SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 20-F

[ ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
     EXCHANGE ACT OF 1934
                                       OR
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
                                       OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                         Commission File Number: 0-17601

                      BONSO ELECTRONICS INTERNATIONAL INC.
                      ------------------------------------
             (Exact name of Registrant as specified in its charter)

                             British Virgin Islands
                             ----------------------
                 (Jurisdiction of incorporation or organization)

                                Unit 1106 - 1110
                                11/F, Star House
                                3 Salisbury Road
                                   Tsimshatsui
                               Kowloon, Hong Kong
                    (Address of principal executive offices)

     Securities registered or to be registered pursuant to Section 12(b) of the
Act: NONE

     Securities registered pursuant to Section 12(g) of the Act:

                          COMMON STOCK, PAR VALUE $.003

     Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act: NONE

     Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report.

     5,577,639 shares of common stock, $0.003 par value, at March 31, 2006

     Indicate by check mark if the registrant is a well known seasoned issuer,
as defined in Rule 405 of the Securities Act.

                                 Yes [ ] No [X]

     If the report is an annual or transition report, indicated by check mark if
the registrant is not required to file reports pursuant to Section 13 or 15D of
the Securities Exchange Act of 1934.

                                 Yes [ ] No [X]

     Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes [X] No [ ]

<PAGE>


     Indicate by check mark whether the Registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer.

 Large Accelerated Filer [ ]   Accelerated Filer [ ]   Non-accelerated filer [X]

Indicate by check mark which financial statement item the Registrant has elected
to follow:

                             Item 17 [ ] Item 18 [X]

If this is an annual report, indicated by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act.)

                                 Yes [ ] No [X]

<PAGE>



                                TABLE OF CONTENTS
                                -----------------
                                                                            Page
                                                                            ----

PART I

Item 1.    Identity of Directors, Senior Management and Advisors.............  2
Item 2.    Offer Statistics and Expected Timetable...........................  2
Item 3.    Key Information...................................................  2
Item 4.    Information on the Company........................................ 14
Item 5.    Operating and Financial Review and Prospects...................... 25
Item 6.    Directors, Senior Management and Employees........................ 40
Item 7.    Major Shareholders and Related Party Transactions................. 47
Item 8.    Financial Information............................................. 48
Item 9.    The Offer and Listing............................................. 49
Item 10.   Additional Information............................................ 50
Item 11.   Quantitative and Qualitative Disclosures about Market Risk........ 54
Item 12.   Description of Securities Other Than Equity Securities............ 55

PART II

Item 13.   Defaults, Dividend Arrearages and Delinquencies................... 55
Item 14.   Material Modifications to the Rights of Security Holders
                and Use of Proceeds.......................................... 55
Item 15.   Controls and Procedures........................................... 55
Item 16.   Reserved.......................................................... 56
Item 16A.  Audit Committee Financial Expert.................................. 56
Item 16B.  Code of Ethics.................................................... 56
Item 16C.  Principal Accountant Fees and Services............................ 57
Item 16D.  Exemptions from the Listing Standards for Audit Committees........ 58
Item 16E.  Purchases of Equity Securities by the Issuer and Affiliates
                Purchasers .................................................. 58

PART III

Item 17.   Financial Statements.............................................. 59
Item 18.   Financial Statements.............................................. 59
Item 19.   Exhibits.......................................................... 60
SIGNATURES................................................................... 61


<PAGE>

FORWARD-LOOKING STATEMENTS

     This Annual Report on Form 20-F contains forward-looking statements. A
forward-looking statement is a projection about a future event or result, and
whether the statement comes true is subject to many risks and uncertainties.
These statements often can be identified by the use of terms such as "may,"
"will," "expect," "believe," "anticipate," "estimate," "approximate" or
"continue," or the negative thereof. The actual results or activities of the
Company will likely differ from projected results or activities of the Company
as described in this Memorandum, and such differences could be material.

     Forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results and performance of the
Company to be different from any future results, performance and achievements
expressed or implied by these statements. In other words, our performance might
be quite different from what the forward-looking statements imply. You should
review carefully all information included in this Annual Report.

     You should rely only on the forward-looking statements that reflect
management's view as of the date of this Annual Report. We undertake no
obligation to publicly revise or update these forward-looking statements to
reflect subsequent events or circumstances. You should also carefully review the
risk factors described in other documents we file from time to time with the
Securities and Exchange Commission (the "SEC"). The Private Securities Reform
Act of 1995 contains a safe harbor for forward-looking statements on which the
Company relies in making such disclosures. In connection with the "safe harbor,"
we are hereby identifying important factors that could cause actual results to
differ materially from those contained in any forward-looking statements made by
us or on our behalf. Factors that might cause such a difference include, but are
not limited to, those discussed in the section entitled "Risk Factors" under
Item 3. - Key Information.

FINANCIAL STATEMENTS AND CURRENCY PRESENTATION

     We prepare our consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America and
publish our financial statements in United States Dollars.

REFERENCES

     In this Annual Report, "China" refers to all parts of the People's Republic
of China other than the Special Administrative Region of Hong Kong. The terms
"Bonso," "we," "our," "us," and the "Company" refer to Bonso Electronics
International Inc. and, where the context so requires or suggests, our direct
and indirect subsidiaries. References to "dollars" or "$" are to United States
Dollars, "HK$" are to Hong Kong Dollars, "Euros" or "(euro)" are to the European
Monetary Union's Currency, "GPB" are to British Pounds, "RMB" are to Chinese
Renminbi and "CDN" are to Canadian Dollars.

                                       1
<PAGE>

                                     PART I

Item 1. Identity of Directors, Senior Management and Advisors

     Not Applicable.

Item 2. Offer Statistics and Expected Timetable

     Not Applicable.

Item 3. Key Information

     The selected consolidated financial data as of March 31, 2005 and 2006 and
for each of the three fiscal years ended March 31, 2006 are derived from the
Audited Consolidated Financial Statements and notes which appear elsewhere in
this Annual Report. The Financial Statements are prepared in accordance with
generally accepted accounting principles in the United States of America and
expressed in United States Dollars. The selected consolidated financial data set
forth below as of March 31, 2002, 2003 and 2004, and for each of the two fiscal
years in the period ended March 31, 2003 have been derived from our audited
consolidated financial statements that are not included in this Annual Report.
The selected consolidated financial data is qualified in their entirety by
reference to, and should be read in conjunction with, the Consolidated Financial
Statements and related notes and Item 5 - "Operating and Financial Review and
Prospects" included in this Annual Report. The consolidated financial data for
the fiscal years ending March 31, 2003, 2004, 2005 and 2006 reflects the
acquisition of a 51% interest in Gram Precision Scales, Inc. ("Gram Precision"),
which was effective as of August 1, 2002. Data for the fiscal year ending March
31, 2002 does not include information relating to Gram Precision.







