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.
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 and the impairment of long-lived assets. Actual results could differ from those estimates.
The Company had operating income of approximately $295,000, $462,000 and $3,302,000 in the fiscal years ended March 31, 2014, 2015 and 2016 respectively. Notwithstanding the negative working capital as of March 31, 2015 and 2016, the accompanying consolidated financial statements have been prepared on a going concern basis. With the unutilized banking facilities of approximately $4,446,000 (refer to note 7) available as of March, 31, 2016 and the increase of gross profit percentage from 20.2% during the fiscal year ended March 31, 2015 to 31.0% during the fiscal year ended March 31, 2016, 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, 2015 and 2016.
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
1
|
Description of business and significant accounting policies (Continued)
|
Inventories are stated at the lower of cost
,
as determined on a first-in, first-out basis, or market. Costs of inventories include purchase and related costs incurred in bringing the products to their present location and condition. Market value is determined by reference to the selling price after the balance sheet date or to management estimates based on prevailing market conditions. The Company routinely reviews its inventories for their salability and for indications of obsolescence to determine if inventory carrying values are higher than market value. Some of the significant factors the Company considers in estimating the market value of its inventories include the likelihood of changes in market and customer demand and expected changes in market prices for its inventories.
Trade receivables are recorded at the invoiced amount, net of allowances for doubtful accounts and sales returns. 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 years ended March 31, 2015 had 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 the period of a maximum of 30 years, in accordance with the business licenses of 30 years.
(g)
|
Property, plant and equipment
|
|
(i)
|
Property, plant and equipment are stated at cost less accumulated depreciation. Leasehold land and buildings are depreciated on a straight-line basis over 15 to 50 years, representing the shorter of the remaining term of the lease or the expected useful life to the 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 to 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, the Company has transferred all its production process to the factory in Xinxing, PRC, and the factory in Shenzhen was leased out to a third party. As a result, the Company performed an assessment of the value of the land, buildings and intangible assets of the factories in Shenzhen and Xinxing, PRC, and no provision for impairment was made by the Company (2015: $nil; 2014: $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.
No revenue is recognized unless there is persuasive evidence of an arrangement, the price to the buyer is fixed or determinable, delivery has occurred and collectibility of the sales price is reasonably assured. Revenue is recognized when title and risk of loss are transferred to customers, which is generally the point at which products are leaving the ports of Hong Kong, or Shenzhen or Nansha (Guangzhou) as designated by our customers. Shipping costs billed to the Company’s customers are included within revenue. Associated costs are classified as part of cost of sales.
The Company provides to certain customers an additional one to two percent of the quantity of certain products ordered in lieu of a warranty, which is recognized as cost of sales when these products are shipped to customers from the Company’s facilities. In addition, certain products sold by the Company are subject to a limited product quality warranty. The Company accrues for estimated incurred but unidentified quality issues based upon historical activity and known quality issues if a loss is probable and can be reasonably estimated. During the fiscal year ended March 31, 2016, the Company recorded $nil for such accrual (2015: $nil, 2014: $nil). The standard limited warranty period is one to three years. Quality returns, refunds, rebates and discounts are recorded net of sales at the time of sale and estimated based on past history. All sales are based upon firm orders with fixed terms and conditions, which generally cannot be modified. Historically, the Company has not experienced material differences between its estimated amounts of quality returns, refunds, rebates and discounts and the actual results. In all contracts, there is no price protection or similar privilege in relation to the sale of goods.
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 in the financial period in which they are incurred.
Advertising costs are expensed as incurred and are included within selling expenses. Advertising costs were approximately $16,000, $9,000 and $12,000 for the fiscal years ended March 31, 2014, 2015 and 2016, respectively.
(m)
|
Foreign currency translations
|
|
(i)
|
The Company’s functional currency is the United States dollar. The financial statements of foreign subsidiaries where the United States dollar is the functional currency and which have transactions denominated in non-United States dollar currencies are translated into United States dollars at the exchange rates existing on that date. The translation of local currencies into United States dollars creates transaction adjustments which are included in net income / (loss). 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 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, 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.
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
|
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 present 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 is currently evaluating the impact this Update will have on its consolidated financial statements.
In June 2014, the FASB issued ASU 2014-12,
“Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”
(“ASU 2014-12”). The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period, with early application permitted. Companies may use either a prospective or a retrospective approach to adopt this ASU and the Company is currently evaluating which transition approach to use. The adoption of ASU 2014-12 is not expected to have a material impact on the Company’s consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15, “
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”
, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact this Update will have on its consolidated financial statements.
