700, Denver, Colorado 80265; telephone: (303) 292-3883;
facsimile: (303) 296-8880.
60
<PAGE>
<PAGE>
Consolidated Financial Statements
Bonso Electronics International Inc.
(Incorporated in the British Virgin Islands)
and Subsidiaries
March 31, 1999
PricewaterhouseCoopers
Independent Accountants
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Index to Consolidated Financial Statements
Contents Pages
Report of Independent Accountants............................................. 2
Consolidated Balance Sheets as of March 31, 1998 and 1999..................... 3
Consolidated Statements of Comprehensive Income
for the years ended 31, 1997, 1998 and 1999................................... 4
Consolidated Statements of Changes in Shareholders'
Equity for the years ended 31, 1997, 1998 and 1999........................... 5
Consolidated Statements of Cash Flows for the years ended
March 31, 1997, 1998 and 1999................................................. 6
Notes to Consolidated Financial Statements...............................7 to 27
F-1
<PAGE>
Report of Independent Accountants
Board of Directors and Shareholders
Bonso Electronics International Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Bonso
Electronics International Inc. and Subsidiaries (the "Group") as of March 31,
1998 and 1999 and the related consolidated statements of comprehensive income,
changes in shareholders' equity and cash flows for each of the three years in
the period ended March 31, 1999. These consolidated financial statements are the
responsibility of the Group's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Group as of
March 31, 1998 and 1999 and the results of their operations and cash flows for
each of the three years in the period ended March 31, 1999, in conformity with
generally accepted accounting principles in the United States of America.
PricewaterhouseCoopers
Hong Kong, May 28, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
Bonso Electronics International Inc. and Subsidiaries
Consolidated Balance Sheets
(Expressed in United States Dollars)
March 31
-----------------------------
1998 1999
---- ----
$ $
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents ...................................... 448,454 271,447
Restricted cash deposits (Note 7) .............................. 952,267 1,011,688
Trade receivables, net (Note 2) ................................ 964,958 362,236
Inventories, net (Note 3) ...................................... 5,966,700 4,697,928
Notes receivable ............................................... 340,518 690,449
Deferred income tax assets - current (Note 5(d)) ............... 35,088 31,251
Other receivables, deposits and prepayments .................... 400,924 243,231
----------- -----------
Total current assets ........................................... 9,108,909 7,308,230
----------- -----------
Deposits ........................................................ 447,735 --
Deferred income tax assets - non current (Note 5(d)) ............ 38,430 81,223
Property, plant and equipment
Leasehold land and buildings ................................... 7,259,414 8,997,073
Construction-in-progress ....................................... 785,364 --
Plant and machinery ............................................ 3,385,846 3,495,632
Molds .......................................................... 2,108,967 2,112,608
Furniture, fixtures and equipment .............................. 2,122,805 2,661,718
Motor vehicles ................................................. 306,946 306,979
----------- -----------
15,969,342 17,574,010
Less: accumulated depreciation and amortization ................ (4,917,853) (6,303,179)
----------- -----------
Net property, plant and equipment .............................. 11,051,489 11,270,831
----------- -----------
Total assets ................................................... 20,646,563 18,660,284
----------- -----------
(cont'd)
See notes to these consolidated financial statements
<PAGE>
<CAPTION>
Bonso Electronics International Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(Expressed in United States Dollars)
March 31
---------------------------
1998 1999
---- ----
$ $
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities
Bank overdrafts (Note 7) ....................................... 600,721 643,278
Notes payable (Note 7) ......................................... 2,260,384 581,349
Accounts payable ............................................... 1,560,954 1,135,910
Accrued charges and deposits ................................... 482,222 516,458
Income taxes payable ........................................... 30,000 11,667
Short-term loans (Note 7) ...................................... 338,632 720,129
Current portion of long-term debt and
capital lease obligations
(Notes 4 and 6(a)) ........................................... 652,041 383,409
----------- -----------
Total current liabilities ...................................... 5,924,954 3,992,200
----------- -----------
Long-term debt and capital lease obligations, net of current
maturities (Notes 4 and 6(a)) .................................. 242,889 42,397
Commitments and contingencies (Note 10)
Shareholders' equity (Notes 8(b), 14 and 15)
Common stock par value $0.003 per share
- authorized shares - 23,333,334
- issued and outstanding shares - 3,119,159 ................... 8,485 9,353
Additional paid-in capital ..................................... 8,724,503 10,285,105
Promissory note receivable from shareholder (Note 8(b)) ........ (1,350,000) (1,430,000)
Common stock subscribed (Note 8(b)) ............................ 1,350,000 --
Retained earnings .............................................. 5,512,204 5,525,958
Accumulated other comprehensive income ......................... 233,528 235,271
----------- -----------
14,478,720 14,625,687
----------- -----------
Total liabilities and shareholders' equity ...................... 20,646,563 18,660,284
----------- -----------
</TABLE>
See notes to these consolidated financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
Bonso Electronics International Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Expressed in United States Dollars)
Year ended March 31
-----------------------------------------
1997 1998 1999
$ $ $
<S> <C> <C> <C>
Net sales (Note 16) ....................... 16,989,019 23,715,576 13,046,265
Cost of sales ............................. 12,096,085 17,071,089 8,812,173
----------- ----------- -----------
Gross margin .............................. 4,892,934 6,644,487 4,234,092
Selling expenses .......................... 432,518 419,755 196,974
Salaries and related costs ................ 1,973,021 1,897,412 1,625,731
Research and development expenses (Note 11) 122,263 158,706 566,030
Administration and general expenses ....... 1,609,217 1,814,535 1,601,186
Net gain on liquidation of a joint venture
company (Note 13) ........................ (159,654) -- --
----------- ----------- -----------
Income from operations .................... 915,569 2,354,079 244,171
Interest income ........................... 64,248 73,431 63,488
Interest expenses ......................... (532,068) (503,896) (445,644)
Less: Interest capitalized ................ 61,413 46,058 25,108
----------- ----------- -----------
(470,655) (457,838) (420,536)
Foreign exchange (losses)/gains ........... (135,780) 35,187 37,882
Other income .............................. 101,843 242,669 52,662
----------- ----------- -----------
Income/(loss) before income taxes ......... 475,225 2,247,528 (22,333)
Income tax benefit (Note 5(c)) ............ 71,364 27,117 36,087
----------- ----------- -----------
Net income ................................ 546,589 2,274,645 13,754
Other comprehensive income, net of tax:
Foreign currency translation adjustments .. 162,970 43,129 1,743
----------- ----------- -----------
Comprehensive income ...................... 709,559 2,317,774 15,497
----------- ----------- -----------
Earning per share (Note 12)
Basic .................................... 19.34 cents 80.39 cents 0.45 cents
----------- ----------- -----------
Diluted .................................. 19.21 cents 72.57 cents 0.37 cents
----------- ----------- -----------
</TABLE>
See notes to these consolidated financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
Bonso Electronics International Inc. and Subsidiaries
Consolidated Statements of Charges in Shareholders' Equity
(Expressed in United States Dollars)
Promissory
Common stock note
----------------------- receivable
Shares Amount Additional from
outstanding outstanding paid-in capital shareholder
----------- ----------- --------------- -----------
$ $ $
<S> <C> <C> <C> <C>
Balance, March 31, 1996 ............ 2,825,949 8,477 8,705,917 --
Net income .........................
Other comprehensive income,
net of tax
Foreign currency adjustments:
Cumulative translation adjustments
Reversal upon liquidation
of a joint venture company .......
Comprehensive income ...............
----------- ----------- ----------- ----------
Balance, March 31, 1997 ............ 2,825,949 8,477 8,705,917 --
Net income .........................
Other comprehensive income,
net of tax
Foreign currency adjustments:
Cumulative translation adjustments
Reversal upon liquidation of a
subsidiary ......................
----------- ----------- ----------- ----------
Comprehensive income ...............
Common stock issued upon exercise
of warrant (Note 15) .............. 2,613 8 18,586
Common stock subscribed
(Note 8(b)) ....................... -- -- -- (1,350,000)
----------- ----------- ----------- ----------
Balance, March 31, 1998 ............ 2,828,562 8,485 8,724,503 (1,350,000)
Net income ......................... 13,754 -- 13,754
Other comprehensive income,
net of tax
Foreign currency adjustments:
Cumulative translation adjustment.. -- 1,743 1,743
----------- ----------- ----------- ----------
Comprehensive income ...............