                                        2
<PAGE>
<TABLE>
<CAPTION>

                      SELECTED CONSOLIDATED FINANCIAL DATA

Income Statement Data
(in 000's USD except per shares and per share data)

-------------------------------- -----------------------------------------------------------------------------------
                                                                Year Ended March 31,
-------------------------------- -----------------------------------------------------------------------------------

                                   2002(1)(2)        2003(2)           2004(2)          2005(2)           2006
                                   ----------        -------           -------          -------           ----
<S>                                 <C>              <C>               <C>              <C>              <C>
Net Sales                           $53,413          $46,400           $74,964          $69,602          $64,543

Cost of sales                      (40,192)         (35,528)          (57,481)         (53,138)         (51,114)
Gross\margin                         13,221           10,872            17,483           16,464           13,429
Selling expenses                    (2,476)          (2,467)           (3,122)          (2,595)          (2,111)
Salaries and related costs          (3,880)          (4,563)           (5,150)          (5,216)          (5,681)
Research and development              (427)            (393)             (740)            (710)            (847)
expenses
Administration and general          (3,411)          (3,957)           (5,439)          (4,079)          (3,421)
expenses
Amortization of brand name            (203)            (200)             (200)            (200)            (200)
Impairment of goodwill                    -                -                 -                -            (258)
Income (loss) from operations         2,824            (708)             2,832            3,664              911
Interest income                         167               85                57               81              202
Interest expense                      (645)            (533)             (500)            (417)            (504)
Foreign exchange gain/(loss)           (40)             (96)                15             (98)            (184)
Other income                             71               99               225              372              190

Consultancy fee                       (381)            (381)                 -                -                -
Income/(loss) before income           1,996          (1,534)             2,629            3,602              615
taxes and minority interest
Income tax benefit/(expense)          (190)             (37)             (402)            (266)            (131)
Net income/(loss) before             $1,806          (1,571)             2,227            3,336              484
minority interest

Minority interest                         -             (72)                41               14                -

Net                                  $1,806         ($1,643)             2,268            3,350              484
income/(loss)

Earning (loss) per share
    -    Basic                      $0.3232        ($0.2936)           $0.3979          $0.5932          $0.0870
    -    Diluted                    $0.3194        ($0.2936)           $0.3743          $0.5533          $0.0820
Weighted average shares           5,586,920        5,599,238         5,702,015        5,646,676        5,577,639
Diluted weighted average shares   5,652,852        5,599,238         6,060,264        6,054,303        5,937,644


(1) Does not include financial results of the acquisition of Gram Precision
Scales that was effective as of August 1, 2002.

(2) Certain comparative figures have been reclassified to conform with the
current year's presentation.

                                        3
<PAGE>

Balance Sheet Data
(in 000's USD except per shares and per share data)

                                                                March 31,
                                  -------------------------------------------------------------------
                                  2002 (1)       2003             2004          2005          2006
                                  -----          ----             ----          ----          ----
Cash and cash equivalents         $1,878         $3,633           $10,815      $9,708         $8,582
Working capital                   $9,599         $9,777           $12,901      $15,345        $16,847
Total assets                      $44,451        $48,911          $53,598      $52,463        $49,479
Current Liabilities               $13,488        $18,424          $20,190      $18,319        $15,657
Long-term debt and capital        $317           $606             $1,158       $168           $0
lease
Deferred income tax assets        $112           $167             $67          $99            $83
Common Stock                      $16            $17              $17          $17            $17
Shareholders' Equity              $29,200        $28,379          $30,750      $33,932        $33,802
Dividends declared per share      $0.10             --            $0.05        $0.10          $0.05

(1) Does not include financial results of the acquisition of Gram Precision
Scales that was effective as of August 1, 2002.

Exchange Rate Information

     The Hong Kong Dollar and the United States Dollar have been fixed at
approximately 7.80 Hong Kong Dollars to 1.00 U.S. Dollars since 1983. The
Chinese government expressed its intention in the Basic Law to maintain the
stability of the Hong Kong currency after the sovereignty of Hong Kong (the
"Basic Law") was transferred to China.

     The noon buying rates in New York City for cable transfers as certified for
customs purposes by the Federal Reserve Bank of New York on September 15, 2006
were U.S. $1.00 = CDN $ 1.1192, U.S. $1.00 = RMB 7.9429, U.S. $1.00 = HK 7.7825,
U.S. $1.00 = Euro 1.2648, U.S $1 = 1.8783 GBP, respectively. The following table
sets forth the high and low noon buying rates between Canadian Dollars and U.S.
Dollars, Chinese Renminbi and U.S. Dollars, Hong Kong Dollars and U.S. Dollars,
Euros and U.S. Dollars and British Pounds and U.S. Dollars for each month during
the six month period ended August 31, 2006.

                                                            NOON BUYING RATE

                ---------------------- ------------------- -------------------- ---------------------- ------------------
                CDN$ Per U.S. $1       RMB Per U.S. $1     HK$ PER U.S. $1      U.S. $1 PER EURO       U.S. $1 per GBP
                ---------------------- ------------------- -------------------- ---------------------- ------------------
                High       Low         High      Low       High       Low       High      Low          High    Low
                ---------------------- ------------------- -------------------- ---------------------- ------------------
March 2006      1.2425     1.2017      8.2765    8.2765    7.7998     7.7987    1.3465    1.2877       1.9292  1.8657
April 2006      1.2568     1.2146      8.2765    8.2765    7.7995     7.7946    1.3093    1.2819       1.9165  1.8733
May 2006        1.2703     1.2373      8.2765    8.2765    7.7995     7.7767    1.2936    1.2349       1.9048  1.8205
June 2006       1.2578     1.2256      8.2765    8.2765    7.7692     7.7842    1.2320    1.2035       1.8368  1.7930
July 2006       1.1415     1.1112      8.0018    7.7690    7.7775     7.7670    1.2822    1.2500       1.8685  1.8203
August 2006     1.1312     1.1056      8.0000    7.9533    7.7796     7.7723    1.2914    1.2735       1.9102  1.8711


     The following table sets forth the average noon buying rates between
Canadian Dollars and U.S. Dollars, between Chinese Renminbi and U.S. Dollars,
between Hong Kong Dollars and U.S. Dollars, between Euros and U.S. Dollars and
between British Pounds and U.S. Dollars for each of the calendar years, 2002,
2003, 2004, 2005 and 2006 based on daily noon buying rates for cable transfer in
New York City certified for customs purposes by the Federal Reserve Bank of New
York.

