| (1) | Customer | | 2017 | | 2018 | | 2019 | Customer A | | | 14 | % | | | 31 | % | | | 37 | % | Customer C | | | 13 | % | | | 14 | % | | | 12 | % | Customer B | | | 8 | % | | | 14 | % | | | 10 | % | Customer E | | | 6 | % | | | 9 | % | | | 10 | % | Customer D(1) | | | 45 | % | | | 10 | % | | | – | | | | | | | | | | | | | | |
(1) This customer is no longer purchasing from us as of June 2017. Component Parts and Suppliers
. We purchase over 1,000 different component parts from more than 100 major suppliers and are not dependent upon any single supplier for key components. We purchase components for our products primarily from suppliers in Japan, Taiwan, Hong Kong and China.
The price of oil and other raw materials increased during the fiscal years ended March 31, 2011 and 2012 resulting in an increase of our component part prices. We have taken steps to reduce our exposure to any inability to obtain components by forecasting with an increased buffer rate and placing orders for components earlier to allow for longer delivery lead times. Because of these actions, we do not expect to experience any difficulty in obtaining needed component parts for our products. The price level of raw materials remained stable in the fiscal year ended March 31, 2014, compared to that in the fiscal year ended March 31, 2013, and decreased slightly in each of the fiscal years ended March 31, 2015 and March 31, 2016 compared to each of the immediately previous fiscal years. The price level of certain raw materials increased in the fiscal year ended March 31, 20172018 compared to that in the fiscal year ended March 31, 2016.
2017 and increased in the fiscal year ended March 31, 2019 compared to the fiscal year ended March 31, 2018.Quality Control
Control. We have received ISO 9001:2015 certification from BSI Assurance UK Limited. The ISO 9001:2015 certification was awarded to our subsidiary, Bonso Advanced Technology (Xinxing) Company Limited. ISO 9001 is one of the ISO 9000 series of quality system standards developed by the International Organization for Standardization, a worldwide federation of national standards bodies. ISO 9001 provides a model for quality assurance (and continuous improvement) in product development, manufacturing, installation and servicing that focuses on meeting customer requirements. We have also received certification on the management system for medical devices of ISO13485:2003, which ensures that we have implemented and maintained a quality system for the design and manufacture of medical devices and allows us to develop and manufacture safe and effective medical devices.
The European Union has enacted the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive (“RoHS”). RoHS prohibits the use of certain substances, including lead, in certain products. We believe that we are in compliance with RoHS and have a supply of compliant components from suppliers.
The Company provides to certain customers an additional one to two percent of certain products ordered in lieu of a warranty, which are recognized as cost of sales when these products are shipped to customers from our facility. In addition, certain products sold by the Company are subject to a limited product quality warranty. The Company accrues for estimated incurred but unidentified quality issues based upon historical activity and known quality issues if a loss is probable and can be reasonably estimated. The standard limited warranty period is one to three years. Quality returns, refunds, rebates and discounts are recorded net of sales if they are within the warranty period. All sales are based upon firm orders with fixed terms and conditions, which generally cannot be modified. Historically, we have not experienced material differences between our estimated amounts of quality returns, refunds, rebates and discounts and the actual results. Our contracts do not contain price protection or similar privileges in relation to the sale of goods. Patents, Licenses, Trademarks, Franchises, Concessions and Royalty Agreements
Agreements. We have obtained a trademark registration in Hong Kong and China for the marks BONSO and MODUS in connection with certain electronic apparatus.
We rely on a combination of patent, trademark and trade secret laws, employee and third partythird-party non-disclosure agreements and other intellectual property protection methods to protect our proprietary rights. There can be no assurance that third parties will not assert infringement or other claims against us with respect to any existing or future products. We cannot assure you that licenses would be available if any of our technology were successfully challenged by a third party, or if it became desirable to use any third-party technology to enhance the Company’s products. Litigation to protect our proprietary information or to determine the validity of any third-party claims could result in a significant expense to us and divert the efforts of our technical and management personnel, whether or not such litigation is determined in our favor.
While we have no knowledge that we are infringing upon the proprietary rights of any third party, there can be no assurance that such claims will not be asserted in the future with respect to existing or future products. Any such assertion by a third party could require us to pay royalties, to participate in costly litigation and defend licensees in any such suit pursuant to indemnification agreements or to refrain from selling an alleged infringing product or service.
Product Research and Development
Development. The major responsibility of the product design, research and development personnel is to develop and produce designs to the satisfaction of, and in accordance with, the specifications provided by the OEMs, OBMs and ODMs. We believe our engineering and product development capabilities are important to the future success of our business. As an ODM, we take specifications that are provided to us by the customer and design a product to meet those specifications. Some of our product design, research and development activities are customer funded and are under agreements with specific customers for specific products. To reduce costs, we conduct our research and development at our facilities in China. We principally employ Chinese engineers and technicians at costs that are substantially lower than those that would be required in Hong Kong. At March 31, 2017,2019, we employed 11nine individuals in Hong Kong and China for our engineering staff, who are at various times engaged in research and development.
Competition
Competition. The manufacture and sale of electronic sensor-based and wireless products is highly competitive. Competition is primarily based upon unit price, product quality, reliability, product features and management’s reputation for integrity. Accordingly, reliance is placed on research and development of new products, line extensions and technological quality and other continuous product improvement. There can be no assurance that we will enjoy the same degree of success in these efforts in the future. Research and development expenses aggregated approximately $228,000, $200,000$158,000, $152,000 and $158,000$175,000 during the fiscal years ended March 31, 2015, 20162017, 2018 and 2017,2019, respectively.
Seasonality
Seasonality. Generally, the first calendar quarter of each year is typically the slowest sales period because our manufacturing facilities in China are closed for two weeks for the Chinese New Year holidays to permit employees to travel to their homes in China. In addition, sales during the first calendar quarter of scales products usually dip following the increase in sales during the Christmas season. A greater number of our sales of scales products occur between the months of July and October for shipment in preparation for the Christmas holiday. Throughout the remainder of the year, our products do not appear to be subject to significant seasonal variation. However, past sales patterns may not be indicative of future performance. Transportation
Transportation. Typically, we sell products either F.O.B. Hong Kong, Yantian (Shenzhen) or Nansha (Guangzhou), which means that our customers are responsible for the transportation of finished products from Hong Kong, Yantian (Shenzhen) or Nansha (Guangzhou) to their final destination. Transportation of components and finished products to and from the point of shipment is by truck. To date, we have not been materially affected by any transportation problems. However, transportation difficulties affecting air cargo or shipping, such as an extended closure of ports that materially disrupts the flow of our customers’ products to their destination, mainly the United States and Europe, could materially and adversely affect our sales and margins if, as a result, our customers delay or cancel orders or seek concessions to offset expediting charges they incurred pending resolution of the problems causing the port closures.
Regulation. We are subject to comprehensive and changing foreign, federal, provincial, state and local environmental requirements, including those governing discharges into the air and water, the handling and disposal of solid and hazardous waste and the remediation of contamination associated with releases of hazardous substances. We believe that we are in compliance with current environmental requirements. Nevertheless, we use hazardous substances in our operations and, as is the case with manufacturers in general, if a release of hazardous substances occurs on or from our properties we may be held liable and may be required to pay the cost of remediation. The amount of any resulting liability could be material.
Operations. Our products are manufactured at our factory located in China. While China has been granted permanent most favored nation trade status in the United States through its entry into the World Trade Organization, controversies between the United States and China may arisehave arisen that threaten the status quo involving trade between the United States and China. These controversies could materiallyThe U.S. government has recently imposed tariffs on certain foreign goods, including some of the Company’s products, and has indicated a willingness to impose tariffs on imports of other products. Related to this action, certain foreign governments, including China, have instituted retaliatory tariffs on certain U.S. goods, and have indicated a willingness to impose additional tariffs on U.S. products. It remains unclear what the U.S. government or foreign governments will or will not do with respect to recent or future tariffs or other international trade agreements and policies. A trade war or other governmental action related to tariffs or international trade agreements or policies has the potential to adversely affectimpact our business by, among other things, causing our products in the United States to become more expensive, resulting in a reduction in thesupply chain and foreign demand for our products by customers inand, thus, to have a material adverse effect on our business and results of operations. During the fiscal year ended March 31, 2019, the United States.
States accounted for approximately 32% of net export sales of our manufactured products as opposed to 42% and 55% for the years ended March 31, 2018 and 2017.Sovereignty over Hong Kong reverted to China on July 1, 1997. The 1984 Sino-British Joint Declaration, the 1990 Basic Law of Hong Kong, the 1992 United States-Hong Kong Policy Act and other agreements provide some indication of the business climate we believe will continue to exist in Hong Kong. Hong Kong remains a Special Administrative Region (“SAR”) of China, with certain autonomies from the Chinese government. Hong Kong is a full member of the World Trade Organization. It has separate customs territory from China, with separate tariff rates and export control procedures. It has a separate intellectual property registration system. The Hong Kong Dollar is legal tender in the SAR, freely convertible and not subject to foreign currency exchange controls by China. The SAR government has sole responsibility for tax policies, though the Chinese government must approve the SAR’s budgets. Notwithstanding the provisions of these international agreements, we cannot be assured of the continued stability of political, legal, economic or other conditions in Hong Kong. No treaty exists between Hong Kong and the United States providing for the reciprocal enforcement of foreign judgments. Accordingly, Hong Kong courts might not enforce judgments predicated on the federal securities laws of the United States, whether arising from actions brought in the United States or, if permitted, in Hong Kong. Organizational
Adequacy of Facilities.We have two wholly-owned Hong Kong subsidiaries, Bonso Electronics Limited (“BEL”)believe our manufacturing complex will be adequate for our reasonably foreseeable needs. Rental and Bonso Advanced Technology Limited (“BATL”). Both BEL and BATL were organized under the laws of Hong Kong and are responsible for the design, development, manufacture and sale ofManagement Segment Since 2014, when we leased our products.
BEL has one active Hong Kong subsidiary, Bonso Investment Limited (“BIL”). BIL was organized under the laws of Hong Kong and has been used to acquire and hold our investment properties in Hong Kong and China.
BEL also has one active PRC subsidiary, Bonso Electronics (Shenzhen) Company, Limited (“BESCL”), which is organized under the laws of the PRC and was used to manufacture our products until January 2014. BESCL leased its factory to a third party from August 2013 to August 2019, and is receiving a monthly rental income of approximately $105,000 as of July 2017. Effective with the transfer of manufacturing operations to Xinxing, we ceased manufacturing in this subsidiary and its principal business today is leasing our formerShenzhen manufacturing facility to a third party.
BATL has two active PRC subsidiaries, Bonso Advanced Technology (Xinxing) Company, Limited (“BATXXCL”), which is organized underparty, we have gradually been developing a rental and management segment of our business. The lease with the laws of the PRC and is used to acquire and hold our new manufacturing facility in Xinxing, Guangdong, China, and Bonso Technology (Shenzhen) Company Limited (“BTL”), in Shenzhen, PRC, to provide product design and distribution servicesthird party for the Group.
Shenzhen factory was terminated as at January 31, 2019. We also have a wholly-owned British Virgin Islands subsidiary, Modus Enterprise International Inc. (“Modus”), which owned 100%currently lease approximately 236,000 square feet of Korona Hauschaltswaren Gmbh & Co. KG (“Korona”), which marketed consumer scale products throughout Europe, until Korona’s liquidation duringspace to third parties for an aggregate gross monthly income of approximately RMB 302,000, or $45,000. During the fiscal year ended March 31, 20122019, rental and which owns 100%management income accounted for approximately 19% of Bonso USA, which has been dormant since 2009our net income. A description of the leases of factory space and was formally deregistered during the fiscal year ended March 31, 2017.
Property, Plant and Equipment
British Virgin Islands
Our corporate administrative offices are located at Cragmuir Chambers, Road Town, Tortola, British Virgin Islands and corporate administrative matters are conducted throughequipment that we have entered into is set forth below under “Real Property.”Real Property.A description of our registered agent, HWR Services Limited, located at P.O. Box 71, Road Town, Tortola, British Virgin Islands.
real properties follows:Hong Kong
Kong.We own a residential property in Hong Kong, which is located at Savanna Garden, House No. 27, Tai Po, New Territories, Hong Kong. House No. 27 consists of approximately 2,475 square feet plus a 177 square foot terrace and a 2,308 square foot garden area. The use of House No. 27 is provided as quarters to Mr. Anthony So, the Chairman and Chief Executive Officer of the Company.
China
China.Our Shenzhen factory in China is located at Shenzhen in the DaYang Synthetical Development District, close to the border between Hong Kong and China. This factory consists of one factory building, which contains approximately 186,000 square feet, two workers’ dormitories, containing approximately 103,000 square feet, a canteen and recreation center of approximately 26,000 square feet, an office building, consisting of approximately 26,000 square feet, and two staff quarters for supervisory employees, consisting of approximately 34,000 square feet, for a total of approximately 375,000 square feet. The Company entered into a rental agreement in June 2013 to rent out the Shenzhen factory to a third party from August 2013 to AugustJuly 31, 2019. We receivedHowever, in December 2018, the local environmental protection bureau ordered the tenant to cease production of its primary products as a result of the imposition of higher pollution standards resulting from the conversion two years ago of a nearby industrial factory to residential buildings. The tenant terminated the lease agreement as at January 31, 2019 and relocated, and the Company was not able to find another tenant. As a result the Company lost the monthly rental income of approximately $99,000 until August 2016, when it increased to approximately $105,000 until August 2019.$107,000 per month. We have engaged consultants to assist us in obtaining the necessary governmental approvals to permit us to redevelop the Shenzhen factory into a high endhigh-end commercial complex, containing retail space, office space and some residential space. In JulyNovember 2017, we signed a letter of intententered into an agreement with Fangda, a property developer in Shenzhen. If a final agreement is reached, then the other party will takeFangda has taken over the process to facilitate and facilitate in obtainingobtain the necessary governmental approvals. We anticipate completing the approval process in 2018;2019; however, there can be no assurance that we will be successful in obtaining all necessary approvals. If we are successful in obtaining the necessary governmental approvals for the redevelopment, we believe that the rental income derived from leasing the redeveloped property will be a significant contributing factor to our profit in the future.
In November 2018, the Company paid a deposit of approximately RMB 6,035,000, or approximately $905,000, to a third party for a residential unit in Shenzhen. This unit, namely Unit 302, 5th Building, Hua Qiang City, is located at Feng Tang Road in Fu Hai, Bao An, Shenzhen. This unit, consisting of 1,354 square feet, is located near our existing Shenzhen factory and will be utilized as quarters for the senior officers of the Company during their visit and monitoring of the redevelopment of the Shenzhen factory. In addition, we own two office units in Beijing, namely Units 12 and 13 on the third floor, Block A of Sunshine Plaza in Beijing, China. Unit 12 consists of 1,102 square feet and Unit 13 consists of 1,860 square feet. One unit is rented to an unaffiliated third party for an aggregate monthly rental of approximately RMB 18,000,19,000, or approximately $3,000, while the other unit is rented to another unaffiliated third party for an aggregate monthly rental of approximately RMB 13,000,12,000, or approximately $2,000.
Our Xinxing factory is located in Xinxing High-Tech Industrial Estate, Xinxing, Yunfu City, Guangdong, China. This factory land area is approximately 1,185,000 square feet, with foursix factory buildings consisting of 357,000approximately 421,000 square feet, three dormitories consisting of an aggregate of approximately 85,000 square feet, a canteen consisting of 15,000 square feet and an office building consisting of 49,000 square feet. Leasehold improvements to the office building were completed in January 2016.
The Company entered into a rental agreement in July 2013 to rent out approximately 13,000 square feet of the factory building, plus some machines and equipment, to a third party from July 2013 to June 2016. We received a monthly rental income of approximately RMB 43,000, or approximately $7,000, under that rental agreement. The rental agreement was renewed in July 2016 and extended to June 2019 for the machines and equipment only, andfor which the Company receives a monthly rental income of approximately $4,000
RMB 26,000, or approximately $4,000.The Company entered into a rental agreement in January 2015 to rent out approximately 46,000 square feet of the factory building, as well as some machines and equipment, to another third party from January 2015 to December 2020. We receive a monthly rental income of approximately $4,000RMB 54,000, or approximately $8,000, under that rental agreement. The Company entered into a rental agreement in September 2015 to rent out approximately 28,000 square feet of the factory building to another third party from September 2015 to February 2019. We receivereceived a monthly rental income of approximately RMB 26,000, or approximately $4,000, under that rental agreement. In July 2016, the Company entered into another rental agreement to rent out approximately 44,000another 28,000 square feet of the factory building to this third party from July 2016 to February 2019. We receive a monthlyThese two rental income of approximately $6,000 under that rental agreement.
Theagreements ended in February 2019 without renewal. In June 2018, the Company entered into aanother rental agreement in July 2016 to rent out approximately 10,000another 42,000 square feet of the factory building to anotherthis third party from July 2016June 2018 to June 2019.2024. The total floor area rented to this third party and its related companies currently is approximately 55,000 square feet. We receive a total monthly rental income of approximately $1,000RMB 60,000, or approximately $9,000, under that rental agreement.
The Company entered into a rental agreement in October 2016 to rent out approximately 29,000 square feet of the factory building to another third party from October 2016 to September 2018. We receivereceived a monthly rental income of approximately RMB 27,000, or approximately $4,000, under that rental agreement. The Company entered into a rental agreement in December 2016 to rent out 957 square feet of an apartment to a third party from December 2016 to November 2018. We receive This lease has been renewed at a monthly rental income of approximately $410 under thatRMB 38,000 or approximately $6,000, and this renewed rental agreement.
agreement will end in September 2024.The Company entered into a rental agreement in January 2017 to rent out approximately 16,00019,000 square feet of the factory building to another third party from January 2017 to December 2022. We receive a monthly rental income of approximately $2,000RMB 19,000, or approximately $3,000, under that rental agreement.
In addition, theThe Company entered into a rental agreement in February 2017 to rent out approximately 43,000 square feet of the factory building to another third party from February 2017 to February 2026. We receive a monthly rental income of approximately RMB 46,000, or approximately $7,000, under that rental agreement. In addition, the Company entered into a rental agreement in June 2018 to rent out approximately 21,000 square feet of the factory building to another third party from June 2018 to June 2024. We receive a monthly rental income of approximately RMB 29,000, or approximately $4,000, under that rental agreement. In addition, the Company entered into a rental agreement in February 2019 to rent out approximately 24,000 square feet of the factory building to another third party from February 2019 to January 2021. We receive a monthly rental income of approximately RMB 29,000, or approximately $4,000, under that rental agreement. The Company entered into a rental agreement in December 2016 to rent out 957 square feet of an apartment unit in Shenzhen to a third party from December 2016 to November 2018. We received a monthly rental income of approximately RMB 2,800, or approximately $400 under that rental agreement. The rental agreement was renewed up to November 2019 with a monthly rental income of approximately RMB 3,000, or approximately $400, and we expect to renew this rental agreement with the same rent. Adequacy of Facilities
We believe our manufacturing complex will be adequate for our reasonably foreseeable needs.
Item 4A. Unresolved Staff Comments
Item 5. Operating and Financial Review and Prospects
The following discussion and analysis should be read in conjunction with Item 3. – “Key Information – Selected Financial Data” and the Consolidated Financial Statements and Notes to Consolidated Financial Statements included elsewhere in this Annual Report.
During the fiscal year ended March 31, 2017,2019, the Company experienced decreased revenues. Our overall sales decreased due to lower demand forrevenues from our products.
scales and pet electronic products segments and increased revenues from our rental and management segment.We derive our revenues principally from the sale of sensor-based scales manufactured in China, which represent 90%67% of total salesrevenue for the fiscal year ended March 31, 2017.2019. As mentioned in Item 3. – “Key Information – Risk Factors,” we are dependent upon a limited number of major customers for a significant portion of our revenues. Our revenues and business operation are subject to fluctuation if there is a loss of orders from any of our largest customers. Further, the pricing of our scale products is becoming increasingly competitive, especially to our customers in the United States and Germany, who together contributed approximately 75%70% of our revenue during the fiscal year ended March 31, 2017.
2019.During the fiscal year ended March 31, 2017,2019, we derived approximately $1,345,000$1,896,000 of rental and management income from leasing our facilities to third parties.
Net sales, incomerevenue, income/(loss) from operations and net incomeincome/(loss) were approximately $28,944,000, $462,000 and $1,110,000, respectively, for the fiscal year ended March 31, 2015, $23,892,000, $3,302,000 and $2,871,000, respectively, for the fiscal year ended March 31, 2016 and $17,476,000,$18,952,000, $3,166,000 and $2,795,000, respectively, for the fiscal year ended March 31, 2017.
2017, $11,523,000, $238,000 and $4,000, respectively, for the fiscal year ended March 31, 2018 and $9,992,000, ($540,000) and ($463,000), respectively, for the fiscal year ended March 31, 2019.Labor costs per worker are increasing in China. In accordance with the new minimum wage set by the local authorities, we increased the minimum wage for our labor in Shenzhen, PRC from RMB 1,320 (or approximately $206) per month beginning April 1, 2011, to RMB 1,500 (or approximately $238) per month beginning February 1, 2012, RMB 1,600 (or approximately $254) per month beginning March 1, 2013, and then to RMB 1,808 (or approximately $293) per month beginning February 1, 2014. In Xinxing, Guangdong, PRC, the minimum wage was RMB 1,010 (or approximately $164)$160) per month beginning in May 1, 2013, and sinceRMB 1,210 (or approximately $181) per month beginning in May 1, 2015, and since July 1, 2018 it has been RMB 1,2101,410 (or approximately $181)$213). We believe that future increases in labor costs in China would have a significant effect on our total production costs and results of operations. Our labor costs represented approximately 11.2%14.0% of our total production costs in the fiscal year ended March 31, 2017,2019, compared to 12.6%13.2% in the fiscal year ended March 31, 20162018 and 11.8%10.6% in the fiscal year ended March 31, 2015.2017. Total labor costs decreased from approximately $2,073,000$919,000 in the fiscal year ended March 31, 20162018 to approximately $1,196,000$844,000 in the fiscal year ended March 31, 2017.2019. The decrease in overall labor costs was the result of a lower production level required due to reduced revenue.sales in the fiscal year ended March 31, 2019. There can be no assurance that labor costs will not increase in the future or that any additionalfuture increase in labor costs will not have a material adverse effect upon our results of operations.
We have continued to shift production and manufacturing of various parts and components to third party suppliers, including plastic injection molded parts and metal parts. In some cases, we have entered into agreements with third parties in which they lease our equipment from us, and then manufacture parts and components that we use in assembling our final products. Those third parties provide the workers and supervisors, and the necessary raw materials. We lease our machinery or equipment, our dormitory and manufacturing facilities for their workers and supervisory staff, and our meals or cafeteria services for the third party’s workers and staff. There are other third partythird-party contractors that utilize their own equipment and their own facilities in manufacturing specific components or parts for us.
We have not experienced significant difficulties in obtaining raw materials for our products, and management does not anticipate any such difficulties in the foreseeable future. Prices of raw materials increased during the fiscal year ended March 31, 2011, but did not vary significantly during the fiscal years ended March 31, 2012, 2013 and 2014. The price of some of the raw materials utilized by the Company fluctuates directly with the price of oil, and the price of raw materials decreased slightly inhas increased over each of the last three fiscal year ended March 31, 2015, compared to that in the fiscal year ended March 31, 2014, decreased in the fiscal year ended March 31, 2016 compared to 2015 and increased in the fiscal year ended March 31, 2017 compared to 2016.years. There can be no assurance that raw material costs will not fluctuate or that any additionalfuture increase in raw material costs will not have a material adverse effect upon our results of operations.
In seeking to return to profitability, in 2014 we analyzed our product mix and concluded that we were most likelyit would be advisable to return to profitability if we eliminatedeliminate the production and sale of lower margin products that require the employment of larger numbers of workers and the commitment of substantial resources to carry or stock raw materials and components inventory. We advised our largest customer for these low margin electronic scale products that without substantial price increases we would not be in a position to continue manufacturing these products in the calendar year beginning January 1, 2015. That customer did not agree to the price increases that we requested, and has shifted this business to alternative suppliers. With the decrease in the production and sale of lower margin products, the Company has increased its gross profit from 20.2%21.9% for the fiscal year ended March 31, 2015, to 31.0%39.6% for the fiscal year ended March 31, 20162019. Operating Results The following table presents selected statement of operations data expressed in thousands of United States Dollars and 38.7%as a percentage of revenue for the fiscal years indicated below: Statement of Operations Data | | Year Ended March 31, | | | | 2017(1) | | | 2018 | | | | 2019 | | | | | $‘000 | | | | % | | | | $’000 | | | | % | | | | $’000 | | | | % | | | | | | | | | | | | | | | | | | | | | | | | | | | Net revenue - scales | | | 15,814 | | | | 83.4 | | | | 7,862 | | | | 68.2 | | | | 6,686 | | | | 66.9 | | Net revenue - pet electronic products | | | 1,662 | | | | 8.8 | | | | 1,861 | | | | 16.2 | | | | 1,410 | | | | 14.1 | | Net revenue - rental and management | | | 1,476 | | | | 7.8 | | | | 1,800 | | | | 15.6 | | | | 1,896 | | | | 19.0 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net revenue - subtotal | | | 18,952 | | | | 100.0 | | | | 11,523 | | | | 100.0 | | | | 9,992 | | | | 100.0 | | | | | | | | | | | | | | | | | | | | | | | | | | | Cost of revenue - scales | | | (9,428 | ) | | | (49.7 | ) | | | (4,809 | ) | | | (41.7 | ) | | | (4,340 | ) | | | (43.4 | ) | Cost of revenue - pet electronic products | | | (991 | ) | | | (5.3 | ) | | | (1,139 | ) | | | (9.9 | ) | | | (915 | ) | | | (9.2 | ) | Cost of revenue - rental and management | | | (855 | ) | | | (4.5 | ) | | | (1,010 | ) | | | (8.8 | ) | | | (780 | ) | | | (7.8 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Cost of revenue - subtotal | | | (11,274 | ) | | | (59.5 | ) | | | (6,958 | ) | | | (60.4 | ) | | | (6,035 | ) | | | (60.4 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Gross profit - scales | | | 6,386 | | | | 33.7 | | | | 3,053 | | | | 26.5 | | | | 2,346 | | | | 23.5 | | Gross profit - pet electronic products | | | 671 | | | | 3.5 | | | | 722 | | | | 6.3 | | | | 495 | | | | 5.0 | | Gross profit - rental and management | | | 621 | | | | 3.3 | | | | 790 | | | | 6.8 | | | | 1,116 | | | | 11.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gross profit - subtotal | | | 7,678 | | | | 40.5 | | | | 4,565 | | | | 39.6 | | | | 3,957 | | | | 39.6 | | | | | | | | | | | | | | | | | | | | | | | | | | | Selling, general and administrative expenses | | | (5,066 | ) | | | (26.7 | ) | | | (4,669 | ) | | | (40.5 | ) | | | (4,605 | ) | | | (4.6 | ) | Other income, net | | | 554 | | | | 2.9 | | | | 342 | | | | 3.0 | | | | 108 | | | | 1.1 | | | | | | | | | | | | | | | | | | | | | | | | | | | Income / (loss) from operations | | | 3,166 | | | | 16.7 | | | | 238 | | | | 2.1 | | | | (540 | ) | | | (5.4 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Non-operating (expenses) / income, net | | | 229 | | | | 1.2 | | | | (234 | ) | | | (2.0 | ) | | | 77 | | | | 0.8 | | | | | | | | | | | | | | | | | | | | | | | | | | | Income / (loss) before income taxes | | | 3,395 | | | | 17.9 | | | | 4 | | | | – | | | | (463 | ) | | | (4.6 | ) | Income tax expense | | | (600 | ) | | | (3.2 | ) | | | – | | | | – | | | | – | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income / (loss) | | | 2,795 | | | | 14.7 | | | | 4 | | | | – | | | | (463 | ) | | | (4.6 | ) | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) Certain amounts in the statement of operations for the fiscal year ended March 31, 2017.
Operating Results
The following table sets forth selected income data as a percentage of net sales2017 have been reclassified to conform to the presentation for the periods indicated:fiscal year ended March 31, 2018. | | Year Ended March 31, | | Statement of Operations Data | | 2015 | | | 2016 | | | 2017 | | | | % | | | % | | | % | | Net sales | | | 100.0 | | | | 100.0 | | | | 100.0 | | Cost of sales | | | (79.8 | ) | | | (69.0 | ) | | | (61.3 | ) | Gross profit | | | 20.2 | | | | 31.0 | | | | 38.7 | | Rental income | | | 5.0 | | | | 6.2 | | | | 7.7 | | Selling expenses | | | (2.8 | ) | | | (1.8 | ) | | | (1.7 | ) | Salaries and related costs | | | (10.9 | ) | | | (12.4 | ) | | | (14.7 | ) | Research and development expenses | | | (0.8 | ) | | | (0.8 | ) | | | (0.9 | ) | Administration and general expenses | | | (11.2 | ) | | | (14.7 | ) | | | (14.9 | ) | Other income | | | 1.8 | | | | 1.1 | | | | 3.3 | | Gain on disposal of property, plant and equipment | | | 0.3 | | | | 3.0 | | | | 0.0 | | Gain on disposal of intangible assets | | | 0.0 | | | | 2.2 | | | | 0.5 | | Gain from deregistration of subsidiaries | | | 0.0 | | | | 0.0 | | | | 0.1 | | Income from operations | | | 1.6 | | | | 13.8 | | | | 18.1 | | Interest income | | | 0.1 | | | | 0.1 | | | | 0.0 | | Interest expenses | | | (1.0 | ) | | | (0.5 | ) | | | (0.2 | ) | Foreign exchange (loss) / gain | | | (0.5 | ) | | | (0.1 | ) | | | 1.5 | | Income before income taxes | | | 0.2 | | | | 13.3 | | | | 19.4 | | Income tax credit / (expense) | | | 3.6 | | | | (1.3 | ) | | | (3.4 | ) | Net income | | | 3.8 | | | | 12.0 | | | | 16.0 | | | | | | | | | | | | | | |
Fiscal year ended March 31, 20172019 compared to fiscal year ended March 31, 2016
2018Net Sales Revenue. Our salesrevenue decreased approximately $6,416,000,$1,531,000, or 26.9%13.3%, from approximately $23,892,000$11,523,000 for the fiscal year ended March 31, 20162018 to approximately $17,476,000$9,992,000 for the fiscal year ended March 31, 2017. 2019. The decrease was mainly related to a decrease in sales revenue of approximately $1,176,000 in our scales segment and a decrease of approximately $451,000 from the pet electronic products segment, offsetting an increase of approximately $96,000 from the rental and management segment.
The decrease in sales revenue from scales segment was primarily due to a lower demand forof our scales products especially fromduring the fiscal year ended March 31, 2019 since one of ourthe major customers. We had salescustomers has stopped purchasing from us as of approximately $8,472,000 to thisJune 2017 and we completed all prior orders for that customer during the fiscal year ended March 31, 2017 compared2019. The revenue decrease in the pet electronic products segment was due to lower demand of our pet electronic products to be exported to the United States and decreased orders from a major customer. The revenue increase in the rental and management segment was due to increased floor area rented out in our Xinxing factory. Gross Profit. Gross profit as a percentage of revenue remained at approximately $14,145,00039.6% during the fiscal year ended March 31, 2016.
Gross Profit. Gross profit2019, as a percentage of revenue increasedcompared to approximately 38.7%39.6% during the fiscal year ended March 31, 2017, as compared2018. The same level of gross margin was primarily the result of same cost structure for the two years.
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by approximately $64,000, or 1.4%, from approximately $4,669,000 for the fiscal year ended March 31, 2018 to approximately 31.0%$4,605,000 for the fiscal year ended March 31, 2019. The decrease was primarily the result of reduced salaries and related costs during the fiscal year ended March 31, 2016. The higher gross margin was primarily2019, as compared to those during the result of an increase in the portion of our product mix which consists of higher gross margin products such as laboratory scales and industrial scales.
Rental Income. Rentalfiscal year ended March 31, 2018.
Other Income, Net. Other income, net decreased by approximately $132,000,$234,000 or 8.9%68.4% from approximately $1,477,000$342,000 for the fiscal year ended March 31, 20162018 to approximately $1,345,000$108,000 for the fiscal year ended March 31, 2017 as a result of the depreciation of the Chinese Yuan against the United States Dollar.
Selling Expenses. Selling expenses decreased by approximately $123,000, or 29.3%, from approximately $420,000 for the fiscal year ended March 31, 2016 to approximately $297,000 for the fiscal year ended March 31, 2017.2019. The decrease was the result of fewer containers shipped due to a reduction in overall sales.
Salaries and Related Costs. Salaries and related costs decreased by approximately $388,000, or 13.1%, from approximately $2,961,000 for the fiscal year ended March 31, 2016 to approximately $2,573,000 for the fiscal year ended March 31, 2017. The decrease in salaries and related costs was primarily the result of a reduction in the numberlower gain from investment of employees due to lower net sales.
Researchfinancial instruments and Development Expenses. Research and development expenses decreased approximately $42,000, or 21.0%, from approximately $200,000 for the fiscal year ended March 31, 2016 to approximately $158,000 for the fiscal year ended March 31, 2017. The decrease in research and development was primarily the result of reduction in salary paid to engineersless government subsidies received during the fiscal year ended March 31, 2017. Research and development expenses account for 0.8% of net revenue for the fiscal year ended March 31, 2016 and 0.9% for the fiscal year ended March 31, 2017.
Administration and General Expenses. Administration and general expenses decreased by approximately $906,000, or 25.9%,2019.Income / (Loss) from approximately $3,503,000 for the fiscal year ended March 31, 2016 to approximately $2,597,000 for the fiscal year ended March 31, 2017. The decrease was primarily the result of a one-time compensation expense of approximately $801,000 due to stock options granted during the fiscal year ended March 31, 2016, whereas no such compensation expense was recorded during the fiscal year ended March 31, 2017.