In January 2015, the FASB issued ASU 2015-01,
“Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items”
(”ASU 2015-01”). The amendments in ASU 2015-01 eliminate from U.S. GAAP the concept of extraordinary items. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period, with early application permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. Companies may use either a prospective or a retrospective approach to adopt this ASU and the Company is currently evaluating which transition approach to use. The adoption of ASU 2015-01 is not expected to have a material impact on the Company’s consolidated financial statements.
In February 2015, the FASB issued ASU 2015-02,
“Consolidation (Topic 810): Amendments to the Consolidation Analysis”
(“ASU 2015-02”). The amendments in ASU 2015-02 change the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The amendments in this ASU are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. A reporting entity may apply the amendments in this ASU using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A reporting entity also may apply the amendments retrospectively. The adoption of ASU 2015-02 is not expected to have a material impact 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)
|
(p)
|
Recent accounting pronouncements (Continued)
|
In April 2015, the FASB issued ASU 2015-03,
“Simplifying the Presentation of Debt Issuance Costs,”
(“ASU 2015-03”) which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. The guidance is effective for fiscal years beginning after December 15, 2015, with early adoption permitted. The adoption of ASU 2015-03 is not expected to have a material impact on the Company’s consolidated financial statements.
In April 2015, the FASB issued ASU 2015-05, “
Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement
” (“ASU 2015-05”) (an update to Subtopic 350-40, Intangibles - Goodwill and Other - Internal-Use Software), which provides guidance on accounting for cloud computing fees. If a cloud computing arrangement includes a software license, then the customer should account for the license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the arrangement should be accounted for as a service contract. This ASU is effective for arrangements entered into, or materially modified, in interim and annual periods beginning after December 15, 2015. Retrospective application is permitted but not required. The adoption of ASU 2015-05 is not expected to have a material impact on the Company’s consolidated financial statements.
In May 2015, the FASB issued ASU 2015-07,
“Fair Value Measurement: Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)”
(“ASU 2015-07”), which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The ASU also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. This ASU is effective for arrangements entered into, or materially modified, in interim and annual periods beginning after December 15, 2015. Retrospective application is permitted but not required. The adoption of ASU 2015-07 is not expected to have a material impact on the Company’s consolidated financial statements.
In July 2015, the FASB issued ASU 2015-11, "
Inventory (Topic 330): Simplifying the Measurement of Inventory
" ("ASU 2015-11"), which states an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This amendment applies to all inventory that is measured using the average cost or first-in first-out (FIFO) methods. This supersedes prior guidance which allowed entities to measure inventory at the lower of cost or market, where market could be replacement cost, net realizable value or net realizable value less an approximately normal profit margin. This ASU is effective for interim and annual periods beginning after December 15, 2016. The amendments should be applied prospectively and earlier application is permitted. This ASU is not expected to have a material impact on the Company’s consolidated financial statements.
In November 2015, the FASB issued ASU 2015-17, "
Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes
" ("ASU 2015-17"). The amendments in this update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. 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 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 (Subtopic 842)
" ("ASU 2016-02"): This Update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. For public business entities, this Update is effective for fiscal years beginning after December 15, 2018, 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 March 2016, the FASB issued ASU 2016-05, "
Derivatives and Hedging: Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships
" ("ASU 2016-05"), which states that a change in counterparty to a derivative instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge account criteria continue to be met. This ASU is effective for interim and annual periods beginning after December 15, 2016. The amendments should be applied on either a prospective basis or a modified retrospective basis and earlier application is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, "
Compensation
–
Stock Compensation: Improvements to Employee Share-Based Payment Accounting
" ("ASU 2016-09"), which provides guidance on several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification on the statement of cash flows. Most notably, the Company will be required to recognize all excess tax benefits and shortfalls as income tax expense or benefit in the statement of earnings within the reporting period in which they occur. This ASU is effective for interim and annual periods beginning after December 15, 2016 and early addition is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, "
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 addition is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
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 $1,415,000 as of March 31, 2015 and 2016. The Company believed that the recoverability was doubtful, and continued to include this amount in allowance for doubtful accounts as of March 31, 2015 and 2016.
Most of the Company’s trade receivables are generally unsecured.
The components of inventories as of March 31, 2015 and 2016 are as follows:
|
|
2015
|
|
|
2016
|
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
Raw materials
|
|
|
1,978
|
|
|
|
684
|
|
Work in progress
|
|
|
676
|
|
|
|
430
|
|
Finished goods
|
|
|
467
|
|
|
|
709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,121
|
|
|
|
1,823
|
|
During the fiscal years ended March 31, 2014, 2015 and 2016, based upon material composition and expected usage, provision for inventories of approximately $874,000, $687,000 and $30,000, 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)
4
|
Property, plant and equipment, net
|
During the fiscal years ended March 31, 2014, 2015 and 2016, depreciation expenses charged to the consolidated statements of operations amounted to approximately $1,086
,000,
$1,082,000 and $1,047,000 respectively. As at March 31, 2015 and 2016, fully depreciated assets that were still in use by the Company amounted to $9,550,000 and $9,195,000, 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 were required for the fiscal years ended March 31, 2015 and 2016
.