                                             AVERAGE NOON BUYING RATE


             CDN$ Per U.S. $1   RMB PER U.S. $1   HK$ PER U.S. $1   U.S. $1 PER EURO   US $1 PER GBP
             ----------------   ---------------   ---------------   ----------------   -------------

  2002           1.5704             8.2770            7.7997             0.9454            1.5025
  2003           1.4013             8.2772            7.7876             1.1315            1.6341
  2004           1.3017             8.2768            7.7891             1.2438            1.8330
  2005           1.1689             8.0699            7.8000             1.2096            1.7346

</TABLE>

     On July 21,2005, the Peoples Bank of China announced it would revalue the
RMB by 2.1%, linking the RMB to a "basket of currencies" of China's main trading
partners, rather than directly at 8.28 RMB to the dollar as it has for a decade.
However, the announcement did not define the composition of the basket. Under
the new rules, the RMB will be allowed to move 0.3 percent on a daily basis
against the dollar. This change in policy has resulted in an approximately 3.7%
appreciation of the RMB against the U.S. dollar between July 21, 2005 and August
21, 2006. As of September 15, 2006, the RMB was valued at 7.9465 per US Dollar.


Risk Factors

     You should carefully consider the following risks, together with all other
information included in this Annual Report. The realization of any of the risks
described below could have a material adverse effect on our business, results of
operations and future prospects.

     Political, Legal, Economic and Other Uncertainties of Operations in China
     and Hong Kong

     We Could Face Increased Currency Risks If China Does Not Maintain The
Stability Of The Hong Kong Dollar or the Chinese Renminbi. The Hong Kong Dollar
and the United States Dollar have been fixed at approximately 7.80 Hong Kong
Dollars to 1.00 U.S. Dollar since 1983. The Chinese Renminbi had remained stable
against the U.S. Dollar at approximately 8.28 to 1.00 U.S. Dollar for several
years and not until July 21, 2005 that the Chinese currency regime was altered
linking the RMB to a "basket of currencies." However, the announcement did not
define the composition of the basket. Under the new rules, the RMB will be
allowed to move 0.3 percent on a daily basis against the dollar. This change in
policy has resulted in an approximately 3.7% appreciation of the RMB against the
U.S. dollar between July 21, 2005 and August 21, 2006. Any significant
revaluation of the RMB may materially and adversely affect our cash flows,
revenues, earnings and financial position, and the value of, and any dividends
payable to our common shareholders in U.S. dollars. As of September 15, 2006,
the RMB was valued at 7.9465 per US Dollar. In addition, China's government
continues to receive significant international pressure to further liberalize
its currency policy and as a result may further change its currency policy. The
Chinese government in the past has expressed its intention in the Basic Law to
maintain the stability of the Hong Kong currency after the sovereignty of Hong
Kong was transferred to China in July 1997. However, there can be no assurance
that the Hong Kong Dollar will remain pegged against the U.S. Dollar or the

                                       5
<PAGE>

Chinese Renminbi will not be allowed to fluctuate more than 0.3% on a daily
basis. If the current exchange rate mechanism is changed, we face increased
currency risks, which could have a material adverse effect upon the Company.

     We Face Significant Risks If The Chinese Government Changes Its Policies,
Laws, Regulations, Tax Structure, Or Its Current Interpretations Of Its Laws,
Rules And Regulations Relating To Our Operations In China. Our manufacturing
facility is located in China. As a result, our operations and assets are subject
to significant political, economic, legal and other uncertainties. Changes in
policies by the Chinese government resulting in changes in laws or regulations
or the interpretation of laws or regulations, confiscatory taxation, changes in
employment restrictions, restrictions on imports and sources of supply, import
duties, corruption, currency revaluation or the expropriation of private
enterprise could materially and adversely affect us. Over the past several
years, the Chinese government has pursued economic reform policies including the
encouragement of private economic activity and greater economic
decentralization. If the Chinese government does not continue to pursue its
present policies that encourage foreign investment and operations in China, or
if these policies are either not successful or are significantly altered, then
our business operations in China could be adversely affected. We could even be
subject to the risk of nationalization, which could result in the total loss of
investment in that country. Following the Chinese government's policy of
privatizing many state-owned enterprises, the Chinese government has attempted
to augment its revenues through increased tax collection. Continued efforts to
increase tax revenues could result in increased taxation expenses being incurred
by us. Economic development may be limited as well by the imposition of
austerity measures intended to reduce inflation, the inadequate development of
infrastructure and the potential unavailability of adequate power and water
supplies, transportation and communications. If for any reason we were required
to move our manufacturing operations outside of China, our profitability would
be substantially impaired, our competitiveness and market position would be
materially jeopardized and we might have to discontinue our operations.

     Contractual arrangements we have entered into among our us and our
subsidiary in China may be subject to scrutiny by China tax authorities and a
finding against Bonso and its subsidiary in China may result in additional tax
liabilities that could substantially reduce our consolidated net income and the
value of our investment. Under Chinese laws and regulations, arrangements and
transactions among related parties may be subject to audit or challenge by the
PRC tax authorities. We could face material and adverse tax consequences if the
Chinese tax authorities determine that the contractual arrangements among our
wholly owned subsidiary in China and Bonso do not represent an arm's length
price and adjust Bonso or its China subsidiary's income in the form of a
transfer pricing adjustment. A transfer pricing adjustment could, among other
things, increase its tax liabilities for Chinese tax purposes. Our consolidated
net income may be materially and adversely affected if our affiliated entities'
tax liabilities increase.

     We Face Risks By Operating In China, Because The Chinese Legal System
Relating To Foreign Investment And Foreign Operations Like Bonso's Is Evolving
And The Application Of Chinese Laws Is Uncertain. The legal system of China
relating to foreign investments is continually evolving, and there can be no

                                       6
<PAGE>

certainty as to the application of its laws and regulations in particular
instances. The Chinese legal system is a civil law system based on written
statutes. Unlike common law systems, it is a system in which decided legal cases
have little precedential value. In 1979, the Chinese government began to
promulgate a comprehensive system of laws and regulations governing economic
matters in general. Legislation over the past 20 years has significantly
enhanced the protections afforded to various forms of foreign investment in
China. Enforcement of existing laws or agreements may be sporadic and
implementation and interpretation of laws inconsistent. The Chinese judiciary is
relatively inexperienced in enforcing the laws that exist, leading to a higher
than usual degree of uncertainty as to the outcome of any litigation. Even where
adequate law exists in China, it may not be possible to obtain swift and
equitable enforcement of that law. Continued uncertainty relating to the laws in
China could have a material adverse effect upon it and our operations in China.