Issue of common stock (Note 8(b))... 200,000 600 1,349,400 --
Common stock issued upon
exercise of share option (Note (14). 5,000 193 131,202 --
Common stock issued upon exercise
of warrant, net of expenses (Note
15) 25,597 75 -- --
Interest income from promissory
note receivable (Note 8(b)) ....... -- -- 80,000 (80,000)
----------- ----------- ----------- ----------
Balance, March 31, 1999 ............ 3,119,159 9,353 10,285,105 (1,430,000)
----------- ----------- ----------- ----------
(cont'd)
<PAGE>
<CAPTION>
Bonso Electronics International Inc. and Subsidiaries
Consolidated Statements of Charges in Shareholders' Equity (continued)
(Expressed in United States Dollars)
Accumulated
other
comprehensive
income-
Common foreign Total
stock Retained currency shareholders'
subscribed earnings adjustments equity
---------- -------- ----------- ------------
$ $ $ $
<S> <C> <C> <C> <C>
Balance, March 31, 1996 ............ -- 2,690,970 27,429 11,432,793
Net income ......................... 546,589 -- 546,589
Other comprehensive income,
net of tax
Foreign currency adjustments:
Cumulative translation adjustments -- 57,746 57,746
Reversal upon liquidation
of a joint venture company ....... -- 105,224 105,224
Comprehensive income ............... 546,589 162,970 709,559
---------- ----------- ----------- -----------
Balance, March 31, 1997 ............ -- 3,237,559 190,399 12,142,352
Net income ......................... 2,274,645 -- 2,274,645
Other comprehensive income,
net of tax
Foreign currency adjustments:
Cumulative translation adjustments -- 45,779 45,779
Reversal upon liquidation of a
subsidiary ...................... -- (2,650) (2,650)
---------- ----------- ----------- -----------
Comprehensive income ............... -- 2,274,645 43,129 2,317,774
Common stock issued upon exercise
of warrant (Note 15) .............. -- -- -- 18,594
Common stock subscribed
(Note 8(b)) ....................... 1,350,000 -- -- --
---------- ----------- ----------- -----------
Balance, March 31, 1998 ............ 1,350,000 5,512,204 233,528 14,478,720
Net income ......................... 13,754 -- 13,754
Other comprehensive income,
net of tax
Foreign currency adjustments:
Cumulative translation adjustment.. -- 1,743 1,743
---------- ----------- ----------- -----------
Comprehensive income ............... 13,754 1,743 15,497
Issue of common stock (Note 8(b))... (1,350,000) -- -- --
Common stock issued upon
exercise of share option (Note (14). -- -- -- 131,395
Common stock issued upon exercise
of warrant, net of expenses (Note
15 -- -- -- 75
Interest income from promissory
note receivable (Note 8(b)) - ..... -- -- -- --
---------- ----------- ----------- -----------
Balance, March 31, 1999 ............ -- 5,525,958 235,271 14,625,687
---------- ----------- ----------- -----------
</TABLE>
See notes to these consolidated financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
Bonso Electronics International Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Expressed in United States Dollars)
Year ended March 31
--------------------------------------------
1997 1998 1999
---- ---- ----
$ $ $
<S> <C> <C> <C>
Cash flows from operating activities
Net income ............................................................ 546,589 2,274,645 13,754
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation .......................................................... 681,730 942,894 1,109,286
Amortization .......................................................... 279,201 482,214 275,323
Other ................................................................. (71,716) 113,794 (51,187)
Changes in assets and liabilities, net of disposed
subsidiary:
Trade receivables ..................................................... 394,234 45,929 596,696
Other receivables, deposits and prepayments ........................... 773,636 (57,577) 157,693
Notes receivable ...................................................... (535,685) 427,015 (349,931)
Inventories ........................................................... 275,537 53,994 1,341,075
Accounts payable, accrued charges and deposits ........................ 1,237,089 (1,084,467) (390,808)
Other ................................................................. (56,309) 63,818 (57,289)
---------- ---------- ----------
Net cash provided by operating activities ............................. 3,524,306 3,262,259 2,644,612
---------- ---------- ----------
Cash flows from investing activities
Restricted cash deposits .............................................. 664,820 (65,947) (59,421)
Deposit for properties ................................................ -- (64,215) --
Proceeds from disposal of property, plant and
equipment ............................................................ 212,494 83,418 --
Acquisition of property, plant and equipment .......................... (2,844,115) (1,557,269) (866,891)
---------- ---------- ----------
Net cash used in investing activities ................................. (1,966,801) (1,604,013) (926,312)
---------- ---------- ----------
Cash flows from financing activities
Issue of shares on exercise of warrants and options ................... -- -- 317,966
Expenses paid for warrant redemption .................................. -- -- (201,586)
Principal payments under long-term debt ............................... (307,692) (410,256) (381,826)
Capital lease payments ................................................ (169,569) (355,750) (372,192)
Net repayment under banking facilities ................................ (1,180,565) (528,414) (1,254,981)
---------- ---------- ----------
Net cash used in financing activities ................................. (1,657,826) (1,294,420) (1,892,619)
---------- ---------- ----------
Effect of foreign exchange rate changes on cash ....................... 23,457 (4,519) (2,688)
---------- ---------- ----------
Net (decrease)/increase in cash ....................................... (76,864) 359,307 (177,007)
Cash and cash equivalents, beginning of year .......................... 166,011 89,147 448,454
---------- ---------- ----------
89,147 448,454 271,447
---------- ---------- ----------
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest paid, net of amounts capitalized ............................ 470,655 457,838 420,536
Income tax paid, net of refund ....................................... 50,383 (33,818) (21,202)
</TABLE>
See notes to these consolidated financial statements
F-6
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
1 Description of business and significant accounting policies
Bonso Electronics International Inc. ("the Company") and its subsidiaries
are engaged in the designing, manufacturing and selling of a comprehensive
line of electronic scales and weighing instruments, electronic consumer
products and health care 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 provisions made against inventories and trade receivables. Actual
results could differ from those estimates.
The significant accounting policies are as follows:
(a) Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its foreign subsidiaries (hereinafter collectively referred to as the
"Group"). All significant intercompany accounts and transactions are
eliminated.
(b) Cash and cash equivalents
Cash and cash equivalents are short-term, highly liquid investments with
original maturities of three months or less. Cash equivalents are stated at
cost, which approximates fair value because of the short term maturity of
these instruments.
(c) Inventories
Inventories are stated at the lower of cost or net realizable value with
cost determined on a first-in, first-out basis. Net realizable value is the
price at which inventories can be sold in the normal course of business
after allowing for the costs of completion and disposal.
(d) Revenue recognition
Revenue is recognized when the products are shipped to customers.
(e) Property, plant and equipment
(i) Property, plant and equipment are stated at cost. Leasehold land and
buildings are amortized on a straight-line basis over 15 to 50 years,
representing the shorter of the remaining term of the lease or the
expected useful life to the Group.
(ii) Construction-in-progress represents factories and office buildings
under construction and is stated at cost. Cost includes the costs of
construction and interest charges arising from borrowings used to
finance these assets during the period of construction.
Construction-in-progress is not depreciated during the period of
construction.
F-7
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
1 Description of business and significant accounting policies (cont'd)
(e) Property, plant and equipment (cont'd)
(iii)Other fixed assets are carried at cost and depreciated using the
straight-line method over their expected useful lives to the Group.
The principal annual rates used for this purpose are:
Plant and machinery - 14% to 33.3%
Molds - 20%
Furniture, fixtures and equipment - 20%
Motor vehicles - 20%
(iv) The cost of major improvements and betterments is capitalized, whereas
the cost of maintenance and repairs is expensed in the year incurred.
(v) Any gain or loss on disposal is included in the Consolidated
Statements of Comprehensive Income.
(f) Research and development costs
Research and development costs are charged to expense as incurred.
(g) Advertising
Advertising costs are expensed as incurred and are included within selling
expenses.
Total advertising costs incurred for the years ended March 31, 1997, 1998
and 1999 amounted to $22,315 and $9,078 and $43,424 respectively.
(h) Deferred income taxes
Amounts in the consolidated financial statements related to income taxes
are calculated using the principles of Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes". SFAS No. 109
requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax assets
and liabilities are determined based on the temporary differences between
the financial reporting basis and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are
expected to reverse. Future tax benefits, such as net operating loss carry
forwards, are recognized to the extent that realization of such benefits is
more likely than not to occur.
(i) Capitalization of interest costs
Interest attributable to borrowings used to finance the construction of
factories and office buildings is capitalized as an additional cost of the
related assets. Interest is capitalized by applying the weighted average
interest rate on borrowings outstanding during the year or, where
applicable, the interest rate related to specific borrowings, to the
average amount of the accumulated expenditures for the assets during the
period. Capitalization of interest ceases when the property is ready for
its intended use.
F-8
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
1 Description of business and significant accounting policies (cont'd)
(j) Foreign currency translations
(i) The functional currency of the Company and one of its Hong Kong
subsidiaries is the United States dollar and the functional currency
of the other Hong Kong subsidiaries is the Hong Kong dollar. The
functional currency of the Company's subsidiary in the Peoples'
Republic of China (the "PRC") is the Renminbi, the national currency
of the PRC. The functional currency of the Company's subsidiary in
Canada, which was liquidated in 1998, is the Canadian dollar.
(ii) The financial statements of foreign subsidiaries where the U.S. dollar
is the functional currency and which have certain transactions
denominated in non-U.S. dollar currencies are remeasured as if the
functional currency were the U.S. dollar. The remeasurement of local
currencies into U.S. dollars creates translation adjustments which are
included in net income.
(iii)The financial statements of foreign subsidiaries, where the local
currency is the functional currency, are translated into U.S. dollars
using exchange rates in effect at period end for assets and
liabilities and average exchange rates during each reporting period
for statement of income. Adjustments resulting from translation of
financial statements are reflected as a separate component of
shareholders' equity.
(k) Adoption of new accounting standards
The Group adopted the provisions of SFAS No. 130, "Reporting Comprehensive
Income". This statement establishes guidelines for the reporting and
display of comprehensive income and its components (revenues, expenses,
gains and losses) in a full set of general-purpose financial statements. It
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements; it does not address issues of recognition or measurement. The
primary element of comprehensive income applicable to the Group is the
foreign currency cumulative translation adjustment. The Group adopted this
standard from December 15, 1998. The comparative figures have been
restated.
The Group adopted the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". This statement
establishes guidelines for the way that public business enterprises report
information about operating segments in financial statements. This
statement also establishes guidelines for related disclosures about
products and services, geographic areas, and major customers. The Group
adopted this standard from December 15, 1998.
F-9
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
2 Allowance for doubtful accounts
Changes in the allowance for doubtful accounts consist of:
1997 1998 1999
---- ---- ----
$ $ $
Balance, April 1 ....................... 52,919 99,856 33,333
Additions charged to expense ........... 46,937 -- 6,026
Write-off .............................. -- (26,126) --
Provision written back ................. -- (40,397) --
------- ------- -------
Balance, March 31 ...................... 99,856 33,333 39,359
------- ------- -------
3 Inventories
(a) The components of inventories are as follows:
March 31
--------------------------
1998 1999
---- ----
$ $
Raw materials ...................... 4,288,182 3,601,695
Work in progress ................... 849,343 841,008
Finished goods ..................... 1,096,799 450,546
---------- ----------
6,234,324 4,893,249
---------- ----------
Provisions ......................... (267,624) (195,321)
---------- ----------
5,966,700 4,697,928
---------- ----------
(b) Changes in the inventories provisions consist of the following:
1997 1998 1999
---- ---- ----
$ $ $
Balance, April 1 ................... 49,014 146,530 267,624
Additions charged to expense ....... 131,516 121,094 --
Write-back ......................... (34,000) -- (72,303)
-------- -------- --------
Balance, March 31 .................. 146,530 267,624 195,321
-------- -------- --------
F-10
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
4 Long-term debt
Long-term debt denominated in Hong Kong dollars consists of the following:
March 31
----------------
1998 1999
---- ----
$ $
Loan payable to a bank at HIBOR plus 2.25% per annum
(8.5% as of March 31, 1998) ............................. 307,692 --
Loan payable to a property developer at 14% per annum ... -- 131,786
Less: current portion ................................... (307,692) (111,494)
-------- --------
Long-term debt, less current maturities .................. -- 20,292
-------- --------
5 Taxation
(a) The companies are subject to tax on an entity basis on income arising in or
derived from Hong Kong and the PRC. The current rates of taxation of the
subsidiaries operating in Hong Kong and Shenzhen in the PRC are 16% and
15%, respectively. The Group is not subject to income taxes in the British
Virgin Islands.
(b) Pursuant to the relevant income tax laws in the PRC, Bonso Electronics
(Shenzhen) Co., Ltd, a wholly owned subsidiary of the Company, is fully
exempt from PRC state income tax for two years starting from the first
profit-making year followed by a 50% reduction over the ensuing three
years. Bonso Electronics (Shenzhen) Co., Ltd. was loss-making for the years
ended March 31, 1997, 1998 and 1999.