5
|
Interests in subsidiaries
|
Particulars of principal subsidiaries as of March 31, 2015 and 2016 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
|
|
|
|
|
|
|
2015
|
|
|
2016
|
|
|
Bonso Electronics Limited *
(“BEL”)
|
Hong Kong,
limited liability company
|
|
|
HK5,000,000 (US$641,026)
|
|
|
|
100%
|
|
|
|
100%
|
|
Investment holding, providing management and administrative support to the Group companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonso Investment Limited
(“BIL”)
|
Hong Kong,
limited liability company
|
|
|
HK3,000,000 (US$384,615)
|
|
|
|
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
|
|
|
HK1,000,000 (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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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
,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
Cost
|
|
|
6,939
|
|
|
|
6,159
|
|
Less: accumulated amortization
|
|
|
(2,820
|
)
|
|
|
(2,867
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
4,119
|
|
|
|
3,292
|
|
The components of intangible assets are as follows:
|
|
March 31
,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
Land use right of factory land in Shenzhen, Guangdong, PRC
|
|
|
1,880
|
|
|
|
1,599
|
|
Land use right of factory land in Xinxing, Guangdong, PRC
|
|
|
2,239
|
|
|
|
1,652
|
|
Golf club membership
|
|
|
-
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,119
|
|
|
|
3,292
|
|
Amortization expense in relation to other intangible assets was approximately $289,000, $294,000 and $288,000 for each of the fiscal years ended March 31, 2014, 2015 and 2016, respectively.
As of March 31, 2016, future minimum amortization expenses in respect of other intangible assets are as follows:
Year ending March 31,
|
|
$ in thousands
|
|
|
|
|
|
2017
|
|
|
284
|
|
2018
|
|
|
284
|
|
2019
|
|
|
284
|
|
2020
|
|
|
284
|
|
2021
|
|
|
284
|
|
Thereafter
|
|
|
1,872
|
|
|
|
|
|
|
Total
|
|
|
3,292
|
|
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
As of March 31, 2016, the Company had general banking facilities for bank overdrafts, letters of credit, notes payable, factoring and term loans. The facilities are interchangeable with total amounts available of $6,189,000 (2015: $9,438,000). 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, 2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
Interest
|
|
Repayment
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
rate
|
|
terms
|
Import and export facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined limit
|
|
|
2,564
|
|
|
|
2,564
|
|
|
|
1,830
|
|
|
|
1,237
|
|
|
|
734
|
|
|
|
1,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Including sub-limit of:
|
Notes payable
|
|
|
2,308
|
|
|
|
2,308
|
|
|
|
1,830
|
|
|
|
1,237
|
|
|
|
478
|
|
|
|
1,071
|
|
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
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,400
|
|
|
|
2,400
|
|
HIBOR* +1.5%
|
|
Repayable in 60 days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Export Documentary Credits
|
|
|
641
|
|
|
|
641
|
|
|
|
-
|
|
|
|
-
|
|
|
|
641
|
|
|
|
641
|
|
|
|
|
Short Term
Loans
|
|
|
3,547
|
|
|
|
1,923
|
|
|
|
1,026
|
|
|
|
-
|
|
|
|
2,521
|
|
|
|
1,923
|
|
(Note A)
|
|
Revolving loan repayable in 30 days
|
Long Term Loans
(1)
|
|
|
2,686
|
|
|
|
1,061
|
|
|
|
2,350
|
|
|
|
506
|
|
|
|
336
|
|
|
|
555
|
|
(Note A)
|
|
Term loans repayable
monthly over 3 years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,438
|
|
|
|
6,189
|
|
|
|
5,206
|
|
|
|
1,743
|
|
|
|
4,232
|
|
|
|
4,446
|
|
|
|
|
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.
(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 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.
* 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 (2015: $25,738,000) was made available to the Company for transactions of financial instruments including forward contracts, and approximately $1,000,000 (2015: $2,000,000) of the facility was utilized.
One of the properties of the Company located in Hong Kong with a net book value of approximately $977,000, the rental assignment over such property, and the rights, interests and benefits of a life insurance contract with a book value of approximately $140,000 are arranged as securities to the banks for the banking facilities arrangement.
The Prime Rate, HIBOR and
Peoples' Bank of China loan benchmark interest rate were 5.00%, 0.89% and 4.75% per annum, respectively, as of March 31, 2016. The Prime Rate is determined by the Hong Kong Bankers Association and is subject to revision from time to time. Interest rates are subject to change if the Company defaults on the amount due under the facility or draws in excess of the facility amounts, or at the discretion of the banks.