     We Could Be Adversely Affected If China Changes Its Economic Policies In
The Shenzhen Special Economic Zone Where We Operate. In August 1980, the Chinese
government passed "Regulations for The Special Economy Zone of Guang Dong
Province" and officially designated a portion of Shenzhen as The Shenzhen
Special Economy Zone. Foreign enterprises in these areas benefit from greater
economic autonomy and special tax incentives than enterprises in other parts of
China. Changes in the policies or laws governing Special Economic Zones could
have a material adverse effect on us. Moreover, economic reforms and growth in
China have been more successful in certain provinces than others, and the
continuation or increase of these disparities could affect the political or
social stability of China, which could have a material adverse effect us and our
operations near Shenzhen.

     Controversies Affecting China's Trade With The United States Could Harm Our
Results Of Operations Or Depress Our Stock Price. 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 arise that threaten the status quo involving trade between the
United States and China. These controversies could materially and adversely
affect our business by, among other things, causing our products in the United
States to become more expensive resulting in a reduction in the demand for our
products by customers in the United States, which would have a material adverse
effect upon us and our results of operations. Further, political or trade
friction between the United States and China, whether or not actually affecting
our business, could also materially and adversely affect the prevailing market
price of our common shares.

     If Our Sole Factory Were Destroyed Or Significantly Damaged As A Result of
Fire Or Some Other Natural Disaster, We Would Be Adversely Affected. All of our
products are currently manufactured at our manufacturing facility located in
Shenzhen, China. Fire fighting and disaster relief or assistance in China may
not be as developed as in Western countries. We currently maintain property
damage insurance aggregating approximately $25,271,000 covering our stock in
trade, goods and merchandise, furniture and equipment and buildings. We do not
maintain business interruption insurance. Investors are cautioned that material
damage to, or the loss of, our factory due to fire, severe weather, flood or
other act of God or cause, even if insured, could have a material adverse effect
on our financial condition, results of operations, business and prospects.

                                       7
<PAGE>

     Our Results Could Be Harmed If We Have To Comply With New Environmental
Regulations. Our operations create some environmentally sensitive waste that may
increase in the future depending on the nature of our manufacturing operations.
The general issue of the disposal of hazardous waste has received increasing
attention from the Chinese national and local governments and foreign
governments and agencies and has been subject to increasing regulation. Our
business and operating results could be materially and adversely affected if we
were to increase expenditures to comply with any new environmental regulations
affecting our operations.

     Future Changes in the Labor Laws in China may result in the Continued
Increase in Labor Costs. During the fiscal year ended March 31, 2006, we
experienced an increase in the cost of labor caused by the increase in the
minimum hourly rate. Any future changes in the labor laws in the PRC could
result in us having to pay increased labor costs. There can be no assurance that
the labor laws will not change, which may have a material adverse effect upon
our business and our results of operations.

     Risk Factors Relating to Our Business

     We Depend Upon Our Largest Customers For A Significant Portion Of Our Sales
Revenue, And We Cannot Be Certain That Sales To These Customers Will Continue.
If Sales To These Customers Do Not Continue, Then Our Sales Will Decline And Our
Business Will Be Negatively Impacted. Traditionally, we have relied upon 3-4
customers for a significant portion of our sales during the fiscal year. During
the year ended March 31, 2004, with one customer accounting for 25% of our sales
and six customers accounted for approximately 65% of our sales, during the
fiscal year ended March 31, 2005, the same three customers accounted for
approximately 45% of our sales and during the fiscal year ended March 31, 2006,
three customers accounted for approximately 48% of our sales. We do not enter
into long-term contracts with our customers, but manufacture based upon purchase
orders and therefore cannot be certain that sales to these customers will
continue. The loss of any of our largest customers would likely have a material
negative impact on our sales revenue and our business.

     Defects In Our Products Could Impair Our Ability To Sell Our Products Or
Could Result In Litigation And Other Significant Costs. Detection of any
significant defects in our products may result in, among other things, delay in
time-to-market, loss of market acceptance and sales of our products, diversion
of development resources, injury to our reputation, or increased warranty costs.
Because our products are complex, they may contain defects that cannot be
detected prior to shipment. These defects could harm our reputation, which could
result in significant costs to us and could impair our ability to sell our
products. The costs we may incur in correcting any product defects may be
substantial and could decrease our profit margins.

     Since certain of our products are used in applications that are integral to
our customers' businesses, errors, defects, or other performance problems could
result in financial or other damages to our customers, which would likely result
in adverse effect upon our business with these customers. If we were involved in
any product liability litigation, even if it were unsuccessful, would be time
consuming and costly to defend. Further, our product liability insurance may not
be adequate to cover claims.

                                       8
<PAGE>

     Our Sales Through Retail Merchants Result In Seasonality And Susceptibility
To A Downturn In The Retail Economy And Sales Variances Resulting From Retail
Promotional Programs. A significant amount of our net sales is the result of
Korona's sales of bathroom and kitchen scales to retail merchants in Europe. In
addition, many of our other customers sell to retail merchants. Accordingly,
these portions of our customer base are susceptible to a downturn in the retail
economy. A greater number of our sales of scales and telecommunications products
occur between the months of April and September for shipment in the summer in
preparation of 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. A significant
portion of our sales in Europe are attributable to the promotional programs of
our retail industry customers. These promotional programs result in significant
orders by customers who do not carry our products on a regular basis.
Promotional programs often involve special pricing terms or require us to spend
funds to have our products promoted. We cannot assure you that promotional
purchases by our retail industry customers will be repeated regularly, or at
all. Further, our promotional sales could cause our quarterly results to vary
significantly. The reduction in promotional purchases would likely have a
material adverse effect upon our results of operations.

     Our Customers Are Dependent On Shipping Companies For Delivery Of Our
Products And Interruptions To Shipping Could Materially And Adversely Affect Our
Business And Operating Results. Typically, we sell our products either F.O.B.
Hong Kong or Yantian (Shenzhen) and our customers are responsible for the
transportation of products from Hong Kong or Yantian (Shenzhen) to their final
destinations. Our customers rely on a variety of carriers for product
transportation through various world ports. A work stoppage, strike or shutdown
of one or more major ports or airports could result in shipping delays
materially and adversely affecting our customers, which in turn could have a
material adverse effect on our business and operating results. Similarly, an
increase in freight surcharges due to rising fuel costs or general price
increases could materially and adversely affect our business and operating
results.

     Customer Order Estimates May Not Be Indicative Of Actual Future Sales. Some
of our customers have provided us with forecasts of their requirements for our
products over a period of time. We make many management decisions based on these
customer estimates, including purchasing materials, hiring personnel, and other
matters that may increase our production capacity and costs. If a customer
reduces its orders from prior estimates after we have increased our production
capabilities and costs, this reduction may decrease our net sales and we may not
be able to reduce our costs to account for this reduction in customer orders.
Many customers do not provide us with forecasts of their requirements for our
products. If those customers place significant orders, we may not be able to
increase our production quickly enough to fulfill the customers' orders. The
inability to fulfill customer orders could damage our relationships with
customers and reduce our net sales.