(c) The components of the income tax benefit are as follows:
Year ended March 31
---------------------------
1997 1998 1999
---- ---- ----
$ $ $
Deferred income tax benefit ................. 65,438 57,117 38,956
Current income tax benefit/(expense) ....... 5,926 (30,000) (2,869)
------- ------- -------
Total income tax benefit .................... 71,364 27,117 36,087
------- ------- -------
F-11
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
5 Taxation (cont'd)
(d) Deferred tax assets are comprised of the following:
March 31
----------------
1998 1999
---- ----
$ $
Deferred tax liabilities
Accelerated depreciation .............. (34,387) (11,807)
Deferred tax assets
Tax loss carry forwards ............... 133,993 127,723
Valuation allowance ................... (61,176) (34,693)
-------- --------
72,817 93,030
-------- --------
Other ................................. 35,088 31,251
-------- --------
107,905 124,281
-------- --------
73,518 112,474
-------- --------
Less: current portion .................. 35,088 31,251
-------- --------
Deferred tax assets, non current portion 38,430 81,223
-------- --------
As of March 31, 1999, the Group had accumulated tax losses amounting to
$798,265 (the tax effect thereon is $127,723) which may be carried forward
and applied to reduce future taxable income which is earned in or derived
from Hong Kong. Realization of deferred tax assets associated with tax loss
carry forwards is dependent upon generating sufficient taxable income prior
to their expiration. A valuation allowance is established against such tax
losses when management believes it is more likely than not that a portion
may be disputed by the tax authorities.
As of March 31, 1999, the Group's accumulated tax losses have no definite
period of expiration.
(e) Changes in the valuation allowance consist of:
1997 1998 1999
---- ---- ----
$ $ $
Balance, April 1 ........................ 89,112 147,716 61,176
Additions/(reductions) charged/(credited)
to income tax expense .................. 58,604 55,082 (4,630)
Release of valuation allowance upon:
- liquidation of subsidiary ............ -- (62,089) --
- approval of losses by tax authorities -- (77,621) (21,853)
Effect of change in tax rate ............ -- (1,912) --
-------- -------- --------
Balance, March 31 ....................... 147,716 61,176 34,693
-------- -------- --------
F-12
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
5 Taxation (cont'd)
(f) The actual income tax benefit attributable to earnings for the years ended
March 31, 1997, 1998 and 1999 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:
<TABLE>
<CAPTION>
Year ended March 31
-------------------------------
1997 1998 1999
---- ---- ----
$ $ $
<S> <C> <C> <C>
Hong Kong statutory tax rate ............... 16.5% 16.5% 16.0%
Income tax (expense)/credit at the Hong Kong
statutory tax rate ........................ (78,412) (370,842) 3,573
Offshore profit not subject to income tax .. 181,409 381,167 40,477
Valuation allowance on tax loss ............ (58,604) 22,539 26,483
Over/(under)provision for Hong Kong tax in
prior years ............................... 5,926 10,246 (22,064)
Other ...................................... 21,045 (15,993) (12,382)
-------- -------- --------
Total income tax benefit ................... 71,364 27,117 36,087
-------- -------- --------
</TABLE>
F-13
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
6 Leases
(a) Capital leases
Motor vehicles and plant and machinery include the following amounts for
capitalized leases:
Motor vehicles Plant and machinery
March 31 March 31
---------------- ----------------
1998 1999 1998 1999
---- ---- ---- ----
$ $ $ $
Cost ......................... 45,835 45,835 1,397,129 1,495,847
Less: accumulated amortization 7,639 16,806 344,684 643,041
--------- --------- --------- ---------
38,196 29,029 1,052,445 852,806
--------- --------- --------- ---------
During the years ended March 31, 1997, 1998 and 1999, the Group entered
into additional capital lease obligations amounting to $880,261, $143,471
and $78,974 respectively.
Future minimum payments for capital leases as of March 31, 1999 with an
initial term of more than one year are as follows:
$
2000 ........................................................ 326,686
2001 ........................................................ 13,812
-------
Total minimum lease payments ................................ 340,498
Less: amount representing interest .......................... 46,478
-------
Present value of net minimum lease payments (including
current portion of $271,915, as of March 31, 1999) ......... 294,020
-------
(b) Operating leases
As of March 31, 1999, future minimum lease commitments in respect of
noncancellable operating leases for office premises and staff quarters in
Hong Kong and the PRC are $46,795, payable in the year ending March 31,
2000.
Rent expense for all operating leases amounted to $279,311, $196,622 and
$166,824 for the years ended March 31, 1997, 1998 and 1999, respectively.
F-14
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
7 Banking facilities
As of March 31, 1999, the Group had general banking facilities for bank
overdrafts, notes payable, short-term loans and long-term debt. The
facilities are interchangeable with total amounts available of $6,217,949
(1998: $6,948,717), including facilities in respect of letters of credit of
$1,410,257 (1998: $1,282,051). All general banking facilities granted to
the Group are denominated in Hong Kong dollars.
The Group's general banking facilities, expressed in United States Dollars,
are further analyzed as follows:
<TABLE>
<CAPTION>
Amount available Amount utilized Terms of banking facilities as of
March 31 March 31 March 31, 1998
---------------- ----------------- ---------------------------
1998 1999 1998 1999 Interest Repayment
---- ---- ---- ---- rate terms
$ $ $ $ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Trade financing facilities:
Notes payable ....... 3,635,726 2,771,089 2,260,384 581,349 Prime rate Repayable in
to Prime rate full within
plus 0.5% or four months
HIBOR plus
2%
Short-term loans .... 723,248 1,075,064 338,632 720,129 Prime rate Repayable in
to Prime rate full within
plus 0.5% or three months
HIBOR plus
2%
Letters of credit .... 1,282,051 1,410,257 502,270 114,601 Nil Nil
Other facilities:
Bank overdrafts ...... 897,436 961,539 600,721 643,278 Prime rate Repayable
plus 0.25% on demand
to Prime rate
plus 1.5%
Long-term debt, ...... 410,256 -- 307,692 -- HIBOR Nil
including current ... plus 2.25%
maturities (Note 4)
--------- --------- ---------- ------------
6,948,717 6,217,949 4,009,699 2,059,357
--------- --------- ---------- ------------
</TABLE>
The Prime rate and HIBOR rate were 8.75% and 5.63%, respectively, as of
March 31, 1999. The Prime rate is determined by the Hong Kong Bankers
Association and is subject to revision from time to time.
F-15
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
7 Banking facilities (cont'd)
The banking facilities are collateralized by the following:
(a) a legal charge over a leasehold property of the Group with net book value
of $1,241,712 (1998: $1,269,917); and
(b) a bank guarantee of $150,000 (1998: $150,000) and restricted cash deposits
of $1,011,688 (1998: $952,267). The restricted cash deposits have original
maturities of less than three months.
The weighted average interest rate of short-term borrowings of the Group is
as follows:
Year ended March 31
-------------------
1998 1999
---- ----
Bank overdrafts ............................... 9.5% 10.2%
Notes payable ................................. 9.4% 9.5%
Short-term loans .............................. 9.4% 9.5%
8 Related party transactions
(a) The Group paid emoluments, commissions and/or consultancy fees to their
directors as follows:
<TABLE>
<CAPTION>
Year ended Mr So Hung Gun,
March 31 Anthony Mr So Cham Some Mr Ray Mehra Mr Chung Kim Wah
-------- -------------- --------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
1997 $443,590 $ 66,410 $ 21,986 $115,226(ii)
1998 $500,560 $ 66,410 $ 11,000 $140,175(ii)
1999 $441,538 $ 13,000 -- $113,589(ii)
Mr George Ms Pang Kit
Mr Luk Kam Sun Mr Fok Woo Ping O'Leary Teng, Cathy
-------------- --------------- --------- -----------
1997 $100,564 $ 12,000 $ 52,605(i) Nil
1998 $106,923 Nil $354,835(i) $ 24,029
1999 $ 91,154 Nil $115,342(i) $ 90,394
</TABLE>
(i) This represented commissions paid to Mr George O'Leary.
(ii) Included in the emoluments is a housing allowance for $38,462
payable to a company in which Mr Chung Kim Wah has a beneficial
interest for each of the three years in the period ended March
31, 1999.
F-16
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
8 Related party transactions (cont'd)
(b) Promissory note receivable from shareholder
On March 27, 1998, Advantage List & Marketing Corporation ("ALMC")
subscribed 200,000 shares of common stock of the Company at a price of
$6.75 per share which represented the fair market value at the date of
subscription, in exchange for ALMC's promissory note of $1,470,000. On the
same date, ALMC entered into a pledge agreement simultaneously under which
ALMC agreed to pledge the common stock to the Company as security for the
payment of the promissory note. The promissory note is with full recourse,
interest free and shall be fully repayable on or before September 27, 1999.
On September 17, 1998, a total of 200,000 shares of common stock were
issued and the shares were held by the Company as security for payment of
the promissory note. The promissory note was recorded at its discounted
value of $1,350,000. Interest of $80,000 accrued thereon in the year ended
March 31, 1999 has been included in additional paid in capital.
9 Provident fund plan
(a) With effect from January 1, 1988, Bonso Electronics Limited ("BEL"), a
wholly-owned foreign subsidiary of the Company, started a provident fund
plan (the "Plan") with a major international assurance company to provide
life insurance and retirement benefits for its employees. All permanent
full time employees, excluding factory workers, are eligible to join the
provident fund plan.
(b) Members of the Plan are required to contribute 5% of their monthly salary.
The contribution by BEL is as follows:
Years of service % of salary as BEL's contribution
---------------- ---------------------------------
Less than 5 years 5.0%
5 to 10 years 7.5%
More than 10 years 10.0%
(c) At normal retirement age, death or ill health, the member shall be entitled
to receive from the Plan a lump sum equal to the total of the member's and
BEL's contributions plus a return on their investment. On resignation prior
to normal retirement age, a member shall be entitled to receive from the
Plan a lump sum equal to the member's contributions plus a percentage of
the employer's balance determined in accordance with a predetermined set
scale.
(d) BEL's contributions to the Plan for the years ended March 31, 1997, 1998
and 1999 amounted to $54,924, $45,227 and $54,046 respectively.
10 Commitments and contingencies
As of March 31, 1999, the Group had contingent liabilities to banks for
outstanding letters of credit of $114,601 (1998: $502,270).
11 Research and development expenses
Included in the research and development expenses for the year ended March
31, 1999 was $392,454 incurred in connection with a telephone project.
F-17
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
12 Earnings per share
Year ended March 31
---------------------------
1997 1998 1999
---- ---- ----
$ $ $
Income available to common
shareholders: ............................ 546,589 2,274,645 13,754
Weighted average shares outstanding ....... 2,825,949 2,829,448 3,079,219
Incremental shares from assumed exercise
of:
Warrants ................................ -- 25,562 166,024
Stock options ........................... 20,095 279,362 429,060
Dilutive potential common shares .......... 20,095 304,924 595,084
--------- --------- ---------
Diluted weighted average shares ........... 2,846,044 3,134,372 3,674,303
--------- --------- ---------
Basic earnings per share .................. 19.34 cents 80.39 cents 0.45 cents
Diluted earnings per share ................ 19.21 cents 72.57 cents 0.37 cents
Earnings per share are computed based on the weighted average number of
common shares and, as appropriate, dilutive common stock equivalents
outstanding for the period and the related income amount.
Warrants to purchase 16,667 shares of common stock at $6.00 per share were
outstanding for the fiscal years ended March 31, 1997 but were not included
in the calculation of earnings per share because the warrants' exercise
price was greater than the market price of the Company's common stock. The
warrants were exercised during the year ended March 31, 1998.