The weighted average interest rates of borrowings of the Company are as follows:
|
|
During the fiscal year ended March 31
,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
|
|
|
|
|
Bank overdrafts
|
|
|
6.00
|
%
|
|
|
6.00
|
%
|
Notes payable
|
|
|
2.92
|
%
|
|
|
2.94
|
%
|
Term Loan in Hong Kong
|
|
|
2.47
|
%
|
|
|
2.50
|
%
|
Term Loan in PRC
|
|
|
6.77
|
%
|
|
|
6.77
|
%
|
Factoring
|
|
|
1.74
|
%
|
|
|
1.74
|
%
|
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.
|
Hong Kong Tax
The subsidiaries operating in Hong Kong are subject to the Hong Kong profits tax rate of 16.5% (2015 and 2014: 16.5%). BIL and BEL have no assessable profits for the year ended March 31, 2016. BATL has assessable profits for the year ended March 31, 2016
.
Therefore, current year provision for taxation has been made for the year ended March 31, 2016 (2015: $nil).
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 later believed 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 believed 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.
PRC Tax
All subsidiaries registered in the PRC are subject to a tax rate of 25% (2015 and 2014: 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 before income taxes by geographical location is analyzed as follows:
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
Hong Kong
|
|
|
(1,495
|
)
|
|
|
(55
|
)
|
|
|
3,933
|
|
PRC
|
|
|
1,337
|
|
|
|
148
|
|
|
|
(167
|
)
|
Others
|
|
|
(63
|
)
|
|
|
(20
|
)
|
|
|
(585
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(221
|
)
|
|
|
73
|
|
|
|
3,181
|
|
Others mainly include the (loss) / income from BVI.
(c)
|
Income tax credit / (expense) comprises the following:
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax expense
|
|
|
-
|
|
|
|
(13
|
)
|
|
|
(310
|
)
|
Income tax credit
|
|
|
-
|
|
|
|
1,050
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax credit / (expense)
|
|
|
-
|
|
|
|
1,037
|
|
|
|
(310
|
)
|
The components of the income tax credit / (expense) by geographical location are as follows:
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
Hong Kong
|
|
|
-
|
|
|
|
1,050
|
|
|
|
(310
|
)
|
PRC
|
|
|
-
|
|
|
|
(13
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
-
|
|
|
|
1,037
|
|
|
|
(310
|
)
|
At the end of the accounting period, the income tax liabilities are as follows:
|
|
2015
|
|
|
2016
|
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
Non-current
|
|
|
-
|
|
|
|
-
|
|
Current
|
|
|
7
|
|
|
|
317
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7
|
|
|
|
317
|
|
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
(d)
|
Deferred tax assets comprise the following:
|
|
|
2015
|
|
|
2016
|
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
Tax loss carry forwards
|
|
|
4,459
|
|
|
|
4,459
|
|
Less: Valuation allowance
|
|
|
(4,459
|
)
|
|
|
(4,459
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
As of March 31, 2015 and 2016, the Company had accumulated tax losses amounting to approximately $25,327,000 and $25,327,000 (the tax effect thereon is $4,459,000 and $4,459,000), respectively, subject to the final agreement by the relevant tax authorities, which may be carried forward and applied to reduce future taxable income which is earned in or derived from Hong Kong and other countries. Realization of deferred tax assets associated with tax loss carry forwards is dependent upon generating sufficient taxable income prior to their expiration. A valuation allowance is established against such tax losses when management believes it is more likely than not that a portion may not be utilized. As of March 31, 2016, the Company’s accumulated tax losses of $1,593,000 will expire in 2018.
(e)
|
Changes in valuation allowance are as follows:
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 1
|
|
|
700
|
|
|
|
853
|
|
|
|
4,459
|
|
Charged to income tax expense
|
|
|
153
|
|
|
|
3,606
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31
|
|
|
853
|
|
|
|
4,459
|
|
|
|
4,459
|
|
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
(f)
|
The actual income tax credit / (expense) attributable to earnings for the fiscal years ended March 31, 2014, 2015 and 2016 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:
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) / income before income taxes
|
|
|
(221
|
)
|
|
|
73
|
|
|
|
3,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit / (expense) on pretax income at statutory rate
|
|
|
36
|
|
|
|
(12
|
)
|
|
|
(525
|
)
|
Effect of different tax rates of subsidiaries operating in other jurisdictions
|
|
|
(28
|
)
|
|
|
(233
|
)
|
|
|
(95
|
)
|
Profit not subject to income tax
|
|
|
1,129
|
|
|
|
542
|
|
|
|
387
|
|
Expenses not deductible for income tax purposes
|
|
|
(1,137
|
)
|
|
|
(336
|
)
|
|
|
(255
|
)
|
Increase in valuation allowance
|
|
|
153
|
|
|
|
3,606
|
|
|
|
-
|
|
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
|
)
|
|
|
-
|
|
Utilization of tax losses not previously recognized / (tax losses not yet recognized)
|
|
|
(153
|
)
|
|
|
(3,580
|
)
|
|
|
178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax (expense) / credit
|
|
|
-
|
|
|
|
1,037
|
|
|
|
(310
|
)
|
The statutory rate of 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, 2016 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, 2016, the Company had no accrued penalties related to uncertain tax positions (2015: $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 forward contracts with a bank, and the bank will pay the Company if the Chinese Yuan appreciates against the USD. If the Chinese Yuan depreciates against the USD, the Company will need to pay the bank, but will be able to buy 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 (2015: $132,000) for the change in valuation, resulting in a liability of approximately $160,000 (2015: $196,000).