     Pressure By Our Customers To Reduce Prices And Agree To Long-Term Supply
Arrangements May Cause Our Net Sales Or Profit Margins To Decline. Our customers
are under pressure to reduce prices of their products. Therefore, we expect to
experience increasing pressure from our customers to reduce the prices of our
products. Continuing pressure to reduce the price of our products could have a

                                       9
<PAGE>

material adverse effect upon our business and operating results. Our customers
frequently negotiate supply arrangements with us well in advance of placing
orders for delivery within a year, thereby requiring us to commit to price
reductions before we can determine if we can achieve the assumed cost
reductions. We believe we must reduce our manufacturing costs and obtain higher
volume orders to offset declining average sales prices. Further, if we are
unable to offset declining average sales prices, our gross profit margins will
decline which would have a material adverse effect upon our results of
operations.

     We Depend Upon Our Key Personnel And The Loss Of Any Key Personnel, Or Our
Failure To Attract And Retain Key Personnel, Could Adversely Affect Our Future
Performance, Including Product Development, Strategic Plans, Marketing And Other
Objectives. The loss or failure to attract and retain key personnel could
significantly impede our performance, including product development, strategic
plans, marketing and other objectives. Our success depends to a substantial
extent not only on the ability and experience of our senior management, but
particularly upon Anthony So our Secretary, Chief Financial Officer, Treasurer
and Chairman of the Board. We do not have key man life insurance on Mr. So. To
the extent that the services of Mr. So would be unavailable to us, we would be
required to obtain another person to perform the duties Mr. So otherwise would
perform. We may be unable to employ another qualified person with the
appropriate background and expertise to replace Mr. So on terms suitable to us.

     Increased Prices for Raw Materials May have a negative impact upon us.
During the fiscal year ended March 31, 2006, the costs of component parts
increased due to the increase in the price of oil used in the production of
components such as plastic resin, steel and other raw materials. If oil prices
continue to increase, it will likely result in an increase in the costs of
components to us as well as an increase in our operating expenses, which may
have a material adverse effect upon our business and results of operations.

     We May Face an Increased Shortage of Factory Workers. During the fiscal
years ended March 31, 2006 and March 31, 2005, we experienced labor shortages
for factory workers. Due to increases in demand for workers in China, we cannot
assure you that we can adequately staff the factory. The ability to adequately
staff our factory could have a material impact on production, which could lead
to delays in shipments or missed sales. In the event that we have delayed or
lost sales, we may need to deliver goods by air to ensure that our products
arrive on time, which would likely result in an increase in air freight costs,
vendor fines and could result in missed sales, any of which could have a
material adverse effect upon our business and our results from operations.

     We Face Increasing Competition in Our Industry and May not be able to
successfully compete with our competitors. Our business is in an industry that
is becoming increasingly competitive, and many of our competitors, both local
and international, have substantially greater technical, financial and marketing
resources than we have, and as a result, we may be unable to compete
successfully with these competitors. We compete with scale manufacturers in the
Far East, the United States, and Europe. We believe that our principal
competitors in the scale and telecommunications market are other; OEM and
original design manufacturer "ODM" manufacturers, and all companies engaged in

                                       10
<PAGE>

the branded, ODM and OEM business. Both the scale and the telecommunications
markets are highly competitive and we face pressures on pricing and lower
margins as evidenced by the decline in margins that we have experienced with our
telecommunications products. Lower margins may affect our ability to cover our
costs which could have a material negative impact on our operations and our
business.

     We Are Controlled By Our Management, Whose Interest May Differ From Those
Of The Other Shareholders. At the present time, Mr. Anthony So, our founder and
Chairman, beneficially owns approximately 36.41% of the outstanding shares of
common stock, including shares underlying his outstanding options, or 29.16%
without including his outstanding options. Due to his stock ownership, Mr. So
may be in a position to elect the board of directors and, therefore, to control
our business and affairs including certain significant corporate actions such as
acquisitions, the sale or purchase of assets and the issuance and sale of our
securities. Mr. So may be able to prevent or cause a change in control. We also
may be prevented from entering into transactions that could be beneficial to us
without Mr. So's consent. The interest of our largest shareholder may differ
from the interests of other shareholders.

     Compliance costs with recently enacted changes in the securities laws and
regulations pursuant to the Sarbanes-Oxley Act of 2002 will increase our costs.
The Sarbanes-Oxley Act of 2002 that became law in July 2002 has required changes
in some of our corporate governance, securities disclosure, accounting and
compliance practices. In response to the requirements of that act, the
Securities and Exchange Commission and the NASDAQ have promulgated new rules on
a variety of subjects. Compliance with these new rules as well as the
Sarbanes-Oxley Act of 2002 has increased our legal, financial and accounting
costs, and we expect the cost of compliance with these new rules to continue to
increase and to be permanent. Further, the new rules may increase the expenses
associated with our director and officer liability insurance.

     Our Operating Results And Stock Price Are Subject To Wide Fluctuations. Our
quarterly and annual operating results are affected by a wide variety of factors
that could materially and adversely affect net sales, gross profit and
profitability. This could result from any one or a combination of factors, many
of which are beyond our control. Results of operations in any period should not
be considered indicative of results to be expected in any future period, and
fluctuations in operating results may also result in fluctuations in the market
price of our common stock.

     Our Results Could be Affected By Changes In Currency Exchange Rates.
Changes in currency rates involving the Canadian Dollar, Hong Kong dollar,
Chinese Renminbi, British Pounds or the Euro could increase our expenses.

     During the fiscal years ended March 31, 2006 and 2005, our financial
results were affected by currency fluctuations, resulting in a total foreign
exchange loss of $183,887 and $98,051, respectively. Generally, our revenues are
collected in United States Dollars, Euros and Canadian Dollars. Our costs and
expenses are paid in United States Dollars, Canadian Dollars, Hong Kong Dollars,
British Pound, Euros and Chinese Renminbi. We face a variety of risks associated
with changes among the relative value of these currencies. An appreciation of

                                       11
<PAGE>

the Canadian Dollar, Chinese Renminbi, Hong Kong Dollar, British Pound, or the
Euro against the U.S. Dollar would increase our expenses when translated into
U.S. Dollars and could materially and adversely affect our margins and results
of operations. In addition, a significant devaluation in the Canadian Dollar,
Chinese Renminbi, Hong Kong Dollar, British Pound or Euro could have a material
adverse effect upon our results of operations if it destabilizes the economy of
Canada, China, Hong Kong, Great Britain or the European Union.