Warrants to purchase 110,000 shares of common stock at $9.1875 per share
were outstanding during the fiscal years ended March 31, 1997, 1998 but
were not included in the calculation of diluted earnings per share because
the warrants' exercise price was greater than the market price of the
Company's common stock. The warrants, which expire on December 14, 1999,
were still outstanding as of March 31, 1999.
Warrants to purchase 2,200,000 shares of common stock at $7.35 per share
were outstanding during the fiscal years ended March 31, 1997 and 1998 but
were not included in the calculation of diluted earnings per share during
the year ended March 31, 1997 because the warrants' exercise price was
greater than the market price of the Company's common stock. During the
year ended March 31, 1999, 25,597 warrants were exercised by the public
shareholders to purchase 25,597 shares of common stock of the Company.
Warrants to purchase 2,174,403 shares of common stock at $7.35 per share,
which expire on December 14, 1999, were still outstanding as of March 31,
1999.
F-18
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
13 Minority interests
In April 1993, the Group, together with a Chinese partner, formed and
invested in a joint venture company in the PRC, Shenzhen Bonso Electronics
Limited ("SBEL"), owned as to 60% by the Group and 40% by the Chinese
partner. According to the joint venture agreement, the registered share
capital of SBEL was $3,205,128 (HK$25 million); the Group and the Chinese
partner could appoint three and two directors, respectively, to the board
of SBEL. The Group effectively controlled all major financial and operating
policy decisions of SBEL. Accordingly, this joint venture company was
consolidated.
In accordance with an agreement between the Group and the Chinese partner,
SBEL was liquidated on October 31, 1996. The land and buildings originally
contributed to the joint venture by the Chinese partner reverted to same
and all other assets and liabilities including the plant and machinery were
taken up by the Group. During the year ended March 31, 1996, the directors
estimated that a provision for permanent diminution in value of SBEL
amounting to $152,480 was necessary and accordingly a provision for this
amount was recorded. During the year ended March 31, 1997, upon the
liquidation of SBEL, a gain of $159,654 was recognized by the Group of
which $152,480 represents the reversal of the provision for permanent
diminution in value.
14 Stock option plan
(a) In October 1996, the Board of Directors approved the 1996 Stock Option Plan
and 1996 Non-Employee Directors' Stock Option Plan. Under the 1996 Stock
Option Plan, the Company may grant options of common stock to certain
employees and directors of the Company for a maximum of 400,000 shares. The
1996 Stock Option Plan is administered by a committee appointed by the
Board of Directors which determines the terms of options granted, including
the exercise price, the option periods and the number of shares to be
subject to each option. The exercise price of options granted under the
1996 Stock Option Plan may be less than the fair market value of the common
shares on the date of grant. The maximum term of options granted under the
1996 Stock Option Plan is 10 years. The right to acquire the common shares
is not assignable except for certain conditions stipulated in the 1996
Stock Option Plan. In January 1997, the Board of Directors delegated to Mr
So Hung Gun, Anthony, the authority to issue options to employees and
directors of the Company for an additional 25,000 shares.
In January 1997, the Company granted options to three directors to purchase
an aggregate of 375,000 shares of common stock of the Company at an
exercise price of $2.00 per share, which was equal to the market value on
the date of grant, in accordance with the 1996 Stock Option Plan. The
options shall expire on January 31, 2007 and can be exercised at any time
immediately after granting.
In January 1998, the Company granted options to an employee to purchase an
aggregate of 25,000 shares of common stock of the Company at an exercise
price of $6.20 per share which is greater than the market value on the date
of grant, in accordance with the 1996 Stock Option Plan. The options shall
expire on January 1, 2008 and can be exercised at any time immediately
after granting.
No options have been exercised during the years ended March 31, 1998 and
1999.
F-19
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
14 Stock option plan (cont'd)
(a) (cont'd)
The stock options outstanding in respect of the 1996 Stock Option Plan as
of March 31, 1999 is summarized as follows:
Average per share
--------------------
Number Exercise Market
of shares price price
Balance, March 31, 1997 ........................ 375,000 $2.00 $2.00
Grant at exercise price greater than the
market value of the common shares ............. 25,000 $6.20 $6.13
------- ----- -----
Balance, March 31, 1998 and 1999 ............... 400,000 $2.26 $2.26
------- ----- -----
Under the 1996 Non-Employee Directors' Stock Option Plan, the non-employee
directors are automatically granted stock options on the third business day
following the day of each annual general meeting of the Company to purchase
an aggregate of 100,000 shares of common stock. The exercise price of all
options granted under the 1996 Non-Employee Directors' Stock Option Plan
shall be one hundred percent of the fair market value per share of the
common shares on the date of grant. The maximum term of options granted
under the 1996 Non-Employee Directors' Stock Option Plan is 10 years. No
stock option may be exercised during the first six months of its term
except for certain conditions provided in the 1996 Non-Employee Directors'
Stock Option Plan. The right to acquire the common shares is not assignable
except for certain conditions stipulated in the 1996 Non-Employee
Directors' Stock Option Plan.
In October 1996, the Company issued options to three non-employee directors
in accordance with the 1996 Non-Employee Directors' Stock Option Plan to
purchase an aggregate of 30,000 shares of common stock of the Company at an
exercise price of $2.25 per share and the options shall expire October 16,
2006 and can be exercised at any time immediately after granting.
In September 1997, the Company issued options to four non-employee
directors in accordance with the 1996 Non-Employee Directors' Stock Option
Plan to purchase an aggregate of 40,000 shares of common stock of the
Company at an exercise price of $5.06 per share and the options shall
expire on September 8, 2007 and can be exercised at any time immediately
after granting.
No annual general meeting was held by the Company for the year 1998 and
therefore no stock option was granted in accordance with the 1996
Non-Employee Directors' Stock Option Plan during the year ended March 31,
1999.
No options have been exercised during the year ended March 31, 1998 and
10,000 stock options were exercised to purchase 10,000 common stock of the
Company at an exercise price of $2.25 per share during the year ended 31,
1999.
F-20
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
14 Stock option plan (cont'd)
(a) (cont'd)
The stock options activity in respect of the 1996 Non-Employee Directors'
Stock Option Plan as of March 31, 1999 is summarized as follows:
Average per share
-----------------
Number Exercise Market
of shares price price
Balance, March 31, 1997 ....................... 30,000 $2.25 $2.25
Grant at exercise price equal to the market
value of the common shares ................... 40,000 $5.06 $5.06
------- ----- -----
Balance, March 31, 1998 ....................... 70,000 $3.86 $3.86
Exercised during the year ..................... (10,000) $2.25 $2.25
------- ----- -----
Balance, March 31, 1999 ....................... 60,000 $4.12 $4.12
------- ----- -----
(b) In January 1997, the Company granted options to three non-employee
directors to purchase an aggregate of 100,000 shares of common stock of the
Company. The exercise price is $2.00 per share, which was equal to the
market value of the Company's common stock on the date of grant. The
options shall expire on January 31, 2007 and can be exercised at any time
immediately after granting.
No options have been exercised during the years ended March 31, 1997 and
1998, and 55,000 options were exercised to purchase 55,000 common stock of
the Company at an exercise price of $2.00 per share during the year ended
March 31, 1999.
The stock options summary as of March 31, 1999 is summarised as follows:
Average per share
------------------
Number Exercise Market
of shares price price
Balance, March 31, 1997 ...................... -- -- --
Grant at exercise price equal to the market
value of the common shares .................. 100,000 $2.00 $2.00
-------- ----- -----
Balance, March 31, 1998 ...................... 100,000 $2.00 $2.00
Exercised during the year .................... (55,000) $2.00 $2.00
-------- ----- -----
Balance, March 31, 1999 ...................... 45,000 $2.00 $2.00
-------- ----- -----
F-21
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
14 Stock option plan (cont'd)
At various times in January 1998, the Company issued options to the
directors and an employee of the Company to purchase an aggregate of
195,000 shares of common stock of the Company at an exercise price of $6.20
per share. The options shall expire in January 2008 and can be exercised at
any time immediately after granting. The exercise prices of these options
were equal to or greater than the fair market value at the time of grant.
No options have been exercised during the years ended March 31, 1998 and
1999.
In October 1998, the Company issued options to the directors, non-employee
directors and certain employees of the Company to purchase an aggregate of
430,000 shares of common stock of the Company at an exercise price of $3.60
to $3.70. The options shall expire in October 2008 and can be exercised at
any time immediately after granting. The exercise prices of these options
were greater than the fair market value at the time of grant. No options
have been exercised during the year ended March 31, 1999.
(e) The following table summarizes the information about stock options
outstanding at March 31, 1999:
Number Exercisable
outstanding at Average life shares at
Exercise price March 31, 1999 (years) March 31, 1999
-------------- -------------- ------------ --------------
$2.00 420,000 7.8 420,000
$2.25 20,000 7.5 20,000
$3.60 415,000 9.5 415,000
$3.70 15,000 9.5 15,000
$5.06 40,000 8.4 40,000
$6.20 220,000 8.8 220,000
--------- --- ---------
$2.00 to $6.20 1,130,000 8.7 1,130,000
--------- --- ---------
(f) Included in the options outstanding as of March 31, 1999 were 10,000 and
63,000 units held by Mr Ray Mehra and Mr So Cham Some, respectively, both
of whom have resigned as directors of the Company on January 2, 1998 and
April 30, 1998, respectively.
F-22
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
14 Stock option plan (cont'd)
(g) The Company applies Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its employee stock options. Under APB Opinion No. 25,
because the exercise price of all the options issued by the Company equals
or is higher than the market price of the underlying stock on the date of
grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123 "Accounting for Stock-Based Compensation", and has
been determined as if the Company had accounted for its employee stock
options under the fair value method of SFAS No. 123. The weighted average
fair value of options granted during the years ended March 31, 1998 and
1999 were $820,200 and $2,503,363, respectively. The fair value for these
options was estimated at the date of grant using a Black-Scholes Option
Valuation model with the following weighted-average assumptions for the
year ended March 31, 1999: risk-free interest rates of 5.48% to 5.49%; no
dividend yield; volatility factor of the expected market price of the
Company's common share of 81.20%; and a weighted-average expected life of
the option of ten years.
For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Group
pro forma information follows:
1998 1999
---- ----
$ $
Net income
As reported ........................... 2,274,645 13,754
Pro forma ............................. 1,454,445 (2,489,609)
Basis earnings/(losses) per share
As reported ........................... 80.39 cents 0.45 cents
Pro forma ............................. 51.40 cents (80.85) cents
Diluted earnings/(losses) per share
As reported ........................... 72.57 cents 0.37 cents
Pro forma ............................. 46.40 cents (67.76) cents
Because compensation expense associated with an award is recognized over
the vesting period, the initial impact on pro forma net income may not be
representative of compensation expense in future years, when the effect of
the amortization of multiple awards would be reflected in the income
statement.
F-23
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
15 Warrants
In 1994, the Company issued 16,667 warrants under a loan agreement to the
lender to purchase common shares of the Company at $6.00 per share. No
warrants were exercised during the year ended March 31, 1997. In December
1997, 2,613 shares of common stock were issued at $7.11 per share, which
represented the fair market value at the date of issue, upon the exercise
of all the warrants on a cashless basis.