Other Income. Other income increased approximately $328,000, or 128.1%, from approximately $256,000 for the fiscal year ended March 31, 2016 to approximately $584,000 for the fiscal year ended March 31, 2017. The increase was primarily the result of an increase in utility and miscellaneous charges to tenants of our Xinxing factory.
Gain on Disposal of Property, Plant and Equipment. Gain on disposal of property, plant and equipment decreased approximately $718,000, from $718,000 for the fiscal year ended March 31, 2016 to approximately $nil for the fiscal year ended March 31, 2017. The gain on disposal of approximately $718,000 in 2016 was the result of the sale of a residential property in Shenzhen to a third party.
Gain on Disposal of Intangible Assets. Gain on disposal of intangible assets was approximately $79,000 during the fiscal year ended March 31, 2017, as compared to $519,000 during the fiscal year ended March 31, 2016. The decrease was primarily the result of gain on disposal of a land use right on part of the land at our Xinxing facility during the fiscal year ended March 31, 2016.
Gain from Deregistration of Subsidiaries. Gain from deregistration of subsidiaries was approximately $22,000 during the fiscal year ended March 31, 2017, as compared to $nil during the fiscal year ended March 31, 2016. Two subsidiaries were deregistered during the fiscal year ended March 31, 2017.
Income from Operations. As a result of the factors described above, income from operations decreased by 4.1%326.9% from a profit of approximately $3,302,000$238,000 for the fiscal year ended March 31, 20162018 to a loss of approximately $540,000 for the fiscal year ended March 31, 2019.
Non-operating (Expenses) / Income, Net. Non-operating (expenses) / income, net increased approximately $311,000 or 132.9% from a loss of approximately $234,000 for the fiscal year ended March 31, 2018 to an income of approximately $77,000 for the fiscal year ended March 31, 2019. The increase was primarily the result of an increase in interest income resulting from more bank deposits placed for fixed deposits. Income Tax Expense. Income tax expense was $nil during the fiscal year ended March 31, 2019, as compared to an income tax expense of $nil during the fiscal year ended March 31, 2018.
Net Income / (Loss). As a result of the factors described above, consolidated net income decreased from approximately $4,000 for the fiscal year ended March 31, 2018 to a net loss of approximately $463,000 for the fiscal year ended March 31, 2019, a decrease in income of approximately $467,000, or 11,675.0%.
Foreign Currency Translation Adjustments, Net of Tax. Foreign currency translation adjustments, net of tax, decreased from a gain of approximately $2,062,000 for the fiscal year ended March 31, 2018 to a loss of approximately $1,113,000 for the fiscal year ended March 31, 2019, a decrease of approximately $3,175,000, or 154.0%. The decreased foreign currency translation gain, net of tax, was primarily the result of the reduced amount of assets denominated in Chinese RMB since the Chinese RMB depreciated against the USD from March 31, 2018 to March 31, 2019.
Comprehensive Income. As a result of the factors described above, comprehensive income decreased from approximately $2,066,000 for the fiscal year ended March 31, 2018 to a loss of approximately $1,576,000 for the fiscal year ended March 31, 2019, a decrease of approximately $3,642,000, or 176.3%.
Fiscal year ended March 31, 2018 compared to fiscal year ended March 31, 2017 Net Revenue. Our revenue decreased approximately $7,429,000, or 39.2%, from approximately $18,952,000 for the fiscal year ended March 31, 2017 to approximately $11,523,000 for the fiscal year ended March 31, 2018. The decrease was mainly related to a decrease in sales revenue of approximately $7,952,000 in our scales segment, offsetting increases of approximately $199,000 from the pet electronic products segment and approximately $324,000 from the rental and management segment.
The decrease in sales revenue from scales segment was primarily due to the loss of a major customer who stopped purchasing from the Company as of June 2017. The revenue increase in the pet electronic products segment was due to increased demand for our products from customers selling into the U.S. and the PRC. The revenue increase in the rental and management segment was due to an increase in factory floor area being leased out. Gross Profit. Gross profit as a percentage of revenue decreased to approximately 39.6% during the fiscal year ended March 31, 2018, as compared to approximately 40.5% during the fiscal year ended March 31, 2017. The lower gross margin was primarily the result of an increase in labor costs and manufacturing costs as a percentage of revenue during the fiscal year ended March 31, 2018, as compared to that during the fiscal year ended March 31, 2017.
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by approximately $397,000, or 7.8%, from approximately $5,066,000 for the fiscal year ended March 31, 2017 to approximately $4,669,000 for the fiscal year ended March 31, 2018. The decrease was primarily the result of a decrease in selling expenses of approximately $43,000 due to fewer shipments made during the fiscal year ended March 31, 2018, a reduction of repair and maintenance expenses of approximately $66,000, a reduction in charitable donations of approximately $61,000 and a reduction of motor vehicle expenses of $41,000 during the fiscal year ended March 31, 2018, as compared to those during the fiscal year ended March 31, 2017. In addition, there was a loss from forward contracts of approximately $70,000 during the fiscal year ended March 31, 2017, whereas there was no such loss during the fiscal year ended March 31, 2018.
Other Income, Net. Other income, net decreased approximately $212,000 or 38.3% from approximately $554,000 for the fiscal year ended March 31, 2017 to approximately $342,000 for the fiscal year ended March 31, 2018. The decrease was primarily the result of a gain on disposal of intangible assets of approximately $79,000 and a gain from deregistration of subsidiaries of approximately $22,000 during the fiscal year ended March 31, 2017, whereas there were no such gains during the fiscal year ended March 31, 2018. Income from Operations. As a result of the factors described above, income from operations decreased by 92.5% from a profit of approximately $3,166,000 for the fiscal year ended March 31, 2017.
Interest2017 to a profit of approximately $238,000 for the fiscal year ended March 31, 2018.Non-operating (Expenses) / Income, . Interest Net. Non-operating (expenses) / income, net decreased to approximately $8,000$463,000 or 202.2% from a gain of approximately $229,000 for the fiscal year ended March 31, 2017 as compared to a loss of approximately $15,000$234,000 for the fiscal year ended March 31, 2016, due to lower interest rates on deposit accounts.
Interest Expense. Interest expense decreased2018. The decrease was primarily the result of an increase in foreign exchange loss of approximately $76,000, or 67.3%,$611,000 from a gain of approximately $113,000 for$258,000 during the fiscal year ended March 31, 20162017 to a loss of approximately $37,000$353,000 during the fiscal year ended March 31, 2018, as a result of the appreciation of the Chinese Renminbi against the United States Dollar during the fiscal year ended March 31, 2018, which offset an increase in interest income of approximately $183,000 resulting from more deposits placed for earning interest income during the fiscal year ended March 31, 2018.
Income Tax Expense. Income tax expense was $nil during the fiscal year ended March 31, 2018, as compared to an income tax expense of $600,000 during the fiscal year ended March 31, 2017. The decrease was primarily the result of less utilization of banking facilities during the fiscal year ended March 31, 2017.
Foreign Exchange (Loss) / Gain. Foreign exchange gain increased approximately $281,000, or 1,221.7%, from a loss of approximately $23,000 for the fiscal year ended March 31, 2016 to a gain of approximately $258,000 for the fiscal year ended March 31, 2017. This increase was primarily the result of an increase in exchange gain from exchanging United States Dollars to Chinese Yuan during the fiscal year ended March 31, 2017.
Income Tax Expense. Income tax expense was approximately $600,000 during the fiscal year ended March 31, 2017, as compared to an income tax expense of $310,000 during the fiscal year ended March 31, 2016. The increase in income tax expense was the result of increased taxable profits in our subsidiaries in Chinareduced income from operations recorded during the fiscal year ended March 31, 2017.
2018 and the utilization of tax losses from prior years to offset taxable income.
Net Income . As a result of the factors described above, consolidated net income decreased from approximately $2,871,000 for the fiscal year ended March 31, 2016 to approximately $2,795,000 for the fiscal year ended March 31, 2017 to approximately $4,000 for the fiscal year ended March 31, 2018, a decrease in income of approximately $76,000,$2,791,000, or 2.6%99.9%.
Foreign Currency Translation Adjustments. Adjustments, Net of Tax. Foreign currency translation adjustments, net of tax, increased from a loss of approximately $850,000 for the fiscal year ended March 31, 2016 to a loss of approximately $1,410,000 for the fiscal year ended March 31, 2017 to a gain of approximately $2,062,000 for the fiscal year ended March 31, 2018, an increase of approximately $560,000,$3,472,000, or 65.9%246.2%. The increased foreign currency translation loss,gain, net of tax, was primarily the result of depreciationthe fluctuation of assets denominated inthe Chinese Renminbi after translation toagainst the United States Dollars.
Dollar.
Comprehensive Income. As a result of the factors described above, comprehensive income decreased from approximately $2,021,000 for the fiscal year ended March 31, 2016 to approximately $1,385,000 for the fiscal year ended March 31, 2017, a decrease of approximately $636,000 or 31.5%.
Fiscal year ended March 31, 2016 compared to fiscal year ended March 31, 2015
Net SalesIncome. Our sales decreased approximately $5,052,000, or 17.5%, from approximately $28,944,000 for the fiscal year ended March 31, 2015 to approximately $23,892,000 for the fiscal year ended March 31, 2016. The decrease in sales was primarily due to lower customer demand for our existing products, together with the elimination of products with lower profit margins.
Gross Profit. Gross profit as a percentage of revenue increased to approximately 31.0% during the fiscal year ended March 31, 2016, as compared to approximately 20.2% during the fiscal year ended March 31, 2015. The higher gross margin was primarily the result of the abandoning of products with lower profit margins.
Rental Income. Rental income increased by approximately $24,000, or 1.7% from approximately $1,453,000 for the fiscal year ended March 31, 2015 to approximately $1,477,000 for the fiscal year ended March 31, 2016 as a result of increased production area being rented out at our Xinxing facility.
Selling Expenses. Selling expenses decreased by approximately $402,000, or 48.9%, from approximately $822,000 for the fiscal year ended March 31, 2015 to approximately $420,000 for the fiscal year ended March 31, 2016. The decrease was the result of reduced net sales and a reduction in required air shipments.
Salaries And Related Costs. Salaries and related costs decreased by approximately $205,000, or 6.5%, from approximately $3,166,000 for the fiscal year ended March 31, 2015 to approximately $2,961,000 for the fiscal year ended March 31, 2016. The decrease in salaries and related costs was primarily the result of a reduction in the number of employees due to lower net sales.
Research And Development Expenses. Research and development expenses decreased approximately $28,000, or 12.3%, from approximately $228,000 for the fiscal year ended March 31, 2015 to approximately $200,000 for the fiscal year ended March 31, 2016. The decrease in research and development was primarily the result of a decrease in the number of engineers employed. Research and development expenses account for 0.8% of net revenue for both the fiscal year ended March 31, 2016, and the fiscal year ended March 31, 2015.
Administration And General Expenses. Administration and general expenses increased by approximately $258,000, or 8.0%, from approximately $3,245,000 for the fiscal year ended March 31, 2015 to approximately $3,503,000 for the fiscal year ended March 31, 2016. The increase was primarily the result of a one-time compensation expense of approximately $801,000 due to stock options granted during the fiscal year ended March 31, 2016. Other than the one-time compensation expense of approximately $801,000, other administration and general expenses accounted for approximately $2,702,000 during the fiscal year ended March 31, 2016, which was approximately $543,000 lower that that for the fiscal year ended March 31, 2015 because of lower depreciation expenses, charitable donations and insurance premium.
Other Income. Other income decreased approximately $264,000 or 50.8%, from approximately $520,000 for the fiscal year ended March 31, 2015 to approximately $256,000 for the fiscal year ended March 31, 2016. The decrease was primarily the result of decreased gain from revaluation of forward contracts. During the fiscal year ended March 31, 2016, the Company recorded a gain from revaluation of forward contracts of approximately $36,000, while the Company recorded a gain on valuation of forward contracts of approximately $131,000 during the fiscal year ended March 31, 2015. In addition, the Company recorded approximately $194,000 for the reduction of aged accounts payable for the fiscal year ended March 31, 2015, as compared to $nil during the fiscal year ended March 31, 2016.
Gain on Disposal of Property, Plant and Equipment. Gain on disposal of property, plant and equipment increased approximately $620,000, or 632.7%, from $98,000 for the fiscal year ended March 31, 2015 to approximately $718,000 for the fiscal year ended March 31, 2016. The gain on disposal of approximately $718,000 was the result of the sale of a residential property in Shenzhen to a third party.
Gain on Disposal of Intangible Assets. Gain on disposal of intangible assets was approximately $519,000 during the fiscal year ended March 31, 2016, as compared to $nil during the fiscal year ended March 31, 2015. The increase was primarily the result of gain on disposal of a land use right of part of the land at our Xinxing facility.
Income From Operations. As a result of the factors described above, income from operations increased by 614.7% from a profit of approximately $462,000 for the fiscal year ended March 31, 2015 to a profit of approximately $3,302,000 for the fiscal year ended March 31, 2016.
Interest Income. Interest income decreased to approximately $15,000 for the fiscal year ended March 31, 2016, as compared to approximately $18,000 for the fiscal year ended March 31, 2015, due to lower interest rates on deposit accounts. During the fiscal year ended March 31, 2015, the Company earned 0.25% per annum, or approximately $3,000, from a fixed deposit in RMB for which the interest rate was pegged to the appreciation rate of RMB against USD. During the fiscal year ended March 31, 2016, the Company did not enter into a similar fixed deposit arrangement.
Interest Expense. Interest expense decreased approximately $160,000, or 58.6%, from approximately $273,000 for the fiscal year ended March 31, 2015 to approximately $113,000 for the fiscal year ended March 31, 2016. The decrease was primarily the result of less utilization of banking facilities since the Company’s operating activities generated positive net cash flows during the fiscal year ended March 31, 2016.
Foreign Exchange Loss. Foreign exchange loss decreased approximately $111,000, or 82.8%, from approximately $134,000 for the fiscal year ended March 31, 2015 to approximately $23,000 for the fiscal year ended March 31, 2016. This decrease was primarily the result of reduced foreign exchange activities with the increased usage of Chinese Renminbi for both payments received and expenses paid.
Income Tax Credit / (Expense). Income tax expense was approximately $310,000 during the fiscal year ended March 31, 2016, as compared to an income tax credit of $1,037,000 during the fiscal year ended March 31, 2015. The increase in income tax expense was the result of an increase in income before tax generated during the fiscal year ended March 31, 2016 as compared to the fiscal year ended March 31, 2015.
Net Income. As a result of the factors described above, net income increased from approximately $1,110,000 for the fiscal year ended March 31, 2015 to approximately $2,871,000 for the fiscal year ended March 31, 2016, an increase in income of approximately $1,761,000, or 158.6%.
Foreign Currency Translation Adjustments. Foreign currency translation adjustments, net of tax, decreased from a gain of approximately $123,000 for the fiscal year ended March 31, 2015 to a loss of approximately $850,000 for the fiscal year ended March 31, 2016, a decrease of approximately $973,000, or 791.1%. The decreased foreign currency translation adjustment, net of tax, was primarily the result of depreciation of assets denominated in Chinese Renminbi after translation to US Dollars.
Comprehensive Income. As a result of the factors described above, comprehensive income increased from approximately $1,233,000$1,385,000 for the fiscal year ended March 31, 20152017 to approximately $2,021,000$2,066,000 for the fiscal year ended March 31, 2016,2018, an increase of approximately $788,000,$681,000, or 63.9%49.2%.
We believe that inflation had an impact on our business during the fiscal years ended March 31, 2012, 2013 and 2014. The minimum wage in Shenzhen, PRC, increased from RMB 1,100 (or approximately $162) per month beginning July 1, 2010 to RMB 1,320 (or approximately $206) per month beginning April 1, 2011, and was later increased to RMB 1,500 (or approximately $238) per month beginning February 1, 2012, RMB 1,600 (or approximately $254) per month beginning March 1, 2013 and then to RMB 1,808 (or approximately $293) per month beginning February 1, 2014. WeAlthough we believe that the impact of inflation on our business was minimal during the fiscal yearsyear ended March 31, 2016 and 2017 due to the lower price of oil. However,oil, we believe that inflation did affect our business during the fiscal years ended March 31, 2018 and 2019. The minimum wage in Xinxing, PRC was increased from RMB 1,010 per month (or approximately $160) to RMB 1,210 per month (or approximately $181) as of May 1, 2015. Although the minimum wage in Xinxing did not increase between May 1, 2015, and then to RMB 1,410 per month (or approximately $213) as of July 14, 2017, we1, 2018. We believe that inflation will continue to increase our operating costs and the cost of raw materials and that it will have a significant impact upon us in the future. We have generally been able to modify and improve our product designs so that we could either increase the prices of our products or lower the production costs in order to keep pace with inflation. Oil prices have been volatile in recent years. If oil prices increase, it will likely result in an increase in the cost of components to us, as well as an increase in our operating expenses, which will have a material adverse effect upon our business and results of operations. Further, the increase in labor costs and operating costs in the PRC has had a material impact on our profitability.
The companies comprising the Group are subject to tax on an entity basis on income arising in, or derived from, Hong Kong and the PRC. The current rate of taxation of the subsidiary operating in Hong Kong is 16.5%. However, BATL, which operates in Hong Kong, is subject to a Hong Kong profits tax rate of 8.25% on its first HKD 2 million of estimated assessable profits and at 16.5% on the remaining estimated assessable profits. The Group is not subject to income taxes in the British Virgin Islands.
The tax rate for our subsidiary in the PRC has been 25% since 2012. There is no tax payable in Hong Kong on offshore profit or on dividends paid to Bonso Electronics Limited by its subsidiaries or to us by Bonso Electronics Limited. Therefore, our overall effective tax rate may be lower than that of most United States corporations; however, this advantage could be materially and adversely affected by changes in the tax laws of the British Virgin Islands, Hong Kong or China.
Efforts by the Chinese government to increase tax revenues could result in decisions or interpretations of the tax laws by the Chinese tax authorities that are unfavorable to us and which increase our future tax liabilities or deny our expected refunds. Changes in Chinese tax laws or their interpretation or application may subject us to additional Chinese taxation in the future.
No reciprocal tax treaty regarding withholding taxes exists between the United States and the British Virgin Islands. Under current British Virgin Islands law, dividends, interest or royalties paid by us to individuals are not subject to tax as long as the recipient is not a resident of the British Virgin Islands. If we were to pay a dividend, we would not be liable to withhold any tax, but shareholders would receive gross dividends, irrespective of their residential or national status.
During the fiscal years ended March 31, 2012, 2013 and 2014, certain of our subsidiaries were, and continue to be, subject to inquiries from the local tax authorities. Upon the adoption of ASC 740 “Income Taxes,” the Company recorded a provision of approximately $2,595,000 in relation to uncertain tax positions as of April 1, 2007. During the fiscal year ended March 31, 2015, the tax review case was closed and confirmed with the local tax authorities and the final tax and interest payable were approximately $1,545,000. After offsetting with the tax reserve certificates purchased for approximately $1,710,000, the Company obtained a refund of approximately $165,000.
Contractual arrangements we have entered into among us and our subsidiaries in different locations may be subject to scrutiny by respective tax authorities, and a finding against the Company and its subsidiaries may result in additional tax liabilities that could substantially reduce our consolidated net income. We could face material and adverse tax consequences if respective tax authorities determine that the contractual arrangements among our subsidiaries and Bonso do not represent an arm’s length price and adjust Bonso’s or its subsidiaries’ income. Our consolidated net income may be materially and adversely affected if our affiliated entities’ tax liabilities increase.
Dividends, if any, paid to any United States resident or citizen shareholder are treated as dividend income for United States federal income tax purposes. Such dividends are not eligible for the 70%50% dividends-received deduction allowed to United States corporations on dividends from a domestic corporation under Section 243 of the United States Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). Various Internal Revenue Code provisions impose special taxes in certain circumstances on non-United States corporations and their shareholders. You are urged to consult your tax advisor with regard to such possibilities and your own tax situation.
In addition to United States federal income taxation, shareholders may be subject to state and local taxes upon their receipt of dividends.
Foreign Currency Exchange Rates
We sell most of our products to international customers. Our principal export markets are North America (mainly the United States), Europe (mainly Germany) and Asia. Other markets are other European countries (such as the United Kingdom), Australia and Africa. Sales to international customers are made directly by us to our customers. We sell all of our products in United States Dollars and Chinese Renminbi and pay for our material components principally in United States Dollars, Hong Kong Dollars and Chinese Renminbi. Most factory expenses incurred are paid in Chinese Renminbi. Because the Hong Kong Dollar is pegged to the United States Dollar, in the past our only material foreign exchange risk arose from potential fluctuations in the Chinese Renminbi and a devaluation in United States Dollars. For the reasons discussed in the paragraphs below, management believes that it may be possible that there will be some fluctuation in the coming year. During the fiscal year ended March 31, 2017,2019, we benefitted fromexperienced a foreign currency exchange gainloss of approximately $258,000.
$21,000.A summary of our debts from our banking facilities utilized as at March 31, 20162018 and 20172019 which were subject to foreign currency risk is as follows:
| | March 31, 2016 | | | March 31, 2017 | | | | $ in thousands | | | $ in thousands | | | | | | | | | Hong Kong dollars and Chinese Yuan | | | 1,743 | | | | 277 | |
| | March 31, 2018 | | March 31, 2019 | | | | $ in thousands | | | | $ in thousands | | | | | | | | | | | Hong Kong dollars | | | 99 | | | | 445 | | | | | | | | | | |
The amount above is due within one year. Fluctuations in the value of the Hong Kong Dollar have not been significant since October 17, 1983, when the Hong Kong government tied the value of the Hong Kong Dollar to that of the United States Dollar. However, there can be no assurance that the value of the Hong Kong Dollar will continue to be tied to that of the United States Dollar. China adopted a floating currency system on January 1, 1994, unifying the market and official rates of foreign exchange. China approved current account convertibility of the Chinese Renminbi on July 1, 1996, followed by formal acceptance of the International Monetary Fund’s Articles of Agreement on December 1, 1996. These regulations eliminated the requirement for prior government approval to buy foreign exchange for ordinary trade transactions, though approval is still required to repatriate equity or debt, including interest thereon. From 1994 until July 2005, the Chinese Renminbi had remained stable against the United States Dollar at approximately 8.28 to 1.00 United States Dollar. On July 21, 2005, the Chinese currency regime was altered to link the RMB to a “basket of currencies,” which includes the United States Dollar, Euro, Japanese Yen and Korean Won. Under the rules, the RMB was allowed to move 0.3% on a daily basis against the United States Dollar. The People's Bank of China, on May 21 2007, widened the RMB trading band from 0.3% daily movement against the United States Dollar to 0.5%0.5%. On June 20, 2010, the People's Bank of China increased the flexibility of the exchange rate and between June 30, 2010 and December 31, 2013, the value of the Renminbi appreciated approximately 12.0% against the United States Dollar, although the value of the Renminbi depreciated approximately 2.5% against the United States Dollar in 2014. In August 2015, the People's Bank of China changed the way it calculates the mid-point price of Renminbi against the United States Dollar, requiring the market-makers who submit for reference rates to consider the previous day's closing spot rate, foreign-exchange demand and supply as well as changes in major currency rates. As a result, in 2015, the value of the Renminbi depreciated approximately 5.8% against the United States Dollar, and from December 31, 2015 through May 20, 2016, the value of the Renminbi further depreciated approximately 1.1% against the United States Dollar. From May 20, 2016 to July 14, 2017, the value of Renminbi further depreciated approximately 3.5% against the United States Dollar, and from July 2017 to July, 2018 it appreciated by approximately 1.2% against the U.S. Dollar. From July 2018 to July 2019, it depreciated by approximately 2.8% against the U.S Dollar. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in greater fluctuations of the Renminbi against the United States Dollar. Accordingly, it is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the United States Dollar in the future. As of July 14, 2017,2019, the RMB was valued at 6.77656.8802 per United StatesU.S. Dollar as compared to 6.68526.6926 per United StatesU.S. Dollar as of July 15, 2016. 14, 2018.To manage our exposure to foreign currency and translation risks, we may purchase currency exchange forward contracts, currency options or other derivative instruments, provided such instruments may be obtained at suitable prices.
Liquidity and Capital Resources
We have financed our growth and cash needs to date primarily from internally generated funds and bank debt. We do not use off-balance sheet financing arrangements, such as securitization of receivables or obtaining access to assets through special purpose entities, as sources of liquidity. Our primary uses of cash have been to fund expansions and upgrades ofto our manufacturing facilities.facilities and purchases of equipment and toolings. Operating activities generated approximately $3,145,000$15,000 of net cash for the fiscal year ended March 31, 2017,2019, as compared to approximately $3,855,000$2,786,000 of net cash for the fiscal year ended March 31, 2016.2018. This decrease in the amount of cash generated by operating activities was primarily attributable to a smaller decrease of accounts payable as atin net income during the fiscal year ended March 31, 2017, compared to that at March 31, 2016.
2019 as discussed above.As of March 31, 2017,2019, we had approximately $3,745,000$7,527,000 in cash and cash equivalents, as compared to approximately $3,547,000$8,751,000 in cash and cash equivalents as of March 31, 2016.2018. Working capital at March 31, 20172019 was approximately $2,499,000,$6,249,000, as compared to approximately negative $530,000$7,016,000 at March 31, 2016.2018. The increasedecrease in working capital was primarily the result of decreasesan increase in bank debtacquisition of property, plant and accounts payable.equipment during the fiscal year ended March 31, 2019. We believe there are no material restrictions (including foreign exchange controls) on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans, advances or product/material purchases. We believe our working capital is sufficient for our present requirements.
As of March 31, 2017,2019, we had approximately $1,167,000$600,000 in net trade receivables, as compared to approximately $913,000$794,000 as of March 31, 2016.2018. This increasedecrease of $254,000approximately $194,000 was primarily attributable to increasedlower sales during the last month ofrevenue for the fiscal year ended March 31, 2017 as compared to the last month of the previous fiscal year.
2019.As of March 31, 2017,2019, we had approximately $1,018,000$829,000 in inventories, as compared to approximately $1,823,000$1,012,000 as of March 31, 2016.2018. This decrease of $805,000approximately $183,000 was primarily attributable to the reduction in stock levelsa lower inventory level required for the manufacturingas a result of our products as one of our major customers informed us in November 2016 that it would no longer purchase from the Company after the quarter ending June 30, 2017 .
lower sales revenue.As of March 31, 2017,2019, we had a total of approximately $1,317,000$443,000 in notes and accounts payable, as compared to approximately $3,738,000$1,023,000 as of March 31, 2016.2018. The decrease of $2,421,000approximately $580,000 was primarily attributable to a decrease in purchases nearraw materials purchased during the fiscal year end and efforts to provide earlier repayments to banks and suppliers .
ended March 31, 2019.As of March 31, 2017,2019, we had in place general banking facilities with one financial institution with amounts available aggregating approximately $5,306,000 (2016: $6,189,000)$5,128,000 (2018: $5,128,000). Such facility includes the ability to obtain overdrafts, letters of credit, short-term notes payable, factoring, short-term loans, long-term loans and financial instruments including forward contracts. As of March 31, 2017,2019, we had utilized approximately $277,000$445,000 from this general banking facility. Interest on this indebtedness fluctuates with the prime rate and the Hong Kong Interbank Offer Rate as set by the Hong Kong Bankers Association, and the People’s Bank of China’s loan benchmark interest rate. The bank credit facility is collateralized by our bank guarantee and an investment property of the Company. Our bank credit facility is due for renewal annually. We anticipate that the banking facilities will be renewed on substantially the same terms and our utilization in the next year will remain at a similar level as that in the current year. During the fiscal years ended March 31, 20162018 and 2017,2019, we paid a total of approximately $113,000$10,000 and $37,000,$23,000, respectively, in interest on indebtedness.
Our current ratio increaseddecreased from 0.932.61 as of March 31, 20162018 to 1.482.50 as of March 31, 2017.2019. Our quick ratio increaseddecreased from 0.712.37 as of March 31, 20162018 to 1.282.30 as of March 31, 2017.
The minimum wage was increased to RMB 1,320 (or approximately $206) beginning April 1, 2011, and was later increased to RMB 1,500 (or approximately $238) per month beginning February 1, 2012, RMB 1,600 (or approximately $254) per month beginning March 1, 2013, and then to RMB 1,808 (or approximately $293) per month beginning February 1, 2014 in Shenzhen, PRC. The minimum wage was RMB 1,010 (or approximately $164) per month beginning May 1, 2013 in Xinxing, Guangdong, PRC, and was later increased to RMB 1,210 (or approximately $181) beginning May 1, 2015. Our entire manufacturing operation was moved to Xinxing during the fiscal year ended2019.As of March 31, 2014, and the overall labor costs have been reduced with the operation in Xinxing.
We2019, we expect to spend approximately $53,000$41,000 on additional construction, leasehold improvements, new machinery and moldtooling in our Xinxing manufacturing facility.
Although we will experience a decreasefacility in sales as a result of a major customer ceasing to purchase from us, wethe next twelve months.We believe that our cash flows from operations, our current cash balance and funds available under our working capital and credit facilities will be sufficient to meet our working capital needs and planned capital expenditures for at least the next 12 to 24 months. However, a further decrease in the demand for our products or increase in our costs of goods sold or expenses may affect our internally generated funds, and we would further look to our banking facilities, as well as to leasing out of excess space at our Xinxing facility, to meet our working capital demands. The Company plans to build another factory building for leasing out to generate extra rental income.
The following table sets forth information with respect to our commitments as of March 31, 2017:
| | | | | Payments due by Period | | | | Total | | | Within 1 year | | | 2 to 3 years | | | 4 to 5 years | | | More than 5 years | | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | $ in thousands | | Notes payable and bank overdrafts and loans(1)(2) | | | 280 | | | | 280 | | | | - | | | | - | | | | - | | Operating leases | | | 120 | | | | 94 | | | | 26 | | | | - | | | | - | | Capital leases(2) | | | 111 | | | | 48 | | | | 58 | | | | 5 | | | | - | | Construction in Xinxing, and mold | | | 53 | | | | 53 | | | | - | | | | - | | | | - | | Income tax liabilities | | | 533 | | | | 533 | | | | - | | | | - | | | | - | | Total | | | 1,097 | | | | 1,008 | | | | 84 | | | | 5 | | | | - | |
2019: | | | | Payments due by Period | | | Total | | Within 1 year | | 2 to 3 years | | 4 to 5 years | | More than 5 years | | | $ in thousands | | $ in thousands | | $ in thousands | | $ in thousands | | $ in thousands | Bank loans | | | 445 | | | | 445 | | | | — | | | | — | | | | — | | Operating leases | | | 463 | | | | 112 | | | | 219 | | | | 132 | | | | — | | Capital leases(1) | | | 33 | | | | 28 | | | | 5 | | | | — | | | | — | | Construction in Xinxing, and mould | | | 41 | | | | 41 | | | | — | | | | — | | | | — | | Income tax liabilities | | | — | | | | — | | | | — | | | | — | | | | — | | Total | | | 982 | | | | 626 | | | | 224 | | | | 132 | | | | | |
(1) Represents amounts due under our banking facilities agreements, without considering the repayment on demand clause. (2)Includes interest payment.
For a discussion of interest rates on our notes payable and bank loans, see Item 11. – “Qualitative and Quantitative Disclosures About Market Risk,” below.
Critical Accounting Policies
The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements. The SEC has defined the most critical accounting policies as the ones that are most important to the portrayal of our financial condition and results and require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our most critical policies include valuation of inventories, revenue recognition, impairment of long-lived assets, stock-based compensation, allowance for trade receivables and income and deferred income taxes. Below, we discuss these policies further, as well as the estimates and judgments involved. We believe that our other policies either do not generally require us to make estimates and judgments that are as difficult or as subjective, or it is less likely that they would have a material impact on our reported results of operations for a given period. For a discussion of all our significant accounting policies, see footnote 1 to the Consolidated Financial Statements included elsewhere in this Annual Report.
Inventories are stated at the lower of cost or net realizable value with cost determined on a first-in, first-out basis. Net realizable value is the price at which inventories can be sold in the normal course of business after allowing for the costs of completion and disposal. The Company continuously reviews slow-moving and obsolete inventory and assesses any inventory obsolescence based on inventory levels, material composition and expected usage as of that date.
NoEffective April 1, 2018, the Company adopted the new guidance of ASC Topic 606,“Revenue from Contracts with Customers (Topic 606)”, which supersedes the revenue recognition requirements in ASC Topic 605,“Revenue Recognition”. Topic 606 requires the Company to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company applies the following steps to recognize revenues: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the Company satisfies a performance obligation. Product sales The Company’s revenue from contracts with customers is derived from product revenue principally from the sales of electronic scales and pet electronic products directly to customers. The Company sells goods to customers based on purchase orders received from the customers. The Company has determined there is one performance obligation for each model included in the purchase orders. The performance obligation is considered to be met and revenue is recognized unless there is persuasive evidence of an arrangement,when the price to the buyer is fixed or determinable, delivery has occurred and collectabilitycustomer obtains control of the sales price is reasonably assured. Revenue is recognized when title and risk of loss transfers to the customer,goods, which is generally when the product ispoint at which products are leaving the portports of Hong Kong, Shenzhen or Guangzhou as designatedNansha (Guangzhou). The Company did not recognize any revenue from contracts with customers for performance obligations satisfied overtime during the year ended March 31, 2019. The timing of revenue recognition is not impacted by ourthe new standard. The transaction price is generally in the form of a fixed price which is agreed with the customer at contract inception. The transaction price is recorded net of any sales return, surcharges and value-added taxes on gross sales. The Company allocates the transaction price to each performance obligation based on the purchase orders. Customers are required to pay over an agreed-upon credit period, usually between 15 to 60 days. In certain circumstances, the Company will request a deposit from a customer. Customers’ deposits are settled part of the outstanding bill upon receiving an acknowledgement from customers. Shipping costs billedFor the remaining balance of the outstanding bill, the customer is required to ourpay over an agreed-upon credit period, usually between 0 to 15 days. Return rights The Company does not provide its customers are included within revenue. Associated costs are classified in costwith a right of sales.
return or production protection. Each customer is required to perform a product quality check before accepting delivery of goods. The Company provides to certain customers an additional one to two percent of the quantity of certain products ordered in lieu of a warranty, which areis recognized as cost of sales when these products are shipped to customers from ourthe Company’s facilities. In addition, certain products soldValue-added taxes and surcharges
The Company presents revenue net of value-added taxes (“VAT”) and surcharges incurred. Surcharge are sales related taxes representing the City Maintenance and Construction Tax and Education Surtax. VAT, business taxes and surcharges collected from customers, net of VAT paid for purchases, are recorded as a liability in the consolidated balance sheets until these are paid to the tax authorities.