     Protection And Infringement Of Intellectual Property. Except for one patent
held by Gram Precision, the trademark for KORONA and fifteen trademarks
currently held by Gram Precision, we have no patents, licenses, franchises,
concessions or royalty agreements that are material to our business. We have
obtained a trademark registration in Hong Kong and China for the marks BONSO and
MODUS in connection with certain electronic apparatus. Unauthorized parties may
attempt to copy aspects of our products or trademarks or to obtain and use
information that we regard as proprietary. Policing unauthorized use of our
products is difficult. Our means of protecting our proprietary rights may not be
adequate. In addition, the laws of some foreign countries do not protect our
proprietary rights to as great an extent as do the laws of the United States.
Our failure to adequately protect our proprietary rights may allow third parties
to duplicate our products or develop functionally equivalent or superior
technology. In addition, our competitors may independently develop similar
technology or design around our proprietary intellectual property.

     Further, we may be notified that we are infringing patents, trademarks,
copyrights or other intellectual property rights owned by other parties. In the
event of an infringement claim, we may be required to spend a significant amount
of money to develop a non-infringing alternative or to obtain licenses. We may
not be successful in developing such an alternative or obtaining a license on
reasonable terms, if at all. Any litigation, even without merit, could result in
substantial costs and diversion of resources and could have a material adverse
affect on our business and results of operations.

     Cancellations Or Delays In Orders Could Materially And Adversely Affect Our
Gross Margins And Operating Income. Sales to our OEM customers are primarily
based on purchase orders we receive from time to time rather than firm,
long-term purchase commitments. Although it is our general practice to purchase
raw materials only upon receiving a purchase order, for certain customers we
will occasionally purchase raw materials based on such customers' rolling
forecasts. Further, during times of potential component shortages we have
purchased, and may continue to purchase, raw materials and component parts in
the expectation of receiving purchase orders for products that use these
components. In the event actual purchase orders are delayed, are not received or
are cancelled, we would experience increased inventory levels or possible
write-downs of raw material inventory that could materially and adversely affect
our business and operating results.

     We Generally Have No Written Agreements With Suppliers To Obtain Components
And Our Margins And Operating Results Could Suffer From Increases In Component
Prices. We are typically responsible for purchasing components used in
manufacturing products for our customers. We generally do not have written
agreements with our suppliers of components. This typically results in our
bearing the risk of component price increases because we may be unable to
procure the required materials at a price level necessary to generate
anticipated margins from the orders of our customers. Further, prices of
components have increased recently based upon the increase in oil prices and

                                       12
<PAGE>

what management believes to be a high worldwide demand for components used in
the manufacturing of our products. Accordingly, additional increases in
component prices could materially and adversely affect our gross margins and
results from operations.

     Certain Legal Consequences of Foreign Incorporation and Operations

     Judgments Against The Company And Management May Be Difficult To Obtain Or
Enforce. We are a holding corporation organized as an International Business
Company under the laws of the British Virgin Islands and our principal operating
subsidiary is organized under the laws of Hong Kong and the laws of the Peoples'
Republic of China. Our principal executive offices are located in Hong Kong and
the Peoples' Republic of China, Korona is located in Germany and Gram Precision
is located in Canada. Outside the United States, it may be difficult for
investors to enforce judgments obtained against us in actions brought in the
United States, including actions predicated upon the civil liability provisions
of federal securities laws. In addition, most of our officers and directors
reside outside the United States and the assets of these persons are located
outside of the United States. As a result, it may not be possible for investors
to effect service of process within the United States upon these persons, or to
enforce against the Company or these persons judgments predicated upon the
liability provisions of United States federal securities laws. Our Hong Kong
counsel and our British Virgin Islands counsel have advised that there is
substantial doubt as to the enforceability against us or any of our directors or
officers in original actions or in actions for enforcement of judgments of
United States courts in claims for liability based on the civil liability
provisions of federal securities laws.

     Because We Are Incorporated In The British Virgin Islands, You May Not Have
The Same Protections As Shareholders Of U.S. Corporations. We are organized
under the laws of the British Virgin Islands. Principles of law relating to
matters affecting the validity of corporate procedures, the fiduciary duties of
our management, directors and controlling shareholders and the rights of our
shareholders differ from, and may not be as protective of shareholders as, those
that would apply if we were incorporated in a jurisdiction within the United
States. Our directors have the power to take certain actions without shareholder
approval, including an amendment of our Memorandum or Articles of Association
and certain fundamental corporate transactions, including reorganizations,
certain mergers or consolidations and the sale or transfer of assets. In
addition, there is doubt that the courts of the British Virgin Islands would
enforce liabilities predicated upon United States federal securities laws.

     Future issuances of preference shares could materially and adversely affect
the holders of our common shares or delay or prevent a change of control. Our
shareholders approved the amendment to our Memorandum and Articles of
Association provide the ability to issue an aggregate of 10,000,000 shares of
preferred stock in four classes. While currently no preferred shares are issued
or outstanding, we may issue preferred shares in the future. Future issuance of
preferred shares could materially and adversely affect the rights of the holders
of our common shares, dilute the common shareholders or delay or prevent a
change of control.

     Our Shareholders Do Not Have The Same Protections Or Information Generally
Available To Shareholders Of U.S. Corporations Because The Reporting
Requirements For Foreign Private Issuers Are More Limited Than Those Applicable

                                       13
<PAGE>

To Public Corporations Organized In The United States. We are a foreign private
issuer within the meaning of rules promulgated under the Exchange Act. We are
not subject to certain provisions of the Exchange Act applicable to United
States public companies including: the rules under the Exchange Act requiring
the filing with the Securities and Exchange Commission (the "SEC") of quarterly
reports on Form 10-Q or current reports on Form 8-K, the sections of the
Exchange Act regulating the solicitation of proxies, consents or authorizations
in respect to a security registered under the Exchange Act and the sections of
the Exchange Act requiring insiders to file public reports of their stock
ownership and trading activities and establishing insider liability for profits
realized from any "short-swing" trading transaction (i.e., a purchase and sale,
or sale and purchase, of the issuer's equity securities within six months or
less). Because we are not subject to these rules, our shareholders are not
afforded the same protections or information generally available to investors in
public companies organized in the United States.

     Our Board's Ability To Amend Our Charter Without Shareholder Approval Could
Have Anti-Takeover Effects That Could Prevent A Change In Control. As permitted
by the law of the British Virgin Islands, our Memorandum and Articles of
Association, which are the terms used in the British Virgin Islands for a
corporation's charter and bylaws, may be amended by our board of directors
without shareholder approval. This includes amendments to increase or reduce our
authorized capital stock. Our board's ability to amend our charter documents
without shareholder approval could have the effect of delaying, deterring or
preventing a change in control of Bonso, including a tender offer to purchase
our common shares at a premium over the then current market price.