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 has been redeemed during the fiscal year ended March 31, 2016.
During the fiscal year ended March 31, 2016, the Company purchased listed shares in Hong Kong for approximately $134,000. A revaluation gain of approximately $10,000 was recorded.
At the end of the accounting period, the fair value of the following assets / (liabilities) were as follows:
|
|
March 31, 2015
|
|
|
March 31, 2016
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Forward contracts (1)
|
|
|
-
|
|
|
|
(196
|
)
|
|
|
-
|
|
|
|
(196
|
)
|
|
|
-
|
|
|
|
(160
|
)
|
|
|
-
|
|
|
|
(160
|
)
|
Investment product (2)
|
|
|
-
|
|
|
|
-
|
|
|
|
391
|
|
|
|
391
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Equity investment (3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
144
|
|
|
|
-
|
|
|
|
-
|
|
|
|
144
|
|
(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, 2016 and March 31, 2015, with a carrying amount of approximately $140,000 and $136,000, 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, 2016, we recorded a gain of approximately $4,000 for the change in valuation (2015: $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 of approximately $123,000 for two motor vehicles. During the year ended March 31, 2015, the Company did not enter into additional capital lease obligations. During the year ended March 31, 2016, the Company entered into additional capital lease obligations amounting to approximately $116,000 for one motor vehicle.
Future minimum payments under capital leases as of March 31, 2016 with an initial term of more than one year are as follows:
Future minimum payments under capital leases for the
years ended March 31,
|
|
Principal repayment
|
|
|
Interest payment
|
|
|
Total obligations
|
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
49
|
|
|
|
5
|
|
|
|
54
|
|
2018
|
|
|
44
|
|
|
|
4
|
|
|
|
48
|
|
2019
|
|
|
28
|
|
|
|
2
|
|
|
|
30
|
|
2020
|
|
|
27
|
|
|
|
1
|
|
|
|
28
|
|
2021
|
|
|
5
|
|
|
|
0
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153
|
|
|
|
12
|
|
|
|
165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
As of March 31, 2016, the Company leases a factory in Shenzhen, two commercial units in Beijing and part of production facilities in Xinxing under rental agreements to third parties. The Company will need to pay a cancellation fee of approximately $71,000 if the Company decides to terminate all the rental agreements before their expiry.
The Shenzhen factory was rented out to a third party from August 1, 2013 to August 1, 2019. Part of the production facilities in Xinxing were rented to various third parties up to December 31, 2020. The expected future rental payments to be received are as follows:
|
|
|
|
Year ending March 31,
|
|
$ in thousands
|
|
|
|
|
|
2017
|
|
|
1,318
|
|
2018
|
|
|
1,312
|
|
2019
|
|
|
1,312
|
|
2020
|
|
|
437
|
|
|
|
|
|
|
|
|
4,379
|
|
|
|
|
|
|
As of March 31, 2016, the future minimum lease commitment payables in respect of non-cancellable operating leases for two offices in Shenzhen, a staff quarter in Shenzhen and a staff quarter in Xinxing are as follows:
|
|
|
|
Year ending March 31,
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
117
|
|
2018
|
|
|
100
|
|
2019
|
|
|
18
|
|
|
|
|
|
|
|
|
235
|
|
|
|
|
|
|
Rental expenses for all operating leases of two office premises in Shenzhen, a staff quarter in Shenzhen and a staff quarter in Xinxing amounted to approximately $51,000
,
$100,000 and $119,000 for the fiscal years ended March 31, 2014, 2015 and 2016, 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
,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
|
|
|
|
|
|
|
Construction in Xinxing, Guangdong, PRC
|
|
|
301
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2016, the Company entered into contractor agreements on leasehold improvements on the manufacturing facility in Xinxing, the PRC for total consideration of $629,000. As of March 31, 2016, $581,000 has been paid, and the remaining balance of $48,000 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 per year 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. The employment agreement was renewed automatically, and will expire on March 31, 2017, unless automatically renewed.