Outbound freight and handling costs
The Company accounts for product outbound freight and handling costs as fulfillment activities and present the associated costs in selling, general and administrative expenses in the period in which it sells the product. Disaggregation of revenue The Company disaggregates its revenue from different types of contracts with customers by principal product categories, as the Company are subjectbelieves it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows. See Note 19 to a limitedour Consolidated Financial Statements included elsewhere in this Annual Report for product quality warranty. revenues by segment.
Contract balances
The Company accrues for estimated incurred but unidentified quality issues based upon historical activitydid not recognize any contract asset as of April 1, 2018 and known quality issues ifMarch 31, 2019. The timing between the recognition of revenue and receipt of payment is not significant. The Company’s contract liabilities consist of deposits received from customers. As of April 1, 2018 and March 31, 2019, the balances of the contract liabilities are approximately $57,000 and $17,000, respectively. All contract liabilities at the beginning of the year ended March 31, 2019 were recognized as revenue during the year ended March 31, 2019 and all contract liabilities as of year ended March 31, 2019 are expected to be realized in the following year. As of April 1, 2019, the adoption of ASU 606 did not have a loss is probable and can be reasonably estimated. The standard limited warranty period is one to three years. Quality returns, refunds, rebates and discounts are recorded net of sales if they are withinmaterial impact on the warranty period. All sales are based upon firm orders with fixed terms and conditions, which generally cannot be modified. Historically, we have not experienced material differences between our estimated amounts of quality returns, refunds, rebates and discounts and the actual results. Company’s consolidation financial statements.
Rental income is recognized according to the rental agreements. Rental income for non-uniform rent payments is recognized on a straight-line basis throughout the lease term.
Impairment of Long-Lived Assets and Intangible Assets
Long-lived assets held and used by the Company and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company evaluates recoverability of assets to be held and used by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the asset. If such assets are considered to be impaired, the impairment loss is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets calculated using a discounted future cash flows analysis.
The Company follows the guidance of ASC 718, “Accounting for Stock Options and Other Stock-Based Compensation.” ASC 718 requires companies to record compensation expense for share-based awards issued to employees and directors in exchange for services provided. The amount of the compensation expense is based on the estimated fair value of the awards on their grant dates and is recognized over the required service periods. Our share-based awards include stock options and restricted stock awards. The estimated fair value underlying our calculation of compensation expense for stock options is based on the Black-Scholes pricing model. Forfeitures of share-based awards are estimated at the time of grant and revised, if necessary, in subsequent periods if our estimates change based on the actual amount of forfeitures we have experienced.
Allowance is made against trade receivables to the extent that collection is considered to be doubtful. This allowance is primarily determined from our monthly aging analysis. It also requires judgment regarding the collectability of certain receivables, as certain receivables may be identified as collectible that are subsequently uncollectible and which could result in a subsequent write-off of the related receivable to the statement of operations. Most of the Company’s trade receivables are generally unsecured. To determine the necessity of a provision, the Company analyzes the age of the receivables and the customer’s ability to pay based on past payment history, financial statements and various information of the customer. Any change in the collectability of accounts receivable that were not previously provided for could significantly change the calculation of such provision and the results of our operations.
Income and Deferred Income Taxes
The Company complies with ASC 740 which prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Only tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized upon adoption of ASC 740. The Company’s accounting policy is to treat interest and penalties as a component of income taxes.
Amounts in the consolidated financial statements related to income taxes are calculated using the principles of ASC 740 and ASU 2013-11 “Presentation“Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.Exists.” ASC 740 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting basisbases and the tax basisbases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Future tax benefits, such as net operating loss carry forwards, are recognized as deferred tax assets. Recognized deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized.
Although we are optimistic about our future in the manufacture and sale of sensor-based scales products, we areWe continue to be dependent upon a limited number of customers for a significant portion of our revenues, and the loss of any of these customers could have a material adverse effect upon us and our results of operations. As of March 31, 2017,2019, our backlog of manufacturing orders was $2,891,000approximately $679,000 as compared to $3,864,000approximately $1,641,000 as of March 31, 2016.2018. We expect that the demand for our products will decrease in the fiscal year ending March 31, 2018, compared with2020 will be similar to that in the fiscal year ended March 31, 2017 as a result of an expected lower overall demand for our products as well as the loss of approximately $8.4 million of orders from a major customer.
2019.Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Recent Accounting Pronouncements
The new accounting pronouncements in the United States that may be relevant to the Group are as follows:
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” ("ASU 2014-09"). The objective of this Update is to remove inconsistencies and weaknesses in revenue requirements, and to simplify the preparation of financial statements by reducing the number requirements to which an entity must refer. The new standard supersedes virtually all present U.S. GAAP guidance on revenue recognition and requires the use of more estimates and judgments than the prior standards, as well as additional disclosures. In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date", deferring the effective date for one year to interim and annual periods beginning after December 15, 2017. Early adoption is also permitted as of the original effective date (interim and annual periods beginning after December 15, 2016) and retrospective application is required. The Company currently expects to adopt the new standard in its fiscal year beginning April 1, 2018 and is evaluating adoption methods. While the impact the new revenue recognition standard will have on its consolidated financial statements and disclosures has not yet been fully assessed, the Company currently expects that the impact will not be material as the agreed terms it has with its customers and the related transaction prices and performance obligations will be minimally affected by the amendments.
In January 2016, the FASB issued ASU 2016-01, "Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01"). The amendments in this update supersede the guidance to classify equity securities with readily determinable fair values into different categories (that is trading or available-for-sale) and require equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures and limited liability companies) to be measured at fair value with changes in the fair value recognized through net income. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the new pronouncement to determine the impact it may have on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, "Lease"Leases (Subtopic 842)" ("ASU 2016-02"). This Update is, and associated ASUs related to increase transparency and comparability among organizations by recognizing leaseTopic 842, which requires an entity that leases assets and lease liabilitiesto recognize on the balance sheet the assets and disclosing key information about leasing arrangements. For public business entities, this Updateliabilities for the rights and obligations created by those leases. Leases will be classified as either financing or operating, similar to current accounting requirements, with the applicable classification determining the pattern of expense recognition in the statement of operations. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 including interim periodsand must be adopted using a modified retrospective approach, which requires lessees and lessors to recognize and measure all leases within those fiscal years.the scope of this ASU using one of the following transition methods: (i) the effective date or (ii) the beginning of the earliest comparative period presented in the financial statements at the date of initial application. The Company is evaluatinghas elected to apply the transition requirements on April 1, 2019, effective date rather than at the beginning of the earliest comparative period presented. This approach allows for a cumulative effect adjustment in the period of adoption, and prior periods will not be restated. In addition, the Company has elected the package of practical expedients permitted under the transition guidance, which does not require a reassessment of prior conclusions related to contracts containing a lease, lease classification and initial direct lease costs. As an accounting policy election, the Company will exclude short-term leases (term of 12 months or less) from the balance sheet presentation and will account for non-lease and lease components in a contract as a single lease component for all asset classes. The Company analyzed the impact of ASU 2016-02 across all lease arrangements to evaluate and implement the new pronouncementstandard. The Company are expected to determinemeet the new accounting and disclosure requirements upon adoption on April 1, 2019. Based on the Company’s preliminary assessment, the Company expects to record right-of-use assets of approximately $413,000 and lease liabilities of approximately $413,000 in the consolidated balance sheets on the adoption date of April 1, 2019. The impact it may have on itsthe Group’s consolidated financial statements. statements of operations and consolidated statements of cash flows is not expected to be material.In June 2016, the FASB issued ASU 2016-13, "Financial"Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"), which improves financial reporting by providing timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Forward-looking information will now be used to better inform credit loss estimates. This ASU is effective for interim and annual periods beginning after December 15, 2019 and early additionadoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230)" ("ASU 2016-15"). This Update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. For public business entities, this Update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the new pronouncement to determine the impact it may have on its consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740)" ("ASU 2016-16"). This Update improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. For public business entities, this Update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the new pronouncement to determine the impact it may have on its consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230)" ("ASU 2016-18"). This Update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. For public business entities, this Update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the new pronouncement to determine the impact it may have on its consolidated financial statements.
In February 2017, the FASB issued ASU 2017-05, "Other Income—Gains and Losses from the De-recognition of Nonfinancial Assets (Subtopic 610-20)" ("ASU 2017-05"). This Update clarifies the Scope of Asset De-recognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which clarifies the scope of the nonfinancial asset guidance in Subtopic 610-20. This ASU also clarifies that the de-recognition of all businesses and nonprofit activities (except those related to conveyances of oil and gas mineral rights or contracts with customers) should be accounted for in accordance with the de-recognition and deconsolidation guidance in Subtopic 810-10. The amendments in this ASU also provide guidance on the accounting for what often are referred to as partial sales of nonfinancial assets within the scope of Subtopic 610-20 and contributions of nonfinancial assets to a joint venture or other non-controlled investee. The amendments in this ASU are effective for annual reporting reports beginning after December 15, 2017, including interim reporting periods within that reporting period. Public entities may apply the guidance earlier but only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We do not expect the adoption of ASU 2017-05 to have a material impact on our consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09, "Compensation—Stock Compensation (Topic 718) Scope of Modification Accounting" ("ASU 2017-09"). The requirement provides guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. For public business entities, this ASU should be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. We are currently evaluating the impact the adoption of ASU 2017-09 will have on our consolidated financial statements.
In July 2017, the FASB issued ASU 2017-11, "Earnings"Earnings Per Share (Topic 260) (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception" ("ASU 2017-11"). The amendments require companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. Companies that provide earnings per share (EPS) data will adjust their basic EPS calculation for the effect of the feature when triggered (i.e., when the exercise price of the related equity-linked financial instrument is adjusted downward because of the down round feature) and will also recognize the effect of the trigger within equity. For public business entities, this ASU should be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. We are currently evaluating the impact the adoption of ASU 2017-092017-11 will have on the Company’s consolidated financial statements. In September 2017, the FASB issued ASU 2017-13,"Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)" ("ASU 2017-13"):Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments. The amendments in ASU 2017-13 amend the early adoption date option for certain companies related to the adoption of ASU 2014-09 and ASU 2016-02. The effective date is the same as the effective date and transition requirements for the amendments for ASU 2014-09 and ASU 2016-02. In February 2018, the FASB issued ASU 2018-02,"Income Statement—Reporting Comprehensive Income (Topic 220)" ("ASU 2018-02"). The amendments in this Update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this Update also require certain disclosures about stranded tax effects. Public business entities should apply the amendments in ASU 2018-02 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted. We are currently evaluating the impact of adopting ASU 2018-02 on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU 2018-13,“Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement,” ("ASU 2018-13") which is part of the FASB disclosure framework project to improve the effectiveness of disclosures in the notes to the financial statements. The amendments in the new guidance remove, modify and add certain disclosure requirements related to fair value measurements covered in Topic 820, “Fair Value Measurement.” The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for either the entire standard or only the requirements that modify or eliminate the disclosure requirements, with certain requirements applied prospectively, and all other requirements applied retrospectively to all periods presented. The Company is currently evaluating the impact of adopting this guidance. In October 2018, the FASB issued ASU No. 2018-17,“Consolidation: Targeted Improvements to Related Party Guidance for Variable Interest Entities,” ("ASU 2018-17") which modifies the guidance related to indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interest. ASU 2018-17 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance. In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses,” (“ASU 2018-19”) which clarifies and improves guidance related to credit losses, hedging, and recognition and measurement. Same as ASU 2016-13, this ASU is effective for interim and annual periods beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. In December 2018, the FASB issued ASU No. 2018-20, “Leases (Topic 842): Narrow-Scope Improvements for Lessors,” (“ASU 2018-20”) which aligns the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842, with that of existing guidance. Same as ASU 2016-02, this ASU is effective for interim and annual periods beginning after December 15, 2018. The Company believes adoption of this ASU would not have significant impact on its consolidated financial statements. In March 2019, the FASB issued ASU No. 2019-01, “Leases (Topic 842): Codification Improvements,” (“ASU 2019-01”) which provides guidance on determining the fair value of the underlying asset by lessors that are not manufacturers or dealers and presenting sales-type and direct financing leases on the statement of cash flows. ASU 2019-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance. We believe there is no additional new accounting guidance adopted, but not yet effective that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting.
Item 6. Directors, Senior Management and Employees
Directors and Senior Management
Our Board of Directors and executive officers are listed below: Name | Age | Position with Bonso | Anthony So | 73 75 | Chairman of the Board, Chief Executive Officer and Director | Andrew So | 31 33 | Deputy Chairman of the Board, President, Chief OperatingExecutive Officer and Director | Albert So | 39 41 | Director, Chief Financial Officer, Treasurer, Financial Controller and Secretary | Kim Wah Chung | 59 61 | Director, Director of Engineering and Research and Development | Woo-Ping Fok | 68 70 | Director | Henry F. Schlueter | 66 68 | Director and Assistant Secretary |
ANTHONY SO is the founder of Bonso. He has been our Chairman of the Board of Directors since July 1988. He was appointed as the Chief Executive Officer and President on November 16, 2006, and served in those capacities until March 20, 2015 when Andrew So was appointed President. On March 15, 2019, Mr. Anthony So resigned from the position of Chief Executive Officer. Mr. So received his BSE degree in civil engineering from National Taiwan University in 1967 and a Master degree in Business Administration (“MBA”) from the Hong Kong campus of the University of Hull, Hull, England in 1994. Mr. So has been Chairman of the Hong Kong GO Association since 1986 and also served as Chairman of the Alumni Association of National Taiwan University for the 1993-1994 academic years. Mr. So has served as a trustee of the Chinese University of Hong Kong, New Asia College since 1994. ANDREW SO joined the Company in August 2009 and has been a director since February 25, 2012. Mr. So currently holds the position of Chief OperatingExecutive Officer, and oversees the Company’s daily operations, and has also held the positions of Deputy Chairman of the Board and President since March 20, 2015. Andrew So was appointed as the Chief Executive Officer on March 15, 2019. Mr. So graduated with distinctions in 2008 from the University of Toronto, Canada, with a Bachelor of Commerce degree (BComm). From 2008 to 2009, prior to his employment with the Company, Mr. So worked as a Derivatives Analyst at State Street Trust Company Canada, Toronto, Canada. Mr. So graduated from the MBA Program of Hong Kong University of Science and Technology in the Fall of 2014.
ALBERT SO was appointed as the Chief Financial Officer and Secretary of the Company on March 27, 2009. He was appointed Treasurer and Financial Controller of the Company on March 20, 2015. Mr. So was previously employed as the Financial Controller of the Company in January 2008 and as a management trainee of the Company in November 2004. Mr. So has been a director since March 1, 2013. Prior to his employment as a management trainee of the Company, Mr. So was a student. Mr. So is a Certified Management Accountant and Financial Risk Manager, and received a Master degree in Business Administration from Heriot-Watt University, Edinburgh, United Kingdom, and a Bachelor degree in Mathematics from Simon Fraser University in Burnaby, British Columbia, Canada.
KIM WAH CHUNG has been a director since September 21, 1994. Mr. Chung has been employed by us since 1981 and currently holds the position of Director of Engineering and Research and Development. Mr. Chung is responsible for all research projects and product development. Mr. Chung’s entire engineering career has been spent with Bonso, and he has been involved in all of our major product developments. Mr. Chung graduated with honors in 1981 from the Chinese University of Hong Kong with a Bachelor of Science degree in electronics.
WOO-PING FOK was elected to our Board of Directors on September 21, 1994. Mr. Fok has practiced law in Hong Kong since 1991 and is a Consultant with Messrs. C.K. Mok & Co. Mr. Fok’s major areas of practice include conveyancing and real property law, corporations and business law, commercial transactions and international trade with a special emphasis in China trade matters. Mr. Fok was admitted to the Canadian Bar as a Barrister & Solicitor in December 1987 and was a partner in the law firm of Woo & Fok, a Canadian law firm with its head office in Edmonton, Alberta, Canada. In 1991, Mr. Fok was qualified to practice as a Solicitor of England & Wales, a Solicitor of Hong Kong and a Barrister & Solicitor of Australian Capital Territory.
HENRY F. SCHLUETER has been a director since October 2001 and has been our Assistant Secretary since October 6, 1988. Since 1992, Mr. Schlueter has been the Managing Director of Schlueter & Associates, P.C., a law firm, practicing in the areas of securities, mergers and acquisitions, finance and corporate law. Mr. Schlueter has served as our United States corporate and securities counsel since 1988. From 1989 to 1991, prior to establishing Schlueter & Associates, P.C., Mr. Schlueter was a partner in the Denver, Colorado office of Kutak Rock (formerly Kutak, Rock & Campbell), and from 1984 to 1989, he was a partner in the Denver office of Nelson & Harding. Mr. Schlueter is a member of the American Institute of Certified Public Accountants, the Colorado and Denver Bar Associations and the Wyoming State Bar. Mr. Schlueter is registered with the Hong Kong Law Society as a Foreign Lawyer. Anthony So, the Company’s Chief Executive Officer and Chairman of the Board of Directors is the father of Andrew So, the Company’s President and Chief OperatingExecutive Officer, and Albert So, the Company’s Chief Financial Officer, Treasurer and Secretary.
No arrangement or understanding exists between any such director or officer and any other persons pursuant to which any director or executive officer was elected as a director or executive officer. Our directors are elected annually and serve until their successors take office or until their death, resignation or removal. The executive officers serve at the pleasure of the Board of Directors.
The aggregate amount of compensation paid by us and our subsidiaries during the year ended March 31, 20172019 to all directors, former directors and officers as a group for services in all capacities was $1,277,000.approximately $1,275,000. Total compensation for the benefit of Anthony So was approximately $643,000, for the benefit of Kim Wah Chung was approximately $171,000, for the benefit of Andrew So was approximately $249,000, for the benefit of Albert So was approximately $152,000 and for the benefit of Henry F. Schlueter was an aggregate of $62,000.approximately $60,000. The $62,000approximately $60,000 listed as having been paid for the benefit of Mr. Schlueter was paid to his law firm, Schlueter & Associates, P.C., for legal services rendered. The amount for the year ended March 31, 2017,2019, included unpaid vacation payments of approximately $43,000 and $11,000 for Mr. Anthony So and Mr. Kim Wah Chung, respectively.
We did not set aside or accrue any amounts to provide pension, retirement or similar benefits for directors and officers for the fiscal year ended March 31, 2017,2019, other than contributions to our Provident Fund Plan, which aggregated $18,000 for officers and directors.
We have employment agreements with Anthony So and Kim Wah Chung. Mr. So’s employment agreement provides for a maximum salary of approximately $800,000 per year plus bonus, and Mr. Chung’s employment agreement provides for a maximum salary of approximately $200,000 per year plus bonus. The initial term of the employment agreements expired on March 31, 2013 (“Initial Term”); however, the employment agreements have been renewed under a provision in the agreements that provides for automatic renewal for successive one yearone-year periods, unless at least 90 days prior to the expiration of the Initial Term or any renewal term, either party gives written notice to the other party specifically electing to terminate the agreement. One of the properties of the Group in Hong Kong is also provided to Mr. So as part of his compensation. Mr. So’s employment agreement contains a provision under which the Company will be obligated to pay Mr. So all compensation for the remainder of his employment agreement and five times his annual salary and bonus compensation if a change of control, as defined in his employment agreement, occurs. Options of Directors and Senior Management
The following table provides information concerning options owned by the directors and senior management at July 14, 2017.
Name | | Number of Common Shares Subject to Stock Options | | | Exercise Price Per Share | | Expiration Date | Anthony So | | | 150,000 | | | $ | 1.50 | | March 31, 2020 | | | | 150,000 | | | $ | 1.50 | | March 31, 2025 | | | | | | | | | | | Andrew So | | | 125,000 | | | $ | 1.50 | | March 31, 2020 | | | | 125,000 | | | $ | 1.50 | | March 31, 2025 | | | | | | | | | | | Albert So | | | 60,000 | | | $ | 1.50 | | March 31, 2020 | | | | 60,000 | | | $ | 1.50 | | March 31, 2025 | | | | | | | | | | | Kim Wah Chung | | | 40,000 | | | $ | 1.50 | | March 31, 2020 | | | | 40,000 | | | $ | 1.50 | | March 31, 2025 | | | | | | | | | | | Woo-Ping Fok | | | 25,000 | | | $ | 1.50 | | March 31, 2020 | | | | 25,000 | | | $ | 1.50 | | March 31, 2025 | | | | | | | | | | | Henry F. Schlueter | | | 25,000 | | | $ | 1.50 | | March 31, 2020 | | | | 25,000 | | | $ | 1.50 | | March 31, 2025 |
2019.Name | | Number of Common Shares Subject to Stock Options | | Exercise Price Per Share | | Expiration Date | Anthony So | | | 150,000 | | | $ | 1.50 | | | March 31, 2020 | | | | 150,000 | | | $ | 1.50 | | | March 31, 2025 | | | | | | | | | | | | Andrew So | | | 125,000 | | | $ | 1.50 | | | March 31, 2020 | | | | 125,000 | | | $ | 1.50 | | | March 31, 2025 | | | | | | | | | | | | Albert So | | | 60,000 | | | $ | 1.50 | | | March 31, 2020 | | | | 60,000 | | | $ | 1.50 | | | March 31, 2025 | | | | | | | | | | | | Kim Wah Chung | | | 40,000 | | | $ | 1.50 | | | March 31, 2020 | | | | 40,000 | | | $ | 1.50 | | | March 31, 2025 | | | | | | | | | | | | Woo-Ping Fok | | | 25,000 | | | $ | 1.50 | | | March 31, 2020 | | | | 25,000 | | | $ | 1.50 | | | March 31, 2025 | | | | | | | | | | | | Henry F. Schlueter | | | 25,000 | | | $ | 1.50 | | | March 31, 2020 | | | | 25,000 | | | $ | 1.50 | | | March 31, 2025 |
Directors
Except as mentioned above, our directors do not receive any additional monetary compensation for serving in their capacities as directors. All directors are reimbursed for all reasonable expenses incurred in connection with their services as a director.
Employee retirement benefits
(a) | With effect from January 1, 1988, BEL, a wholly-owned foreign subsidiary of the Company in Hong Kong, implemented a defined contribution plan (the “Plan”) with a major international assurance company to provide life insurance and retirement benefits for its employees. All permanent full timefull-time employees who joined BEL before December 2000, excluding factory workers, are eligible to join the provident fund plan. Eligible employees of the Plan are required to contribute 5% of their monthly salary, while BEL is required to contribute from 5% to 10% based on the eligible employee’s salary, depending on the number of years of the eligible employee’s service. |
The Mandatory Provident Fund (the “MPF”) was introduced by the Hong Kong Government and commenced in December 2000. BEL joined the MPF by implementing a plan with a major international assurance company. All permanent Hong Kong full time employees who joined BEL on or after December 2000, excluding factory workers, are eligible to join the MPF. Eligible employees’ and the employer’s contributions to the MPF are both at 5% of the eligible employee’s monthly salary and are subject to a maximum mandatory contribution of HK$1,000 (US$128) monthly. The maximum mandatory contribution was increased to HK$1,250 (US$160) monthly starting from June 1, 2012. The maximum mandatory contribution was increased to HK$1,500 (US$192) per month starting from June 1, 2014.
Pursuant to the relevant PRC regulations, the Group is required to make contributions for each employee, at rates based upon the employee’s standard salary base as determined by the local Social Security Bureau, to a defined contribution retirement scheme organized by the local Social Security Bureau in respect of the retirement benefits for the Group’s employees in the PRC.
(b) | The contributions to each of the above schemes are recognized as employee benefit expense when they are due and are charged to the consolidated statement of income (loss). The Group’s total contributions to the above schemes for the years ended March 31, 2015, 20162017, 2018 and 20172019 amounted to approximately $693,000, $293,000$267,000, $255,000 and $267,000,$264,000, respectively. The Group has no other obligation to make payments in respect of retirement benefits of the employees. |
All directors hold office until our next annual meeting of shareholders or until their respective successors are duly elected and qualified or their positions are earlier vacated by resignation or otherwise. All executive officers are appointed by the Board and serve at the pleasure of the Board. There are no director service contracts providing for benefits upon termination of employment or directorship.
NASDAQ Exemptions and Home Country Practices
NASDAQ Marketplace Rule 4350 provides that foreign private issuers may elect to follow certain home country corporate governance practices so long as they provide NASDAQ with a letter from outside counsel in their home country certifying that the issuer 's corporate governance practices are not prohibited by home country law.
On July 19, 2005, we submitted a letter to NASDAQ certifying that certain of Bonso’s corporate governance practices are not prohibited by the relevant laws of the British Virgin Islands. We will follow British Virgin Island law in respect to the following requirements:
· A majority of Bonso’s Board of Directors will not be independent; · Bonso will not have a nominating committee; · Bonso will not have a compensation committee; · Bonso’s independent directors will not meet in executive session; and · Bonso’s audit committee may have only one member.
Mr. Woo-Ping Fok is the sole member of the Audit Committee and Mr. Schlueter serves as an ad hoc member. Mr. Fok is “independent” as defined in the NASDAQ listing standards, and Mr. Schlueter may not be considered “independent” since his law firm serves as Bonso’s United States counsel.
The Audit Committee was established to: (i) review and approve the scope of audit procedures employed by our independent auditors; (ii) review and approve the audit reports rendered by our independent auditors; (iii) approve the audit fee charged by the independent auditors; (iv) report to the Board of Directors with respect to such matters; (v) recommend the selection of independent auditors; and (vi) discharge such other responsibilities as may be delegated to it from time to time by the Board of Directors. Effective as of June 30, 2015, the Board of Directors adopted an amended charter for its Audit Committee.
At March 31, 2017,2019, we employed a total of 286231 persons, as compared to 266 at March 31, 2018, 286 persons at March 31, 2017, 415 persons at March 31, 2016 and 528 persons at March 31, 2015 and 663 persons at March 31, 2014;2015; 8 employees in Hong Kong (8 in 2018, 2017, 2016 and 20152015) and 12 in 2014) and 278223 employees in China (407(258 in 2018, 278 in 2017, 407 in 2016 and 520 in 2015 and 651 in 2014)2015). Employees are not covered by collective bargaining agreements. We consider our global labor practices and employee relations to be good.
The following table shows the number of shares of common stock beneficially owned by our directors and executive officers as of July 14, 2017:
Name | | Shares of Common Stock Owned of Record | | | Options Held | | | Total Number of Shares of Common Stock Beneficially Owned | | | Percent of Beneficial Ownership | | Anthony So | | | 2,281,770 | (1) | | | 300,000 | (2) | | | 2,581,770 | | | | 49.1 | % | Andrew So | | | 453,000 | | | | 250,000 | (3) | | | 703,000 | | | | 13.5 | % | Albert So | | | 250,000 | | | | 120,000 | (4) | | | 370,000 | | | | 7.3 | % | Kim Wah Chung | | | 93,700 | | | | 80,000 | (5) | | | 173,700 | | | | 3.4 | % | Woo-Ping Fok | | | 66,507 | | | | 50,000 | (6) | | | 116,507 | | | | 2.3 | % | Henry F. Schlueter | | | 10,000 | | | | 50,000 | (7) | | | 60,000 | | | | 1.2 | % | All Directors and Officers as a group (6 persons) | | | 3,154,977 | | | | 850,000 | | | | 4,004,977 | | | | 68.9 | % | Note: The number of shares outstanding is 4,963,196 shares, with 5,553,639 total number of shares issued, of which 590,443 shares are held in treasury. The calculations above are based upon the number of shares outstanding of 4,963,196. | |
(1) | 2019:Name | | Shares of Common Stock Owned of Record | | Options Held | | Total Number of Shares of Common Stock Beneficially Owned | | Percent of Beneficial Ownership(1) | Anthony So | | | 2,281,770 | (2) | | | 300,000 | (3) | | | 2,581,770 | | | | 52.1 | % | Andrew So | | | 453,000 | | | | 250,000 | (4) | | | 703,000 | | | | 14.3 | % | Albert So | | | 250,000 | | | | 120,000 | (5) | | | 370,000 | | | | 7.8 | % | Kim Wah Chung | | | 93,700 | | | | 80,000 | (6) | | | 173,700 | | | | 3.7 | % | Woo-Ping Fok | | | 66,507 | | | | 50,000 | (7) | | | 116,507 | | | | 2.5 | % | Henry F. Schlueter | | | 0 | | | | 50,000 | (8) | | | 50,000 | | | | 1.1 | % | All Directors and Officers as a group (6 persons) | | | 3,144,977 | | | | 850,000 | | | | 3,994,977 | | | | 72.6 | % |
(1) The number of shares outstanding is 4,653,369 shares, with 5,543,639 total number of shares issued, of which 890,270 shares are held in treasury. The calculations herein are based on the number of shares outstanding of 4,653,369. (2) Includes 1,143,421 shares of common stock owned of record by a corporation that is wholly owned by a trust of which Mr. So is the sole beneficiary. (3) Includes options to purchase 150,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2020 and options to purchase 150,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2025. (4) Includes options to purchase 125,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2020 and, options to purchase 125,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2025. (5) Includes options to purchase 60,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2020 and options to purchase 60,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2025. (6) Includes options to purchase 40,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2020 and options to purchase 40,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2025. (7) Includes options to purchase 25,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2020 and options to purchase 25,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2025. (8) Includes options to purchase 25,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2020 and options to purchase 25,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2025. (2) | Includes options to purchase 150,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2020 and options to purchase 150,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2025. |
(3) | Includes options to purchase 125,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2020 and, options to purchase 125,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2025. |
(4) | Includes options to purchase 60,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2020 and options to purchase 60,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2025. |
(5) | Includes options to purchase 40,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2020 and options to purchase 40,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2025. |
(6) | Includes options to purchase 25,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2020 and options to purchase 25,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2025. |
(7) | Includes options to purchase 25,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2020 and options to purchase 25,000 shares of common stock at an exercise price of $1.50 per share expiring on March 31, 2025. |
Stock Option and Bonus Plans
The 1996 Stock Option Plan
In October 1996, our stockholders adopted the 1996 Stock Option Plan (the “Employees’ Plan”), which provided for the grant of options to purchase an aggregate of not more than 400,000 shares of our common stock. In January 2000, our shareholders approved the proposal of the Board of Directors to increase from 400,000 to 900,000 in the aggregate the number of options to purchase common stock under the Employees’ Plan. The purpose of the Employees’ Plan is to make options available to management and employees in order to encourage them to secure or increase on reasonable terms their stock ownership and to encourage them to remain with the Company.
The Employees’ Plan is administered by a committee appointed by the Board of Directors which determines the persons to be granted options under the Employees’ Plan, the number of shares subject to each option, the exercise price of each option and the option period, subject to the requirement that no option may be exercisable more than ten years after the date of grant. The exercise price of an option may be less than the fair market value of the underlying shares of common stock. No options granted under the Employees’ Plan are transferable by the optionee other than by will or the laws of descent and distribution, and each option will be exercisable during the lifetime of the optionee only by such optionee.
The exercise price of an option granted pursuant to the Employees’ Plan may be paid in cash, by the surrender of options, in common stock, in other property, including the optionee’s promissory note, or by a combination of the above, at our discretion.
During the fiscal year ended March 31, 2017,2019, no options were granted under the Employees’ Plan and as of July 14, 2017,2019, there were no options outstanding which were issued under that plan.
The 2004 Stock Option Plan
On March 23, 2004, our stockholders adopted the 2004 Stock Option Plan (the “2004 Plan”), which provided for the grant of up to six hundred thousand (600,000) shares of the Company’s common stock in the form of stock options, subject to certain adjustments as described in the 2004 Plan. At the Annual Meeting of Shareholders held on March 20, 2015, the shareholders approved an amendment to the 2004 Plan to increase the number of shares that could be granted from 600,000 to 850,000.
The purpose of the 2004 Plan is to induce key employees to remain in the employ of the Company and to encourage such employees to secure or increase on reasonable terms their common stock ownership in the Company. The Company believes that the 2004 Plan promotes continuity of management and increased incentive and personal interest in the welfare of the Company. The 2004 Plan is administered by a committee appointed by the Board of Directors, which consists of at least two but not more than three members of the Board, one of whom shall be a non-employee of the Company. The committee members currently are Anthony So and Woo-Ping Fok. The committee determines the specific terms of the options granted, including the employees to be granted options under the plan, the number of shares subject to each option grant, the exercise price of each option and the option period, subject to the requirement that no option may be exercisable more than 10 years after the date of grant. The exercise price of an option may be less than the fair market value of the underlying shares of common stock. No options granted under the plan will be transferable by the optionee other than by will or the laws of descent and distribution, and each option will be exercisable during the lifetime of the optionee only by the optionee.
The exercise price of an option granted pursuant to the 2004 Plan may be paid in cash, by the surrender of options, in common stock, in other property, including a promissory note from the optionee, or by a combination of the above, at the discretion of the Committee.
As of March 31, 2017,2019, 850,000 options, all with an exercise price of $1.50 per share, had been granted to officers and directors of the Company under the 2004 Plan, all of which remained outstanding as of July 14, 2017.
2019.2004 Stock Bonus Plan
On September 7, 2004, our stockholders adopted the 2004 Stock Bonus Plan (the “Stock Bonus Plan”), which authorizes the issuance of up to five hundred thousand (500,000) shares of the Company’s common stock in the form of a stock bonus.
The purpose of the Stock Bonus Plan is to: (i) induce key employees to remain in the employ of the Company or of any subsidiary of the Company; (ii) encourage such employees to secure or increase their stock ownership in the Company; and (iii) reward employees, non-employee directors, advisors and consultants for services rendered, or to be rendered, to or for the benefit of the Company or any of its subsidiaries. The Company believes that the Stock Bonus Plan will promote continuity of management and increased incentive and personal interest in the welfare of the Company.