     We May Not Pay Dividends In The Future. Although we have declared dividends
during the fiscal years ended March 31, 2001 and 2002 and on April 2, 2003 and
July 13, 2004 and July 12, 2005 and August 22, 2006. we may not be able to
declare dividends or the board of directors may decide not to declare dividends
in the future. We will determine the amounts of any dividends when and if they
are declared, in the future at the time of declaration.

Item 4. Information on the Company
History and Development of the Company

     Bonso Electronics International Inc. was formed on August 8, 1988 as a
limited liability International Business Company under the laws of the British
Virgin Islands under the name "Golden Virtue Limited." On September 14, 1988, we
changed our name to Bonso Electronics International, Inc. We currently operate
under the International Business Companies Ordinance, 1984, of the British
Virgin Islands. On January 1, 2007, we will automatically be registered and
operate under the BVI Business Companies Act.

     As part of our ongoing expansion of the sensor-based product business,
effective as of August 1, 2002, we acquired 51% of the equity of Gram Precision.
Gram Precision is primarily engaged in the distribution and marketing of pocket
scales in the United States, Canada, and Europe.

     Effective as of May 1, 2001 we acquired 100% of the equity of Korona.
Korona markets consumer scale products throughout Europe to retail merchandisers
and distributors. These products feature contemporary designs using the latest
materials and attractive packaging.

                                       14
<PAGE>

     Our corporate administrative matters are conducted through our registered
agent, HWR Services Limited, P.O. Box 71, Road Town, Tortola, British Virgin
Islands. Our principal executive offices are located at Unit 1106 - 1110, 11/F,
Star House, 3 Salisbury Road, Tsimshatsui, Kowloon, Hong Kong. Our telephone
number is 852-2605-5822, our facsimile number is 852-2691-1724, our e-mail
address is info@bonso.com and our website is www.bonso.com.

     Our principal capital expenditures and divestitures over the last three
years were:

                                      2004            2005            2006
                                      ----            ----            ----

 Property Plant & Equipment        $3,089,656       $684,398       $1,340,134


     Our capital expenditures include the purchase of machinery used in the
production of certain of our products.

     All of the foregoing capital expenditures were financed principally from
internally generated funds.

     On August 13, 2006, Bonso entered into a letter of intent to acquire
approximately 100,000 square meters of land for future expansion. Under the
terms of the letter of intent the cost of the land is approximately $760,000

     This new piece of land is more than triple the size of the land upon which
the Company's existing facilities are located in Shenzhen, China. It is expected
that the land transfer will be completed in 2007 and the first phase of
construction of the new manufacturing facilities will be completed in 2009. The
projected capital expenditure for the first phase of investment is approximately
$8,000,000. Our plans for capital improvements are subject to change from time
to time.


Business Overview

     Bonso Electronics International Inc. designs, develops, produces and sells
electronic sensor-based and wireless products for private label Original
Equipment Manufacturers (individually "OEM" or collectively "OEMs"), Original
Brand Manufacturers (individually "OBM" or collectively "OBMs") and Original
Design Manufacturers (individually "ODM" or collectively "ODMs").

     Since 1989, we have manufactured all of our products in China in order to
take advantage of the lower overhead costs and competitive labor rates. Our
factory is located in Shenzhen, China, about 50 miles from Hong Kong. The
convenient location permits us to easily manage manufacturing operations from
Hong Kong and facilitates transportation of our products out of China through
the port of Hong Kong and Yantian (Shenzhen).

                                       15
<PAGE>

     Products

     Our sensor-based scale products are comprised of bathroom, kitchen, office,
jewelry, laboratory, postal and industrial scales that are used in consumer,
commercial and industrial applications. These products accounted for 61% of
revenue for the fiscal year ended March 31, 2004, 68% for 2005 and 67% for 2006.
We believe that our industrial scales will continue to be a larger portion of
our scales revenue.

     Our wireless telecommunications products are primarily comprised of two-way
radios and cordless telephones that are used in consumer and commercial
applications. These products accounted for 37% of revenue for the fiscal year
ended March 31, 2004, 30% for 2005 and 32% for 2006.

     We also receive revenue from certain customers for the development and
manufacture of tooling and molding for scales and telecommunication products.
Generally, these tools and moulds are used by us for the manufacture of
products. We also generate some sales of spare parts for repair work by our
customers and from repair work performed by us for our customers. These revenues
accounted for approximately 2% of net sales for the fiscal years ended March 31,
2004 and 2005, and 1% for 2006.

     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, 2004, 2005,
and 2006.

                                              Year ended March 31,
                                          ---------------------------
Product Line                              2004        2005       2006
--------------------                      ----        ----       ----
Scales                                    61%         68%        67%
Telecommunications Products               37%         30%        32%
Others                                     2%          2%         1%
Total                                     100%        100%       100%


     Business Strategy

     We believe that our continued growth depends upon our ability to strengthen
our customer base by enhancing and diversifying our products, increasing the
number of customers and expanding into additional markets, while maintaining or
increasing sales of our products to existing customers. Our continued growth and
profitability is also dependent upon our ability to control production costs and
increase production capacity. Our strategy to achieve these goals is as follows:

     Product Enhancement And Diversification. We continually seek to improve and
enhance our existing products in order to provide a longer product life-cycle
and to meet increasing customer demands for additional features. Our research
and development staff are currently working on a variety of projects to enhance
our existing scale products and for the telecommunications industry and in the
postal scale/meter area. See "Products, Research and Development / Competition"
below.

                                       16
<PAGE>

     Maintaining And Expanding Business Relations With Existing Customers. We
promote relationships with our significant customers through regular
communication, including visiting certain of our customers in their home
countries and providing direct access to our manufacturing and quality control
personnel. This access, together with our concern for quality, has resulted in a
relatively low level of defective products. Moreover, we believe that our
emphasis on timely delivery, good service and low cost has contributed and will
continue to contribute to good relations with our customers and increased
orders. Further, we solicit suggestions from our customers for product
enhancement and when feasible, plan to develop and incorporate the enhancements
suggested by our customers into our products.

     Market And Product Expansion. We have significantly expanded our marketing
efforts in the United States, Canada and Europe. We have primarily done this
through the acquisitions of Gram Precision and Korona, and through efforts to
introduce the Korona brand name and products into the United States. Further, we
have taken significant steps to expand the products that we sell and to position
ourselves as both ODMs and OEMs for other companies that require a manufacturing
partner with our capabilities. We intend to increase our marketing and sales
efforts with both existing and potential customers.