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. 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 404,208 shares of its common stock, including 73,472 ($99,000) shares that were repurchased during the fiscal year ended March 31, 2016. No shares were repurchased during the fiscal years ended March 31, 2014 and 2015. 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, limitation and restrictions as the Board of Directors shall fix and as have not been fixed in the Company’s Memorandum of Association. The Company has not issued any shares of preferred stock as of March 31, 2016.
No dividends were declared by the Company for each of the fiscal years ended March 31, 2014, 2015 and 2016
,
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 Director
’
s Stock Option Plan was 600,000. The exercise price of all options granted under the 1996 Non-Employee Directors’ Stock Option Plan shall be one hundred percent of the fair market value per share of the common shares on the date of grant. The maximum term of options granted under the 1996 Non-Employee Directors’ Stock Option Plan is 10 years. No stock option may be exercised during the first six months of its term except for certain conditions provided in the 1996 Non-Employee Directors’ Stock Option Plan. The right to acquire the common shares is not assignable except for under certain conditions stipulated in the 1996 Non-Employee Directors’ Stock Option Plan.
In April 2003, the Company issued options to certain directors and non-employee directors of the Company to purchase an aggregate of 372,500 shares of common stock of the Company at an exercise price of $1.61. The 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 continue in full force and effect pursuant to their terms of grant.
During the fiscal years ended March 31, 2014, 2015 and 2016, 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)
|
(b)
|
2004 Stock Bonus Plan
|
On September 7, 2004, the Company’s stockholders adopted the 2004 Stock Bonus Plan (the “Stock Bonus Plan”) which authorizes the issuance of up to five hundred thousand (500,000) shares of the Company’s common stock in the form of stock bonus.
The purpose of this Stock Bonus Plan is to (i) induce key employees to remain in the employment of the Company or of any subsidiary of the Company; (ii) encourage such employees to secure or increase their stock ownership in the Company; and (iii) reward employees, non-employee directors, advisors and consultants for services rendered or to be rendered to or for the benefit of the Company or any of its subsidiaries. The Company believes that the Stock Bonus Plan will promote continuity of management and increase incentive and personal interest in the welfare of the Company.
The Stock Bonus Plan shall be administered by a committee appointed by the Board of Directors which consists of at least two but not more than three members of the Board, one of whom shall be a non-employee of the Company. The existing Committee members are Mr. Anthony So and Mr. Woo Ping Fok. The Committee has the authority, in its sole discretion: (i) to determine the parties to receive bonus stock, the times when they shall receive such awards, the number of shares to be issued and the time, terms and conditions of the issuance of any such shares; (ii) to construe and interpret the terms of the Stock Bonus Plan; (iii) to establish, amend and rescind rules and regulations for the administration of the Stock Bonus Plan; and (iv) to make all other determinations necessary or advisable for administering the Stock Bonus Plan.
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 Plan. At the Annual meeting of stockholders 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. 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.
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, 2016. 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 plans 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, March 31, 2014
|
|
|
70,000
|
|
|
$
|
5.47
|
|
Expired
|
|
|
(40,000
|
)
|
|
$
|
6.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2015
|
|
|
30,000
|
|
|
$
|
4,50
|
|
Expired
|
|
|
(30,000
|
)
|
|
$
|
4.50
|
|
Granted
|
|
|
85
0,000
|
|
|
$
|
1.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2016
|
|
|
85
0,000
|
|
|
$
|
1.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e)
|
The following table summarizes information about all stock options of the Company outstanding as at March 31, 2016:
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Number
|
|
|
average
|
|
|
Exercisable
|
|
Weighted average
|
|
|
outstanding at
|
|
|
remaining life
|
|
|
shares at
|
|
exercise price
|
|
|
March 31, 2016
|
|
|
(years)
|
|
|
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.50
|
|
|
|
850,000
|
|
|
|
6.5
|
|
|
|
850,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The intrinsic value of options outstanding and exercisable was $nil on March 31, 2016. 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, 2016.
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 is no vesting periods. The fair value of the option 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
|
|
|
|
|
|
Risk-free interest rate
(1)
|
|
1.63% to 2.36%
|
|
Expected life (years)
(2)
|
|
4.71 to 9.71
|
|
Expected dividend yield
(3)
|
|
|
0
|
%
|
Volatility
(4)
|
|
|
73.63
|
%
|
Fair value of options at grant date per share
|
|
$
|
0.81 to $1.08
|
|
|
|
|
|
|
(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 were 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 related compensation expense of approximately $nil, $nil and $801,000 during the fiscal years ended March 31, 2014, 2015 and 2016.