The Stock Bonus Plan is administered by a committee appointed by the Board of Directors which consists of at least two but not more than three members of the Board, one of whom shall be a non-employee of the Company. The Committee members currently are Anthony So and Woo-Ping Fok. The Committee has the authority, in its sole discretion: (i) to determine the parties to receive bonus stock, the times when they shall receive such awards, the number of shares to be issued and the time, terms and conditions of the issuance of any such shares; (ii) to construe and interpret the terms of the Stock Bonus Plan; (iii) to establish, amend and rescind rules and regulations for the administration of the Stock Bonus Plan; and (iv) to make all other determinations necessary or advisable for administering the Stock Bonus Plan.
As of March 31, 2017,2019, no shares had been granted under the Stock Bonus Plan.
Item 7. Major Shareholders and Related Party Transactions
We are not directly or indirectly owned or controlled by any foreign government or by another corporation. The following table sets forth, as of July 14, 2017,2019, beneficial ownership of our common stock by each person, to the best of our knowledge, known to own beneficially 5% or more of our common stock outstanding as of such date. Except as otherwise indicated, all shares are owned directly and hold equal voting rights.
Name | | Shares of Common Stock Owned | | | Options to Purchase Common Stock | | | Percent of Beneficial Ownership(1) | | Anthony So | | | 2,281,770 | (2) | | | 300,000 | | | | 49.1 | % | Andrew So | | | 453,000 | | | | 250,000 | | | | 13.5 | % | Albert So | | | 250,000 | | | | 120,000 | | | | 7.3 | % | CAS Corporation | | | 290,654 | (3) | | | - | | | | 5.9 | % |
Name | | Shares of Common Stock Owned | | | Options to Purchase Common Stock | | | Percent of Beneficial Ownership(1) | | Anthony So | | | 2,281,770 | (2) | | | 300,000 | | | | 52.1 | % | Andrew So | | | 453,000 | | | | 250,000 | | | | 14.3 | % | Albert So | | | 250,000 | | | | 120,000 | | | | 7.8 | % | CAS Corporation | | | 290,654 | (3) | | | - | | | | 6.2 | % |
| (1) | The number of shares outstanding is 4,963,1964,653,369 shares, with 5,553,6395,543,639 total number of shares issued, of which 590,443890,270 shares are held in treasury. The calculations above are based upon the number of shares outstanding of 4,963,196.4,653,369. |
| (2) | Includes 1,143,421 shares of common stock owned of record by a corporation that is wholly owned by a trust of which Mr. So is the sole beneficiary. |
| (3) | According to the Schedule 13D filed by CAS Corporation on December 11, 2007. |
There are no arrangements known to us which may at a subsequent date result in a change in control of the Company.
Related Party Transactions
During the fiscal years ended March 31, 2015, 20162017, 2018 and 2017,2019, we paid Schlueter & Associates, P.C. an aggregate of approximately $55,000,$62,000, $60,000 and $62,000,$60,000, respectively, for legal fees. Mr. Henry F. Schlueter, a director of the Company, is the Managing Director of Schlueter & Associates, P.C.
During the fiscal year ended March 31, 2015, Anthony So, our Chairman and Chief Executive Officer, made an interest-free loan to Bonso Advanced Technology Limited, a subsidiary of Bonso Electronics International Inc., in the principal amount of HK$4,200,000 (approximately US$538,000 as of the date of the loan). The loan is payable in 48 equal monthly installments of HK$87,500 each (approximately US$11,000), which commenced on October 31, 2014. As of March 31, 2017,2019, the Company had repaid approximately $336,000 to Mr. Anthony So, and the balance of thethis loan due to Mr. Anthony So was approximately $202,000.
in its entirety.During the fiscal year ended March 31, 2015, one of the subsidiaries in Shenzhen, PRC entered into a rental agreement with a director and stockholder, Mr. Anthony So, for three apartment units located in Shenzhen, PRC for office usage. Mr. Anthony So is the sole owner of these three apartment units. The monthly rental payment was approximately $2,000. Starting from August 1, 2016, rental of two of the apartment units was no longer required and the rental agreement was terminated; a new rental agreement for one apartment unit for staff quarters was executed, for a monthly rental payment of $260.approximately $270. The total rental payment paid to Mr. Anthony So during the fiscal year ended March 31, 20172019 was approximately $9,000 (2016: $24,000)$3,000 (2018: $3,000; 2017: $9,000).
During the fiscal year ended March 31, 2015, one of the subsidiaries in Xinxing, PRC entered into a rental agreement with a director and stockholder, Mr. Andrew So, for an apartment unit located in Xinxing, PRC for staff quarters. Mr. Andrew So is the sole owner of this apartment unit. The monthly rental payment iswas approximately $430,$450. Starting from December 1, 2018, the monthly rental payment was approximatley $580, and the total rental payment paid to Mr. Andrew So during the fiscal year ended March 31, 20172019 was approximately $5,000 (2016:$6,000 (2018: $5,000; 2017: $5,000).
During the fiscal year ended March 31, 2016, one of the subsidiaries in Shenzhen, PRC entered into a rental agreement with a director and stockholder, Mr. Anthony So, for one apartment unit located in Shenzhen, PRC for staff quarters. Mr. Anthony So is the sole owner of this apartment unit. Starting from April 1, 2017, rental of this apartment unit was no longer required and the rental agreement was terminated. The monthly rental payment iswas approximately $330, and the total rental payment paid to Mr. Anthony So during the fiscal year ended March 31, 20172019 was approximately $4,000 (2016: $2,000)$nil (2018: $nil; 2017: $4,000) for this unit.
In February 2017, Henry F. Schlueter, a director of the Company, sold 24,000 shares of the Company’s common stock to the Company at a purchase price of $2.39 per share, pursuant to the Company’s repurchase program. In February 2018, Mr. Schlueter sold an additional 10,000 shares of the Company’s common stock to the Company at a purchase price of $3.48 per share. See Item 16E. – “Purchases of Equity Securities by the Issuer and Affiliated Purchasers.” Interests of Experts and Counsel
Item 8. Financial Information
Our Consolidated Financial Statements are set forth under Item 18. – “Financial Statements.”
Item 9. The Offer and Listing
Offer and Listing Details
Our common stock is traded only in the United States over-the-counter market. It is quoted on the NASDAQ Capital Market under the trading symbol “BNSO.” The following table sets forth, for the periods indicated, the range of high and low closing sales prices per share reported by NASDAQ. The quotations represent prices between dealers and do not include retail markup, markdown or commissions and may not necessarily represent actual transactions.
The following table sets forth the high and low sale prices for each of the last five years: Period | | High | | | Low | | April 1, 2012 to March 31, 2013 | | $ | 1.88 | | | $ | 0.88 | | April 1, 2013 to March 31, 2014 | | $ | 2.94 | | | $ | 1.33 | | April 1, 2014 to March 31, 2015 | | $ | 2.10 | | | $ | 1.11 | | April 1, 2015 to March 31, 2016 | | $ | 3.25 | | | $ | 1.00 | | April 1, 2016 to March 31, 2017 | | $ | 4.25 | | | $ | 1.23 | |
Period | | High | | Low | | April 1, 2014 to March 31, 2015 | | | $ | 2.10 | | | $ | 1.11 | | | April 1, 2015 to March 31, 2016 | | | $ | 3.25 | | | $ | 1.00 | | | April 1, 2016 to March 31, 2017 | | | $ | 4.25 | | | $ | 1.23 | | | April 1, 2017 to March 31, 2018 | | | $ | 4.10 | | | $ | 1.96 | | | April 1, 2018 to March 31, 2019 | | | $ | 5.04 | | | $ | 1.62 | |
The following table sets forth the high and low sale prices during each of the quarters in the two-year period ended June 30, 2017. Period | | High | | | Low | | July 1, 2015 to September 30, 2015 | | $ | 1.89 | | | $ | 1.16 | | October 1, 2015 to December 31, 2015 | | $ | 3.25 | | | $ | 1.00 | | January 1, 2016 to March 31, 2016 | | $ | 1.49 | | | $ | 1.14 | | April 1, 2016 to June 30, 2016 | | $ | 1.80 | | | $ | 1.23 | | July 1, 2016 to September 30, 2016 | | $ | 3.35 | | | $ | 1.30 | | October 1, 2016 to December 31, 2016 | | $ | 4.25 | | | $ | 1.32 | | January 1, 2017 to March 31, 2017 | | $ | 3.34 | | | $ | 2.01 | | April 1, 2017 to June 30, 2017 | | $ | 2.84 | | | $ | 2.30 | |
2019.Period | | High | | LLow | | July 1, 2017 to September 30, 2017 | | | $ | 3.02 | | | $ | 1.96 | | | October 1, 2017 to December 31, 2017 | | | $ | 3.31 | | | $ | 2.06 | | | January 1, 2018 to March 31, 2018 | | | $ | 4.10 | | | $ | 2.42 | | | April 1, 2018 to June 30, 2018 | | | $ | 5.04 | | | $ | 2.73 | | | July 1, 2018 to September 30, 2018 | | | $ | 3.96 | | | $ | 2.76 | | | October 1, 2018 to December 31, 2018 | | | $ | 3.49 | | | $ | 1.62 | | | January 1, 2019 to March 31, 2019 | | | $ | 3.30 | | | $ | 1.87 | | | April 1, 2019 to June 30, 2019 | | | $ | 3.06 | | | $ | 2.43 | |
The following table sets forth the high and low sale prices during each of the most recent six months. Period | | High | | | Low | | January 2017 | | $ | 3.34 | | | $ | 2.01 | | February 2017 | | $ | 2.70 | | | $ | 2.02 | | March 2017 | | $ | 2.84 | | | $ | 2.22 | | April 2017 | | $ | 2.84 | | | $ | 2.30 | | May 2017 | | $ | 2.67 | | | $ | 2.38 | | June 2017 | | $ | 2.55 | | | $ | 2.36 | |
Period | | High | | Low | | January 2019 | | | $ | 2.62 | | | $ | 1.87 | | | February 2019 | | | $ | 2.98 | | | $ | 2.19 | | | March 2019 | | | $ | 3.30 | | | $ | 2.71 | | | April 2019 | | | $ | 3.06 | | | $ | 2.56 | | | May 2019 | | | $ | 2.85 | | | $ | 2.43 | | | June 2019 | | | $ | 2.80 | | | $ | 2.49 | |
On July 14, 2017,2019, the closing price of our common stock was $2.57.$2.70. Of the 5,553,6395,543,639 shares of common stock issued as of July 14, 2017, 4,963,1962019, 4,653,369 shares were outstanding, 2,338,3701,873,589 shares were held in the United States by 147138 holders of record and 590,443890,270 shares were held by the Company as treasury stock. We have 160151 shareholders of record.
Transfer and Warrant Agent
The transfer agent and registrar for the common stock is Computershare, 8742 Lucent Boulevard, Suite 225, Highlands Ranch, Colorado 80129.
Item 10. Additional Information
Our authorized capital is $170,000, consisting of 23,333,334 shares of common stock, $0.003 par value per share, and 10,000,000 authorized shares of preferred stock, $0.01 par value, divided into 2,500,000 shares each of class A preferred stock, class B preferred stock, class C preferred stock and class D preferred stock. Information with respect to the number of shares of common stock outstanding at the beginning and at the end of the last three fiscal years is presented in the Consolidated Statements of Changes in Stockholders’ Equity for the fiscal years ended March 31, 2015, 20162017, 2018 and 20172019 included herein in Item 18.
At July 14, 2017,2019, there were 5,553,6395,543,639 shares of our common stock issued, 4,963,1964,653,369 shares were outstanding and 590,443890,270 shares were held by the Company in treasury. All shares were fully paid. In addition, we had outstanding 850,000 options to purchase common stock as follows: Number of Options | Exercise Price per Share | Expiration Date | 425,000 | $ 1.50 | March 31, 2020 | 425,000 | $ 1.50 | March 31, 2025 |
Number of Options | | Exercise Price per Share | | Expiration Date | | 425,000 | | | $ | 1.50 | | | March 31, 2020 | | 425,000 | | | $ | 1.50 | | | March 31, 2025 |
At July 14, 2017,2019, there were no shares of our preferred stock outstanding.
Memorandum and Articles of Association
We are registered in the British Virgin Islands and have been assigned company number 9032 in the register of companies. Our registered agent is HWR Services Limited at Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, British Virgin Islands. The object or purpose of the Company is to engage in any act or activity that is not prohibited under British Virgin Islands law as set forth in Paragraph 4 of our Memorandum of Association. As an International Business Company, we are prohibited from doing business with persons resident in the British Virgin Islands, owning real estate in the British Virgin Islands or acting as a bank or insurance company. We do not believe that these restrictions materially affect our operations.
Paragraph 57(c) of our Amended Articles of Association (the “Articles”) provides that a director may be counted as one of a quorum in respect of any contract or arrangement in which the director is materially interested; however, if the agreement or transaction cannot be approved by a resolution of directors without counting the vote or consent of any interested director, the agreement or transaction may only be validated by approval or ratification by a resolution of the members. Paragraph 53 of the Articles allows the directors to vote compensation to themselves in respect of services rendered to the Company. Paragraph 66 of the Articles provides that the directors may by resolution exercise all the powers of the Company to borrow money and to mortgage or charge its undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of ours or of any third party. Such borrowing powers can be altered by an amendment to the Articles. There is no provision in the Articles for the mandatory retirement of directors. Directors are not required to own shares of the Company in order to serve as directors. Our authorized share capital is $170,000, divided into 23,333,334 shares of common stock, $0.003 par value, and 10,000,000 authorized shares of preferred stock, $0.01 par value. Holders of our common stock are entitled to one vote for each whole share on all matters to be voted upon by shareholders, including the election of directors. Holders of our common stock do not have cumulative voting rights in the election of directors. All of our common shares are equal to each other with respect to liquidation and dividend rights. Holders of our common shares are entitled to receive dividends if and when declared by our Board of Directors out of funds legally available therefor under British Virgin Islands law. In the event of our liquidation, all assets available for distribution to the holders of our common stock are distributable among them according to their respective holdings. Holders of our common stock have no preemptive rights to purchase any additional unissued common shares. No shares of our preferred stock have been issued; however, the Board of Directors has the ability to determine the rights, preferences and restrictions of the preferred stock at their discretion.
Paragraph 7 of the Memorandum of Association provides that without prejudice to any special rights previously conferred on the holders of any existing shares, any share may be issued with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting, return of capital or otherwise, as the directors may from time to time determine.
Paragraph 10 of the Memorandum of Association provides that if at any time the authorized share capital is divided into different classes or series of shares, the rights attached to any class or series may be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of any other class or series of shares which may be affected by such variation.
Paragraph 105 of the Articles of Association provides that our Memorandum and Articles of Association may be amended by a resolution of members or a resolution of directors. Thus, our Board of Directors without shareholder approval may amend our Memorandum and Articles of Association. This includes amendments to increase or reduce our authorized capital stock. Our ability to amend our Memorandum and Articles of Association without shareholder approval could have the effect of delaying, deterring or preventing a change in control of the Company, including a tender offer to purchase our common shares at a premium over the then current market price.
Provisions in respect of the holding of general meetings and extraordinary general meetings are set out in Paragraphs 68 through 77 of the Articles and under the International Business Companies Act. The directors may convene meetings of the members at such times and in such manner and places as the directors consider necessary or desirable, and they shall convene such a meeting upon the written request of members holding more than 30% of the votes of our outstanding voting shares.
British Virgin Islands law and our Memorandum and Articles of Association impose no limitations on the right of nonresident or foreign owners to hold or vote our securities. There are no provisions in the Memorandum and Articles of Association governing the ownership threshold above which shareholder ownership must be disclosed.
A copy of our Memorandum and Articles of Association, as amended, was filed as an exhibit to our Registration Statement on Form F-2 (SEC File No. 333-32524).
The following summarizes each material contract, other than contracts entered into in the ordinary course of business, to which Bonso or any subsidiary of Bonso is a party, for the two years immediately preceding the filing of this report:
We signed a Banking Facilities Letter dated February 16, 2017April 4, 2019 with Hang Seng Bank for an approximately HK$41.440.0 million (or approximately US$5.35.1 million) letter of credit, trust receipt facility, export D/P bills, export trade loan, factoring, overdraft facility, term loans and financial instruments including forward contracts. A copy of this Banking Facilities Letter is attached to this Annual Report on Form 20-F as Exhibit 4.1 and is incorporated herein by this reference.
AndIn November 2017, we signed an agreement with a property developer in Shenzhen (Fangda) to cooperate in reconstructing and redeveloping the Shenzhen factory. Under the terms of the agreement, Fangda is responsible for applying for necessary government approvals and for financing and handling the redevelopment project. Under the agreement, both companies will share the redeveloped property after reconstruction/redevelopment is completed with Bonso holding a 45% interest in the total floor area. In July 2018, we signed a Banking Facilities Letter dated June 21,supplementary agreement with Fangda to modify our approach in obtaining government approvals. Summaries of the November 2017 agreement and the supplementary agreement are filed as Exhibit 99.1 to the Company’s Current Report on Form 6-K which was filed with Hang Seng Bankthe SEC on March 27, 2018, and Exhibit 4.2 to update certain terms and conditions from the letter dated February 16, 2017. A copy of this Banking Facilities Letter is attached to thisCompany’s Annual Report on Form 20-F as Exhibit 4.2 and isfor the fiscal year ended March 31, 2018 which was filed with the SEC on August 15, 2018, respectively. Both agreements are incorporated herein by this reference. The Banking Facilities Letters dated June 21, 2017 and February 16, 2017 with Hang Seng Bank superseded the Banking Facilities Letter dated February 2, 2016.
There are no exchange control restrictions on payments of dividends on our common stock or on the conduct of our operations either in Hong Kong, where our principal executive offices are located, or the British Virgin Islands, where we are incorporated. Other jurisdictions in which we conduct operations may have various exchange controls. Taxation and repatriation of profits regarding our China operations are regulated by Chinese laws and regulations. With respect to our PRC subsidiaries, with the exception of a requirement that approximately 11%10% of profits be reserved for future developments and staff welfare, there are no restrictions on the payment of dividends and the removal of dividends from China once all taxes are paid and assessed and losses, if any, from previous years have been made good. To date, these controls have not had, and are not expected to have, a material impact on our financial results. There are no material British Virgin Islands laws that impose foreign exchange controls on us or that affect the payment of dividends, interest or other payments to holders of our securities who are not residents of the British Virgin Islands. British Virgin Islands law and our Memorandum and Articles of Association impose no limitations on the right of nonresident or foreign owners to hold or vote our securities.
No reciprocal tax treaty regarding withholding exists between the United States and the British Virgin Islands. Under current British Virgin Islands law, dividends, interest or royalties paid by us to individuals are not subject to tax as long as the recipient is not a resident of the British Virgin Islands. If we were to pay a dividend, we would not be liable to withhold any tax, but shareholders would receive gross dividends, if any, irrespective of their residential or national status.
Dividends, if any, paid to any United States resident or citizen shareholder are treated as dividend income for United States federal income tax purposes. Such dividends are not eligible for the 70%50% dividends-received deduction allowed to United States corporations on dividends from a domestic corporation under Section 243 of the Internal Revenue Code. Various Internal Revenue Code provisions impose special taxes in certain circumstances on non-United States corporations and their shareholders. You are urged to consult your tax advisor with regard to such possibilities and your own tax situation.
A foreign corporation will be treated as a passive foreign investment company (“PFIC”) for United States federal income tax purposes if, after applying relevant look-through rules with respect to the income and assets of subsidiaries, 75% or more of its gross income consists of certain types of passive income or 50% or more of the gross value of its assets is attributable to assets that produce passive income or are held for the production of passive income. For this purpose, passive income generally includes dividends, interest, royalties, rents (other that rents and royalties derived in the active conduct of a trade or business), annuities and gains from assets that produce passive income. We presently believe that we are not a PFIC and do not anticipate becoming a PFIC. This is, however, a factual determination made on an annual basis and is subject to change. If we were to be classified as a PFIC in any taxable year, (i) U.S. holders would generally be required to treat any gain on sales of our shares held by them as ordinary income and to pay an interest charge on the value of the deferral of their United States federal income tax attributable to such gain; and (ii) distributions paid by us to our United States holders could also be subject to an interest charge. In addition, we would not provide information to our United States holders that would enable them to make a “qualified electing fund” election under which, generally, in lieu of the foregoing treatment, our earnings would be currently included in their United States federal income.
In addition to United States federal income taxation, shareholders may be subject to state and local taxes upon their receipt of dividends.
You may read and copy documents referred to in this Annual Report on Form 20-F that have been filed with the SEC at the SEC’s Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You can also obtain copies of our SEC filings by going to the SEC’s website at http://www.sec.gov.
The SEC allows us to “incorporate by reference” the information we file with the SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this Annual Report on Form 20-F.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a certain level of interest rate risk and foreign currency exchange risk.
Our interest rate risk primarily arises from our bank borrowings and our general banking facilities. As at March 31, 2017,2019, we had utilized approximately $277,000$445,000 of our total banking facilities of $5,306,000.approximately $5,128,000. Based on the maturity profile and composition of our long-term debt and general banking facilities, including the fact that our banking facilities are at variable interest rates, we estimate that changes in interest rates will not have a material impact on our operating results or cash flows. We intend to manage our interest rate risk through appropriate borrowing strategies. We have not entered into interest rate swap or risk management agreements; however, it is possible that we may do so in the future.
A summary of our debts as at March 31, 20172019 which were subject to variable interest rates is as below:
| | March 31, | | Interest | | | 2017 | | Rate | Notes payable | | $ | 134,000 | | HIBOR(1) +2.50% | Term loans (2) | | $ | 143,000 | | HIBOR(1) +2.25% | | | | | | |
| | March 31, | | Interest | | | 2019 | | Rate | Notes payable | | $ | Nil | | | | HIBOR(1)+2.50% | | Short term loans(2) | | $ | Nil | | | | HIBOR(1)+2.25% | | Long term loans(2) | | $ | 445,000 | | | | HIBOR(1)+2.00% | | | | | | | | | | |
(1) HIBOR is the Hong Kong Interbank Offer Rate. (2) A clause in the banking facility states that the term loans are subject to review any time and also subject to the bank's overriding right of repayment on demand, including the right to call for cash cover on demand for prospective and contingent liabilities. Therefore, all long-term loans were classified as current liabilities in the consolidated balance sheets.
A change in the interest rate of 1% will increase or decrease the interest expense of the Company by approximately $10,000.
$6,000.For further information concerning our banking facilities, the interest rates payable and repayment terms, please see Note 7 to our Consolidated Financial Statements included elsewhere in this Annual Report. Foreign Currency Exchange Rates
For a discussion of our Foreign Currency Exchange Risk, See Item 5. – “Operating and Financial Review and Prospects - Foreign Currency Exchange Rates.”
Item 12. Description of Securities Other Than Equity Securities
Not applicable to Bonso.
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
The Company’s management directed that an evaluation of our disclosure controls and procedures, as defined in paragraph (e) of Rule 13a-15 or 15d-15 under the Exchange Act, be conducted as of March 31, 2017.2019. Our Company's internal control over financial reporting is a process designed under the supervision of the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
| · | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
| · | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our Company are being made only in accordance with authorizations of our management and directors; and |
| · | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements. |
There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In making this assessment, management used the criteria established in 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the assessment, the Company’s management, including its Chief Operating Officer and Chief Financial Officer, have concluded that, as of March 31, 2017,2019, there were certain material weaknesses in our internal controls over financial reporting related to our financial closing process, the lack of trained accounting personnel and the failure to enter certain transactions into the accounting records on a timely basis. All of these weaknesses were identified in the Form 20-F that we filed during the previous year. As a result of that evaluation and other assessments and observations, management concluded that both our internal controls over financial reporting and disclosure controls and procedures for the fiscal year ended March 31, 2017,2019, were ineffective.
· | We have not maintained effective internal control over the financial closing process to provide reasonable assurance that the financial statements (including our interim financial statements) are prepared in accordance with Generally Accepted Accounting Principles (GAAP). |
| § | a sufficient number of experienced personnel in our accounting and finance departments to provide reasonable assurance that transactions were being recorded, and adequate supervisory reviews and monitoring activities over financial reporting matters and controls performed, as necessary to permit the preparation of the financial statements (including our interim financial statements) in accordance with GAAP; |
| § | timely and accurate preparation and review of period-end account analyses and timely disposition of any required adjustments; and |
| § | adequate training of and communication to employees regarding their duties and control responsibilities within the accounting and finance organization to ensure that processes and control activities were being carried out appropriately. |
These material weaknesses resulted in material post-closing adjustments reflected in the financial statements for the year ended March 31, 2017. These adjustments resulted in changes to assets, liabilities, stockholders' equity, income and expenses.
During the fiscal year ended March 31, 2014, we identified additional material weaknesses, relating to the conduct of our year-end inventory count, and the approval of loans to an officer and director in violation of Section 13(k) adopted under the Exchange Act as more particularly described below. We have taken certain remedial actions to address these matters and management does not believe that these material weaknesses exist as of March 31, 2017.
Notwithstanding the identified material weaknesses, management believes the consolidated financial statements included in this Annual Report on Form 20-F fairly present in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.
In response to the material weaknesses described above, management intends to do the following:
| · | Provide further training and communication to its accounting staff with regard to the recording of transactions in the accounting records, and closing procedures and practices. |
| · | Increase supervisory review and monitoring activities over financial reporting matters and controls. |
| · | Consider hiring either an additional experienced accountant with U.S. GAAP experience or outside consultants to work with the Company and its accounting staff. |
If the remedial measures described above are insufficient to address any of the identified material weaknesses or are not implemented effectively, or additional deficiencies arise in the future, material misstatements in our interim or annual financial statements may occur in the future. We are currently working to implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. A key element of our remediation effort is the ability to recruit and retain qualified individuals to support our remediation efforts. While our Audit Committee and Board of Directors have been supportive of our efforts by supporting the hiring of various individuals in finance, as well as funding efforts to improve our financial reporting system, improvement in internal control will be hampered if we cannot recruit and retain more qualified professionals. Among other things, any unremediated material weaknesses could result in material post-closing adjustments in future financial statements. Furthermore, any such unremediated material weaknesses could have the effects described above in the Risk Factor captioned “We have identified material weaknesses in our internal control over financial reporting which could, if not remediated, result in material misstatements in our financial statements.” Management believes that the remediation items listed above, if executed, will ensure that data and reports can be relied upon for the purpose of accurately and timely recording transactions in accordance with GAAP.
However, we have experienced material weaknesses in our internal controls for several years and, to date, management has been unable to implement effective remediation measures.Changes in Internal Controls
There were no changes in the Company’s internal controls during the period covered by this Report that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
Item 16A. Audit Committee Financial Expert
Henry F. Schlueter is an ad hoc member of the Company’s Audit Committee and is deemed to be a financial expert. Mr. Schlueter, the Company’s outside securities counsel, may not be deemed to be “independent” within the definition of “independence” published by NASDAQ.
We have adopted a code of ethics that applies to our Chief Executive Officer and Chief Financial Officer. We intend to disclose any changes in, or waivers from, our code of ethics by filing a Form 6-K. Stockholders may request a free copy in print form from our Chief Financial Officer at:
Bonso Electronics International, Inc. Unit 1404, 14/F, Cheuk Nang Centre 9 Hillwood Road, Tsimshatsui Hong Kong
Item 16C. Principal Accountant Fees and Services
Audit Committee’s Pre-approval Policies and Procedure
The Audit Committee must pre-approve the audit and non-audit services performed by the independent auditor in order to assure that the provision of such services does not impair the auditor's independence. Before the Company or any of its subsidiaries engage the independent auditor to render a service, the engagement must be either:
· | specifically approved by the Audit Committee; or |
· | entered into pursuant to this Pre-Approval Policy. |
The term of any pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period. The Audit Committee may periodically revise the list of pre-approved services.
The Audit Committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee may not delegate to management the Audit Committee's responsibilities to pre-approve services performed by the independent auditor.
The Audit Committee must specifically pre-approve the terms of the annual audit services engagement. The Audit Committee shall approve, if necessary, any changes in terms resulting from changes in audit scope, Company structure or other matters. In addition to the annual audit services engagement approved by the Audit Committee, the Audit Committee may grant pre-approval for other audit services, which are those services that only the independent auditor reasonably can provide.
The Audit Committee may grant pre-approval to those permissible non-audit services classified as other services that it believes would not impair the independence of the auditor, including those that are routine and recurring services.
The Audit Committee may consider the amount or range of estimated fees as a factor in determining whether a proposed service would impair the auditor's independence. Where the Audit Committee has approved an estimated fee for a service, the pre-approval applies to all services described in the approval. However, in the event the invoice in respect of any such service is materially in excess of the estimated amount or range, the Audit Committee must approve such excess amount prior to payment of the invoice. The Audit Committee expects that any requests to pay invoices in excess of the estimated amounts will include an explanation as to the reason for the overage. The Company’s independent auditor will be informed of this policy.
The Company’s management shall inform the Audit Committee of each service performed by the independent auditor pursuant to this Pre-Approval Policy. Requests or applications to provide services that require separate approval by the Audit Committee shall be submitted to the Audit Committee by both the independent auditor and the Chief Financial Officer and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC’s and the Public Company Accounting Oversight Board (United States)’s rules on auditor independence.
All audit related services, tax services and other services indicated below were pre-approved by the Audit Committee.
The aggregate fees billed by Moore Stephens CPA Limited for professional services rendered for the audit of the Company’s annual consolidated financial statements for the fiscal years ended March 31, 20172019 and 20162018 were $190,000 for each year.
approximately $150,000 and $160,000, respectively.Audit Related Fees
There were no fees billed by Moore Stephens CPA Limited for professional services rendered for assurance and related services that were reasonably related to the performance of the audit and are not reported above under “Audit Fees” for the fiscal year ended March 31, 2017 and2019 or for the fiscal year ended March 31, 2016.
The aggregate fees billed for professional services rendered for tax compliance for the fiscal years ended March 31, 20172019 and 20162018 were approximately $3,600$5,000 and $4,800,$8,000, respectively.
The aggregate fees billed by Moore Stephens CPA Limited for agreed-upon procedures rendered during the fiscal years ended March 31, 20172019 and 20162018 were approximately $10,000$nil and $nil, respectively. Item 16D. Exemptions from the Listing Standards for Audit Committees
Pursuant to NASDAQ Marketplace Rule 4350(a), a foreign private issuer may follow its home country practice in lieu of Rule 4350, which sets forth the qualitative Listing Requirements for NASDAQ listed companies. Rule 4350 requires, among other things, that a listed company have at least three members on its audit committee. The Company currently has an audit committee consisting of two directors, one of whom is deemed to be “independent” as defined in NASDAQ Marketplace Rule 4200. The Company has obtained a letter from independent counsel in the British Virgin Islands certifying that having a single member audit committee is not prohibited by British Virgin Island law. See “ Item 6. – “Directors, Senior Management and Advisors - NASDAQ Exemptions and Home Country Practices.”
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
In August of 2001, the Company's Board of Directors authorized a program for the Company to repurchase up to $500,000 of its common stock. This repurchase program does not obligate the Company to acquire any specific number of shares or acquire shares over any specified period of time. On November 16, 2006 and on September 17, 2015, the Company's Board of Directors authorized an additional $1,000,000 and an additional $1,500,000, respectively, for the Company’s repurchase of its common stock under the same repurchase program. These two authorizationsOn April 25, 2018, the Board of Directors approved the expenditure of an additional $3,000,000 to repurchase shares together, increasedof the Company’s common stock, bringing the aggregate amount authorizedavailable for repurchases to$6,000,000.As of March 31, 2019, the Company has repurchased 906,866 shares of its common stock and expended approximately $2,866,000 to repurchase from $500,000those shares. Effective April 25, 2018, with the adoption of the above-mentioned increase, the Company had up to $3,000,000. approximately $3,499,000 available to fund additional repurchases of the Company’s common stock. As of March 31, 2019, the Company had 4,670,773 shares of its common stock issued and outstanding. BALANCE OF PAGE INTENTIONALLY LEFT BLANK The following table contains the Company’s purchases of equity securities in the fiscal year ended March 31, 2017
Issuer Purchases of Equity Securities | | Period | | (a) Total Number of Shares (or Units) Purchased | | | (b) Average Price Paid per Share (or Unit) | | | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | | | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs | | April 1, 2016 to April 30, 2016 | | | 19,000 | | | $ | 1.40 | | | | 19,000 | | | $ | 1,409,000 | | May 1, 2016 to May 31, 2016 | | | - | | | | - | | | | - | | | $ | 1,409,000 | | June 1, 2016 to June 30, 2016 | | | - | | | | - | | | | - | | | $ | 1,409,000 | | July 1, 2016 to July 31, 2016 | | | - | | | | - | | | | - | | | $ | 1,409,000 | | August 1, 2016 to August 31, 2016 | | | - | | | | - | | | | - | | | $ | 1,409,000 | | September 1, 2016 to September 30, 2016 | | | - | | | | - | | | | - | | | $ | 1,409,000 | | October 1, 2016 to October 31, 2016 | | | - | | | | - | | | | - | | | $ | 1,409,000 | | November 1, 2016 to November 30, 2016 | | | - | | | | - | | | | - | | | $ | 1,409,000 | | December 1, 2016 to December 31, 2016 | | | - | | | | - | | | | - | | | $ | 1,409,000 | | January 1, 2017 to January 31, 2017 | | | - | | | | - | | | | - | | | $ | 1,409,000 | | February 1, 2017 to February 29, 2017 | | | 48,550 | | | $ | 2.32 | | | | 48,550 | | | $ | 1,296,000 | | March 1, 2017 to March 31, 2017 | | | 96,761 | | | $ | 2.36 | | | | 96,761 | | | $ | 1,067,000 | | TOTAL | | | 164,311 | | | $ | 2.24 | | | | 164,311 | | | $ | 1,067,000 | |
2019.Issuer Purchases of Equity Securities | | Period | | (a) Total Number of Shares (or Units) Purchased | | | (b) Average Price Paid per Share (or Unit) | | | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | | | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs | | April 1, 2018 to April 30, 2018 | | | 77,931 | | | $ | 3.14 | | | | 77,931 | | | $ | 3,254,000 | | May 1, 2018 to May 31, 2018 | | | 2,800 | | | $ | 3.10 | | | | 2,800 | | | $ | 3,246,000 | | June 1, 2018 to June 30, 2018 | | | 2,591 | | | $ | 3.38 | | | | 2,591 | | | $ | 3,237,000 | | July 1, 2018 to July 31, 2018 | | | - | | | $ | - | | | | - | | | $ | 3,237,000 | | August 1, 2018 to August 31, 2018 | | | - | | | $ | - | | | | - | | | $ | 3,237,000 | | September 1, 2018 to September 30, 2018 | | | - | | | $ | - | | | | - | | | $ | 3,237,000 | | October 1, 2018 to October 31, 2018 | | | 3,000 | | | $ | 2.87 | | | | 3,000 | | | $ | 3,228,000 | | November 1, 2018 to November 30, 2018 | | | 11,043 | | | $ | 2.47 | | | | 11,043 | | | $ | 3,201,000 | | December 1, 2018 to December 31, 2018 | | | 7,883 | | | $ | 2.29 | | | | 7,883 | | | $ | 3,183,000 | | January 1, 2019 to January 31, 2019 | | | 10,755 | | | $ | 2.28 | | | | 10,755 | | | $ | 3,158,000 | | February 1, 2019 to February 29, 2019 | | | 2,884 | | | $ | 2.41 | | | | 2,884 | | | $ | 3,151,000 | | March 1, 2019 to March 31, 2019 | | | 5,962 | | | $ | 2.84 | | | | 5,962 | | | $ | 3,134,000 | | TOTAL | | | 124,849 | | | $ | 2.92 | | | | 124,849 | | | $ | 3,134,000 | |
* From April 1, 20172019 to July 14, 2017,2019, the Company repurchased an additional 45,92417,404 shares of its common stock for an aggregate purchase price of approximately $114,000. $47,000.As of July 14, 2017, 24,0002019, 34,000 repurchased shares had been removed from the total number of shares issued. The Company (through its subsidiary) had repurchased and held an aggregate of 590,443890,270 shares of its common stock. The Company may from time to time repurchase additional shares of its common stock under this program.