As a result of the Company's second public offering in December 1994, the
Company issued 2,200,000 five-year warrants to its public shareholders.
Each warrant entitles the holder thereof to purchase one share of common
stock of the Company at $7.35 per share. The warrants expire on December
14, 1999. The warrants are redeemable by the Company at $0.05 per warrant
upon 30 to 45 days notice at any time after December 14, 1995, or such
earlier date as the representatives of the underwriters may determine, if
the closing price per share of common stock of the Company for 20
consecutive trading days within the 30-day period prior to the date of
notice of redemption is given equals or exceeds $8.575 per share. No
warrants were exercised or redeemed during the years ended March 31, 1997
and 1998. A total of 25,597 warrants were exercised to purchase 25,597
shares of common stock of the Company at $7.35 per share during the year
ended March 31, 1999.
In conjunction with the second public offering, the Company issued warrants
to the representatives of the underwriters (the "Representatives'
Warrants") to purchase from the Company up to an aggregate of 110,000 units
at an exercise price of $9.1875 per unit; each unit consists of one share
of common stock and two five-year warrants of the Company. The
Representatives' Warrants are exercisable for a period of three years
commencing December 15, 1996. Upon any transfer to a person other than an
officer, shareholder or director of the representatives of the
underwriters, the transferred five-year warrants must be exercised
immediately or they will lapse. No warrants have been transferred during
the years ended March 31, 1997, 1998 and 1999.
F-24
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
16 Business segment information
(a) The Group's operations have been classified into three business segments:
scales, health care products and other. Summarized financial information by
business segment for 1997, 1998 and 1999 is as follows:
<TABLE>
<CAPTION>
Identifiable Depreciation
Net Operating assets as of and Capital
sales profit March 31 amortization expenditure
----- --------- ------------ ------------ -----------
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
1999
Scales .................................. 10,306,549 3,042,936 12,098,180 1,015,272 132,395
Health care products .................... 1,956,940 55,066 212,450 17,829 2,325
Other ................................... 782,776 532,353 2,053,884 172,361 22,476
---------- ---------- ---------- ---------- ----------
Total operating segments ................ 13,046,265 3,630,355 14,364,514 1,205,462 157,196
Corporate ............................... -- (3,386,184) 4,295,770 179,147 1,442,324
---------- ---------- ---------- ---------- ----------
Group ................................... 13,046,265 244,171 18,660,284 1,384,609 1,599,520
---------- ---------- ---------- ---------- ----------
1998
Scales .................................. 18,260,994 5,234,759 14,604,822 1,110,023 1,280,219
Health care products .................... 3,083,025 73,197 204,218 15,521 17,901
Other ................................... 2,371,557 534,778 1,492,015 113,399 130,786
---------- ---------- ---------- ---------- ----------
Total operating segments ................ 23,715,576 5,842,734 16,301,055 1,238,943 1,428,906
Corporate ............................... -- (3,488,655) 4,345,508 186,165 271,834
---------- ---------- ---------- ---------- ----------
Group ................................... 23,715,576 2,354,079 20,646,563 1,425,108 1,700,740
---------- ---------- ---------- ---------- ----------
1997
Scales .................................. 11,892,313 3,188,072 13,369,205 656,807 4,534,113
Health care products .................... 2,718,243 66,246 277,802 13,648 94,216
Other ................................... 2,378,463 720,500 3,021,421 148,438 1,024,703
---------- ---------- ---------- ---------- ----------
Total operating segments ................ 16,989,019 3,974,818 16,668,428 818,893 5,653,032
Corporate ............................... -- (3,059,249) 3,847,183 142,038 8,100
---------- ---------- ---------- ---------- ----------
Group ................................... 16,989,019 915,569 20,515,611 960,931 5,661,132
---------- ---------- ---------- ---------- ----------
</TABLE>
Operating profit by segment equals total operating revenues less expenses
which are related to the segment's operating revenues. 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, income
tax recoverable, deferred income tax assets and other identifiable assets
not related specifically to individual segments.
F-25
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
16 Business segment information (cont'd)
(b) The Group primarily operates in Hong Kong and the PRC. The manufacture of
components and their assembly into finished products is carried out in the
PRC. The Hong Kong office is mainly responsible for the purchase of raw
materials, arrangement of shipments and research and development. As the
operations are integrated, it is not practicable to distinguish the sales
and net income derived from the activities in Hong Kong from those in the
PRC.
Identifiable assets by geographical areas are as follows:
1998 1999
---- ----
$ $
Hong Kong .................... 7,469,828 5,314,252
The PRC ...................... 13,176,735 13,346,032
---------- ----------
Total assets ................. 20,646,563 18,660,284
---------- ----------
(c) The following is a summary of net export sales to customers by geographical
area for the years ended March 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
Year ended March 31
---------------------------------------------------------
1997 % 1998 % 1999 %
---- - ---- - ---- -
$ $ $
<S> <C> <C> <C> <C> <C> <C>
United States of
America .......... 6,873,780 40 12,570,427 53 5,609,457 43
Germany ............ 3,994,167 24 6,290,634 27 4,212,958 32
Others ............ 6,121,072 36 4,854,515 20 3,223,850 25
---------- --- ---------- --- ---------- ---
16,989,019 100 23,715,576 100 13,046,265 100
---------- --- ---------- --- ---------- ---
</TABLE>
(d) The details of sales made to customers constituting 10% or more of total
sales of the Group is as follows:
<TABLE>
<CAPTION>
Year ended March 31
-----------------------------------------------------
Business 1997 % 1998 % 1999 %
segment $ $ $
--------- ---- - ---- - ---- -
<S> <C> <C> <C> <C> <C> <C>
Pitney Bowes, Inc. (USA) ............... Scales 3,007,070 18 7,075,338 30 2,011,393 15
Globaltec Corporation (USA) ............ Scales 2,252,184 13 3,721,060 15 1,454,550 11
Werner Dorsch Gmbh & Co. ...............
(Germany) ............................. Scales 1,906,961 11 2,105,307 9 1,998,505 15
Omron Healthcare ....................... Health care
Group ................................. products 1,888,335 11 1,841,427 8 1,358,356 10
--------- --------- ---- ---------- ---- ---------- ----
9,054,550 53 14,743,132 62 6,822,804 51
--------- --------- ---- ---------- ---- ---------- ----
</TABLE>
F-26
<PAGE>
Bonso Electronics International Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
17 Financial instruments
In accordance with SFAS No. 107 "Disclosures about Fair Value of Financial
Instruments", the carrying amounts and fair values of the Group's financial
instruments are as follows:
<TABLE>
<CAPTION>
Carrying amount Fair value
March 31 March 31
-------------------- -----------------
1998 1999 1998 1999
---- ---- ---- ----
$ $ $ $
<S> <C> <C> <C> <C>
Cash and cash equivalents ............ 448,454 271,447 448,454 271,447
Restricted cash deposits ............. 952,267 1,011,688 952,267 1,011,688
Deposits ............................. 447,735 -- 447,735 --
Bank overdrafts ...................... 600,721 643,278 600,721 643,278
Notes payable ........................ 2,260,384 581,349 2,260,384 581,349
Short-term loans ..................... 338,632 720,129 338,632 720,129
Long-term debt ....................... 307,692 131,786 299,215 136,013
Promissory note receivable ........... 1,350,000 1,350,000 1,350,000 1,350,000
--------- --------- --------- ---------
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
(a) Cash and cash equivalents, restricted cash deposits, bank overdrafts, notes
payable and short-term loans - the carrying amount approximates fair value
because of the short maturity of these instruments.
(b) Long term debt - interest rates that are currently available to the Group
for issuance of debt with similar terms and remaining maturities are used
to estimate the fair value of debt issues that are not quoted on an
exchange. Fair value estimates are made at a specific point in time and
based on relevant market information. These estimates are subjective in
nature, involve uncertainties and matters of significant judgement and
therefore cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
(c) Deposits - the carrying amount of refundable deposits approximates fair
value based on the terms of the related contracts.
(d) Promissory note receivable - the fair value of promissory note receivable
approximates the carrying value based on a comparison of interest rate to
current market rate for instruments of similar nature.
All other financial instruments included among current assets and
liabilities are stated at cost which approximates their fair value.
18 Post balance sheet date events
In May 1999, the Group acquired an office premise in Hong Kong at a
consideration of $743,590.
F-27
<PAGE>
<TABLE>
<CAPTION>
BONSO ELECTRONICS INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
(In U.S. Dollars)
September 30 March 31
1999 1999
---- ----
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current Assets :
Cash and cash equivalents ................................... $ 383,747 $ 271,447
Restricted cash deposits .................................... 1,036,513 1,011,688
Trade receivables, net ...................................... 731,725 362,236
Inventories, net ............................................ 3,982,263 4,697,928
Notes receivable ............................................ 173,854 690,449
Deferred income tax assets - current ........................ 31,251 31,251
Other receivables, deposits and
Prepayments ............................................... 285,063 243,231
------------ ------------
Total current assets ...................................... $ 6,624,416 $ 7,308,230
Deferred income tax assets - non current ...................... 81,223 81,223
Net property, plant and equipment ............................. 12,838,475 11,270,831
------------ ------------
Total assets .................................................. $ 19,544,114 $ 18,660,284
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities :
Bank overdrafts ............................................. $ 488,428 $ 643,278
Notes payable ............................................... 1,281,995 581,349
Account payable ............................................. 1,207,127 1,135,910
Accrued charges and deposits ................................ 312,720 516,458
Income taxes payable ........................................ 98,590 11,667
Short-term loans ............................................ 162,182 720,129
Current portion of long-term debt &
capital lease obligations ................................. 420,671 383,409
------------ ------------
Total Current Liabilities ................................. $ 3,971,713 $ 3,992,200
Long term debt and capital lease
Obligations, net of current maturities ..................... 326,923 42,397
Shareholders' equity :
Common stock par value $0.003 per
share authorized 23,333,334 shares
issued and outstanding 2,919,159 shares ..................... 8,753 8,753
Additional paid in capital .................................. 8,855,705 8,935,705
Promissory note receivable from
Shareholder .............................................. -- (1,430,000)
Common stock subscribed ..................................... -- 1,350,000
Retained earnings ........................................... 6,147,494 5,525,958
Accumulated other comprehensive
income ................................................... 233,526 235,271
------------ ------------
$ 15,245,478 $ 14,625,687
------------ ------------
Total Liabilities & Shareholders' equity ...................... $ 19,544,114 $ 18,660,284
============ ============
</TABLE>
See notes to unaudited consolidated financial statements
F-28
<PAGE>
<TABLE>
<CAPTION>
BONSO ELECTRONICS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousand of U.S. Dollars)
(unaudited)
Three months ended Six months ended
September 30 September 30
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales ....................................... 3,515 2,720 7,855 6,946
Cost of Sales ............................... (2,280) (1,948) (5,274) (5,067)
------ ------ ------ ------
Gross Profits ............................... 1,235 772 2,581 1,879
Operating Expenses
Selling Expense ........................... 38 32 90 84
Salary & related cost ..................... 380 346 875 816
Research & development
Expenses .................................. 91 6 98 12
General & administrative
expenses ................................ 424 366 788 705
------ ------ ------ ------
Income from operations ...................... 302 22 730 262
Other income ................................ 80 30 110 60
Foreign exchange Gain/
(Loss) ...................................... 1 15 (6) 37
Interest Expenses ........................... (60) (114) (125) (249)
------ ------ ------ ------
Income before income tax .................... 323 (47) 709 110
Income tax (credit)/charge .................. (87) -- (87) --
------
Net income .................................. 236 (47) 622 110
====== ====== ====== ======
Per share amounts (in dollars) : earnings per share
Basic ..................................... 0.076 (0.0155) 0.20 0.036
Diluted ................................... 0.065 (0.0137) 0.17 0.032
Weighted average shares
Outstanding ............................... 3,115,880 3,034,439 3,115,880 3,034,439
Incremental shares from
Assumed exercise of
Warrants and stock
options ................................... 539,950 396,687 539,950 396,687
Adjusted weighted average
Share ..................................... 3,655,830 3,431,126 3,655,830 3,431,126
</TABLE>
See notes to unaudited consolidated financial statements
F-29
<PAGE>
BONSO ELECTRONICS INTERNATIONAL INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles in the United States
for interim financial information and Item 319 of Regulation S-K. They do not
include all of the information and footnotes required by generally accepted
accounting principles for for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. The results of
operations for the periods presented are not necessarily indicative of the
results to be expected for the full year. The accompanying financial statements
should be read in conjunction with the Company's audited financial statements
for the year ended March 31, 1999, included elsewhere in this Form F-3.