The following table summarizes the share based compensation expense:
|
|
For the Fiscal Year Ended March 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
$ 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
|
|
|
|
|
|
|
|
|
|
|
2014
|
$857 (i), (iii)
|
|
$161 (iii)
|
|
Nil
|
|
$
|
128
|
|
2015
|
$857 (i), (iii)
|
|
$160 (iii)
|
|
Nil
|
|
$
|
124
|
|
2016
|
$857 (i), (iii)
|
|
$170 (iii)
|
|
Nil
|
|
$
|
249
|
|
|
Mr. Henry
|
|
Mr. Albert
|
|
|
Schlueter
|
|
So
|
|
|
Director and
Assistant Secretary
|
|
Director, Chief Financial
Officer and Secretary
|
|
|
$ in thousands
|
|
$ in thousands
|
|
|
|
|
|
|
2014
|
$84 (ii)
|
|
$
|
125
|
|
2015
|
$55 (ii)
|
|
$
|
109
|
|
2016
|
$60 (ii)
|
|
$
|
181
|
|
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, 2014, 2015 and 2016 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, 2014, included unpaid vacation payments of $10,000, for Mr. Kim Wah Chung. The amount for the year ended March 31, 2014 included vacation payment of $57,000 for Mr. Anthony So. The amount for the year ended March 31, 2015, included unpaid vacation payments of $57,000 and $9,000 for Mr. Anthony So and Mr. Kim Wah Chung, respectively. The amount for the year ended March 31, 2016, included unpaid vacation payments of $57,000, $10,000, and $12,000 for Mr. Anthony So, Mr. Kim Wah Chung, and Mr. Albert So, 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 was to be repaid by installments in 48 months. As of March 31, 2016, the Company had repaid a total of approximately $201,000 to Mr. Anthony So, and the balance of loan due to Mr. Anthony so was approximately $337
,000.
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, and the total rental payment paid to Mr. Anthony So during the fiscal year ended March 31, 2016 was approximately $24
,000
(2015: $10,000)
.
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 was approximately $480, and the total rental payment paid to Mr. Andrew So during the fiscal year ended March 31, 2016 was approximately $5
,000
(2015: $2,000)
.
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. The monthly rental payment was approximately $350, and the total rental payment paid to Mr. Anthony So during the fiscal year ended March 31, 2016 was approximately $2
,000
(2015: $nil)
.
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, 2015 and 2016, the Company had credit risk exposure of uninsured cash and deposits with maturities of less than one year in banks of approximately $3,027,000 and $3,547,000, respectively.
A substantial portion, 45%, 37% and 59% of revenue, was generated from sales to one customer for the years ended March 31, 2014, 2015 and 2016, respectively
.
The net sales to customers representing at least 10% of net total sales are as follows:
|
|
Year Ended March 31,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
$ in thousands
|
|
|
%
|
|
|
$ in thousands
|
|
|
%
|
|
|
$ in thousands
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sunbeam Products, Inc.
|
|
|
14,080
|
|
|
|
45
|
|
|
|
6,879
|
|
|
|
24
|
|
|
|
1,738
|
|
|
|
7
|
|
Fitbit, Inc.
|
|
|
10,396
|
|
|
|
33
|
|
|
|
10,593
|
|
|
|
37
|
|
|
|
14,145
|
|
|
|
59
|
|
Kern + Sohn GMBH
|
|
|
2,762
|
|
|
|
9
|
|
|
|
5,424
|
|
|
|
19
|
|
|
|
3,874
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,238
|
|
|
|
87
|
|
|
|
22,896
|
|
|
|
80
|
|
|
|
19,757
|
|
|
|
82
|
|
The following customers had balances greater than 10% of the total trade receivables at the respective balance sheet dates set forth below:
|
|
March 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
$ in thousands
|
|
|
%
|
|
|
$ in thousands
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sunbeam Products, Inc.
|
|
|
101
|
|
|
|
8
|
|
|
|
87
|
|
|
|
10
|
|
Fitbit, Inc.
|
|
|
324
|
|
|
|
25
|
|
|
|
378
|
|
|
|
41
|
|
Kern + Sohn GMBH
|
|
|
224
|
|
|
|
17
|
|
|
|
204
|
|
|
|
22
|
|
Pitney Bowes Inc.
|
|
|
355
|
|
|
|
27
|
|
|
|
145
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
|
|
|
|
|
|
|
|
89
|
|
At March 31, 2015 and 2016, these customers accounted for 77% and 89%, 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, 2014, 2015 and 2016 amounted to $758,000, $693,000 and $293,000, 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. As such, the Company paid $1,194,000 for severance payment in the fiscal year ended March 31, 2014 to the terminated staff when production was moved from the Shenzhen factory to the Xinxing factory. The Company recognized a total provision of $317,000 as of March 31, 2016 for severance payments for staff in the PRC (2015: $256,000, 2014: $156,000). The accrued severance payment allowance is reviewed every year.
|
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
18
|
Net (loss) / earnings per share
|
Basic (loss) / earnings per share is computed by dividing net (loss) / earnings available to common stockholders by the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed in a manner consistent with that of basic earnings per share while giving effect to all potentially dilutive shares of common stock that were outstanding during the period, including stock options.