Item 16F. Changes in Registrant’s Certifying Accountants.
Item 16G. Corporate Governance.
For a discussion of the ways in which the Company’s corporate governance differs from those followed by domestic companies under the NASDAQ Marketplace listing requirements, see “NASDAQItem 6. – “Directors, Senior Management and Advisors - NASDAQ Exemptions and Home Country Practices”Practices,” above.
Item 16H. Mine Safety Disclosure.
Not applicable to Bonso.
Item 17. Financial Statements
Item 18. Financial Statements
The following Financial Statements are filed as part of this Annual Report: Contents | Pages | Report of Independent Registered Public Accounting Firm | F-1 F-2 | | | Consolidated Balance Sheets as of March 31, 20162018 and 2017 2019 | F-2 F-3 | | | Consolidated Statements of Operations and Comprehensive Income for the years ended March 31, 2015, 20162017, 2018 and 2017 2019 | F-3 F-4 | | | Consolidated Statements of Changes in Stockholders’ Equity for the years ended March 31, 2015, 20162017, 2018 and 2017 2019 | F-4 F-5 | | | Consolidated Statements of Cash Flows for the years ended March 31, 2015, 20162017, 2018 and 2017 2019 | F-5 F-6 | | | Notes to Consolidated Financial Statements | F-6F-7 to F-43 F-44 |
| 4.2 | Banking Facilities Letter, dated June 21, 2017 between Bonso and the Hang Seng Bank Limited |
| 4.3 | Letter of Intent dated July 11, 2017, between Bonso and Shenzhen Fangda Property Development Company Limited |
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf. behalf | BONSO ELECTRONICS INTERNATIONAL INC. | | | | | Dated: August 15, 20172019 | /s/ AnthonyAndrew So | | | AnthonyAndrew So, Chairman of the Board, Chief Executive Officer and Director | | | | | | | | Dated: August 15, 20172019 | /s/ Albert So | | | Albert So, Chief Financial Officer, Treasurer and Secretary | | | | | | | | | | | | | |
Bonso Electronics International Inc. (Incorporated in the British Virgin Islands)
Consolidated Financial Statements
March 31, 20172019
Bonso Electronics International Inc. Index to Consolidated Financial Statements
Contents Contents
| Pages | | | Report of Independent Registered Public Accounting Firm | F-1 F-2 | | | Consolidated Balance Sheets as of March 31, 20162018 and 2017 2019 | F-2 F-3 | | | Consolidated Statements of Operations and Comprehensive Income for the years ended March 31, 2015, 20162017, 2018 and 2017 2019 | F-3 F-4 | | | Consolidated Statements of Changes in Stockholders’ Equity for the years ended March 31, 2015, 20162017, 2018 and 2017 2019 | F-4 F-5 | | | Consolidated Statements of Cash Flows for the years ended March 31, 2015, 20162017, 2018 and 2017 2019 | F-5 F-6 | | | Notes to Consolidated Financial Statements | F-7 - F-44 |
F-6 to F-43
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Bonso Electronics International Inc.
Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Bonso Electronics International Inc. and subsidiaries (the “Company”) as of March 31, 20162018 and 20172019, and the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended March 31, 2017. 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2018 and 2019, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 2019, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesethe Company’s consolidated financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. OurAs part of our audits, included considerationwe are required to obtain an understanding of internal control over financial reporting, as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposespurpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement presentation.statements. 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 consolidated financial position of the Company as of March 31, 2016 and 2017, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
/s/ Moore Stephens CPA Limited Moore Stephens CPA Limited Certified Public Accountants We have served as the Company's auditor since 2009. Hong Kong August 15, 20172019
Bonso Electronics International Inc. Consolidated Balance Sheets (Expressed in United States Dollars) | | | | | March 31, | | | | Note | | | 2016 | | | 2017 | | | | | | | $ in thousands | | | $ in thousands | | Assets | | | | | | | | | | | | | | | | | | | | Current assets | | | | | | | | | | Cash and cash equivalents | | | | | | 3,547 | | | | 3,745 | | Trade receivables, net | | | 2 | | | | 913 | | | | 1,167 | | Other receivables, deposits and prepayments | | | | | | | 1,180 | | | | 1,646 | | Inventories, net | | | 3 | | | | 1,823 | | | | 1,018 | | Financial instruments at fair value | | | 9 | | | | 144 | | | | 167 | | | | | | | | | | | | | | | Total current assets | | | | | | | 7,607 | | | | 7,743 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment in life insurance contract | | | 10 | | | | 140 | | | | 144 | | Other receivables - non-current portion | | | | | | | 265 | | | | - | | | | | | | | | | | | | | | Property, plant and equipment | | | | | | | | | | | | | Buildings | | | | | | | 16,403 | | | | 16,285 | | Construction-in-progress | | | | | | | 821 | | | | 62 | | Plant and machinery | | | | | | | 9,862 | | | | 9,810 | | Furniture, fixtures and equipment | | | | | | | 1,323 | | | | 1,273 | | Motor vehicles | | | | | | | 685 | | | | 626 | | | | | | | | | | | | | | | | | | | | | | 29,094 | | | | 28,056 | | Less: accumulated depreciation | | | | | | | (17,377 | ) | | | (17,762 | ) | | | | | | | | | | | | | | Property, plant and equipment, net | | | 4 | | | | 11,717 | | | | 10,294 | | | | | | | | | | | | | | | Intangible assets, net | | | 6 | | | | 3,292 | | | | 2,785 | | | | | | | | | | | | | | | Total assets | | | | | | | 23,021 | | | | 20,966 | | | | | | | | | | | | | | | Liabilities and stockholders’ equity | | | | | | | | | | | | | | | | | | | | | | | | | | Current liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | Notes payable - secured | | | 7 | | | | 1,237 | | | | 134 | | Bank loans - secured | | | 7 | | | | 506 | | | | 143 | | Accounts payable | | | | | | | 2,501 | | | | 1,183 | | Accrued charges and deposits | | | | | | | 3,153 | | | | 3,018 | | Income tax liabilities | | | 8 | | | | 317 | | | | 533 | | Payable to affiliated parties | | | 15 | | | | 79 | | | | 54 | | Financial instruments at fair value | | | 9 | | | | 160 | | | | - | | Current portion of capital lease obligations | | | 11(a) | | | | 49 | | | | 44 | | Loan from affiliated party - current portion | | | 15 | | | | 135 | | | | 135 | | | | | | | | | | | | | | | Total current liabilities | | | | | | | 8,137 | | | | 5,244 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Capital lease obligations - non current portion | | | 11(a) | | | | 104 | | | | 60 | | Loan from affiliated party - non current portion | | | 15 | | | | 202 | | | | 67 | | | | | | | | | | | | | | | Commitments and contingent liabilities | | | 12 | | | | | | | | | | | | | | | | | | | | | | | Stockholders’ equity | | | | | | | | | | | | | Common stock par value $0.003 per share | | | | | | | | | | | | | - authorized shares - 23,333,334 | | | | | | | | | | | | | - issued shares: March 31, 2016 and 2017 - 5,577,639, - outstanding shares: March 31, 2016: 5,173,431; March 31, 2017: 5,009,120. | | | | | | | 17 | | | | 17 | | Additional paid-in capital | | | | | | | 22,566 | | | | 22,566 | | Treasury stock at cost: March 31, 2016: 404,208; March 31, 2017: 568,519. | | | | | | | (1,561 | ) | | | (1,929 | ) | Accumulated deficit | | | | | | | (8,828 | ) | | | (6,033 | ) | Accumulated other comprehensive income | | | | | | | 2,384 | | | | 974 | | | | | | | | | | | | | | | | | | | | | | 14,578 | | | | 15,595 | | | | | | | | | | | | | | | Total liabilities and stockholders’ equity | | | | | | | 23,021 | | | | 20,966 | | | |
| | | | March 31, | | | Note | | 2018 | | 2019 | | | | | $ in thousands | | $ in thousands | Assets | | | | | | | | | | | | | | Current assets | | | | | | | | | | | | | Cash and cash equivalents | | | | | | | 8,751 | | | | 7,527 | | Trade receivables, net | | | 2 | | | | 794 | | | | 600 | | Other receivables, deposits and prepayments | | | | | | | 745 | | | | 1,341 | | Inventories | | | 3 | | | | 1,012 | | | | 829 | | Income tax recoverable | | | 8 | | | | 5 | | | | 5 | | Financial instruments at fair value | | | 9 | | | | 78 | | | | 102 | | Total current assets | | | | | | | 11,385 | | | | 10,404 | | | | | | | | | | | | | | | Investment in life insurance contract | | | 10 | | | | 149 | | | | 153 | | | | | | | | | | | | | | | Property, plant and equipment, net | | | 4 | | | | 10,434 | | | | 9,591 | | | | | | | | | | | | | | | Intangible assets, net | | | 6 | | | | 2,787 | | | | 2,338 | | | | | | | | | | | | | | | Total assets | | | | | | | 24,755 | | | | 22,486 | | | | | | | | | | | | | | | Liabilities and stockholders’ equity | | | | | | | | | | | | | | | | | | | | | | | | | | Current liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | Notes payable - secured | | | 7 | | | | 99 | | | | — | | Bank loans - secured | | | 7 | | | | — | | | | 445 | | Accounts payable | | | | | | | 924 | | | | 443 | | Contract liabilities | | | | | | | — | | | | 17 | | Accrued charges and deposits | | | | | | | 3,178 | | | | 3,168 | | Payable to affiliated parties | | | 15 | | | | 73 | | | | 54 | | Current portion of capital lease obligations | | | 11 | (a) | | | 28 | | | | 28 | | Loan from affiliated party - current portion | | | 15 | | | | 67 | | | | — | | Total current liabilities | | | | | | | 4,369 | | | | 4,155 | | | | | | | | | | | | | | | Capital lease obligations - non current portion | | | 11 | (a) | | | 32 | | | | 5 | | | | | | | | | | | | | | | Long-term loan | | | 20 | | | | 2,527 | | | | 2,485 | | | | | | | | | | | | | | | Long-term deposit received | | | 20 | | | | 738 | | | | 692 | | | | | | | | | | | | | | | Total liabilities | | | | | | | 7,666 | | | | 7,337 | | Commitments and contingent liabilities | | | 12 | | | | | | | | | | | | | | | | | | | | | | | Stockholders’ equity | | | | | | | | | | | | | Common stock par value $0.003 per share | | | | | | | | | | | | | - authorized shares - 23,333,334 | | | | | | | | | | | | | - issued shares: March 31, 2018: 5,543,639; March 31, 2019: 5,543,639. - outstanding shares: March 31, 2018: 4,795,622; March 31, 2019: 4,670,773. | | | | | | | 17 | | | | 17 | | Additional paid-in capital | | | | | | | 22,474 | | | | 22,474 | | Treasury stock at cost: March 31, 2018: 748,017; March 31, 2019: 872,866. | | | | | | | (2,409 | ) | | | (2,773 | ) | Accumulated deficit | | | | | | | (6,029 | ) | | | (6,492 | ) | Accumulated other comprehensive income | | | | | | | 3,036 | | | | 1,923 | | | | | | | | | | | | | | | | | | | | | | 17,089 | | | | 15,149 | | | | | | | | | | | | | | | Total liabilities and stockholders’ equity | | | | | | | 24,755 | | | | 22,486 | | | | | | | | | | | | | | |
See notes to these consolidated financial statementsstatements. Bonso Electronics International Inc. Consolidated Statements of Operations and Comprehensive Income (Expressed in United States Dollars)
| | | | | Years ended March 31, | | | | Note | | | 2015 | | | 2016 | | | 2017 | | | | | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | | | | | | | | | | | | | Net sales | | | 19 | | | | 28,944 | | | | 23,892 | | | | 17,476 | | Cost of sales | | | | | | | (23,092 | ) | | | (16,476 | ) | | | (10,715 | ) | | | | | | | | | | | | | | | | | | Gross profit | | | | | | | 5,852 | | | | 7,416 | | | | 6,761 | | | | | | | | | | | | | | | | | | | Rental income | | | | | | | 1,453 | | | | 1,477 | | | | 1,345 | | Selling expenses | | | | | | | (822 | ) | | | (420 | ) | | | (297 | ) | Salaries and related costs | | | | | | | (3,166 | ) | | | (2,961 | ) | | | (2,573 | ) | Research and development expenses | | | | | | | (228 | ) | | | (200 | ) | | | (158 | ) | Administration and general expenses | | | | | | | (3,245 | ) | | | (3,503 | ) | | | (2,597 | ) | Other income | | | | | | | 520 | | | | 256 | | | | 584 | | Gain on disposal of property plant and equipment | | | | | | | 98 | | | | 718 | | | | - | | Gain on disposal of intangible assets | | | | | | | - | | | | 519 | | | | 79 | | Gain from deregistration of subsidiaries | | | | | | | - | | | | - | | | | 22 | | | | | | | | | | | | | | | | | | | Income from operations | | | 19 | | | | 462 | | | | 3,302 | | | | 3,166 | | Interest income | | | | | | | 18 | | | | 15 | | | | 8 | | Interest expense | | | | | | | (273 | ) | | | (113 | ) | | | (37 | ) | Foreign exchange (loss) / gain | | | | | | | (134 | ) | | | (23 | ) | | | 258 | | | | | | | | | | | | | | | | | | | Income before income taxes | | | | | | | 73 | | | | 3,181 | | | | 3,395 | | Income tax credit / (expense) | | | 8 | | | | 1,037 | | | | (310 | ) | | | (600 | ) | | | | | | | | | | | | | | | | | | Net income | | | | | | | 1,110 | | | | 2,871 | | | | 2,795 | | | | | | | | | | | | | | | | | | | Other comprehensive income / (loss), net of tax: | | | | | | | | | | | | | | | | | Foreign currency translation adjustments, net of tax | | | | | | | 123 | | | | (850 | ) | | | (1,410 | ) | | | | | | | | | | | | | | | | | | Comprehensive income | | | | | | | 1,233 | | | | 2,021 | | | | 1,385 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income attributable to common shareholders | | | | | | | 1,110 | | | | 2,871 | | | | 2,795 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net earnings per share | | | 18 | | | | | | | | | | | | | | - basic | | | | | | $ | 0.21 | | | $ | 0.55 | | | $ | 0.54 | | | | | | | | | | | | | | | | | | | Weighted average number of shares outstanding in calculating net earnings per share | | | | | | | | | | | | | | | | | - basic | | | 18 | | | | 5,246,903 | | | | 5,173,431 | | | | 5,143,648 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net earnings per share | | | 18 | | | | | | | | | | | | | | - diluted | | | | | | $ | 0.21 | | | $ | 0.55 | | | $ | 0.53 | | | | | | | | | | | | | | | | | | | Weighted average number of shares outstanding in calculating net earnings per share | | | | | | | | | | | | | | | | | - diluted | | | 18 | | | | 5,246,903 | | | | 5,173,431 | | | | 5,316,393 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Years ended March 31, | | | Note | | 2017 | | 2018 | | 2019 | | | | | $ in thousands | | $ in thousands | | $ in thousands | | | | | | | | | | Net revenue | | | 19 | | | | 18,952 | | | | 11,523 | | | | 9,992 | | Cost of revenue | | | | | | | (11,274 | ) | | | (6,958 | ) | | | (6,035 | ) | | | | | | | | | | | | | | | | | | Gross profit | | | | | | | 7,678 | | | | 4,565 | | | | 3,957 | | | | | | | | | | | | | | | | | | | Selling, general and administrative expenses | | | | | | | (5,066 | ) | | | (4,669 | ) | | | (4,605 | ) | Other income, net | | | 21 | | | | 554 | | | | 342 | | | | 108 | | | | | | | | | | | | | | | | | | | Income / (loss) from operations | | | 19 | | | | 3,166 | | | | 238 | | | | (540 | ) | Non-operating income / (expenses), net | | | 22 | | | | 229 | | | | (234 | ) | | | 77 | | | | | | | | | | | | | | | | | | | Income / (loss) before income taxes | | | | | | | 3,395 | | | | 4 | | | | (463 | ) | Income tax expense | | | 8 | | | | (600 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | | Net income / (loss) | | | | | | | 2,795 | | | | 4 | | | | (463 | ) | | | | | | | | | | | | | | | | | | Other comprehensive (loss) / income, net of tax: | | | | | | | | | | | | | | | | | Foreign currency translation adjustments, net of tax | | | | | | | (1,410 | ) | | | 2,062 | | | | (1,113 | ) | | | | | | | | | | | | | | | | | | Comprehensive income / (loss) | | | | | | | 1,385 | | | | 2,066 | | | | (1,576 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income / (loss) attributable to common shareholders | | | | | | | 2,795 | | | | 4 | | | | (463 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net earnings / (loss) per share | | | | | | | | | | | | | | | | | - basic | | | 18 | | | $ | 0.54 | | | $ | 0.00 | | | ($ | 0.10 | ) | | | | | | | | | | | | | | | | | | Weighted average number of shares outstanding in calculating net earnings per share | | | | | | | | | | | | | | | | | - basic | | | 18 | | | | 5,143,648 | | | | 4,910,357 | | | | 4,703,224 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net earnings / (loss) per share | | | | | | | | | | | | | | | | | - diluted | | | 18 | | | $ | 0.53 | | | $ | 0.00 | | | ($ | 0.10 | ) | | | | | | | | | | | | | | | | | | Weighted average number of shares outstanding in calculating net earnings per share | | | | | | | | | | | | | | | | | - diluted | | | 18 | | | | 5,316,393 | | | | 5,290,904 | | | | 4,703,224 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See notes to these consolidated financial statementsstatements. Bonso Electronics International Inc. Consolidated Statements of Changes in Stockholders’ Equity (Expressed in United States Dollars)
| | Common stock | | | | | | Treasury stock | | | | | | Accumulated | | | | | | | | | | | | | | | | | | | | | | | | | other | | | | | | | | | | | | | | | | | | | | | | | | | comprehensive | | | | | | | | | | | | | Additional | | | Treasury | | | | | | | | | income-foreign | | | Total | | | | Shares | | | Amount | | | paid-in | | | Shares | | | Amount | | | Accumulated | | | currency | | | stockholders’ | | | | Issued | | | outstanding | | | capital | | | held | | | outstanding | | | deficit | | | adjustments | | | equity | | | | | | | $ in thousands | | | $ in thousands | | | | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, April 1, 2014 | | | 5,577,639 | | | | 17 | | | | 21,765 | | | | 330,736 | | | | (1,462 | ) | | | (12,809 | ) | | | 3,111 | | | | 10,622 | | Net income | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,110 | | | | - | | | | 1,110 | | Foreign exchange translation adjustment | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 123 | | | | 123 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, March 31, 2015 | | | 5,577,639 | | | | 17 | | | | 21,765 | | | | 330,736 | | | | (1,462 | ) | | | (11,699 | ) | | | 3,234 | | | | 11,855 | | Net income | | | - | | | | - | | | | - | | | | - | | | | - | | | | 2,871 | | | | - | | | | 2,871 | | Share-based compensation (Note 14(f)) | | | - | | | | - | | | | 801 | | | | - | | | | - | | | | - | | | | - | | | | 801 | | Shares repurchased (Note 13(a)) | | | - | | | | - | | | | - | | | | 73,472 | | | | (99 | ) | | | - | | | | - | | | | (99 | ) | Foreign exchange translation adjustment | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (850 | ) | | | (850 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, March 31, 2016 | | | 5,577,639 | | | | 17 | | | | 22,566 | | | | 404,208 | | | | (1,561 | ) | | | (8,828 | ) | | | 2,384 | | | | 14,578 | | Net income | | | - | | | | - | | | | - | | | | - | | | | - | | | | 2,795 | | | | - | | | | 2,795 | | Shares repurchased (Note 13(a)) | | | - | | | | - | | | | - | | | | 164,311 | | | | (368 | ) | | | - | | | | - | | | | (368 | ) | Foreign exchange translation adjustment | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,410 | ) | | | (1,410 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, March 31, 2017 | | | 5,577,639 | | | | 17 | | | | 22,566 | | | | 568,519 | | | | (1,929 | ) | | | (6,033 | ) | | | 974 | | | | 15,595 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common stock | | | | Treasury stock | | | | Accumulated | | | | | | | | | | | | | | | | | other | | | | | | | | | | | | | | | | | comprehensive | | | | | | | | | | | | | | | | | income- | | Total | | | Shares | | Amount | | Additional paid-in | | Treasury Shares | | Amount | | Accumulated | | foreign currency | | stockholders’ | | | Issued | | outstanding | | capital | | held | | outstanding | | deficit | | adjustments | | equity | | | | | $ in thousands | | $ in thousands | | | | $ in thousands | | $ in thousands | | $ in thousands | | $ in thousands | | | | | | | | | | | | | | | | | | Balance, March 31, 2016 | | | 5,577,639 | | | | 17 | | | | 22,566 | | | | 404,208 | | | | (1,561 | ) | | | (8,828 | ) | | | 2,384 | | | | 14,578 | | Net income | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,795 | | | | — | | | | 2,795 | | Shares repurchased (Note 13(a)) | | | — | | | | — | | | | — | | | | 164,311 | | | | (368 | ) | | | — | | | | — | | | | (368 | ) | Foreign currency translation adjustments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,410 | ) | | | (1,410 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, March 31, 2017 | | | 5,577,639 | | | | 17 | | | | 22,566 | | | | 568,519 | | | | (1,929 | ) | | | (6,033 | ) | | | 974 | | | | 15,595 | | Net income | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4 | | | | — | | | | 4 | | Shares repurchased (Note 13(a)) | | | — | | | | — | | | | — | | | | 213,498 | | | | (572 | ) | | | — | | | | — | | | | (572 | ) | Removal of treasury shares from the total number of shares issued (Note 13(a)) | | | (34,000 | ) | | | — | | | | (92 | ) | | | (34,000 | ) | | | 92 | | | | — | | | | — | | | | — | | Foreign currency translation adjustments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,062 | | | | 2,062 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, March 31, 2018 | | | 5,543,639 | | | | 17 | | | | 22,474 | | | | 748,017 | | | | (2,409 | ) | | | (6,029 | ) | | | 3,036 | | | | 17,089 | | Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | (463 | ) | | | — | | | | (463 | ) | Shares repurchased (Note 13(a)) | | | — | | | | — | | | | — | | | | 124,849 | | | | (364 | ) | | | — | | | | — | | | | (364 | ) | Foreign currency translation adjustments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,113 | ) | | | (1,113 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, March 31, 2019 | | | 5,543,639 | | | | 17 | | | | 22,474 | | | | 872,866 | | | | (2,773 | ) | | | (6,492 | ) | | | 1,923 | | | | 15,149 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See notes to these consolidated financial statementsstatements. Bonso Electronics International Inc. Consolidated Statements of Cash Flows (Expressed in United States Dollars) | | Years Ended March 31, | | | | 2015 | | | 2016 | | | 2017 | | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | | | | | | | | | | Cash flows from operating activities | | | | | | | | | | Net income | | | 1,110 | | | | 2,871 | | | | 2,795 | | | | | | | | | | | | | | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | | Depreciation | | | 1,082 | | | | 1,047 | | | | 1,046 | | Amortization | | | 294 | | | | 288 | | | | 271 | | Gain on disposal of property, plant and equipment | | | (98 | ) | | | (718 | ) | | | - | | Gain on disposal of intangible assets | | | - | | | | (519 | ) | | | (79 | ) | Write-down of inventories | | | 687 | | | | 30 | | | | 156 | | Write off of property, plant and equipment | | | 192 | | | | - | | | | 2 | | Gain from deregistration of subsidiaries | | | - | | | | - | | | | (22 | ) | Change in cash surrender value of life insurance contract | | | (5 | ) | | | (4 | ) | | | (4 | ) | Change in fair value of financial instruments | | | (132 | ) | | | (46 | ) | | | 61 | | Dividend income from financial instruments at fair value | | | - | | | | - | | | | (1 | ) | Gain from sale of financial instruments at fair value | | | - | | | | - | | | | (3 | ) | Compensation expense for stock options granted | | | - | | | | 801 | | | | - | | | | | | | | | | | | | | | Changes in assets and liabilities: | | | | | | | | | | | | | Trade receivables | | | 1,174 | | | | 393 | | | | (254 | ) | Other receivables, deposits and prepayments | | | 380 | | | | 336 | | | | (209 | ) | Repayment from affiliated party | | | 166 | | | | - | | | | - | | Inventories | | | 3,737 | | | | 1,268 | | | | 649 | | Income tax recoverable | | | - | | | | 39 | | | | - | | Accounts payable | | | (5,622 | ) | | | (2,290 | ) | | | (1,318 | ) | Accrued charges and deposits | | | 520 | | | | 36 | | | | (136 | ) | Payable to affiliated parties | | | 56 | | | | 13 | | | | (25 | ) | Income tax liabilities | | | (894 | ) | | | 310 | | | | 216 | | | | | | | | | | | | | | | Net cash provided by operating activities | | | 2,647 | | | | 3,855 | | | | 3,145 | | | | | | | | | | | | | | | Cash flows from investing activities | | | | | | | | | | | | | Proceeds from disposal of property, plant and equipment | | | 314 | | | | 805 | | | | - | | Acquisition of property, plant and equipment | | | (1,105 | ) | | | (823 | ) | | | (289 | ) | Proceeds from disposal of intangible assets | | | - | | | | 342 | | | | 120 | | Acquisition of financial instruments at fair value | | | (390 | ) | | | (134 | ) | | | (163 | ) | Payments made upon expiry of forward contracts | | | - | | | | - | | | | (225 | ) | Proceeds from sale of financial instruments at fair value | | | - | | | | 391 | | | | 146 | | Dividends received from financial instruments at fair value | | | - | | | | - | | | | 1 | | Proceeds from maturity of fixed deposits | | | 1,049 | | | | - | | | | - | | | | | | | | | | | | | | | Net cash (used in) / generated from investing activities | | | (132 | ) | | | 581 | | | | (410 | ) | | | | | | | | | | | | | | Cash flows from financing activities | | | | | | | | | | | | | Capital lease payments | | | (24 | ) | | | (31 | ) | | | (49 | ) | Advance from notes payable | | | 6,275 | | | | 4,370 | | | | 1,721 | | Repayment of notes payable | | | (6,972 | ) | | | (4,963 | ) | | | (2,820 | ) | Repayment of bank overdrafts | | | (630 | ) | | | - | | | | - | | Advance from bank loans | | | 2,927 | | | | - | | | | - | | Repayment of bank loans | | | (1,871 | ) | | | (2,870 | ) | | | (363 | ) | Advance from affiliated party | | | 538 | | | | - | | | | - | | Payment to affiliated party | | | (67 | ) | | | (134 | ) | | | (135 | ) | Stock repurchase | | | - | | | | (99 | ) | | | (368 | ) | | | | | | | | | | | | | | Net cash generated from / (used in) financing activities | | | 176 | | | | (3,727 | ) | | | (2,014 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | Net increase in cash and cash equivalents | | | 2,691 | | | | 709 | | | | 721 | | Effect of exchange changes on cash and cash equivalents | | | 220 | | | | (189 | ) | | | (523 | ) | Cash and cash equivalents, beginning of year | | | 116 | | | | 3,027 | | | | 3,547 | | | | | | | | | | | | | | | Cash and cash equivalents, end of year | | | 3,027 | | | | 3,547 | | | | 3,745 | | | | | | | | | | | | | | | Supplemental disclosure of cash flow information | | | | | | | | | | | | | Cash paid during the year for: | | | | | | | | | | | | | Interest | | | 273 | | | | 113 | | | | 37 | | Income tax | | | 13 | | | | - | | | | 360 | | | | | | | | | | | | | | | Income tax refund received | | | 165 | | | | 39 | | | | - | | Non-cash investing activities: | | | | | | | | | | | | | Property plant and equipment acquired under capital lease | | | - | | | | 116 | | | | - | | | | | | | | | | | | | | | Non-cash financing activities: | | | | | | | | | | | | | Compensation expense for stock options granted | | | - | | | | 801 | | | | - | |
| | Years Ended March 31, | | | 2017 | | 2018 | | 2019 | | | $ in thousands | | $ in thousands | | $ in thousands | | | | | | | | Cash flows from operating activities | | | | | | | | | | | | | Net income / (loss) | | | 2,795 | | | | 4 | | | | (463 | ) | | | | | | | | | | | | | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | | Depreciation | | | 1,046 | | | | 1,099 | | | | 859 | | Amortization | | | 271 | | | | 277 | | | | 275 | | Loss / (gain) on disposal of property, plant and equipment | | | — | | | | 12 | | | | (5 | ) | Gain on disposal of intangible assets | | | (79 | ) | | | — | | | | — | | Write-down of inventories | | | 156 | | | | 569 | | | | 73 | | Write off of property, plant and equipment | | | 2 | | | | 2 | | | | — | | Gain from deregistration of subsidiaries | | | (22 | ) | | | — | | | | — | | Change in cash surrender value of life insurance contract | | | (4 | ) | | | (5 | ) | | | (4 | ) | Change in fair value of financial instruments | | | 61 | | | | 7 | | | | (4 | ) | Dividend income from financial instruments at fair value | | | (1 | ) | | | (4 | ) | | | (1 | ) | Gain from sale of financial instruments at fair value | | | (3 | ) | | | (58 | ) | | | (16 | ) | Interest expense | | | — | | | | 62 | | | | 116 | | | | | | | | | | | | | | | Changes in assets and liabilities: | | | | | | | | | | | | | Trade receivables | | | (300 | ) | | | 498 | | | | 166 | | Other receivables, deposits and prepayments | | | (163 | ) | | | 965 | | | | (586 | ) | Inventories | | | 649 | | | | (563 | ) | | | 18 | | Accounts payable | | | (1,318 | ) | | | (419 | ) | | | (407 | ) | Contract liabilities | | | — | | | | — | | | | 17 | | Accrued charges and deposits | | | (136 | ) | | | 122 | | | | 4 | | Payable to affiliated parties | | | (25 | ) | | | 19 | | | | (23 | ) | Income tax liabilities | | | 216 | | | | (539 | ) | | | — | | Long-term deposit received | | | — | | | | 738 | | | | (46 | ) | Long-term loan | | | — | | | | — | | | | 42 | | | | | | | | | | | | | | | Net cash provided by operating activities | | | 3,145 | | | | 2,786 | | | | 15 | | Cash flows from investing activities | | | | | | | | | | | | | Proceeds from disposal of property, plant and equipment | | | — | | | | 4 | | | | 5 | | Acquisition of property, plant and equipment | | | (289 | ) | | | (364 | ) | | | (578 | ) | Proceeds from disposal of intangible assets | | | 120 | | | | — | | | | — | | Acquisition of financial instruments at fair value | | | (163 | ) | | | (517 | ) | | | (226 | ) | Payments made upon expiry of forward contracts | | | (225 | ) | | | — | | | | — | | Proceeds from sale of financial instruments at fair value | | | 146 | | | | 657 | | | | 223 | | Dividends received from financial instruments at fair value | | | 1 | | | | 4 | | | | 1 | | | | | | | | | | | | | | | Net cash used in investing activities | | | (410 | ) | | | (216 | ) | | | (575 | ) | Cash flows from financing activities | | | | | | | | | | | | | Capital lease payments | | | (49 | ) | | | (44 | ) | | | (28 | ) | Advance from notes payable | | | 1,721 | | | | 467 | | | | 237 | | Repayment of notes payable | | | (2,820 | ) | | | (502 | ) | | | (336 | ) | Advance from bank loans | | | — | | | | — | | | | 641 | | Repayment of bank loans | | | (363 | ) | | | (143 | ) | | | (196 | ) | Payment to affiliated party | | | (135 | ) | | | (135 | ) | | | (67 | ) | Stock repurchase | | | (368 | ) | | | (572 | ) | | | (364 | ) | Advance from long-term loan | | | — | | | | 2,465 | | | | — | | | | | | | | | | | | | | | Net cash (used in) / generated from financing activities | | | (2,014 | ) | | | 1,536 | | | | (113 | ) | | | | | | | | | | | | | | Net increase / (decrease) in cash and cash equivalents | | | 721 | | | | 4,106 | | | | (673 | ) | Effect of exchange rate changes on cash and cash equivalents | | | (523 | ) | | | 900 | | | | (551 | ) | Cash and cash equivalents, beginning of year | | | 3,547 | | | | 3,745 | | | | 8,751 | | | | | | | | | | | | | | | Cash and cash equivalents, end of year | | | 3,745 | | | | 8,751 | | | | 7,527 | | | | | | | | | | | | | | | Supplemental disclosure of cash flow information | | | | | | | | | | | | | Cash paid during the year for: | | | | | | | | | | | | | Interest | | | 37 | | | | 10 | | | | 23 | | Income tax | | | 360 | | | | 562 | | | | — | |
See notes to these consolidated financial statementsstatements. Bonso Electronics International Inc.
Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 1 | Description of business and significant accounting policies |
Bonso Electronics International Inc. and its subsidiaries (collectively, the “Company” or “Group”) are engaged in the designing, manufacturing and selling of a comprehensive line of electronic scales and weighing instruments, pet electronics products and other products. Further, the Group also rents or leases both factory facilities and equipment not being currently used to third parties.
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 valuation of inventories, allowance for trade receivables, stock-based compensation, valuation allowance for deferred tax assets and the impairment of long-lived assets. Actual results could differ from those estimates.
The Company had operating income / (loss) of approximately $462,000, $3,302,000$3,166,000, $238,000 and $ 3,166,000($540,000) in the fiscal years ended March 31, 2015, 20162017, 2018 and 2017,2019, respectively. As of March 31, 2017,2019, the Company had positive working capital of approximately $2,499,000$6,249,000 and the accompanying consolidated financial statements were prepared on a going concern basis. Management believes the Company will have sufficient working capital to meet its financing requirements based upon their experience and their assessment of the Company’s projected performance, credit facilities and banking relationships.
The significant accounting policies are as follows:
| (a) | Principles of consolidation |
The consolidated financial statements include the financial statements of the Company and its subsidiaries after elimination of inter-company accounts and transactions.
Acquisitions of companies have been consolidated from the date on which control of the net assets and operations was transferred to the Company.
Acquisitions of companies are accounted for using the purchase method of accounting.
| (b) | Cash and cash equivalents |
Cash and cash equivalents are short-term, highly liquid investments with original maturities of three months or less. Cash equivalents are stated at cost, which approximates fair value because of the short-term maturity of these instruments. The Company has no cash equivalents as of March 31, 20162018 and 2017.2019.
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 1 | Description of business and significant accounting policies (Continued) |
Inventories are stated at the lower of cost,, as determined on a first-in, first-out basis, or market.net realizable value. Costs of inventories include purchase and related costs incurred in bringing the products to their present location and condition. MarketNet realizable value is determined by reference to the estimated selling price afterin the balance sheet date or to management estimates based on prevailing market conditions.ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company routinely reviews its inventories for their salability and for indications of obsolescence to determine if inventory carrying values are higher than marketnet realizable value. Some of the significant factors the Company considers in estimating the marketnet realizable value of its inventories include the likelihood of changes in market and customer demand and expected changes in market prices for its inventories.
Trade receivables are recorded at the invoiced amount, net of allowances for doubtful accounts and sales returns.returns, if any. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing trade receivables. Bad debt expense is included in the administrative and general expenses.
The Company recognizes an allowance for doubtful receivables to ensure accounts and other receivables are not overstated due to uncollectibility. Allowance for doubtful receivables is maintained for all customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience. An additional allowance for individual accounts is recorded when the Company becomes aware of customers’ or other debtors’ inability to meet their financial obligations, such as bankruptcy filings or deterioration in the customer’s or other debtor’s operating results or financial position. If circumstances related to customers or debtors change, estimates of the recoverability of receivables will be further adjusted.
| (e) | Income taxes and deferred income taxes |
Amounts in the consolidated financial statements related to income taxes are calculated using the principles of Accounting Standards Codification (“ASC”) 740 and Accounting Standards Updates (“ASU”) 2013-11“Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. ASC 740 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting bases and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Future tax benefits, such as net operating loss carry forwards, are recognized as deferred tax assets. Recognized deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company complies with ASC 740 “Income Taxes”for uncertainty in income taxes recognized in financial statements. ASC 740 prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company’s accounting policy is to treat interest and penalties as components of income taxes. The Company’s income tax returns through the fiscal yearsyear ended March 31, 20162018 have been assessed by the tax authorities.
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 1 | Description of business and significant accounting policies (Continued) |
| (f) | Lease prepayments and intangible assets |
Lease prepayments represent the cost of land use rights in the People’s Republic of China (“PRC”). Land use rights held by the Company are included in intangible assets. The granted useful life of the land use rights is 50 years. They are stated at cost and amortized on a straight-line basis over a maximum period of 30 years, in accordance with the business licenses of 30 years.
| (g) | Property, plant and equipment, net |
| (i) | Property, plant and equipment are stated at cost less accumulated depreciation. Leasehold land and buildings are depreciated on a straight-line basis over 15 to 50 years, representing the shorter of the remaining term of the lease or the expected useful life to the Company. |
| (ii) | Other categories of property, plant and equipment are carried at cost and depreciated using the straight-line method over their expected useful lives to the Company. The principal estimated useful lives for depreciation are: |
| | Plant and machinery | - 10 years |
| Furniture, fixtures and equipment | - 5 to10to 10 years |
| (iii) | Assets under construction are not depreciated until construction is completed and the assets are ready for their intended use. |
| (iv) | The cost of major improvements and betterments is capitalized, whereas the cost of maintenance and repairs is expensed in the year when it is incurred. |
| (v) | Any gain or loss on disposal is included in the consolidated statements of operations and comprehensive income. |
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 1 | Description of business and significant accounting policies (Continued) |
| (h) | Impairment of long-lived assets including intangible assets |
Long-lived assets held and used by the Company and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company evaluates recoverability of assets to be held and used by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the asset. If such assets are considered to be impaired, the impairment loss is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets calculated using a discounted future cash flows analysis. Provisions for impairment made on other long-lived assets are disclosed in the consolidated statements of operations and comprehensive income. Since the fiscal year ended March 31, 2014, theThe Company has transferred all its production process to the factory in Xinxing, PRC,lost a major customer during 2017 and the factory in Shenzhen was leased out to a third party. Asas a result, the Company performed an assessment of the value of the land, buildingsproperty, plant and equipment and intangible assets of the factories in Shenzhen and Xinxing, PRC, and no provision for impairment was made by the Company (2016:(2018: $nil; 2015:2017: $nil) based on the assessment.
| (i) | Capital and operating leases |
Costs in respect of operating leases are charged against income on a straight-line basis over the lease term. Leasing agreements, which transfer to the Company substantially all the benefits and risks of ownership of an asset,, are treated as if the asset had been purchased outright. The assets are included in property, plant and equipment (“capital leases”) and the capital element of the lease commitments is shown as an obligation under capital leases. The lease rentals are treated as consisting of capital and interest elements. The capital element is applied to reduce the outstanding obligation and the interest element is charged against profit so as to give a consistent periodic rate of charge on the remaining balance outstanding at the end of each accounting period. Assets held under capital leases are depreciated over the useful lives of the equivalent owned assets or the lease term, whichever is shorter.
NoEffective April 1, 2018, the Company adopted the new guidance of ASC Topic 606,“Revenue from Contracts with Customers (Topic 606)”, which supersedes the revenue recognition requirements in ASC Topic 605,“Revenue Recognition”. Topic 606 requires the Company to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company applies the following steps to recognize revenues: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the Company satisfies a performance obligation. Product sales The Company’s revenue from contracts with customers is derived from product revenue principally from the sales of electronic scales and pet electronic products directly to customers. The Company sells goods to customers based on purchase orders received from the customers. The Company has determined there is one performance obligation for each model included in the purchase orders. The performance obligation is considered to be met and revenue is recognized unless there is persuasive evidence of an arrangement,when the price to the buyer is fixed or determinable, delivery has occurred and collectibilitycustomer obtains control of the sales price is reasonably assured. Revenue is recognized when title and risk of loss are transferred to customers,goods, which is generally the point at which products are leaving the ports of Hong Kong, or Shenzhen or Nansha (Guangzhou) as designated. The Company did not recognize any revenue from contracts with customers for performance obligations satisfied overtime during the year ended March 31, 2019. The timing of revenue recognition is not impacted by our customers. Shipping costs billedthe new standard. Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars) | 1 | Description of business and significant accounting policies (Continued) |
The transaction price is generally in the Company’s customersform of a fixed price which is agreed with the customer at contract inception. The transaction price is recorded net of any sales return, surcharges and value-added taxes on gross sales. The Company allocates the transaction price to each performance obligation based on the purchase orders. Customers are included within revenue. Associated costsrequired to pay over an agreed-upon credit period, usually between 15 to 60 days. In certain circumstances, the Company will request a deposit from a customer. Customers’ deposits are classified assettled part of costthe outstanding bill upon receiving an acknowledgement from customers. For the remaining balance of sales. the outstanding bill, the customer is required to pay over an agreed-upon credit period, usually between 0 to 15 days.Return rights
The Company does not provide its customers with a right of return or production protection. Each customer is required to perform a product quality check before accepting delivery of goods. The Company provides to certain customers an additional one to two percent of the quantity of certain products ordered in lieu of a warranty, which is recognized as cost of sales when these products are shipped to customers from the Company’s facilities. In addition, certain products soldValue-added taxes and surcharges
The Company presents revenue net of value-added taxes (“VAT”) and surcharges incurred. Surcharge are sales related taxes representing the City Maintenance and Construction Tax and Education Surtax. VAT, business taxes and surcharges collected from customers, net of VAT paid for purchases, are recorded as a liability in the consolidated balance sheets until these are paid to the tax authorities.
Outbound freight and handling costs
The Company accounts for product outbound freight and handling costs as fulfillment activities and present the associated costs in selling, general and administrative expenses in the period in which it sells the product. Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars) | 1 | Description of business and significant accounting policies (Continued) |
Disaggregation of revenue The Company disaggregates its revenue from different types of contracts with customers by principal product categories, as the Company are subject to a limitedbelieves it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows. See Note 19 for product quality warranty. revenues by segment. Contract balances The Company accrues for estimated incurred but unidentified quality issues based upon historical activitydid not recognize any contract asset as of April 1, 2018 and known quality issues if a lossMarch 31, 2019. The timing between the recognition of revenue and receipt of payment is probablenot significant. The Company’s contract liabilities consist of deposits received from customers. As of April 1, 2018 and can be reasonably estimated. DuringMarch 31, 2019, the fiscalbalances of the contract liabilities are approximately $57,000 and $17,000, respectively. All contract liabilities at the beginning of the year ended March 31, 2017,2019 were recognized as revenue during the Company recorded $nil for such accrual (2016: $nil, 2015: $nil). The standard limited warranty period is oneyear ended March 31, 2019 and all contract liabilities as of year ended March 31, 2019 are expected to three years. Quality returns, refunds, rebates and discounts are recorded netbe realized in the following year. As of sales atApril 1, 2019, the timeadoption of sale and estimated basedASU 606 did not have a material impact on past history. All sales are based upon firm orders with fixed terms and conditions, which generally cannot be modified. Historically, the Company has not experienced material differences between its estimated amounts of quality returns, refunds, rebates and discounts and the actual results. In all contracts, there is no price protection or similar privilege in relation to the sale of goods.
Company’s consolidation financial statements.Rental income is recognized according to the rental agreements. Rental income for non-uniform rent payments is recognized on a straight-line basis throughout the lease term. Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
1 | Description of business and significant accounting policies (Continued) |
(k) | Research and development costs |
Research and development costs include salaries, utilities and contractor fees that are directly attributable to the conduct of research and development progress primarily related to the development of new design of products. Research and development costs are expensed inof approximately $158,000, $152,000 and $175,000 were charged to operations for the financial period in which they are incurred.
years ended March 31, 2017, 2018 and 2019, respectively.
Advertising costs are expensed as incurred and are included within selling, general and administrative expenses. Advertising costs were approximately $9,000, $12,000$10,000, $18,000 and $10,000$21,000 for the fiscal years ended March 31, 2015, 20162017, 2018 and 2017,2019, respectively. Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars) | 1 | Description of business and significant accounting policies (Continued) |
| (m) | Foreign currency translations |
| (i) | The Company’s functional currency is the United States dollar. Transactions denominated in non-United States dollar currencies of foreign subsidiaries where the United States dollar is the functional currency are translated into United States dollars at the exchange rates existing at date of transaction. The translation of local currencies into United States dollars at the balance sheet date creates transaction adjustments which are included in net income. Exchange differences are recorded in the statements of operations and comprehensive income. |
| (ii) | The financial statements of foreign subsidiaries, where non-United States dollar currencies are the functional currencies, are translated into United States dollars using exchange rates in effect at period end for assets and liabilities and average exchange rates during each reporting period for the statement of operations. Adjustments resulting from translation of these financial statements are reflected as a separate component of stockholders’ equity in accumulated other comprehensive income. |
| (n) | Stock options and warrants |
Stock options have been granted to employees, directors and non-employee directors. Upon exercise of the options, a holder can acquire shares of common stock of the Company at an exercise price determined by the board of directors. The options are exercisable based on the vesting terms stipulated in the option agreements or plan.
The Company follows the guidance of ASC 718, “Accounting for Stock Options and Other Stock-Based Compensation”. ASC 718 requires companies to record compensation expense for share-based awards issued to employees and directors in exchange for services provided. The amount of the compensation expense is based on the estimated fair value of the awards on their grant dates and is recognized over the required service periods. Our share-based awards include stock options and restricted stock awards. The estimated fair value underlying our calculation of compensation expense for stock options is based on the Black-Scholes pricing model. Forfeitures of share-based awards are estimated at the time of grant and revised, if necessary, in subsequent periods if our estimates change based on the actual amount of forfeitures we have experienced.
| (o) | Fair value of financial instruments |
The carrying amounts of financial instruments including cash and cash equivalents, trade receivables, net, other receivables, deposits and prepayments, other current assets, accounts payable and accrued charges and deposits, and other current liabilities approximate fair value due to the relatively short-term maturity of these instruments. The carrying value of long-term debt approximates fair value based on prevailing borrowing rates currently available for loans with similar terms and maturities. The Company periodically retires treasury shares that it acquires through share repurchases and returns those shares to the status of authorized but unissued. The Company accounts for treasury stock transactions under the cost method. For each reacquisition of common stock, the number of shares and the acquisition price for those shares is added to the existing treasury stock count and total value, respectively, and recognized as a deduction from equity. When treasury shares are retired, the Company’s policy is to allocate the excess of the repurchase price over the par value of shares acquired to additional paid-in capital, with any remaining amount being charged to retained earnings. Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 1 | Description of business and significant accounting policies (Continued) |
(p) | (q) | Recent accounting pronouncements |
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” ("ASU 2014-09"). The objective of this Update is to remove inconsistencies and weaknesses in revenue requirements, and to simplify the preparation of financial statements by reducing the number requirements to which an entity must refer. The new standard supersedes virtually all present U.S. GAAP guidance on revenue recognition and requires the use of more estimates and judgments than the prior standards, as well as additional disclosures. In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date", deferring the effective date for one year to interim and annual periods beginning after December 15, 2017. Early adoption is also permitted as of the original effective date (interim and annual periods beginning after December 15, 2016) and retrospective application is required. The Company currently expects to adopt the new standard in its fiscal year beginning April 1, 2018 and is evaluating adoption methods. While the impact the new revenue recognition standard will have on its consolidated financial statements and disclosures has not yet been fully assessed, the Company currently expects that the impact will not be material as the agreed terms it has with its customers and the related transaction prices and performance obligations will be minimally affected by the amendments.
In January 2016, the FASB issued ASU 2016-01, "Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01"). The amendments in this update supersede the guidance to classify equity securities with readily determinable fair values into different categories (that is trading or available-for-sale) and require equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in the fair value recognized through net income. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the new pronouncement to determine the impact it may have on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, "Lease"Leases (Subtopic 842)" ("("ASU 2016-02"). This Update is, and associated ASUs related to increase transparency and comparability among organizations by recognizing leaseTopic 842, which requires an entity that leases assets and lease liabilitiesto recognize on the balance sheet the assets and disclosing key information about leasing arrangements. For public business entities, this Updateliabilities for the rights and obligations created by those leases. Leases will be classified as either financing or operating, similar to current accounting requirements, with the applicable classification determining the pattern of expense recognition in the statement of operations. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 including interim periodsand must be adopted using a modified retrospective approach, which requires lessees and lessors to recognize and measure all leases within those fiscal years.the scope of this ASU using one of the following transition methods: (i) the effective date or (ii) the beginning of the earliest comparative period presented in the financial statements at the date of initial application. The Company is evaluatinghas elected to apply the transition requirements on April 1, 2019, effective date rather than at the beginning of the earliest comparative period presented. This approach allows for a cumulative effect adjustment in the period of adoption, and prior periods will not be restated. In addition, the Company has elected the package of practical expedients permitted under the transition guidance, which does not require a reassessment of prior conclusions related to contracts containing a lease, lease classification and initial direct lease costs. As an accounting policy election, the Company will exclude short-term leases (term of 12 months or less) from the balance sheet presentation and will account for non-lease and lease components in a contract as a single lease component for all asset classes.
The Company analyzed the impact of ASU 2016-02 across all lease arrangements to evaluate and implement the new pronouncementstandard. The Company are expected to determinemeet the new accounting and disclosure requirements upon adoption on April 1, 2019. Based on the Company’s preliminary assessment, the Company expects to record right-of-use assets of approximately $413,000 and lease liabilities of approximately $413,000 in the consolidated balance sheets on the adoption date of April 1, 2019. The impact it may have on itsthe Group’s consolidated financial statements. statements of operations and consolidated statements of cash flows is not expected to be material.
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 1 | Description of business and significant accounting policies (Continued) |
(p) | (q) | Recent accounting pronouncements (Continued) |
In June 2016, the FASB issued ASU 2016-13, "Financial"Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("("ASU 2016-13"), which improves financial reporting by providing timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Forward-looking information will now be used to better inform credit loss estimates. This ASU is effective for interim and annual periods beginning after December 15, 2019 and early additionadoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230)" ("ASU 2016-15"). This Update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. For public business entities, this Update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the new pronouncement to determine the impact it may have to its consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740)" ("ASU 2016-16"). This Update improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. For public business entities, this Update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the new pronouncement to determine the impact it may have on its consolidated financial statements.
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
1 | Description of business and significant accounting policies (Continued) |
(p) | Recent accounting pronouncements (Continued) |
In November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230)" ("ASU 2016-18"). This Update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. For public business entities, this Update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the new pronouncement to determine the impact it may have on its consolidated financial statements.
In February 2017, the FASB issued ASU 2017-05, "Other Income—Gains and Losses from the De-recognition of Nonfinancial Assets (Subtopic 610-20)" ("ASU 2017-05"). This Update clarifies the Scope of Asset De-recognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which clarifies the scope of the nonfinancial asset guidance in Subtopic 610-20. This ASU also clarifies that the de-recognition of all businesses and nonprofit activities (except those related to conveyances of oil and gas mineral rights or contracts with customers) should be accounted for in accordance with the de-recognition and deconsolidation guidance in Subtopic 810-10. The amendments in this ASU also provide guidance on the accounting for what often are referred to as partial sales of nonfinancial assets within the scope of Subtopic 610-20 and contributions of nonfinancial assets to a joint venture or other non-controlled investee. The amendments in this ASU are effective for annual reporting reports beginning after December 15, 2017, including interim reporting periods within that reporting period. Public entities may apply the guidance earlier but only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We do not expect the adoption of ASU 2017-05 to have a material impact on our consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09, "Compensation—Stock Compensation (Topic 718) Scope of Modification Accounting" ("ASU 2017-09"). The requirement provides guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. For public business entities, this ASU should be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. We are currently evaluating the impact the adoption of ASU 2017-09 will have on its consolidated financial statements.
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
1 | Description of business and significant accounting policies (Continued) |
(p) | Recent accounting pronouncements (Continued) |
In July 2017, the FASB issued ASU 2017-11, "Earnings"Earnings Per Share (Topic 260) (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception" ("ASU 2017-11"). The amendments require companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. Companies that provide earnings per share (EPS) data will adjust their basic EPS calculation for the effect of the feature when triggered (i.e., when the exercise price of the related equity-linked financial instrument is adjusted downward because of the down round feature) and will also recognize the effect of the trigger within equity. For public business entities, this ASU should be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. We are currently evaluating the impact the adoption of ASU 2017-092017-11 will have on the Company’s consolidated financial statements. In September 2017, the FASB issued ASU 2017-13,“Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)”("ASU 2017-13"): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments. The amendments in ASU 2017-13 amend the early adoption date option for certain companies related to the adoption of ASU 2014-09 and ASU 2016-02. The effective date is the same as the effective date and transition requirements for the amendments for ASU 2014-09 and ASU 2016-02.
In February 2018, the FASB issued ASU 2018-02,“Income Statement—Reporting Comprehensive Income (Topic 220)”("ASU 2018-02"). The amendments in this Update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this Update also require certain disclosures about stranded tax effects. Public business entities should apply the amendments in ASU 2018-02 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted. We are currently evaluating the impact of adopting ASU 2018-02 on the Company’s consolidated financial statements. Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars) | 1 | Description of business and significant accounting policies (Continued) |
| (q) | Recent accounting pronouncements (Continued) |
In August 2018, the FASB issued ASU 2018-13,“Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement,” ("ASU 2018-13") which is part of the FASB disclosure framework project to improve the effectiveness of disclosures in the notes to the financial statements. The amendments in the new guidance remove, modify and add certain disclosure requirements related to fair value measurements covered in Topic 820,“Fair Value Measurement.” The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for either the entire standard or only the requirements that modify or eliminate the disclosure requirements, with certain requirements applied prospectively, and all other requirements applied retrospectively to all periods presented. The Company is currently evaluating the impact of adopting this guidance. In October 2018, the FASB issued ASU No. 2018-17,“Consolidation: Targeted Improvements to Related Party Guidance for Variable Interest Entities,” ("ASU 2018-17") which modifies the guidance related to indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interest. ASU 2018-17 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance In November 2018, the FASB issued ASU No. 2018-19,“Codification Improvements to Topic 326, Financial Instruments—Credit Losses,” (“ASU 2018-19”) which clarifies and improves guidance related to credit losses, hedging, and recognition and measurement. Same as ASU 2016-13, this ASU is effective for interim and annual periods beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
In December 2018, the FASB issued ASU No. 2018-20, “Leases (Topic 842): Narrow-Scope Improvements for Lessors,” (“ASU 2018-20”) which aligns the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842, with that of existing guidance. Same as ASU 2016-02, this ASU is effective for interim and annual periods beginning after December 15, 2018. The Company believes adoption of this ASU would not have significant impact on its consolidated financial statements. In March 2019, the FASB issued ASU No. 2019-01, “Leases (Topic 842): Codification Improvements,” (“ASU 2019-01”) which provides guidance on determining the fair value of the underlying asset by lessors that are not manufacturers or dealers and presenting sales-type and direct financing leases on the statement of cash flows. ASU 2019-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance. We believe there is no additional new accounting guidance adopted, but not yet effective that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on our financial reporting. Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 2 | Allowance for doubtful accounts |
Allowance for doubtful accounts amounted to $nil as of March 31, 2017 (2016: $1,415,000)2019 (2018: $nil). Most of the Company’s trade receivables are generally unsecured.
The components of inventories as of March 31, 2016 and 2017 are as follows:
| | 2016 | | | 2017 | | | | $ in thousands | | | $ in thousands | | | | | | | | | Raw materials | | | 684 | | | | 442 | | Work in progress | | | 430 | | | | 317 | | Finished goods | | | 709 | | | | 259 | | | | | | | | | | | | | | 1,823 | | | | 1,018 | | | | | | | | | | |
| | March 31, | | | 2018 | | 2019 | | | $ in thousands | | $ in thousands | | | | | | Raw materials | | | 275 | | | | 297 | | Work in progress | | | 237 | | | | 218 | | Finished goods | | | 500 | | | | 314 | | | | | | | | | | | | | | 1,012 | | | | 829 | | | | | | | | | | |
During the fiscal years ended March 31, 2015, 20162017, 2018 and 2017,2019, based upon material composition and expected usage, provisions for inventories of approximately $687,000, $30,000$156,000, $569,000 and $156,000,$73,000, respectively, were charged to the consolidated statements of operations under cost of sales.
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
revenue. | 4 | Property, plant and equipment, net |
Property, plant and equipment, net, consisted of the following: | | March 31, | | | 2018 | | 2019 | | | $ in thousands | | $ in thousands | Cost | | | | | Buildings | | | 17,863 | | | | 16,890 | | Construction-in-progress | | | 260 | | | | 597 | | Plant and machinery | | | 9,932 | | | | 9,838 | | Furniture, fixtures and equipment | | | 1,468 | | | | 1,475 | | Motor vehicles | | | 643 | | | | 636 | | | | | | | | | | | | | | 30,166 | | | | 29,436 | | Less: accumulated depreciation | | | (19,732 | ) | | | (19,845 | ) | | | | | | | | | | | | | 10,434 | | | | 9,591 | |
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars) | 4 | Property, plant and equipment, net (Continued) |
During the fiscal years ended March 31, 2015, 20162017, 2018 and 2017,2019, depreciation expenses charged to the consolidated statements of operations amounted to approximately $1,082,000, $1,047,000$1,046,000, $1,099,000 and $1,046,000,$859,000, respectively. As at March 31, 20162018 and 2017,2019, fully depreciated assets that were still in use by the Company amounted to $9,195,000$9,853,000 and $8,761,000,$15,749,000, respectively.
Property, plant and equipment in Shenzhen and Xinxing were assessed for impairment according to the policy described in note 1(h). The Company concluded that no impairment to property, plant and equipment in Shenzhen and Xinxing was required for the fiscal years endedas at March 31, 2016 and 2017.
2019. | 5 | Interests in subsidiaries |
Particulars of principal subsidiaries as of March 31, 20162018 and 20172019 are as follows:
Name of company | | Place of incorporation and kind of legal entity | | Particulars of issued capital/ registered capital | | | Percentage of capital held by the Company | | Principal activities | | | | | | | | 2016 | | 2017 | | | Bonso Electronics Limited * (“BEL”) | | Hong Kong, limited liability company | | | | | | | 100 | % | | | 100 | % | | Investment holding, providing management and administrative support to the Group companies | | | | | | | | | | | | | | | | | | Bonso Investment Limited (“BIL”) | | Hong Kong, limited liability company | | | | | | | 100 | % | | | 100 | % | | Investment holding and property investment | | | | | | | | | | | | | | | | | | Bonso Electronics (Shenzhen) Company, Limited (“BESCL”) | | PRC, limited liability company | | | US$12,621,222 | | | | 100 | % | | | 100 | % | | Investment holding and property rental | | | | | | | | | | | | | | | | | | Bonso Advanced Technology Limited * (“BATL”) | | Hong Kong, limited liability company | | | HK$1,000,000 (US$128,205) | | | | 100 | % | | | 100 | % | | Investment holding, and trading of scales and pet electronics products | | | | | | | | | | | | | | | | | | Bonso Advanced Technology (Xinxing) Company, Limited (“BATXXCL”) | | PRC, limited liability company | | | US$10,000,000 | | | | 100 | % | | | 100 | % | | Production of scales and pet electronics products | | | | | | | | | | | | | | | | | | Bonso Technology (Shenzhen) Company, Limited (“BTL”) | | PRC, limited liability company | | | HK$200,000 | | | | 100 | % | | | 100 | % | | Product development | | | | | | | | | | | | | | | | | |
Name of company | | Place of incorporation and kind of legal entity | | | Percentage of capital held by the Company | | Principal activities | | | | | | 2018 | | 2019 | | | Bonso Electronics Limited * (“BEL”) | | Hong Kong, limited liability company | | | | 100 | % | | | 100 | % | | Investment holding, providing management and administrative support to the Group companies | | | | | | | | | | | | | | | Bonso Investment Limited (“BIL”)
| | Hong Kong, limited liability company | | | | 100 | % | | | 100 | % | | Investment holding and property investment | | | | | | | | | | | | | | | Bonso Electronics (Shenzhen) Company, Limited (“BESCL”)
| | PRC, limited liability company | | | | 100 | % | | | 100 | % | | Investment holding and property rental | | | | | | | | | | | | | | | Bonso Advanced Technology Limited * (“BATL”) | | Hong Kong, limited liability company | | | | 100 | % | | | 100 | % | | Investment holding and trading of scales and pet electronics products | | | | | | | | | | | | | | | Bonso Advanced Technology (Xinxing) Company, Limited (“BATXXCL”) | | PRC, limited liability company | | | | 100 | % | | | 100 | % | | Production of scales and pet electronics products and property rental | | | | | | | | | | | | | | | Bonso Technology (Shenzhen) Company, Limited (“BTL”) | | PRC, limited liability company | | | | 100 | % | | | 100 | % | | Product development | | | | | | | | | | | | | | |
* Shares directly held by the Company Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
Intangible assets are analyzed as follows: | | March 31, | | | | 2016 | | | 2017 | | | | $ in thousands | | | $ in thousands | | | | | | | | | Cost | | | 6,159 | | | | 5,740 | | Less: accumulated amortization | | | (2,867 | ) | | | (2,955 | ) | | | | | | | | | | | 3,292 | | | | 2,785 | |
| | March 31, | | | 2018 | | 2019 | | | $ in thousands | | $ in thousands | | | | | | Cost | | | 6,348 | | | | 5,951 | | Less: accumulated amortization | | | (3,561 | ) | | | (3,613 | ) | | | | | | | | | | | | | 2,787 | | | | 2,338 | |
The components of intangible assets are as follows: | | March 31, | | | | 2016 | | | 2017 | | | | $ in thousands | | | $ in thousands | | | | | | | | | Land use right of factory land in Shenzhen, Guangdong, PRC | | | 1,599 | | | | 1.326 | | Land use right of factory land in Xinxing, Guangdong, PRC | | | 1,652 | | | | 1,459 | | Golf club membership | | | 41 | | | | - | | | | | | | | | | | | 3,292 | | | | 2,785 | |
| | March 31, | | | 2018 | | 2019 | | | $ in thousands | | $ in thousands | | | | | | Land use right of factory land in Shenzhen, Guangdong, PRC | | | 1,274 | | | | 1,014 | | Land use right of factory land in Xinxing, Guangdong, PRC | | | 1,513 | | | | 1,324 | | | | | | | | | | | | | | 2,787 | | | | 2,338 | |
Amortization expense in relation to other intangible assets was approximately $294,000, $288,000$271,000, $277,000 and $271,000$275,000 for each of the fiscal years ended March 31, 2015, 20162017, 2018 and 2017,2019, respectively.
As of March 31, 2017,2019, future minimum amortization expenses in respect of other intangible assets are as follows: Year ending March 31, | | $ in thousands | | | | | 2020 | | | | 275 | | | 2021 | | | | 275 | | | 2022 | | | | 275 | | | 2023 | | | | 275 | | | 2024 | | | | 275 | | | Thereafter | | | | 963 | | | | | | | | | | Total | | | | 2,338 | | | | | | | | |
In November 2017, the Company signed an agreement with a property developer in Shenzhen - Shenzhen Fangda Property Development Company Limited (“Fangda”) to cooperate in reconstructing and redeveloping the Shenzhen factory. The redevelopment will be on the factory land in Shenzhen. Year ending March 31, | | $ in thousands | | | | | | 2018 | | | 265 | | 2019 | | | 265 | | 2020 | | | 265 | | 2021 | | | 265 | | 2022 | | | 265 | | Thereafter | | | 1,460 | | | | | | Total | | | 2,785 | | | | | |
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
As of March 31, 2017,2019, the Company had general banking facilities for bank overdrafts, letters of credit, notes payable and term loans. The facilities are interchangeable with total amounts available of $5,306,000 (2016: $6,189,000)approximately $5,128,000 (2018: $5,128,000). The general banking facilities utilized by the Company are denominated in United States dollars, Hong Kong dollars and Chinese Yuan.