F-30
<PAGE>
PART II
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection with
this registration:
SEC Registration Fees.................................. $ 0(1)
NASD Filing Fees....................................... $ 0(2)
Printing Registration Statement, Prospectus
and Related Documents................................ $25,000(3)
Accounting Fees and Expenses........................... $10,000(3)
Legal Fees and Expenses................................ $75,000(3)
Transfer/Warrant Agent Fees and Expenses............... $ 1,500(3)
Miscellaneous.......................................... $13,500(3)
-------
Total.................................................. $125,000(3)
- --------------------------------
(1) Previously paid.
(2) Exempt under NASD Rule 2710(b)(7)(C)(i) (3) Estimated
Item 15. Indemnification of Directors and Officers.
The Articles of Association of Bonso provide that, subject to British
Virgin Islands law, every director or other officer of Bonso shall be entitled
to be indemnified out of the assets of Bonso against all losses or liabilities
which he may sustain or incur in or about the execution of the duties of his
office or otherwise in relation thereto. No director or other officer shall be
liable for any loss, damage or misfortune which may happen to, or be incurred by
Bonso in the execution of the duties of his office, or in relation thereto.
Item 16. Exhibits.
The following Exhibits are filed as part of this Registration Statement, or
are incorporated by reference to previously filed documents:
Exhibit No. Description
- ---------- -----------
1.1 Selling Agreement between Bonso and H.J. Meyers & Co., Inc. and Cohig
& Associates, Inc. (1)
4.1 Specimen Certificate of Common Stock, $.0001 par value and relevant
portions of Memorandum and Articles of Association of the Registrant,
as amended (2)
5.1 Opinion and consent of Schlueter & Associates, P.C. as to legality of
securities being registered (3)
II-1
<PAGE>
Exhibit No. Description
- ---------- -----------
5.2 Opinion and consent of Harney, Westwood & Riegels, P.O. Box 71, Road
Town, Tortola, British Virgin Islands, as to the legality of
securities being registered (3)
5.3 Opinion and consent of Wong & Fok, Solicitors, Room 2014-15, Hutchison
House, 10 Harcourt Road, Central, Hong Kong, as to certain matters
regarding the Hong Kong subsidiaries and Hong Kong law (3)
5.4 Opinion and consent of Shenzhen Jinyuan Law Firm, 7/F Office Tower,
Shun Hing Square, Di Wang Commercial Centre, Shen Nan Dong Road,
Shenzhen, PRC 518008, as to certain matters regarding thePRC
subsidiary and PRC law (3)
10.1 Lease for real property located at Universal Industrial Centre, 23-25
Shan Mei Street, Fo Tan, Shatin, New Territories, Hong Kong (1)
10.2 English translation of Amendment to Contract for the Use of Land and
Supply of Workers between Bonso and Shenzhen Boaon Fuan Industrial
Company (1)
10.3 Forms of Warrant Solicitation and Warrant Subscription Form
23.1 Consent of PricewaterhouseCoopers
23.2 Consent of Schlueter & Associates, P.C. (included in Exhibit 5.1) (3)
23.3 Consent of Harney, Westwood & Riegels (included in Exhibit 5.2) (3)
23.4 Consent of Wong & Fok, Solicitors (included in Exhibit 5.3) (3)
23.5 Consent of Shenzhen Jinyuan Law Firm (included in Exhibit 5.4) (3)
- --------------------------
(1) This documemnt has been previously filed as an Exhibit to the Registrant's
Registration Statement on Form F-3 (SEC Registration No. 333-9002), and is
hereby incorporated by reference.
(2) This documemnt has been previously filed as Exhibit 4.1 to the Registrant's
Registration Statement on Form F-2 (SEC Registration No. 33-84872), and is
hereby incorporated by reference.
(3) This documemnt has been previously filed as an Exhibit to Post-Effective
Amendment No. 1 to the Registrant's Registration Statement on Form F-3 (SEC
Registration No. 333-9002), and is hereby incorporated by reference.
II-2
<PAGE>
Item 17. Undertakings
With regard to the securities of the Registrant being registered pursuant
to Rule 415 under the Securities Act of 1933, the Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) To file a post-effective amendment to the Registration Statement to
include any financial statements required by Rule 3-19 of Regulation S-X at the
start of any delayed offering or throughout a continuous offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
II-3
<PAGE>
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Hong Kong, on November 18, 1999.
BONSO ELECTRONICS INTERNATIONAL INC.
By: /s/ Anthony So
---------------------------------------------
Anthony So, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: November 18, 1999 /s/ Anthony So
------------------------------------------------
Anthony So, President (Chief Executive Officer),
Secretary, Treasurer (Chief Financial Officer)
and Chairman of the Board of Directors
Date: November 18, 1999 /s/ Kim Wah Chung
------------------------------------------------
Kim Wah Chung, Director
Date: November 18, 1999 /s/ Woo Ping Fok
------------------------------------------------
Woo Ping Fok, Director
Date: November 18, 1999 /s/ Kam Sun Luk
------------------------------------------------
Kam Sun Luk, Director
Date: November 18, 1999 /s/ Cathy Pang
------------------------------------------------
Cathy Pang, Director
SCHLUETER & ASSOCIATES, P.C.
Date: November 18, 1999 /s/ Henry F. Schlueter
------------------------------------------------
Henry F. Schlueter, Authorized Representative in
the United States
II-5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
1.1 Selling Agreement between Bonso and H.J. Meyers & Co., Inc. and Cohig
& Associates, Inc. (1)
4.1 Specimen Certificate of Common Stock, $.0001 par value and relevant
portions of Memorandum and Articles of Association of the Registrant,
as amended (2)
5.1 Opinion and consent of Schlueter & Associates, P.C. as to legality of
securities being registered (3)
5.2 Opinion and consent of Harney, Westwood & Riegels, P.O. Box 71, Road
Town, Tortola, British Virgin Islands, as to the legality of
securities being registered (3)
5.3 Opinion and consent of Wong & Fok, Solicitors, Room 2014-15, Hutchison
House, 10 Harcourt Road, Central, Hong Kong, as to certain matters
regarding the Hong Kong subsidiaries and Hong Kong law (3)
5.4 Opinion and consent of Shenzhen Jinyuan Law Firm, 7/F Office Tower,
Shun Hing Square, Di Wang Commercial Centre, Shen Nan Dong Road,
Shenzhen, PRC 518008, as to certain matters regarding thePRC
subsidiary and PRC law (3)
10.1 Lease for real property located at Universal Industrial Centre, 23-25
Shan Mei Street, Fo Tan, Shatin, New Territories, Hong Kong (1)
10.2 English translation of Amendment to Contract for the Use of Land and
Supply of Workers between Bonso and Shenzhen Boaon Fuan Industrial
Company (1)
10.3 Forms of Warrant Solicitation and Warrant Subscription Form
23.1 Consent of PricewaterhouseCoopers
23.2 Consent of Schlueter & Associates, P.C. (included in Exhibit 5.1) (3)
23.3 Consent of Harney, Westwood & Riegels (included in Exhibit 5.2) (3)
23.4 Consent of Wong & Fok, Solicitors (included in Exhibit 5.3) (3)
23.5 Consent of Shenzhen Jinyuan Law Firm (included in Exhibit 5.4) (3)
- --------------------------
(1) This documemnt has been previously filed as an Exhibit to the Registrant's
Registration Statement on Form F-3 (SEC Registration No. 333-9002), and is
hereby incorporated by reference.
(2) This documemnt has been previously filed as Exhibit 4.1 to the Registrant's
Registration Statement on Form F-2 (SEC Registration No. 33-84872), and is
hereby incorporated by reference.
(3) This documemnt has been previously filed as an Exhibit to Post-Effective
Amendment No. 1 to the Registrant's Registration Statement on Form F-3 (SEC
Registration No. 333-9002), and is hereby incorporated by reference.
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO SELL
NOR A SOLICITATION OF AN OFFER TO BUY THESE SECURITIES.
THE OFFER IS MADE ONLY BY PROSPECTUS.
WARRANT SOLICITATION
BY
BONSO ELECTRONICS INTERNATIONAL INC.
TO OUR WARRANT HOLDERS:
Enclosed herewith is the final prospectus, dated _________, 1999 of Bonso
Electronics International Inc. ("Bonso") relating to a Warrant Solicitation
pursuant to which the holders of Bonso's Warrants may exercise their Warrants
and purchase shares of Common Stock at $7.35 per share.
We are requesting your instructions as to whether your Warrants should be
exercised. THE WARRANTS WILL EXPIRE AT 2:00 P.M. PACIFIC TIME ON JANUARY 31,
2000.
Warrants may be exercised only pursuant to your instructions. You should
carefully review the Prospectus which describes in greater detail the nature of
the Warrant Solicitation and the risks attendant in the exercise of the
Warrants. If you decide to exercise your Warrants, please complete the enclosed
Warrant Subscription Form and return it to U.S. Stock Transfer Corporation, 1745
Gardena Avenue #200, Glendale, California 91204. If you have any questions
concerning the Warrant Solicitation, please call EBI Securities Corporation at
(303) 694-0295; facsimile: (303) 694-3289.
INSTRUCTIONS TO EXERCISE SHOULD BE FORWARDED TO U.S. STOCK TRANSFER
CORPORATION AS PROMPTLY AS POSSIBLE AND MUST BE RECEIVED BY U.S. STOCK TRANSFER
CORPORATION ON OR BEFORE JANUARY 31, 2000.