The diluted net (loss) / earnings per share was the same as the basic net (loss) / shares per share for the years ended March 31, 2014, 2015 and 2016
,
as all potential common shares (70,000 shares on March 31, 2014, 3
0,0
00 shares on March 31, 2015 and 850,000 shares on March 31, 2016) from the exercise of stock options are anti-dilutive and are therefore excluded from the computation of diluted net (loss) / earnings per share.
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 three business segments, Scales, Pet Electronics Products and Others for the fiscal years ended March 31, 2015 and 2016.
|
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 93% (2015: 89%) of overall revenue of the Company for the fiscal year ended March 31, 2016, and the Company expects that the revenue from scale products will continue to contribute a similar level of revenue for the next 12 months.
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 6% (2015: 10%) of overall revenue of the Company for the fiscal year ended March 31, 2016, 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.
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, 2014, 2015, and 2016:
|
|
Year ended March 31,
|
|
Product Line
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
Scales
|
|
|
95
|
%
|
|
|
89
|
%
|
|
|
93
|
%
|
Pet Electronics Products
|
|
|
4
|
%
|
|
|
10
|
%
|
|
|
6
|
%
|
Others
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
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)
|
Summarized financial information by business segment as of March 31, 2014, 2015 and 2016 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scales & Others
|
|
|
29,837
|
|
|
|
281
|
|
|
|
23,279
|
|
|
|
1,035
|
|
|
|
2,762
|
|
Pet Electronics Products
|
|
|
1,468
|
|
|
|
14
|
|
|
|
1,145
|
|
|
|
51
|
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating segments
|
|
|
31,305
|
|
|
|
295
|
|
|
|
24,424
|
|
|
|
1,086
|
|
|
|
2,898
|
|
Corporate
|
|
|
-
|
|
|
|
-
|
|
|
|
7,716
|
|
|
|
289
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
31,305
|
|
|
|
295
|
|
|
|
32,140
|
|
|
|
1,375
|
|
|
|
2,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, plant and equipment, net by geographical areas are as follows:
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
|
$ in thousands
|
|
|
$ in thousands
|
|
Hong Kong
|
|
|
1,194
|
|
|
|
1,159
|
|
The PRC
|
|
|
11,290
|
|
|
|
10,558
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
12,484
|
|
|
|
11,717
|
|
|
|
|
|
|
|
|
|
|
(c)
|
The following is a summary of net export sales by geographical areas, which are defined by the final shipment destination, constituting 10% or more of total sales of the Company for the years ended March 31, 2014, 2015 and 2016:
|
|
|
Year ended March 31
,
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
$ in thousands
|
|
|
%
|
|
|
$ in thousands
|
|
|
%
|
|
|
$ in thousands
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
25,203
|
|
|
|
81
|
|
|
|
21,271
|
|
|
|
73
|
|
|
|
14,062
|
|
|
|
59
|
|
Germany
|
|
|
4,688
|
|
|
|
15
|
|
|
|
6,210
|
|
|
|
22
|
|
|
|
4,568
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,891
|
|
|
|
96
|
|
|
|
27,481
|
|
|
|
95
|
|
|
|
18,630
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d)
|
The following is a summary of net export sales by customers, constituting 10% or more of total sales of the Company for the years ended March 31, 2014, 2015 and 2016:
|
|
|
|
|
Year ended March 31
,
|
|
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
Segment
|
|
$ in thousands
|
|
|
%
|
|
|
$ in thousands
|
|
|
%
|
|
|
$ in thousands
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sunbeam Products, Inc.
|
|
Scales & Pet Electronics Products
|
|
|
14,080
|
|
|
|
45
|
|
|
|
6,879
|
|
|
|
24
|
|
|
|
1,738
|
|
|
|
7
|
|
Fitbit, Inc.
|
|
Scales
|
|
|
10,396
|
|
|
|
33
|
|
|
|
10,593
|
|
|
|
37
|
|
|
|
14,145
|
|
|
|
59
|
|
Kern + Sohn GMBH
|
|
Scales
|
|
|
2,762
|
|
|
|
9
|
|
|
|
5,424
|
|
|
|
19
|
|
|
|
3,874
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,238
|
|
|
|
87
|
|
|
|
22,896
|
|
|
|
80
|
|
|
|
19,757
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonso Electronics International Inc.
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)