The Company’s general banking facilities, expressed in United States dollars, are further detailed as follows: | | Amount available | | | Amount utilized | | | Amount unutilized | | Terms of banking facilities as of | | | March 31, | | | March 31, | | | March 31, | | March 31, 2017 | | | 2016 | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | 2017 | | Interest | Repayment | | | $ in thousands | | | $ in thousands | | | $ in thousands | | rate | terms | Import and export facilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Combined limit | | | 2,564 | | | | 2,564 | | | | 1,237 | | | | 134 | | | | 1,327 | | | | 2,430 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Including sub-limit of: | Notes payable | | | 2,308 | | | | 2,308 | | | | 1,237 | | | | 134 | | | | 1,071 | | | | 2,174 | | HIBOR* +2.5% | Repayable in full within 120 days | Bank overdrafts | | | 641 | | | | 641 | | | | - | | | | - | | | | 641 | | | | 641 | | Prime rate + 1% | Repayable on demand | Factoring | | | 2,400 | | | | - | | | | - | | | | - | | | | 2,400 | | | | - | | HIBOR* +1.5% | Repayable in 60 days | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other facilities | | | | | | | | | | | | | | | | | | | | | | | | | | | Export Documentary Credits | | | 641 | | | | 641 | | | | - | | | | - | | | | 641 | | | | 641 | | | | Short Term Loans | | | 1,923 | | | | 1,923 | | | | - | | | | - | | | | 1,923 | | | | 1,923 | | (Note A) | Revolving loan repayable in 30 days | Long Term Loans (1) | | | 1,061 | | | | 178 | | | | 506 | | | | 143 | | | | 555 | | | | 35 | | (Note A) | Term loans repayable monthly over 3 years. | | | | | | | | | | | | | | | | | | | | | | | | | 6,189 | | | | 5,306 | | | | 1,743 | | | | 277 | | | | 4,446 | | | | 5,029 | | | | | | | | | | | | | | | | | | | | | | | | |
Note A: HIBOR* +2.25% for loans in Hong Kong. People's Bank of China’s loan benchmark interest rate times 110% for loans in PRC.
| | Amount available | | Amount utilized | | Amount unutilized | | Terms of banking facilities as of | | | March 31, | | March 31, | | March 31, | | March 31, 2019 | | | 2018 | | 2019 | | 2018 | | 2019 | | 2018 | | 2019 | | Interest | | Repayment | | | $ in thousands | | $ in thousands | | $ in thousands | | rate | | terms | Import and export facilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Combined limit | | | 2,564 | | | | 2,564 | | | | 99 | | | | 445 | | | | 2,465 | | | | 2,119 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Including sub-limit of: | Notes payable | | | 2,308 | | | | 2,308 | | | | 99 | | | | — | | | | 2,209 | | | | 2,308 | | | HIBOR* +2.5% | | Repayable in full within 120 days | Bank overdrafts | | | 641 | | | | 641 | | | | — | | | | — | | | | 641 | | | | 641 | | | Prime rate +1% | | Repayable on demand | Long term loans(1) | | | 641 | | | | 641 | | | | — | | | | 445 | | | | 641 | | | | 196 | | | HIBOR* +2% | | Term loans repayable monthly over 3 years. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other facilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Export documentary credits | | | 641 | | | | 641 | | | | — | | | | — | | | | 641 | | | | 641 | | | | | | Short term loans | | | 1,923 | | | | 1,923 | | | | — | | | | — | | | | 1,923 | | | | 1,923 | | | HIBOR* +2.25% | | Revolving loan repayable in 30 days | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,128 | | | | 5,128 | | | | 99 | | | | 445 | | | | 5,029 | | | | 4,683 | | | | | |
(1) A clause in the banking facilities states that the term loans are subject to review any time and also subject to the bank's overriding right ofto repayment on demand, including the right to call for cash cover on demand for prospective and contingent liabilities. Therefore, all long-term loans were classified as current liabilities in the consolidated balance sheets. As of March 31, 2017,2019, the long-term loans became current as it isthey are repayable within one year in accordance with the repayment schedule.
* HIBOR is the Hong Kong Interbank Offer Rate Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 7 | Banking facilities (Continued) |
As of March 31, 2016, a treasury product facility of approximately $25,738,000 was made available to the Company for transactions of financial instruments including forward contracts, and approximately $1,000,000 of the facility was utilized. There was no such treasury product facility available as of March 31, 2017.
One of the properties of the Company located in Hong Kong with a net book value of approximately $965,000,$728,000 as of March 31, 2019, the rental assignment over such property and the rights, interests and benefits of a life insurance contract with a book value of approximately $144,000$153,000 are arranged as securities to the banks for the banking facilities arrangement.
The Prime Rate and HIBOR were 5.125% and Peoples' Bank of China loan benchmark interest rate were 5.00%, 1.11% and 4.75%1.650% per annum, respectively, as of March 31, 2017.2019. The Prime Rate is determined by the Hong Kong Bankers Association of Banks and is subject to revision from time to time. Interest rates are subject to change if the Company defaults on the amount due under the facility or draws in excess of the facility amounts, or at the discretion of the banks.
The weighted average interest rates of borrowings of the Company are as follows: | | During the fiscal year ended March 31, | | | 2018 | | 2019 | | | | | | Bank overdrafts | | | 6.00 | % | | | 6.00 | % | Notes payable | | | 3.42 | % | | | 4.18 | % | Term loans in Hong Kong | | | 2.69 | % | | | 3.45 | % |
| During the fiscal year ended March 31, | | | 2016 | | 2017 | | | | | | | Bank overdrafts | | | 6.00 | % | | | 6.00 | % | Notes payable | | | 2.94 | % | | | 3.13 | % | Term Loan in Hong Kong | | | 2.50 | % | | | 2.59 | % | Term Loan in PRC | | | 6.77 | % | unutilized | | Factoring | | | 1.74 | % | unutilized | |
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| (a) | The subsidiaries comprising the Group are subject to tax on an entity basis on income arising in or derived from Hong Kong and the PRC. The Company is not subject to income taxes in the British Virgin Islands. |
The subsidiariesBIL and BEL operating in Hong Kong are subject to the Hong Kong profits tax rate of 16.5% (2016(2018 and 2015:2017: 16.5%). BATL operating in Hong Kong is subject to the Hong Kong profits tax rate of 8.25% (2018 and 2017: 16.5%) on the first HKD 2 million of the estimated assessable profits and at 16.5% on the estimated assessable profits above HKD 2 million. BIL, BATL and BEL have no assessable profits for the year ended March 31, 2017.
Since December 2005, BEL was under tax review by the local tax authorities for the profits tax assessment for the fiscal years ended March 31, 2000 to 2005. During the tax years under review, BEL was reporting profits tax with tax benefit of 50% reduction in tax payment due to import processing. However, the local tax authorities determined that BEL was not entitled to this tax benefit as the PRC factory setup was no longer considered an import processing activity. Also, during the tax years under review, the local tax authorities determined that some profits of BEII were generated within the territory of Hong Kong and should be taxable in Hong Kong. After review and discussion between the Company and the local tax authorities, both parties agreed that the tax benefit of 50% reduction was not applicable and certain profits of BEII were taxable in Hong Kong during the tax years in review.
During the fiscal year ended March 31, 2015, the tax review case was closed and confirmed with the local tax authorities and the final tax and interest payable were approximately $1,545,000. After offsetting with the tax reserve certificates purchased for approximately $1,710,000, the Company obtained a refund of approximately $165,000.
All subsidiaries registered in the PRC are subject to a tax rate of 25% (2016(2018 and 2015:2017: 25%).
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
(b) | Income is subject to taxation in the various countries in which the Company and its subsidiaries operate. The (loss)income / income(loss) before income taxes by geographical location is analyzed as follows: |
| | 2015 | | | 2016 | | | 2017 | | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | | | | | | | | | | Hong Kong | | | (55 | ) | | | 3,933 | | | | 693 | | PRC | | | 148 | | | | (167 | ) | | | 2,531 | | Others | | | (20 | ) | | | (585 | ) | | | 171 | | | | | | | | | | | | Total | | | 73 | | | | 3,181 | | | | 3,395 | | | | | | | | | | | |
| | 2017 | | 2018 | | 2019 | | | | $ in thousands | | | | $ in thousands | | | | $ in thousands | | | | | | | | | | | | | | | Hong Kong | | | 693 | | | | 221 | | | | (813 | ) | PRC | | | 2,531 | | | | (406 | ) | | | 168 | | Others | | | 171 | | | | 189 | | | | 182 | | | | | | | | | | | | | | | Total | | | 3,395 | | | | 4 | | | | (463 | ) | | | | | | | | | | | | | |
Others mainly include the (loss)income / income(loss) from BVI. Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars) | (c) | Income tax credit / (expense)expense comprises the following: |
| | 2015 | | | 2016 | | | 2017 | | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | | | | | | | | | | Current income tax expense | | | (13 | ) | | | (310 | ) | | | (600 | ) | Income tax credit | | | 1,050 | | | | - | | | | - | | | | | | | | | | | | Total income tax credit / (expense) | | | 1,037 | | | | (310 | ) | | | (600 | ) |
| | 2017 | | 2018 | | 2019 | | | | $ in thousands | | | | $ in thousands | | | | $ in thousands | | | | | | | | | | | | | | | Current income tax expense | | | (600 | ) | | | — | | | | — | |
The components of the income tax credit / (expense)expense by geographical location are as follows:
| | 2015 | | | 2016 | | | 2017 | | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | | | | | | | | | | Hong Kong | | | 1,050 | | | | (310 | ) | | | (5 | ) | PRC | | | (13 | ) | | | - | | | | (595 | ) | | | | | | | | | | | Total | | | 1,037 | | | | (310 | ) | | | (600 | ) |
| | 2017 | | 2018 | | 2019 | | | | $ in thousands | | | | $ in thousands | | | | $ in thousands | | | | | | | | | | | | | | | Hong Kong | | | (5 | ) | | | — | | | | — | | PRC | | | (595 | ) | | | — | | | | — | | | | | | | | | | | | | | | Total | | | (600 | ) | | | — | | | | — | |
At the end of the accounting periods, the income tax liabilitiesrecoverable are as follows:
| | 2016 | | | 2017 | | | | $ in thousands | | | $ in thousands | | | | | | | | | Non-current | | | - | | | | - | | Current | | | 317 | | | | 533 | | | | | | | | | Total | | | 317 | | | | 533 | | | | | | | | |
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
| | 2018 | | 2019 | | | | $ in thousands | | | | $ in thousands | | | | | | | | | | | Current income tax recoverable | | | 5 | | | | 5 | | | | | | | | | | |
(d) | Deferred tax assets comprise the following: |
| | 2016 | | | 2017 | | | | $ in thousands | | | $ in thousands | | | | | | | | | Tax loss carry forwards | | | 4,459 | | | | 4,270 | | Less: Valuation allowance | | | (4,459 | ) | | | (4,270 | ) | | | | | | | | | | | | | - | | | | - | |
| | 2018 | | 2019 | | | | $ in thousands | | | | $ in thousands | | | | | | | | | | | Tax loss carry forwards | | | 4,607 | | | | 4,203 | | Less: Valuation allowance | | | (4,607 | ) | | | (4,203 | ) | | | | | | | | | | | | | — | | | | — | |
As of March 31, 20162018 and 2017,2019, the Company had accumulated tax losses amounting to approximately $25,327,000$25,928,000 and $24,410,000$23,865,000 (the tax effect thereon is approximately $4,459,000$4,607,000 and $4,270,000)$4,203,000), respectively, subject to the final agreement by the relevant tax authorities, which may be carried forward and applied to reduce future taxable income which is earned in or derived from Hong Kong and other jurisdictions. Realization of deferred tax assets associated with tax loss carry forwards is dependent upon generating sufficient taxable income prior to their expiration. A valuation allowance is established against such tax losses when management believes it is more likely than not that a portion may not be utilized. As of March 31, 2017,2019, the Company’s accumulated tax losses of approximately $2,848,000$3,122,000 will expire from 20182020 to 2022. 2024.Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars) | (e) | Changes in valuation allowance are as follows: |
| | 2015 | | | 2016 | | | 2017 | | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | | | | | | | | | | Balance, April 1 | | | 853 | | | | 4,459 | | | | 4,459 | | Charged / (credited) to income tax expense | | | 3,606 | | | | - | | | | (189 | ) | | | | | | | | | | | Balance, March 31 | | | 4,459 | | | | 4,459 | | | | 4,270 | | | | | | | | | | | |
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
| | 2017 | | 2018 | | 2019 | | | | $ in thousands | | | | $ in thousands | | | | $ in thousands | | | | | | | | | | | | | | | Balance, April 1 | | | 4,459 | | | | 4,270 | | | | 4,607 | | (Credited) / charged to income tax expense | | | (189 | ) | | | 337 | | | | (404 | ) | | | | | | | | | | | | | | Balance, March 31 | | | 4,270 | | | | 4,607 | | | | 4,203 | |
(f) | The actual income tax credit / (expense)expense attributable to earnings for the fiscal years ended March 31, 2015, 20162017, 2018 and 20172019 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: |
| | 2015 | | | 2016 | | | 2017 | | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | | | | | | | | | | Income before income taxes | | | 73 | | | | 3,181 | | | | 3,395 | | | | | | | | | | | | Income tax benefit / (expense) on pretax income at statutory rate | | | (12 | ) | | | (525 | ) | | | (560 | ) | Effect of different tax rates of subsidiaries operating in other jurisdictions | | | (233 | ) | | | (95 | ) | | | (52 | ) | Profit not subject to income tax | | | 542 | | | | 387 | | | | 472 | | Expenses not deductible for income tax purposes | | | (336 | ) | | | (255 | ) | | | (686 | ) | Increase / (decrease) in valuation allowance | | | 3,606 | | | | - | | | | (189 | ) | Reversal of provision from conclusion of tax review with tax authorities | | | 2,595 | | | | - | | | | - | | Tax expense from conclusion of tax review with tax authorities | | | (1,545 | ) | | | - | | | | - | | Under provision in prior year | | | - | | | | - | | | | 5 | | Utilization of tax losses / (tax losses recognized) | | | (3,580 | ) | | | 178 | | | | 410 | | | | | | | | | | | | Total income tax credit / (expense) | | | 1,037 | | | | (310 | ) | | | (600 | ) | | | | | | | | | | |
| | 2017 | | 2018 | | 2019 | | | | $ in thousands | | | | $ in thousands | | | | $ in thousands | | | | | | | | | | | | | | | Income / (loss) before income taxes | | | 3,395 | | | | 4 | | | | (463 | ) | | | | | | | | | | | | | | Income tax (expense) / benefit on pretax income at statutory rate | | | (560 | ) | | | (1 | ) | | | 55 | | Effect of different tax rates of subsidiaries operating in other jurisdictions | | | (52 | ) | | | 128 | | | | 8 | | Profit not subject to income tax | | | 472 | | | | 61 | | | | 9 | | Expenses not deductible for income tax purposes | | | (686 | ) | | | (167 | ) | | | (163 | ) | (Decrease) / increase in valuation allowance | | | (189 | ) | | | 337 | | | | (404 | ) | Under provision in prior year | | | 5 | | | | — | | | | — | | Utilization of tax losses / (tax losses recognized) | | | 410 | | | | (358 | ) | | | 495 | | | | | | | | | | | | | | | Total income tax expense | | | (600 | ) | | | — | | | | — | |
The statutory rate of 8.25% or 16.5% used above is that of Hong Kong, where the Company’s main business is located.
| (g) | The Company complies with ASC 740 and assessed the tax position during the fiscal year ended March 31, 20172019 and concluded that such prior year uncertain income tax liability was no longer required. |
The Company’s accounting policy is to treat interest and penalties as components of income taxes. As of March 31, 2017,2019, the Company had no accrued penalties related to uncertain tax positions (2016:(2018: $nil). Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 9 | Financial instruments at fair value |
The Company complies with ASC 820, “Fair Value Measurements” (“ASC 820”). ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data.
Level 3-Inputs are unobservable inputs which reflect the reporting entity's own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The Company entered into a forward contractscontract with a bank andon March 10, 2015 with the purpose of obtaining a gain while the Company expected the trend of Chinese Yuan appreciation against the USD would continue for the next twenty four months. The bank willwas obligated to pay the Company if the Chinese Yuan appreciates against the USD. If the Chinese Yuan depreciatesappreciated against the USD, and the Company will needhad to pay the bank but will be ableif the Chinese Yuan depreciated against the USD, although this depreciation allowed the Company to buypurchase more Chinese Yuan as a result. During the fiscal year ended March 31, 2016, based on our valuation of the existing forward contracts, we recorded a gain of approximately $36,000 for the change in valuation, resulting in a liability of approximately $160,000.Yuan. During the fiscal year ended March 31, 2017, the forward contractscontract matured and payments of approximately $225,000 have been made.
During the fiscal year ended March 31, 2015, the Company purchased an investment product for approximately $390,000 through Ping An Bank, and the fair value at March 31, 2015 was approximately $391,000. Such investment product for trading purpose was redeemed during the fiscal year ended March 31, 2016.
During the fiscal year ended March 31, 2017,2019, the Company purchased listed shares in Hong Kong for trading purposepurposes for approximately $163,000 (2016: $134,000)$226,000 (2018: $517,000). During the fiscal year ended March 31, 2019, a gain from disposal of financial assets at fair value of approximately $16,000 was recorded (2018: $58,000). A revaluation gain of approximately $4,000 was recorded (2016: $10,000)during the fiscal year ended March 31, 2019 (2018: revaluation loss of $7,000).
At the end of the accounting period, the fair value of the following assets / (liabilities) were as follows: | | March 31, 2016 | | | March 31, 2017 | | $ in thousands | | | | | | | | | | | | | | | | | | | | | | | | | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | Forward contracts (1) | | | - | | | | (160 | ) | | | - | | | | (160 | ) | | | - | | | | - | | | | - | | | | - | | Investment product (2) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Equity investment (3) | | | 144 | | | | - | | | | - | | | | 144 | | | | 167 | | | | - | | | | - | | | | 167 | |
| | March 31, 2018 | | March 31, 2019 | $ in thousands | | | | | | | | | | | | | | | | | | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | Equity investments | | | 78 | | | | — | | | | — | | | | 78 | | | | 102 | | | | — | | | | — | | | | 102 | |
The fair value of equity investments is determined based on quoted price in active markets. (1) | The fair value of forward contracts was determined based on the present value of expected future cash flows considering the risks involved, and using discount rates appropriate for the respective maturities. Observable level 2 inputs are used to determine the present value of expected future cash flows. |
(2) | Observable inputs for the fair value of financial instruments were not assessable. The fair value is determined based on valuation and projection provided by Ping An Bank. On July 8, 2015, the investment product has been redeemed for approximately $397,000 for a net gain of approximately $6,000. |
(3) | The fair value of equity investment is determined based on quoted price in active markets. |
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
10 | Investment in life insurance contract
|
Investment in life insurance contract represents the carrying amount (surrender value) of the contract if it is to be terminated by the Company. There is one life insurance contract as of March 31, 20162018 and March 31, 2017,2019, with a carrying amount of approximately $140,000$149,000 and $144,000,$153,000, respectively. All premiums of this contract have already been paid during the fiscal year ended March 31, 2012. The face amount (death benefit) of this contract is $1,000,000. During the fiscal year ended March 31, 2017,2019, we recorded a gain of approximately $4,000 for the change in valuation (2016: $4,000)(2018: $5,000). Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
During the year ended March 31, 2014, the Company entered into capital lease obligations amounting to approximately $123,000 for two motor vehicles. During the year ended March 31, 2016, the Company entered into an additional capital lease obligation amounting to approximately $116,000 for one motor vehicle.
During the year ended March 31, 2018, one capital lease obligation amounting to approximately $69,000 for a motor vehicle was fully repaid. During the year ended March 31, 2019, one capital lease obligation amounting to approximately $47,000 for another motor vehicle was fully repaid.Future minimum payments under capital leases as of March 31, 20172019 with an initial term of more than one year are as follows: | Future minimum payments under capital leases for the years ending March 31, | | | | Principal repayment | | | | Interest payment | | | | Total obligations | | | | | | | $ in thousands | | | | $ in thousands | | | | $ in thousands | | | | | | | | | | | | | | | | | | 2020 | | | | 27 | | | | 1 | | | | 28 | | | 2021 | | | | 5 | | | | — | | | | 5 | | | | | | | | | | | | | | | | | | | | | | 32 | | | | 1 | | | | 33 | | | | | | | | | | | | | | | | |
Future minimum payments under capital leases for the years ending March 31, | | Principal repayment | | | Interest payment | | | Total obligations | | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | | | | | | | | | | 2018 | | | 44 | | | | 4 | | | | 48 | | 2019 | | | 28 | | | | 2 | | | | 30 | | 2020 | | | 27 | | | | 1 | | | | 28 | | 2021 | | | 5 | | | | 0 | | | | 5 | | | | | | | | | | | | | | | 104 | | | | 7 | | | | 111 | | | | | | | | | | | |
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
As of March 31, 2017,2019, the Company leases a factory in Shenzhen, two commercial units in Beijing and part of production facilities and machines in Xinxing under rental agreements to third parties. The Company will need to pay a cancellation fee of approximately $84,000$108,000 if the Company decides to terminate all the rental agreements before their expiry.
The Shenzhen factory wasis rented out to a third party from August 1, 2013 to August 1, 2019, and the rent terminated as at January 31, 2019. Part of the production facilities in Xinxing wereare rented out to various third parties up to December 31, 2020.February 13, 2026. Certain tenants have an option to early terminate their tenancy agreements. The expected future minimum rental payments to be received are as follows:
| | | | Year ending March 31, | | $ in thousands | | | | | | 2018 | | | 1,302 | | 2019 | | | 1,231 | | 2020 | | | 410 | | | | | | | | | 2,943 | | | | | |
Year ending March 31, | | $ in thousands | | | | | 2020 | | | | 95 | | | | | | | 95 | |
As of March 31, 2017,2019, the future minimum lease commitment payables in respect of non-cancellable operating leases for one office and two staff quarters in Shenzhen and a staff quarter in Xinxing are as follows:
| | | | Year ending March 31, | | $ in thousands | | | | | | | | | | 2018 | | | 94 | | 2019 | | | 26 | | | | | | | | | 120 | | | | | |
Year ending March 31, | | $ in thousands | | | | | 2020 | | | | 112 | | | 2021 | | | | 110 | | | 2022 | | | | 109 | | | 2023 | | | | 109 | | | 2024 | | | | 23 | | | | | | | 463 | |
Rental expenses for all operating leases of one office premise in Shenzhen, two staff quarters in Shenzhen and a staff quarter in Xinxing amounted to approximately $100,000, $119,000$95,000 and $100,000$102,000 for the fiscal years ended March 31, 2015, 20162017, 2018 and 2017,2019, respectively.
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
12 Commitments and contingent liabilities
Capital expenditures contracted at the balance sheet date but not yet provided for are as follows:
| | March 31, | | | | 2016 | | | 2017 | | | | $ in thousands | | | $ in thousands | | | | | | | | | Construction in Xinxing, Guangdong, PRC | | | 48 | | | | 31 | | Mold | | | - | | | | 22 | | | | | | | | | | | | | | 48 | | | | 53 | | | | | | | | |
| | March 31, | | | 2018 | | 2019 | | | $ in thousands | | $ in thousands | | | | | | Construction in Xinxing, Guangdong, PRC | | | 358 | | | | 41 | | | | | 358 | | | | 41 | |
As of March 31, 2017,2019, the Company entered into contractor agreements on buildings and leasehold improvements on the manufacturing facility in Xinxing, the PRC and mold for a total consideration of $346,000.$544,000. As of March 31, 2017, $293,0002019, $503,000 has been paid, and the remaining balance of $53,000$41,000 is to be paid in accordance with the progress of the construction.
| (b) | Contingent liabilities |
The Company has entered into an employment agreement with a director, Anthony So. Mr. So’s employment agreement provides for a maximum yearly salary of approximately $800,000 plus bonus. The initial term of the employment agreement expired on March 31, 2013 (“Initial Term”); however, the employment agreement has been renewed under a provision in the agreement that provides for automatic renewal for successive one year periods, unless at least 90 days prior to the expiration of the Initial Term or any renewal term, either party gives written notice to the other party specifically electing to terminate the agreement. Mr. So’s employment agreement contains a provision under which the Company will be obligated to pay Mr. So all compensation for the remainder of his employment agreement and five times his annual salary and bonus compensation if a change of control, as defined in his employment agreement occurs. Bonuses shall be determined by the Board of Directors in their sole discretion.
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| (a) | Repurchase of common stock |
In August of 2001, the Company's Board of Directors authorized a program for the Company to repurchase up to $500,000 of its common stock. This repurchase program does not obligate the Company to acquire any specific number of shares or acquire shares over any specified period of time. No stock had been repurchased when, on November 16, 2006, the Company's Board of Directors authorized another $1,000,000 for the Company to repurchase its common stock under the same repurchase program. This authorization to repurchase shares increased the amount authorized for repurchase from $500,000 to $1,500,000. On September 17, 2015, the Company’s Board of Directors authorized an additional $1,500,000 to repurchase its common stock under the same repurchase program, bringing the amount authorized for repurchase to $3,000,000. On April 25, 2018, the Company’s Board of Directors authorized an additional $3,000,000 to repurchase its common stock under the same repurchase program, bringing the amount authorized for repurchase to $6,000,000. The Board of Directors believed that the common stock was undervalued and that the repurchase of common stock would be beneficial to the Company's stockholders. The Company (through its subsidiary) has repurchased an aggregate of 568,519906,866 shares of its common stock, including 124,849 shares ($364,000) that were repurchased during the fiscal year ended March 31, 2019, 213,498 shares ($572,000) that were repurchased during the fiscal year ended March 31, 2018, and 164,311 shares ($368,000) that were repurchased during the fiscal year ended March 31, 2017, and 73,4722017. No shares ($99,000) thatrepurchased were repurchasedremoved from the total number of shares issued during the fiscal year ended March 31, 2016. No2019 (2018: 34,000 shares, were repurchased during the fiscal years ended March 31, 2015.2017: nil). The Company may from time to time repurchase shares of its common stock under this program.
The Company has authorized share capital of $100,000 for 10,000,000 shares of preferred stock, with par value of $0.01 each, divided into 2,500,000 shares each of class A preferred stock, class B preferred stock, class C preferred stock and class D preferred stock. Shares may be issued within each class from time to time by the Company’s Board of Directors in its sole discretion without the approval of the stockholders, with such designations, power preferences, rights, qualifications, limitationlimitations and restrictions as the Board of Directors shall fix and as have not been fixed in the Company’s Memorandum of Association. The Company has not issued any shares of preferred stock as of March 31, 2017.
No dividends were declared by the Company for each of the fiscal years ended March 31, 2015, 20162017, 2018 and 2017,2019, respectively. Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 14 | Stock option and bonus plans |
| (a) | 1996 Stock Option Plan |
In October 1996, the Company’s Board of Directors approved the 1996 Stock Option Plan and 1996 Non-Employee Directors’ Stock Option Plan. Under the 1996 Stock Option Plan, the Company may grant options of common stock to certain employees and directors of the Company for a maximum of 900,000 shares. The 1996 Stock Option Plan is administered by a committee appointed by the Board of Directors which determines the terms of options granted, including the exercise price, the option periods and the number of shares to be subject to each option. The exercise price of options granted under the 1996 Stock Option Plan may be less than the fair market value of the common shares on the date of grant. The maximum term of options granted under the 1996 Stock Option Plan is 10 years. The right to acquire the common shares is not assignable except for certain conditions stipulated in the 1996 Stock Option Plan.
Under the 1996 Non-Employee Directors’ Stock Option Plan, the non-employee directors were automatically granted stock options on the third business day following the day of each annual general meeting of the Company to purchase shares of common stock. The maximum number of authorized shares under the 1996 Non-Employee Directors’Directors’ Stock Option Plan was 600,000. The exercise price of all options granted under the 1996 Non-Employee Directors’ Stock Option Plan shall be one hundred percent of the fair market value per share of the common shares on the date of grant. The maximum term of options granted under the 1996 Non-Employee Directors’ Stock Option Plan is 10 years. No stock option may be exercised during the first six months of its term except for certain conditions provided in the 1996 Non-Employee Directors’ Stock Option Plan. The right to acquire the common shares is not assignable except for under certain conditions stipulated in the 1996 Non-Employee Directors’ Stock Option Plan. In April 2003, the Company issued options to certain directors and non-employee directors of the Company to purchase an aggregate of 372,500 shares of common stock of the Company at an exercise price of $1.61. The exercise prices of these options were equal to the fair market value at the time of grant. The options expired on March 31, 2013. No such options were exercised during the ten year term ended March 31, 2013.
In March 2004, the Company issued options to certain non-employee directors of the Company to purchase an aggregate of 40,000 shares of common stock of the Company at an exercise price of $6.12. The exercise prices of these options were equal to the fair market value at the time of grant. The options expired on March 25, 2014. No such options were exercised during the ten year term ended March 31, 2014.
In September 2004, the Company issued options to certain non-employee directors of the Company to purchase an aggregate of 40,000 shares of common stock of the Company at an exercise price of $6.20. The exercise prices of these options were equal to the fair market value at the time of grant. The options expired on September 12, 2014. No such options were exercised up to September 12, 2014.
In December 2005, the Company issued options to certain non-employee directors of the Company to purchase an aggregate of 30,000 shares of common stock of the Company at an exercise price of $4.50. The exercise prices of these options were equal to the fair market value at the time of grant. The options expired on December 4, 2015. No such options were exercised up to December 4, 2015.
On November 16, 2006, the Board of Directors of the Company voted to rescind the Company’s 1996 Non-Employee Directors’ Stock Option Plan (the “Non-Employee Directors’ Plan”). All options previously granted under the Non-Employee Directors’ Plan have expired pursuant to their terms of grant.
During the fiscal years ended March 31, 2015, 20162017, 2018 and 2017,2019, no shares or share options were granted under the 1996 Stock Option Plan. Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 14 | Stock option and bonus plans (Continued) |
On September 7, 2004, the Company’s stockholders adopted the 2004 Stock Bonus Plan (the “Stock Bonus Plan”) which authorizes the issuance of up to five hundred thousand (500,000) shares of the Company’s common stock in the form of stock bonus.
The purpose of this Stock Bonus Plan is to (i) induce key employees to remain in the employment of the Company or of any subsidiary of the Company; (ii) encourage such employees to secure or increase their stock ownership in the Company; and (iii) reward employees, non-employee directors, advisors and consultants for services rendered or to be rendered to or for the benefit of the Company or any of its subsidiaries. The Company believes that the Stock Bonus Plan will promote continuity of management and increase incentive and personal interest in the welfare of the Company.
The Stock Bonus Plan shall beis administered by a committee appointed by the Board of Directors which consists of at least two but not more than three members of the Board, one of whom shall be a non-employee of the Company. The existing Committee members are Mr. Anthony So and Mr. Woo Ping Fok. The Committee has the authority, in its sole discretion: (i) to determine the parties to receive bonus stock, the times when they shall receive such awards, the number of shares to be issued and the time, terms and conditions of the issuance of any such shares; (ii) to construe and interpret the terms of the Stock Bonus Plan; (iii) to establish, amend and rescind rules and regulations for the administration of the Stock Bonus Plan; and (iv) to make all other determinations necessary or advisable for administering the Stock Bonus Plan.
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 14 | Stock option and bonus plans (Continued) |
| (c) | 2004 Stock Option Plan |
On March 23, 2004, the Company’s stockholders adopted the 2004 Stock Option Plan (the “2004 Plan”) which provides for the grant of up to six hundred thousand (600,000) shares of the Company’s common stock in the form of stock options, subject to certain adjustments as described in the 2004 Plan. At the Annual meetingMeeting of stockholdersStockholders held on March 20, 2015, the stockholders approved an amendment to the 2004 Plan to increase the number of shares that could be granted from 600,000 to 850,000.
The purpose of the 2004 Plan is to secure key employees to remain in the employment of the Company and to encourage such employees to secure or increase on reasonable terms their common stock ownership in the Company. The Company believes that the 2004 Plan promotes continuity of management and increased incentive and personal interest in the welfare of the Company.
The 2004 Plan is administered by a committee appointed by the Board of Directors which consists of at least two but not more than three members of the Board, one of whom shall be a non-employee of the Company. The current committee members are Mr. Anthony So and Mr. Woo Ping Fok. The committee determines the specific terms of the options granted, including the employees to be granted options under the plan, the number of shares subject to each option grant, the exercise price of each option and the option period, subject to the requirement that no option may be exercisable more than 10 years after the date of grant. The exercise price of an option may be less than the fair market value of the underlying shares of Common Stock.common stock. No options granted under the plan will be transferable by the optionee other than by will or the laws of descent and distribution, and each option will be exercisable during the lifetime of the optionee only by the optionee.
The exercise price of an option granted pursuant to the 2004 Plan may be paid in cash, by the surrender of options, in common stock, in other property, including a promissory note from the optionee, or by a combination of the above, at the discretion of the Committee.committee.
On July 15, 2015, 850,000 options, all with an exercise price of $1.50 per share, had been granted to officers and directors of the Company under the 2004 Plan, all of which remained outstanding as of March 31, 2017.2019. The options for 425,000 shares will expire on March 31, 2020, and options for 425,000 shares will expire on March 31, 2025. Options granted under the stock option plans2004 Plan vest immediately and may contain such other terms as the Board of Directors or a committee appointed to administer the plan may determine.