-----------------------------------
<PAGE>
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO SELL
NOR A SOLICITATION OF AN OFFER TO BUY THESE SECURITIES.
THE OFFER IS MADE ONLY BY PROSPECTUS.
WARRANT SOLICITATION
BY
BONSO ELECTRONICS INTERNATIONAL INC.
TO SECURITIES DEALERS, BANKS AND TRUST COMPANIES:
Enclosed herewith are documents, consisting of the final prospectus dated
_______, 1999 relating to a Warrant Solicitation being conducted by Bonso
Electronics International Inc. ("Bonso") pursuant to which the holders of its
Warrants may exercise their Warrants and purchase shares of Common Stock at
$7.35 per share. We are asking you, as securities dealer, bank or trust company,
to contact your clients for whom you hold Warrants of Bonso Electronics
International Inc., to bring to their attention as promptly as possible the
Warrant Solicitation. The Warrants will expire as of 2:00 p.m. (Pacific Time) on
January 31, 2000.
Bonso will promptly reimburse any holder of record for reasonable expenses
incurred by it in forwarding the enclosed letter and Prospectus to the
beneficial owners of the Warrants.
For your information, we are enclosing herewith copies of the following
material:
1. Prospectus, dated ________, 1999;
2. A letter to be sent to your clients for whose accounts you hold
Warrants; and
3. A Warrant Subscription Form which may be used to exercise the Warrants.
We urge you to contact your clients promptly. Please note that the Warrants
will expire at 2:00 p.m. (Pacific Time) on January 31, 2000.
Additional copies of the enclosed material may be obtained from EBI
Securities Corporation, 6300 South Syracuse Way, Suite 645, Englewood, Colorado
80111. If you have any questions concerning the Warrant Solicitation, please
call EBI Securities Corporation at (303) 694-0295; facsimile: (303) 694-3289.
Very truly yours,
BONSO ELECTRONICS INTERNATIONAL INC.
---------------------------
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE AGENT OF
BONSO ELECTRONICS INTERNATIONAL INC. OR AUTHORIZE YOU TO MAKE ANY STATEMENTS ON
ITS BEHALF WITH RESPECT TO THE ENCLOSED OFFER OTHER THAN THE STATEMENTS
SPECIFICALLY SET FORTH HEREIN OR THEREIN.
<PAGE>
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO SELL
NOR A SOLICITATION OF AN OFFER TO BUY THESE SECURITIES.
THE OFFER IS MADE ONLY BY PROSPECTUS.
WARRANT SOLICITATION
BY
BONSO ELECTRONICS INTERNATIONAL INC.
TO OUR CLIENTS:
Enclosed herewith is the final prospectus, dated ______, 1999 of Bonso
Electronics International Inc. ("Bonso") relating to a Warrant Solicitation
pursuant to which the holders of Bonso's Warrants may exercise their Warrants
and purchase shares of Common Stock at $7.35 per share.
We are requesting your instructions as to whether your Warrants should be
exercised. THE WARRANTS WILL EXPIRE AT 2:00 P.M. PACIFIC TIME ON JANUARY 31,
2000.
Warrants may be exercised by us only pursuant to your instructions. You
should carefully review the Prospectus which describes in greater detail the
nature of the Warrant Solicitation and the risks attendant in the exercise of
the Warrants. If you decide to exercise your Warrants, please complete the
enclosed Warrant Subscription Form and return it to us. We will then exercise
the number of Warrants indicated for exercise on the Warrant Subscription Form
on your behalf.
If you have any questions regarding the means of exercising your Warrants,
please call EBI Securities Corporation at (303) 694-0295; facsimile: (303)
694-3289.
INSTRUCTIONS TO EXERCISE SHOULD BE FORWARDED TO US AS PROMPTLY AS POSSIBLE
AND MUST BE RECEIVED BY THE WARRANT AGENT ON OR BEFORE JANUARY 31, 2000.
-----------------------------------
<PAGE>
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO SELL
NOR A SOLICITATION OF AN OFFER TO BUY THESE SECURITIES.
THE OFFER IS MADE ONLY BY PROSPECTUS.
**
WARRANT SOLICITATION
BY
BONSO ELECTRONICS INTERNATIONAL INC.
TO OUR WARRANT HOLDERS:
Enclosed herewith is the final prospectus, dated _______, 1999 of Bonso
Electronics International Inc. ("Bonso") relating to a Warrant Solicitation
pursuant to which the holders of Bonso's Warrants may exercise their Warrants
and purchase shares of Common Stock at $7.35 per share.
We are requesting your instructions as to whether your Warrants should be
exercised. THE WARRANTS WILL EXPIRE AT 2:00 P.M. PACIFIC TIME ON JANUARY 31,
2000.
Warrants may be exercised only pursuant to your instructions. You should
carefully review the Prospectus which describes in greater detail the nature of
the Warrant Solicitation and the risks attendant in the exercise of the
Warrants. If you decide to exercise your Warrants, please complete the enclosed
Warrant Subscription Form and return it to your broker. If you have any
questions concerning the Warrant Solicitation, please call EBI Securities
Corporation at (303) 694-0295; facsimile: (303) 694-3289.
INSTRUCTIONS TO EXERCISE SHOULD BE FORWARDED TO YOUR BROKER AS PROMPTLY AS
POSSIBLE AND MUST BE RECEIVED BY THE WARRANT AGENT ON OR BEFORE JANUARY 31,
2000.
-----------------------------------
<PAGE>
For Use By Record Holders of Warrants
BONSO ELECTRONICS INTERNATIONAL INC.
WARRANT SUBSCRIPTION FORM
Return to: U.S. STOCK TRANSFER CORPORATION
1745 Gardena Avenue #200
Glendale, California 91204
Telephone: (818) 502-1404
Facsimile: (818) 502-0674
A. To EXERCISE WARRANTS: The undersigned acknowledges receipt and review of the
Prospectus dated _________, 1999 and hereby irrevocably elects to exercise the
following Warrants and to purchase the shares of Common Stock issuable upon the
exercise thereof, as follows:
- --------------------------------------------------------------------------------
EXERCISE OF WARRANTS
(See Instruction 1 of Instructions for Exercise of Warrants)
- --------------------------------------------------------------------------------
EXERCISE OF WARRANTS (See Instruction 1 of Instructions For Exercise
of Warrants)
Name(s) and Address(es) of Registered Owner(s) as shown on Certificate(s)
Exercised
Certificate Number(s) Number of Warrants Exercised* Amount
Enclosed**
Tax Identification or Social Security
Number(s) of present registered owner(s)
if not listed above
NOTE: If additional space is required, attach a separate sheet *
If fewer than all the Warrants which are evidenced by any Certificate listed
above are to be exercised, please indicate in this column the exact number which
are to be exercised. Otherwise, all the Warrants evidenced by such Certificate
will be deemed to have been exercised. ** Payment must be made by certified or
cashier's check payable to the order of "U.S. Stock Transfer Corporation for
Bonso Electronics International Inc." in the total amount of the exercise price.
The exercise price is $7.35 for each Warrant exercised.
FOR USE BY WARRANT AGENT ONLY
WARRANTS
Date Received Number of Warrants Received Number of Warrants Exercised
Amount Received Number of Warrants Returned
Warrant Certificate Number
<PAGE>
SPECIAL REPORT, ISSUANCE AND DELIVERY INSTRUCTIONS
To be Used Only If Issuance or Delivery Is To Be Made
To Other Than the Undersigned
The Certificates for the Common Stock to be issued upon exercise of the
Warrants will be issued to the order of the undersigned and mailed to the
address shown under the signatures on this Warrant Subscription Form unless
otherwise indicated below.
SPECIAL ISSUANCE INSTRUCTIONS ISSUE SHARES AND NEW WARRANT CERTIFICATES TO:
Name______________________________________ (Type or print, use full given name,
initial and last name) ___________________________________________ Social
Security Number Address ___________________________________________ (Number)
(Street) ___________________________________________ (City) (State) (Zip)
SPECIAL DELIVERY INSTRUCTIONS DELIVER SHARES AND NEW WARRANT CERTIFICATES TO:
Name______________________________________ (Type or print, use full given name,
initial and last name) Address ___________________________________________
(Number) (Street) ___________________________________________ (City) (State)
(Zip)
DATE AND SIGN HERE _________________________, ____
------------------------------------------------------
(Signature of Warrant holder)
------------------------------------------------------
(Signature of Warrant holder)
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) or by person(s) authorized to become registered holder(s) by
Certificate(s) and documents transmitted. (See Instruction 2)
Please Print:
Name(s) __________________________________
Address __________________________________
- -----------------------------------------
(City) (State) (Zip)
Telephone Number(s)________________________
(Include Area Code)
<PAGE>
Tax Identification or
Social Security Number_______________________
Signature(s) Guaranteed By:
- -------------------------------------------
(Authorized Signature - See Instruction 2)
INSTRUCTIONS FOR EXERCISE OF WARRANTS
To exercise your Warrants of Bonso Electronics International Inc.
("Bonso"), this Warrant Subscription Form must be properly completed, dated,
signed and delivered, prior to the expiration of the Warrants, together with
your Warrant Certificate and a certified or cashier's check payable in United
States currency to the order of "U.S. Stock Transfer Corporation for Bonso
Electronics International Inc." for the entire exercise price, to the Warrant
Agent at the following address:
U.S. Stock Transfer Corporation
1745 Gardena Avenue #200
Glendale, California 91204
Telephone: (818) 502-1404
Facsimile: (818) 502-0674
The method of delivery is at the option and risk of the holder, but
delivery will be deemed effective only when actually received by the Warrant
Agent. If such delivery is by mail, it is suggested that insured, registered
mail be used.
If the Warrants are not exercised prior to 2:00 p.m. (Pacific Time) on
January 31, 2000, the Warrants will expire unexercised.
Inquiries and requests for assistance may be directed to your broker or
bank, or to EBI Securities Corporation at (303) 694-0295; facsimile: (303)
694-3289. Do not send Warrant Subscription Forms or Warrant Certificates to
Bonso.
1. Description of Warrants
Name. If the Warrant Certificates owned by you are registered in more than
one name on several Warrant Certificates, it will be necessary for you to
complete, sign and submit as many separate Warrant Subscription Forms as there
are different registrations of your Warrants.
Number of Warrants. All the Warrants represented by each of the
Certificates that you list on the Warrant Subscription Form will be deemed to
have been exercised unless you indicate otherwise on the "Exercise of Warrants"
table in the column entitled "Number of Warrants Exercised." If less than all
the Warrants are exercised, a new Certificate for the remainder of the Warrants
will be sent to you. Any Warrants that have not been exercised by 2:00 p.m.
(Pacific Time) on January 31, 2000, will expire as of that time.
Warrant Number. Copy exactly in the indicated boxes the Warrant Number(s)
appearing on the Certificate(s) representing the Warrants you wish to exercise.
<PAGE>
Tax Identification Number. Enter the tax identification or social security
number of the present registered owner(s) of the Warrants being exercised.
2. Signature
If you are the person whose name appears on the Certificate(s) representing
the Warrants that you are exercising, the Purchase Form on the reverse of the
Certificate(s) should be duly executed, or you may sign the Warrant Subscription
Form attached hereto exactly as your name appears on such Certificate(s).
If you are exercising Warrants represented by Certificates on which there
appears a name other than your own, (i) you must sign the Warrant Subscription
Form attached hereto, (ii) the Warrant Certificate must be endorsed by a stock
power signed by the registered owner, and (iii) the signature on the endorsement
or stock power must be guaranteed by an eligible guarantor institution (banks,
stockbrokers, savings and loan associations and credit unions with membership in
an approved signature guarantee Medallion Program), pursuant to S.E.C. Rule
17Ad-15.
Also, if you request in the Warrant Subscription Form that the Common Stock
to which you are entitled be issued in the name of a third party, your signature
on the Warrant Subscription Form must be guaranteed as described above.
In case of joint ownership, all joint owners must sign the Warrant
Subscription Form. Warrant Subscription Forms submitted by trustees, executors,
administrators, guardians, officers of corporations, attorneys-in-fact or others
acting in a fiduciary capacity must be accompanied by evidence satisfactory to
the Warrant Agent and to Bonso as to the signer's authority to act. Additional
evidence of authority may be required by the Warrant Agent or Bonso in their
discretion.
3. Transfer Fees and Taxes
The Warrant Agent imposes a Transfer Fee of $10.00 for each stock
certificate to be issued. Bonso will pay the Transfer Fee for the issuance of
one (1) stock certificate for each Warrant holder. If a Warrant holder desires
more than one stock certificate, the amount of $10 per additional stock
certificate must accompany the Warrant Subscription Form, and may be in the form
of a separate check payable to "U.S. Stock Transfer Corporation" or included in
the exercise price. If adequate funds do not accompany the Warrant Exercise
Form, only that number of stock certificates for which the appropriate Transfer
Fee has been received will be issued. Other than the foregoing, all necessary
transfer taxes, if any, will be paid by Bonso, and no transfer tax stamps need
be affixed to the tendered Warrant Certificates.
4. General Matters
Bonso reserves full discretion to determine whether the documentation with
respect to exercised Warrants is complete and generally to determine all
questions as to exercise, including the date and hour of receipt of an exercise,
the propriety of execution of any document and other questions as to the
eligibility or acceptability of any exercise. Bonso reserves the right to reject
any exercise not in proper form or to waive any irregularities or conditions,
and Bonso's interpretation of the terms and conditions of the Warrant
Solicitation and of the Warrant Exercise Form, including these instructions,
will be final. All improperly exercised Warrants will be returned, unless
irregularities are waived, without cost to the exercising Warrant holder.
<PAGE>
For Use By Street Name Holders of Warrants
BONSO ELECTRONICS INTERNATIONAL INC.
WARRANT SUBSCRIPTION FORM
Please return this Warrant Subscription Form to your Securities Dealer
A. To EXERCISE WARRANTS: The undersigned acknowledges receipt and review of the
Prospectus dated ______, 1999 and hereby irrevocably elects to exercise the
following Warrants and to purchase the shares of Common Stock issuable upon the
exercise thereof, as follows:
- --------------------------------------------------------------------------------
EXERCISE OF WARRANTS
(See Instruction 1 of Instructions for Exercise of Warrants)
- --------------------------------------------------------------------------------
EXERCISE OF WARRANTS (See Instruction 1 of Instructions For Exercise
of Warrants)
Name(s) and Address(es) of Registered Owner(s) as shown on Certificate(s)
Exercised
Certificate Number(s) Number of Warrants Exercised* Amount
Enclosed**
Tax Identification or Social Security
Number(s) of present registered owner(s)
if not listed above
NOTE: If additional space is required, attach a separate sheet *
If fewer than all the Warrants which are evidenced by any Certificate listed
above are to be exercised, please indicate in this column the exact number which
are to be exercised. Otherwise, all the Warrants evidenced by such Certificate
will be deemed to have been exercised.**
<PAGE>
Payment must be made by certified or cashier's check payable to the order
of "U.S. Stock Transfer Corporation for Bonso Electronics International Inc." in
the total amount of the exercise price. The exercise price is $7.35 for each
Warrant exercised.
FOR USE BY WARRANT AGENT ONLY
WARRANTS
Date Received Number of Warrants Received Number of Warrants Exercised
Amount Received Number of Warrants Returned
Warrant Certificate Number
SPECIAL REPORT, ISSUANCE AND DELIVERY INSTRUCTIONS
To be Used Only If Issuance or Delivery Is To Be Made
To Other Than the Undersigned
The Certificates for the Common Stock to be issued upon exercise of the
Warrants will be issued to the order of the undersigned and mailed to the
address shown under the signatures on this Warrant Subscription Form unless
otherwise indicated below.
SPECIAL ISSUANCE INSTRUCTIONS ISSUE SHARES AND NEW WARRANT CERTIFICATES TO:
Name______________________________________ (Type or print, use full given name,
initial and last name) ___________________________________________ Social
Security Number Address ___________________________________________ (Number)
(Street) ___________________________________________ (City) (State) (Zip)
SPECIAL DELIVERY INSTRUCTIONS DELIVER SHARES AND NEW WARRANT CERTIFICATES TO:
Name______________________________________ (Type or print, use full given name,
initial and last name) Address ___________________________________________
(Number) (Street) ___________________________________________ (City) (State)
(Zip)
DATE AND SIGN HERE _________________________,_____
------------------------------------------------------
(Signature of Warrant holder)
------------------------------------------------------
(Signature of Warrant holder)
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) or by person(s) authorized to become registered holder(s) by
Certificate(s) and documents transmitted. (See Instruction 2)
<PAGE>
Please Print:
Name(s) __________________________________
Address __________________________________
- -----------------------------------------
(City) (State) (Zip)
Telephone Number(s)________________________
(Include Area Code)
Tax Identification or
Social Security Number_______________________
Signature(s) Guaranteed By:
- -------------------------------------------
(Authorized Signature - See Instruction 2)
INSTRUCTIONS FOR EXERCISE OF WARRANTS
To exercise your Warrants of Bonso Electronics International Inc.
("Bonso"), this Warrant Subscription Form must be properly completed, dated,
signed and delivered, prior to the expiration of the Warrants, together with
your Warrant Certificate and a certified or cashier's check payable in United
States currency to the order of "U.S. Stock Transfer Corporation for Bonso
Electronics International Inc." for the entire exercise price, to your
Securities Dealer.
The method of delivery is at the option and risk of the holder, but
delivery will be deemed effective only when actually received by the Warrant
Agent. If such delivery is by mail, it is suggested that insured, registered
mail be used.
If the Warrants are not exercised prior to 2:00 p.m. (Pacific Time) on
January 31, 2000, the Warrants will expire unexercised.
Inquiries and requests for assistance may be directed to your broker or
bank, or to EBI Securities Corporation at (303) 694-0295; facsimile: (303)
694-3289. Do not send Warrant Subscription Forms or Warrant Certificates to
Bonso.
1. Description of Warrants
Name. If the Warrant Certificates owned by you are registered in more than
one name on several Warrant Certificates, it will be necessary for you to
complete, sign and submit as many separate Warrant Subscription Forms as there
are different registrations of your Warrants.
Number of Warrants. All the Warrants represented by each of the
Certificates that you list on the Warrant Subscription Form will be deemed to
have been exercised unless you indicate otherwise on the "Exercise of Warrants"
table in the column entitled "Number of Warrants Exercised." If less than all
the Warrants are exercised, a new Certificate for the remainder of the Warrants
will be sent to you. Any Warrants that have not been exercised by 2:00 p.m.
(Pacific Time) on January 31, 2000, will expire as of that time.
<PAGE>
Warrant Number. Copy exactly in the indicated boxes the Warrant Number(s)
appearing on the Certificate(s) representing the Warrants you wish to exercise.
Tax Identification Number. Enter the tax identification or social security
number of the present registered owner(s) of the Warrants being exercised.
2. Signature
If you are the person whose name appears on the Certificate(s) representing
the Warrants that you are exercising, the Purchase Form on the reverse of the
Certificate(s) should be duly executed, or you may sign the Warrant Subscription
Form attached hereto exactly as your name appears on such Certificate(s).
If you are exercising Warrants represented by Certificates on which there
appears a name other than your own, (i) you must sign the Warrant Subscription
Form attached hereto, (ii) the Warrant Certificate must be endorsed by a stock
power signed by the registered owner, and (iii) the signature on the endorsement
or stock power must be guaranteed by an eligible guarantor institution (banks,
stockbrokers, savings and loan associations and credit unions with membership in
an approved signature guarantee Medallion Program), pursuant to S.E.C. Rule
17Ad-15.
Also, if you request in the Warrant Subscription Form that the Common Stock
to which you are entitled be issued in the name of a third party, your signature
on the Warrant Subscription Form must be guaranteed as described above.
In case of joint ownership, all joint owners must sign the Warrant
Subscription Form. Warrant Subscription Forms submitted by trustees, executors,
administrators, guardians, officers of corporations, attorneys-in-fact or others
acting in a fiduciary capacity must be accompanied by evidence satisfactory to
the Warrant Agent and to Bonso as to the signer's authority to act. Additional
evidence of authority may be required by the Warrant Agent or Bonso in their
discretion.
3. Transfer Fees and Taxes
The Warrant Agent imposes a Transfer Fee of $10.00 for each stock
certificate to be issued. Bonso will pay the Transfer Fee for the issuance of
one (1) stock certificate for each Warrant holder. If a Warrant holder desires
more than one stock certificate, the amount of $10 per additional stock
certificate must accompany the Warrant Subscription Form, and may be in the form
of a separate check payable to "U.S. Stock Transfer Corporation" or included in
the exercise price. If adequate funds do not accompany the Warrant Exercise
Form, only that number of stock certificates for which the appropriate Transfer
Fee has been received will be issued. Other than the foregoing, all necessary
transfer taxes, if any, will be paid by Bonso, and no transfer tax stamps need
be affixed to the tendered Warrant Certificates.
<PAGE>
4. General Matters
Bonso reserves full discretion to determine whether the documentation with
respect to exercised Warrants is complete and generally to determine all
questions as to exercise, including the date and hour of receipt of an exercise,
the propriety of execution of any document and other questions as to the
eligibility or acceptability of any exercise. Bonso reserves the right to reject
any exercise not in proper form or to waive any irregularities or conditions,
and Bonso's interpretation of the terms and conditions of the Warrant
Solicitation and of the Warrant Exercise Form, including these instructions,
will be final. All improperly exercised Warrants will be returned, unless
irregularities are waived, without cost to the exercising Warrant holder.
Consent of Independent Public Accountants
We hereby consent to the use in this Registration Statement on Form F-3 of Bonso
Electronics International Inc. of our report dated May 28, 1999 relating to the
financial statements as of March 31, 1999 and 1998 and for each of the three
years in the period ended March 31, 1999, which appear in such Registration
Statement. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
Hong Kong
November 17, 1999