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 14 | Stock option and bonus plans (Continued) |
| (d) | A summary of the stock options activity is as follows: |
| | | | | | Number | | | Weighted average exercise | | | | of options | | | price | | | | | | | | | Balance, April 1, 2015 | | | 30,000 | | | $ | 4,50 | | Expired | | | (30,000 | ) | | $ | 4.50 | | Granted | | | 850,000 | | | $ | 1.50 | | | | | | | | | | Balance, March 31, 2016 and 2017 | | | 850,000 | | | $ | 1.50 | |
| | Number of options | | Weighted Average Exercise Price | | | | | | | | | | | | | Balance, March 31, 2017, 2018 and 2019 | | | | 850,000 | | | $ | 1.50 | |
| (e) | The following table summarizes information about all stock options of the Company outstanding as at March 31, 2017: 2019: |
| | | Number | | | Weighted average | | | Exercisable | | Weighted average | | | outstanding at | | | remaining life | | | shares at | | exercise price | | | March 31, 2017 | | | (years) | | | March 31, 2017 | | | | | | | | | | | | | $ | 1.50 | | | | 850,000 | | | | 5.5 | | | | 850,000 | |
| Weighted average exercise price | | | | Number outstanding at March 31, 2019 | | | | Weighted average remaining life (years) | | | | Exercisable shares at March 31, 2019 | | | | | | | | | | | | | | | | | $ | 1.50 | | | | 850,000 | | | | 3.5 | | | | 850,000 | |
The intrinsic value of options outstanding and exercisable was $1.07approximately $1,204,000 on March 31, 2017.2019. The intrinsic value represents the pre-tax intrinsic value (the difference between the closing stock price of the Company’s common stock on the balance sheet date and the exercise price for both the outstanding and exercisable options) that would have been received by the option holders if all options had been exercised on March 31, 2017. 2019.New shares will be issued by the Company upon future exercise of stock options. Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 14 | Stock option and bonus plans (Continued) |
| (f) | Stock-based compensation expense is recognized on a straight-line basis over the respective vesting periods, or at the time of option granting if there are no vesting periods. The fair value of the optionoptions granted was estimated on the date of granting using the Black-Scholes option-pricing model with the following assumptions used for grants during the applicable periods: |
| | For the Fiscal Year Ended March 31, | | | | 2016 | | | 2017 | | | | | | | | | | | | | | | | Risk-free interest rate (1) | | 1.63% to 2.36% | | | | N/A | | Expected life (years) (2) | | 4.71 to 9.71 | | | | N/A | | Expected dividend yield (3) | | | 0 | % | | | N/A | | Volatility (4) | | | 73.63 | % | | | N/A | | Fair value of options at grant date per share | | $ | 0.81 to $1.08 | | | | N/A | | | | | | | | | | |
(1) | Risk-free interest rate
Risk-free interest rate for periods within the contractual life of the option is based upon the interest rate on U.S. Treasury zero-coupon bond issued with remaining terms similar to the expected term of the options granted.
|
(2) | Expected life (years)
Assumption of the expected term was based on the vesting and contractual terms and employee demographics.
|
(3) | Expected dividend yield
The dividend yield was estimated by the Company based on its expected dividend policy over the expected term of the options.
|
(4) | Volatility
The volatility assumption was estimated based on historical volatility of the Company’s share price applying the guidance provided by ASC 718.
|
| | | For the Fiscal Year Ended March 31, | | | | | 2017 | | | | 2018 | | | | 2019 | | | | | | | | | | | | | | | Risk-free interest rate (1) | | | N/A | | | | N/A | | | | N/A | | Expected life (years) (2) | | | N/A | | | | N/A | | | | N/A | | Expected dividend yield (3) | | | N/A | | | | N/A | | | | N/A | | Volatility (4) | | | N/A | | | | N/A | | | | N/A | | Fair value of options at grant date per share | | | N/A | | | | N/A | | | | N/A | |
(1) Risk-free interest rate Risk-free interest rate for periods within the contractual life of the option is based upon the interest rate on U.S. Treasury zero-coupon bonds issued with remaining terms similar to the expected term of the options granted. (2) Expected life (years) Assumption of the expected term was based on the vesting and contractual terms and employee demographics. (3) Expected dividend yield The dividend yield was estimated by the Company based on its expected dividend policy over the expected term of the options. (4) Volatility The volatility assumption was estimated based on historical volatility of the Company’s share price applying the guidance provided by ASC 718. The Company recorded the relatedno compensation expense of approximately $nil, $801,000in selling, general and $niladministrative expenses during the fiscal years ended March 31, 2015, 20162017, 2018 and 2017.2019. The following table summarizes the share based compensation expense:
| | For the Fiscal Year Ended March 31, | | | | 2015 | | | 2016 | | | 2017 | | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | | | | | | | | | | Administration and general | | | - | | | | 801 | | | | - | | | | | | | | | | | | Total | | | - | | | | 801 | | | | - | | | | | | | | | | | |
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 15 | Related party transactions |
| (a) | The Company paid emoluments, commissions and/or consultancy fees to its directors and officers as follows: |
Year ended | Mr. Anthony | | Mr. Kim Wah | | Mr. Woo-Ping | | Mr. Andrew | | March 31, | So | | Chung | | Fok | | So | | | Director, Chief Executive Officer | | Director | | Director | | Director and Chief Operating Officer | | $ in thousands | | $ in thousands | | $ in thousands | | $ in thousands | | | | | | | | | | | 2015 | $857 (i), (iii) | | $160 (iii) | | Nil | | | $124 | | 2016 | $857 (i), (iii) | | $170 (iii) | | Nil | | | $249 | | 2017 | $643 (i), (iii) | | $171 (iii) | | Nil | | | $249 | |
| Mr. Henry | | Mr. Albert | | | Schlueter | | So | | | Director and Assistant Secretary | | Director, Chief Financial Officer and Secretary | | | $ in thousands | | $ in thousands | | | | | | | 2015 | $55 (ii) | | | $109 | | 2016 | $60 (ii) | | | $181 | | 2017 | $62 (ii) | | | $152 | |
Year ended | | Mr. Anthony | | Mr. Kim Wah | | Mr. Woo-Ping | | Mr. Andrew | March 31, | | So | | Chung | | Fok | | So | | | Director, Chief Executive Officer | | Director | | Director | | Director and Chief Operating Officer | | | | | $ in thousands | | $ in thousands | | $ in thousands | | $ in thousands | | | | | | | | | | | | | 2017 | | | $643 (i), (iii) | | $171 (iii) | | Nil | | $249 | | 2018 | | | $643 (i), (iii) | | $170 (iii) | | Nil | | $259 (iii) | | 2019 | | | $643 (i), (iii) | | $171 (iii) | | Nil | | $249 (iii) |
| | | | | Mr. Henry Schlueter | | | Mr. Albert So | | | | | | Director and Assistant Secretary | | | Director, Chief Financial Officer and Secretary | | | | | | $ in thousands | | | $ in thousands | | | | | | | | | | | 2017 | | | | $62(ii) | | | $152 | | 2018 | | | | $60(ii) | | | $162 (iii) | | 2019 | | | | $60(ii) | | | $152 (iii) |
The emoluments paid to the Company’s directors and officers were included in the salaries and related costs, while the consultancy fees or professional fees paid to Schlueter & Associates, P.C., were included in the administration and general expenses.
| (i) | Apart from the emoluments paid by the Company as shown above, one of the properties of the Company in Hong Kong is also provided to Mr. Anthony So for his accommodation. |
| (ii) | The amounts for the years ended March 31, 2015, 20162017, 2018 and 20172019 represented professional fees paid to Schlueter & Associates, P.C., the Company’s SEC counsel, in which Mr. Henry Schlueter is one of the principals. |
| (iii) | The amount for the year ended March 31, 2015,2017, included unpaid vacation payments of $57,000approximately $43,000 and $9,000$11,000 for Mr. Anthony So and Mr. Kim Wah Chung, respectively. The amount for the year ended March 31, 2016,2018, included unpaid vacation payments of $57,000,approximately $43,000, $10,000, $10,000 and $12,000$10,000 for Mr. Anthony So, Mr. Kim Wah Chung, Mr. Andrew So and Mr. Albert So, respectively. The amount for the year ended March 31, 2017,2019, included unpaid vacation payments of approximately $43,000 and $11,000 for Mr. Anthony So and Mr. Kim Wah Chung, respectively. |
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 15 | Related party transactions (Continued) |
During the fiscal year ended March 31, 2015, one of the subsidiaries in Hong Kong borrowed an interest-free loan of approximately $538,000 from a director and stockholder, Mr. Anthony So,, to provide working capital. This loan is to be repaid in 48 equal installments. As ofDuring the fiscal year ended March 31, 2017,2019, the Companysubsidiary had repaid a total of approximately $336,000 to Mr. Anthony So and the balanceapproximately $67,000. This loan had been fully repaid as of loan due to Mr. Anthony so was approximately $202,000.
March 31, 2019.During the fiscal year ended March 31, 2015, one of the subsidiaries in Shenzhen, PRC entered into a rental agreement with a director and stockholder, Mr. Anthony So, for three apartment units located in Shenzhen, PRC for office usage. Mr. Anthony So is the sole owner of these three apartment units. The monthly rental payment was approximately $2,000. Starting from August 1, 2016, rental of two of the apartment units was no longer required and the rental agreement was terminated, and a new rental agreement for one apartment unit for staff quarters was in place, for a monthly rental payment of $260.$270. The total rental payment paid to Mr. Anthony So during the fiscal year ended March 31, 20172019 was approximately $9,000 (2016: $24,000)$3,000 (2018: $3,000; 2017: $9,000).
During the fiscal year ended March 31, 2015, one of the subsidiaries in Xinxing, PRC entered into a rental agreement with a director and stockholder, Mr. Andrew So, for an apartment unit located in Xinxing, PRC for staff quarters. Mr. Andrew So is the sole owner of this apartment unit.�� The monthly rental payment iswas approximately $430,$450. Starting from December 1, 2018, the monthly rental payment was approximately $580, and the total rental payment paid to Mr. Andrew So during the fiscal year ended March 31, 20172019 was approximately $5,000 (2016:$6,000 (2018: $5,000; 2017: $5,000).
During the fiscal year ended March 31, 2016, one of the subsidiaries in Shenzhen, PRC entered into a rental agreement with a director and stockholder, Mr. Anthony So, for one apartment unit located in Shenzhen, PRC for staff quarters. Mr. Anthony So is the sole owner of this apartment unit. Starting from April 1, 2017, rental of this apartment unit was no longer required and the rental agreement was terminated. The monthly rental payment was approximately $330, and the total rental payment paid to Mr. Anthony So during the fiscal year ended March 31, 20172019 was approximately $4,000 (2016: $2,000)$nil (2018: $nil; 2017: $4,000) for this unit.
unit.In February 2017, a non-employee director of the Company, Henry F. Schlueter, sold 24,000 shares of the Company’s common stock to the Company at a purchase price of $2.39 per share, pursuant to the Company repurchase program. In February 2018, Mr. Schlueter sold 10,000 shares of the Company’s common stock to the Company at a purchase price of $3.48 per share, pursuant to the Company repurchase program.
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 16 | Concentrations and credit risk |
The Company operates principally in the PRC (including Hong Kong) and grants credit to its customers in this geographic region. Although the PRC is economically stable, it is always possible that unanticipated events in foreign countries could disrupt the Company’s operations.
Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and trade receivables. The Company does not require collateral to support financial instruments that are subject to credit risk.
At March 31, 20162018 and 2017,2019, the Company had credit risk exposure of uninsured cash and deposits with maturities of less than one year in banks of approximately $3,547,000$8,751,000 and $3,745,000,$7,527,000, respectively.
A substantial portion, 37%45%, 59%31% and 48%37% of revenue, was generated from sales to one customer for the years ended March 31, 2015, 20162017, 2018 and 2017,2019, respectively. That customer has discontinued purchasing from us effective June 2017.
The net sales to customersrevenue representing at least 10% of total net total salesrevenue are as follows:
| | Year Ended March 31, | | | | 2015 | | | 2016 | | | 2017 | | | | $ in thousands | | | % | | | $ in thousands | | | % | | | $ in thousands | | | % | | | | | | | | | | | | | | | | | | | | | Fitbit, Inc. | | | 10,593 | | | | 37 | | | | 14,145 | | | | 59 | | | | 8.472 | | | | 48 | | Kern + Sohn GMBH | | | 5,424 | | | | 19 | | | | 3,874 | | | | 16 | | | | 2,729 | | | | 16 | | Pitney Bowes Inc. | | | 2,476 | | | | 8 | | | | 1,969 | | | | 8 | | | | 2,435 | | | | 14 | | Sunbeam Products, Inc. | | | 6,879 | | | | 24 | | | | 1,738 | | | | 7 | | | | 1,563 | | | | 9 | | | | | | | | | | | | | | | | | | | | | | | | | | | 25,372 | | | | 88 | | | | 21,726 | | | | 90 | | | | 15,199 | | | | 87 | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended March 31, | | | 2017 | | 2018 | | 2019 | | | $ in thousands | | % | | $ in thousands | | % | | $ in thousands | | % | | | | | | | | | | | | | | Customer A | | | 2,729 | | | | 14 | | | | 3,579 | | | | 31 | | | | 3,715 | | | | 37 | | Customer C | | | 2,435 | | | | 13 | | | | 1,599 | | | | 14 | | | | 1,225 | | | | 12 | | Customer B | | | 1,563 | | | | 8 | | | | 1,662 | | | | 14 | | | | 1,027 | | | | 10 | | Customer E | | | 1,061 | | | | 6 | | | | 1,050 | | | | 9 | | | | 996 | | | | 10 | | Customer D * | | | 8,472 | | | | 45 | | | | 1,115 | | | | 10 | | | | 21 | | | | – | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 16,260 | | | | 86 | | | | 9,005 | | | | 78 | | | | 6,984 | | | | 69 | | | | | | | | | | | | | | | | | | | | | | | | | | |
* That customer has stopped purchasing from us as of June 2017. The following customers had balances of at least 10% of the total trade receivables at the respective balance sheet dates set forth below:
| | March 31, | | | | 2016 | | | 2017 | | | | $ in thousands | | | % | | | $ in thousands | | | % | | | | | | | | | | | | | | | Sunbeam Products, Inc. | | | 87 | | | | 10 | | | | 162 | | | | 14 | | Fitbit, Inc. | | | 378 | | | | 41 | | | | 109 | | | | 9 | | Kern + Sohn GMBH | | | 204 | | | | 22 | | | | 328 | | | | 28 | | Pitney Bowes Inc. | | | 145 | | | | 16 | | | | 455 | | | | 39 | | | | | | | | | | | | | | | | | | | | | | | | 89 | | | | | | | | 90 | | | | | | | | | | | | | | | | |
| | March 31, | | | 2018 | | 2019 | | | $ in thousands | | % | | $ in thousands | | % | | | | | | | | | | Customer B | | | — | | | | — | | | | 191 | | | | 32 | | Customer C | | | 200 | | | | 25 | | | | 136 | | | | 23 | | Customer A | | | 234 | | | | 30 | | | | 127 | | | | 21 | | Customer E | | | 113 | | | | 14 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | 69 | | | | | | | | 76 | |
At March 31, 20162018 and 2017,2019, these customers accounted for 89%69% and 90%76%, respectively, of net trade receivables. The trade receivables have repayment terms of not more than twelve months.
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 17 | Employee retirement benefits and severance payment allowance |
| (a) | With effect from January 1, 1988, BEL, a wholly-owned foreign subsidiary of the Company in Hong Kong, implemented a defined contribution plan (the “Plan”) with a major international insurance company to provide life insurance and retirement benefits for its employees. All permanent full time employees who joined BEL before December 2000, excluding factory workers, are eligible to join the Plan. Each eligible employee that chooses to participate in the Plan is required to contribute 5% of their monthly salary, while BEL is required to contribute from 5% to 10% depending on the eligible employee’s salary and number of years in service. |
The Mandatory Provident Fund (the “MPF”) was introduced by the Hong Kong Government and commenced in December 2000. BEL joined the MPF by implementing a plan with a major international insurance company. All permanent Hong Kong full time employees who joined BEL on or after December 2000, excluding factory workers, must join the MPF, except for those who joined the Plan before December 2000. Both the employee’s and employer’s contributions to the MPF are 5% of the eligible employee’s monthly salary and are subject to a maximum mandatory contribution of HK$1,000 (US$128) per month. Both the maximum mandatory employee’s and employer’s contributions per month increased to HK$1,250 (US$160) since June 1, 2012, and then later to HK$1,500 (US$192) since June 1, 2014.
Pursuant to the relevant PRC regulations, the Company is required to make contributions for each employee, at rates based upon the employee’s standard salary base as determined by the local Social Security Bureau, to a defined contribution retirement scheme organized by the local Social Security Bureau in respect of the retirement benefits for the Company’s employees in the PRC.
| (b) | The contributions to each of the above schemes are recognized as employee benefit expenses when they are due and are charged to the consolidated statement of operations. The Company’s total contributions and accruals to the above schemes for the years ended March 31, 2015, 20162017, 2018 and 20172019 amounted to $693,000, $293,000$267,000, $255,000 and $267,000,$264,000, respectively. The Company has no other obligation to make payments in respect of retirement benefits of the employees. |
| (c) | According to the New Labor Law in the PRC which was effective on January 1, 2008, a company is required to provide one month’s salary for each year of service as a severance payment. The Company recognized a total provision of $297,000$437,000 as of March 31, 20172019 for severance payments for staff in the PRC (2016: $317,000, 2015: $256,000)(2018: $396,000, 2017: $297,000). The accrued severance payment allowance is reviewed every year. |
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
Basic net earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net earnings per share gives effect to all dilutive potential common shares outstanding during the period. The weighted average number of common shares outstanding is adjusted to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. In computing the dilutive effect of potential common shares, the average stock price for the period is used in determining the number of treasury shares assumed to be purchased with the proceeds from the exercise of options. | | Year Ended March 31, | | | 2017 | | 2018 | | 2019 | | | | | | | | Income / (loss) available to common stockholders ($ in thousands) | | $ | 2,795 | | | $ | 4 | | | $ | (463 | ) | | | | | | | | | | | | | | Basic weighted average common shares outstanding | | | 5,143,648 | | | | 4,910,357 | | | | 4,703,224 | | | | | | | | | | | | | | | Basic net earnings / (loss) per share | | $ | 0.54 | | | $ | 0.00 | | | $ | (0.10 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | Basic weighted average common shares outstanding | | | 5,143,648 | | | | 4,910,357 | | | | 4,703,224 | | Effect of dilutive securities – Options | | | 172,745 | | | | 380,547 | | | | — | | | | | | | | | | | | | | | Diluted weighted average common and potential common shares outstanding | | | 5,316,393 | | | | 5,290,904 | | | | 4,703,224 | | | | | | | | | | | | | | | Diluted net earnings / (loss) per share | | $ | 0.53 | | | $ | 0.00 | | | $ | (0.10 | ) | | | | | | | | | | | | | |
| | Year Ended March 31, | | | | 2015 | | | 2016 | | | 2017 | | | | | | | | | | | | Income available to common stockholders ($ in thousands) | | $ | 1,110 | | | $ | 2,871 | | | $ | 2,795 | | | | | | | | | | | | | | | Basic weighted average common shares outstanding | | | 5,246,903 | | | | 5,173,431 | | | | 5,143,648 | | | | | | | | | | | | | | | Basic net earnings per share | | $ | 0.21 | | | $ | 0.55 | | | $ | 0.54 | | | | | | | | | | | | | | | | | | | | | | | | | Basic weighted average common shares outstanding | | | 5,246,903 | | | | 5,173,431 | | | | 5,143,648 | | Effect of dilutive securities – Options | | | - | | | | - | | | | 172,745 | | | | | | | | | | | | Diluted weighted average common and potential common shares outstanding | | | 5,246,903 | | | | 5,173,431 | | | | 5,316,393 | | | | | | | | | | | | | | | Diluted net earnings income per share | | $ | 0.21 | | | $ | 0.55 | | | $ | 0.53 | | | | | | | | | | | |
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 19 | Business segment information |
| (a) | The Company is organized based on the products it offers. Under this organizational structure, the Company’s operations can be classified into threehas four business segments, Scales, Pet Electronics Products, Rental and Management and Others for the fiscal years ended March 31, 20162018 and 2017.2019. The Chief Operating Decision Maker, identified as the Chief Executive Officer and Chief Financial Officer, reviews these segment results when making decisions about allocating revenues and assessing the performance of the Company. |
Scales operations principally involve production and marketing of sensor-based scales products. These include bathroom, kitchen, office, jewelry, laboratory, postal and industrial scales that are used in consumer, commercial and industrial applications. Revenue from scale products was 90% (2016: 93%67% (2018: 68%) of overall revenue of the Company for the fiscal year ended March 31, 2017,2019, and the Company expects that the revenue will decrease for the next 12 months as one of our major customers has discontinued purchasing from us effective June 2017.
Pet Electronics Products principally involve development and production of pet-related electronics products that are used in consumer applications. Revenue from pet electronics products was 9% (2016: 6%) of overall revenue of the Company for the fiscal year ended March 31, 2017, and the Company expects that the revenue from pet electronics products will continue to contribute a similar level of revenue for the next 12 months.
The “Others” segment is a residual, which principally includes the activities of (i) tooling and mould charges for scales and pet electronics products, and (ii) sales of scrap materials.
Pet Electronics Products principally involve development and production of pet-related electronics products that are used in consumer applications. Revenue from pet electronics products was 14% (2018: 16%) of overall revenue of the Company for the fiscal year ended March 31, 2019, and the Company expects that the revenue from pet electronics products will continue to contribute a similar level of revenue for the next 12 months.Rental and Management involve leasing out part of our factories and machinery to third parties. The management decided to identify and expand the rental and management segment during the fiscal year ended March 31, 2018 with the signing of an agreement with Fangda, a property developer in Shenzhen, to cooperate in reconstructing and redeveloping the Shenzhen factory to generate more rental revenue in the future. Revenue from rental and management was 19% (2018: 16%) of overall revenue of the Company for the fiscal year ended March 31, 2019. The Shenzhen factory was rented to a third party with a lease term from August 1, 2013 to August 1, 2019; however, the rent terminated as at January 31, 2019. The Company expects that the revenue from rental and management will decrease for the next 12 months. The following table sets forth the percentage of net sales for each of the product lines mentioned above for the fiscal years ended March 31, 2015, 2016,2017, 2018, and 2017:
| | Year ended March 31, | | Product Line | | 2015 | | | 2016 | | | 2017 | | Scales | | | 89 | % | | | 93 | % | | | 90 | % | Pet Electronics Products | | | 10 | % | | | 6 | % | | | 9 | % | Others | | | 1 | % | | | 1 | % | | | 1 | % | Total | | | 100 | % | | | 100 | % | | | 100 | % |
2019: | | Year ended March 31, | Product Line | | 2017 | | 2018 | | 2019 | Scales and Others | | | 83 | % | | | 68 | % | | | 67 | % | Pet Electronics Products | | | 9 | % | | | 16 | % | | | 14 | % | Rental and Management | | | 8 | % | | | 16 | % | | | 19 | % | Total | | | 100 | % | | | 100 | % | | | 100 | % |
The accounting policies of the Company’s reportable segments are the same as those described in the description of business and significant accounting policies. Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 19 | Business segment information (Continued) |
| (a) | (Continued)Summarized financial information by business segment as of March 31, 2017, 2018 and 2019 is as follows: |
Summarized financial information by business segment as of March 31, 2015, 2016 and 2017 is as follows:
| | Net sales | | | Operating income | | | Identifiable assets as of March 31 | | | Depreciation and amortization | | | Capital expenditure | | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | $ in thousands | | | | | | | | | | | | | | | | | | 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Scales & Others | | | 25,911 | | | | 414 | | | | 16,172 | | | | 968 | | | | 1,472 | | Pet Electronics Products | | | 3,033 | | | | 48 | | | | 1,893 | | | | 114 | | | | 173 | | Total operating segments | | | 28,944 | | | | 462 | | | | 18,065 | | | | 1,082 | | | | 1,645 | | Corporate | | | - | | | | - | | | | 7,712 | | | | 294 | | | | - | | Group | | | 28,944 | | | | 462 | | | | 25,777 | | | | 1,376 | | | | 1,645 | | | | | | | | | | | | | | | | | | | | | | | 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Scales & Others | | | 22,378 | | | | 3,094 | | | | 14,896 | | | | 981 | | | | 880 | | Pet Electronics Products | | | 1,514 | | | | 208 | | | | 1,002 | | | | 66 | | | | 59 | | Total operating segments | | | 23,892 | | | | 3,302 | | | | 15,898 | | | | 1,047 | | | | 939 | | Corporate | | | - | | | | - | | | | 7,123 | | | | 288 | | | | - | | Group | | | 23,892 | | | | 3,302 | | | | 23,021 | | | | 1,335 | | | | 939 | | | | | | | | | | | | | | | | | | | | | | |
2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Scales & Others | | | 15,814 | | | | 2,865 | | | | 12,782 | | | | 947 | | | | 262 | | Pet Electronics Products | | | 1,662 | | | | 301 | | | | 1,343 | | | | 99 | | | | 27 | | Total operating segments | | | 17,476 | | | | 3,166 | | | | 14,125 | | | | 1,046 | | | | 289 | | Corporate | | | - | | | | - | | | | 6,841 | | | | 271 | | | | - | | Group | | | 17,476 | | | | 3,166 | | | | 20,966 | | | | 1,317 | | | | 289 | | | | | | | | | | | | | | | | | | | | | | |
| | Net sales | | Cost of Revenue | | Operating income / (loss) | | Identifiable assets as of March 31 | | Depreciation and amortization | | Capital expenditure | | | $ in thousands | | $ in thousands | | $ in thousands | | $ in thousands | | $ in thousands | | $ in thousands | 2017 | | | | | | | | | | | | | | | | | | | | | | | | | | Scales and Others | | | 15,814 | | | | 9,428 | | | | 2,916 | | | | 10,355 | | | | 515 | | | | 262 | | Pet Electronics Products | | | 1,662 | | | | 991 | | | | 307 | | | | 1,089 | | | | 54 | | | | 27 | | Rental and Management | | | 1,476 | | | | 855 | | | | (57 | ) | | | 5,465 | | | | 748 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Total operating segments | | | 18,952 | | | | 11,274 | | | | 3,166 | | | | 16,909 | | | | 1,317 | | | | 289 | | Corporate | | | — | | | | — | | | | — | | | | 4,057 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Group | | | 18,952 | | | | 11,274 | | | | 3,166 | | | | 20,966 | | | | 1,317 | | | | 289 | |
| | | | | | | | | | | | | 2018 | | | | | | | | | | | | | | | | | | | | | | | | | | Scales and Others | | | 7,862 | | | | 4,809 | | | | 208 | | | | 8,211 | | | | 479 | | | | 79 | | Pet Electronics Products | | | 1,861 | | | | 1,139 | | | | 49 | | | | 1,944 | | | | 113 | | | | 19 | | Rental and Management | | | 1,800 | | | | 1,010 | | | | (19 | ) | | | 5,622 | | | | 784 | | | | 266 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total operating segments | | | 11,523 | | | | 6,958 | | | | 238 | | | | 15,777 | | | | 1,376 | | | | 364 | | Corporate | | | — | | | | — | | | | — | | | | 8,978 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Group | | | 11,523 | | | | 6,958 | | | | 238 | | | | 24,755 | | | | 1,376 | | | | 364 | |
| | | | | | | | | | | | | 2019 | | | | | | | | | | | | | | | | | | | | | | | | | | Scales and Others | | | 6,686 | | | | 4,340 | | | | (74 | ) | | | 8,244 | | | | 540 | | | | 236 | | Pet Electronics Products | | | 1,410 | | | | 915 | | | | (16 | ) | | | 1,739 | | | | 115 | | | | 67 | | Rental and Management | | | 1,896 | | | | 780 | | | | (450 | ) | | | 4,716 | | | | 479 | | | | 289 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total operating segments | | | 9,992 | | | | 6,035 | | | | (540 | ) | | | 14,699 | | | | 1,134 | | | | 592 | | Corporate | | | — | | | | — | | | | — | | | | 7,787 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Group | | | 9,992 | | | | 6,035 | | | | (540 | ) | | | 22,486 | | | | 1,134 | | | | 592 | |
Operating income by segment equals total operating revenues less expenses directly attributable to the generation of 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, investment in life insurance contracts, intangible assets and other identifiable assets not related specifically to individual segments. Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 19 | Business segment information (Continued) |
| (b) | The Company primarily operates in Hong Kong and the PRC. The manufacture of components and their assembly into finished products and research and development are carried out in the PRC. As the operations are integrated, it is not practicable to distinguish the net income derived among the activities in Hong Kong and the PRC. |
Total property,Property, plant and equipment, net by geographical areas are as follows:
| | March 31, | | | March 31, | | | | 2016 | | | 2017 | | | | $ in thousands | | | $ in thousands | | Hong Kong | | | 1,159 | | | | 1,126 | | The PRC | | | 10,558 | | | | 9,168 | | | | | | | | | | | Total property, plant and equipment | | | 11,717 | | | | 10,294 | | | | | | | | | | |
| | March 31, | | March 31, | | | 2018 | | 2019 | | | | $ in thousands | | | | $ in thousands | | Hong Kong | | | 1,092 | | | | 845 | | The PRC | | | 9,342 | | | | 8,746 | | | | | | | | | | | Property, plant and equipment, net | | | 10,434 | | | | 9,591 | | | | | | | | | | |
| (c) | The following is a summary of net export salesrevenue by geographical areas which are defined by the final shipment destination, constituting 10% or more of total salesrevenue of the Company for the years ended March 31, 2015, 20162017, 2018 and 2017:2019: |
| | Year ended March 31, | | | 2017 | | 2018 | | 2019 | | | $ in thousands | | % | | $ in thousands | | % | | $ in thousands | | % | | | | | | | | | | | | | | Germany | | | 2,797 | | | | 15 | | | | 3,621 | | | | 31 | | | | 3,760 | | | | 38 | | United States | | | 10,356 | | | | 55 | | | | 4,807 | | | | 42 | | | | 3,184 | | | | 32 | | The PRC | | | 1,590 | | | | 8 | | | | 2,054 | | | | 18 | | | | 2,265 | | | | 23 | | Netherlands | | | 2,299 | | | | 12 | | | | 87 | | | | 1 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 17,042 | | | | 90 | | | | 10,569 | | | | 92 | | | | 9,209 | | | | 93 | |
| | Year ended March 31, | | | | 2015 | | | 2016 | | | 2017 | | | | $ in thousands | | | % | | | $ in thousands | | | % | | | $ in thousands | | | % | | | | | | | | | | | | | | | | | | | | | United States | | | 21,271 | | | | 73 | | | | 14,062 | | | | 59 | | | | 10,356 | | | | 59 | | Germany | | | 6,210 | | | | 22 | | | | 4,568 | | | | 19 | | | | 2,797 | | | | 16 | | Netherlands | | | 0 | | | | 0 | | | | 1,901 | | | | 8 | | | | 2,299 | | | | 13 | | | | | | | | | | | | | | | | | | | | | | | | | | | 27,481 | | | | 95 | | | | 20,531 | | | | 86 | | | | 15,452 | | | | 88 | | | | | | | | | | | | | | | | | | | | | | | |
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars)
| 19 | Business segment information (Continued) |
| (d) | The following is a summary of net export salesrevenue by customers constituting 10% or more of total salesrevenue of the Company for the years ended March 31, 2015, 20162017, 2018 and 2017:2019: |
| | | | Year Ended March 31, | | | | | 2017 | | 2018 | | 2019 | Customers | | Segment | | $ in thousands | | % | | $ in thousands | | % | | $ in thousands | | % | | | | | | | | | | | | | | | | Customer A | | Scales | | | 2,729 | | | | 14 | | | | 3,579 | | | | 31 | | | | 3,715 | | | | 37 | | Customer C | | Scales | | | 2,435 | | | | 13 | | | | 1,599 | | | | 14 | | | | 1,225 | | | | 12 | | Customer B | | Scales and Pet Electronics Products | | | 1,563 | | | | 8 | | | | 1,662 | | | | 14 | | | | 1,027 | | | | 10 | | Customer E | | Rental and Management | | | 1,061 | | | | 6 | | | | 1,050 | | | | 9 | | | | 996 | | | | 10 | | Customer D | | Scales | | | 8,472 | | | | 45 | | | | 1,115 | | | | 10 | | | | 21 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 16,260 | | | | 86 | | | | 9,005 | | | | 78 | | | | 6,984 | | | | 69 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 20 | Long-term loan and long-term deposit received |
In November 2017, the Company signed an agreement with a property developer in Shenzhen -- Fangda to cooperate in reconstructing and redeveloping the Shenzhen factory. Fangda is a wholly owned subsidiary of Fangda Group Co., Ltd. (“Fangda Group”), which is listed on the Shenzhen Stock Exchange. During the year ended March 31, 2018, the Company received approximately $3,199,000 from Fangda as a deposit according to the agreement. The Company will return this deposit in full (without interest) to Fangda when the redeveloped property is completed and the Company’s share of the redeveloped property is transferred to the Company, which is expected to take place in March 2023. The Company has treated this deposit as a long-term loan and discounted it up to March 2023. This liability is presented as a long-term loan and deposit received in our consolidated balance sheet as of March 31, 2018 and 2019.
| | | | Year Ended March 31, | | | | | | 2015 | | | 2016 | | | 2017 | | Customers | | Segment | | $ in thousands | | | % | | | $ in thousands | | | % | | | $ in thousands | | | % | | | | | | | | | | | | | | | | | | | | | | | Fitbit, Inc. | | Scales | | | 10,593 | | | | 37 | | | | 14,145 | | | | 59 | | | | 8.472 | | | | 48 | | Kern + Sohn GMBH | | Scales | | | 5,424 | | | | 19 | | | | 3,874 | | | | 16 | | | | 2,729 | | | | 16 | | Pitney Bowes Inc. | | Scales | | | 2,476 | | | | 8 | | | | 1,969 | | | | 8 | | | | 2,435 | | | | 14 | | Sunbeam Products, Inc. | | Scales & Pet Electronics Products | | | 6,879 | | | | 24 | | | | 1,738 | | | | 7 | | | | 1,563 | | | | 9 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 25,372 | | | | 88 | | | | 21,726 | | | | 90 | | | | 15,199 | | | | 87 | | | | | | | | | | | | | | | | | | | | | | | | | |
Bonso Electronics International Inc. Notes to Consolidated Financial Statements (Expressed in United States Dollars) Other income, net consisted of the following: | | Year Ended March 31, | | | 2017 | | 2018 | | 2019 | | | $ in thousands | | $ in thousands | | $ in thousands | | | | | | | | Gain on disposal of property, plant and equipment | | | — | | | | — | | | | 5 | | Gain on disposal of intangible assets | | | 79 | | | | — | | | | — | | Gain from deregistration of subsidiaries | | | 22 | | | | — | | | | — | | Other gains | | | 453 | | | | 342 | | | | 103 | | | | | | | | | | | | | | | Other income, net | | | 554 | | | | 342 | | | | 108 | |
| 22 | Non-operating income / (expenses), net |
Non-operating income / (expenses), net comprises the following: | | Year Ended March 31, | | | 2017 | | 2018 | | 2019 | | | $ in thousands | | $ in thousands | | $ in thousands | | | | | | | | Interest income | | | 8 | | | | 191 | | | | 237 | | Interest expense | | | (37 | ) | | | (72 | ) | | | (139 | ) | Foreign exchange gain / (loss) | | | 258 | | | | (353 | ) | | | (21 | ) | | | | | | | | | | | | | | Non-operating income / (expenses), net | | | 229 | | | | (234 | ) | | | 77 | | | | | | | | | | | | | | |
From April 1, 20172019 to July 14, 2017,June 30, 2019, the Company repurchased an additional 45,92417,404 shares of its common stock for an aggregate purchase price of approximately $114,000.$47,000.
In July 2017, the Company signed a letter of intent with Shenzhen Fangda Property Development Company Limited (hereafter "Fangda") to cooperate in reconstructing the existing Shenzhen factory of the Company into a high-rise industrial and commercial complex. Under the terms of the agreement, Fangda will be responsible for applying for necessary government approvals and for financing and handling the redevelopment project. Both companies will share the redeveloped property after the reconstruction. The companies expect to reach a definitive agreement within the next three months. If an agreement is reached, the redevelopment will start in mid-2019 and the reconstruction is expected to be finished by 2021.
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