     Controlling Production Costs. In 1989, recognizing that labor cost is a
major factor permitting effective competition in the consumer electronic
products industry, we relocated all of our manufacturing operations to China to
take advantage of the large available pool of lower cost manufacturing labor. We
located our manufacturing facilities within 50 miles of Hong Kong in order to
facilitate transportation of our products to markets outside of China, while
benefiting from the advantages associated with manufacturing in China and in the
Shenzhen Special Economy Zone.

     We are actively seeking to control production costs by such means as
redesigning our existing products in order to decrease material and labor costs,
controlling the number of our employees, increasing the efficiency of workers by
providing regular training and tools and redesigning the flow of our production
lines.

     Increasing Production Capacity. We have significantly expanded our
production capacity by leasing additional factory and dormitory buildings
immediately adjacent to our factory in China. We have the opportunity to
increase our capacity through the construction and/or leasing of additional
factory and dormitory space near our factory in China. Further, on August 13,
2006, Bonso entered into a letter of intent to acquire approximately 100,000
square meters of land for future expansion. This new piece of land is more than
triple the size of the land upon which the Company's existing facilities are
located in Shenzhen, China. We intend to carefully monitor our capacity needs
and to expand capacity as necessary.

     Customers and Marketing

     We sell our products primarily in the United States and Europe. Customers
for our products are primarily OEMs, OBMs and ODMs, which market the products
under their own brand names. We continue to market our products to OEM's, OBM's
and ODM's at trade shows, via e-mail and facsimile. Gram Precision engages in
the distribution and marketing of pocket and industrial scales in the United

                                       17
<PAGE>

States, Canada, and Europe. Korona engages in the distribution and marketing of
electronic and mechanical body and kitchen scales directly to the retail and
catalogue markets in Europe.

     Net export sales to customers by geographic area consisted of the following
for each of the three years ended March 31, 2004, 2005 and 2006.

     Certain comparative figures have been reclassified to conform with the
current year's presentation.
<TABLE>
<CAPTION>

                                             Year ended March 31,
                     --------------------------------------------------------------------
                            2004                    2005                      2006
                     ------------------      ------------------       -------------------
<S>                   <C>                    <C>                      <C>
  Canada              $3,768,000     5%       $2,686,951     4%         $1,637,447     3%

  United States      $41,302,191    55%      $38,638,906    55%        $37,352,618    58%
  of America

  Germany            $17,429,011    23%      $15,025,103    22%       $13,302,506     21%

  United Kingdom      $3,879,272     5%       $2,769,900     4%         $2,262,160     3%

  Other EC           $ 6,483,109     9%       $7,948,970    11%         $7,997,740    12%
  Countries

  Asia and           $ 2,102,502     3%       $2,532,362     4%         $1,990,492     3%
  Others

  Total              $74,964,085   100%      $69,602,192   100%        $64,542,963   100%

</TABLE>

     We maintain a marketing and sales team of eleven people in China, a
marketing team of two people in Canada for Gram Precision and a sales team of
six people at Korona in Germany (including two sales representative and four
persons who are directly employed by Korona). Also, our experienced engineering
teams work directly with our customers to develop and tailor our products to
meet the customer's specific needs. We market our products primarily through a
combination of direct contact by our experienced in-house technical sales staff
and our sales representatives, and through the use of direct mail catalogues and
product literature. Korona sells its products primarily through direct contact
by sales teams with customers. External sales agents may be hired to conduct
sales and we may pay commissions to the agents in connection with the sales.
During the fiscal years ended March 31, 2004, 2005 and 2006 we recorded a total
commission payment of $445,376, $440,743 and $379,162, respectively. In
addition, our marketing teams contact existing and potential customers by
telephone, mail, facsimile, and in person.

     A list of our major electronics sensor customers for each of the prior
three fiscal years follows:


                                       18
<PAGE>

                     Percent of Sales - Year ended March 31,

  Electronics Sensor Customers                  2004         2005         2006
  ----------------------------                  ----         ----         ----

  Sunbeam Products, Inc.                         14%          17%          16%

  Salter Housewares Ltd.                          6%          3%            4%

  Media Markt und Saturn Verwaltungs              5%          6%            5%
  GmbH

  Pitney Bowes, Inc.                              2%          6%            7%


     A list of our major telecommunications customers for each of the prior
three fiscal years follows:

                    Percent of Sales - Year ended March 31,

  Telecommunications Customer                   2004         2005         2006
  ---------------------------                   ----         ----         ----

  TTI Tech Co., Ltd.                             25%          11%          16%

  Global Link Corporation Ltd.                   11%          17%          16%

     Sales of our products to OEMs and ODM's accounted for approximately 70% of
our total net sales in the year ended March 31, 2004, 67% for the year ended
March 31, 2005 and 70% for the year ended March 31, 2006. Korona contributed
$15,459,585 of our net sales or 21% of net sales for the year ended March 31,
2004, $16,959,313 of our total net sales or 24% of total net sales for the year
ended March 31, 2005 and $13,672,447 or 21% of total net sales for the year
ended March 31, 2006. Gram Precision contributed $6,340,999 of our net sales or
8% of net sales for the year ended March 31, 2004, $5,961,367 of our total net
sales or 9% of total net sales for the year ended March 31, 2005 and $5,571,132
or 9% of total net sales for the year ended March 31, 2006.

     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,
South Korea, Hong Kong and China.

     During the fiscal years ended March 31, 2005 and March 31, 2006, the costs
of component parts increased due to the increase in the price of oil used in the
production of components such as plastic resin, steel and other raw materials.
Further, we believe that costs of component parts have also increased due to an
increase in worldwide demand for electronic components such as those used in the
production of our products. 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 and allowing 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.

                                       19
<PAGE>

     Quality Control

     We have received ISO 9001: 2000 certification from Det Norske Veritas
Certification B.V., the Netherlands. The ISO 9001: 2000 certification was
awarded to our subsidiary, Bonso Electronics Limited and to Bonso Electronics
Limited's subsidiary Bonso Electronics (Shenzhen) Company Limited. Further, we
have received TL 9000 certification for our telecommunications products. We also
received certification according to the Environmental Management Standards of
ISO 14001:2004 and the Occupational Health and Safety Management Standard of
OHSAS 18001.

     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. The TL
9000 standard was developed by the Quality Excellence for Suppliers of
Telecommunications (QuEST) Leadership Forum. The TL 9000 certification process
was developed exclusively to address the quality of products and services
provided by suppliers to the telecommunications industry.

     By integrating the Occupational Health and Safety Management Standard of
OHSAS 18001 into our quality and environmental systems, we have created a total
Integrated Management System (IMS) - Quality, Environment and Health and Safety
by combining ISO9001, ISO 14001 and OHSAS 18001 into one
Quality/Environment/Health and Safety registration.

     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, sold after July 1, 2006. We believe that we can manufacture compliant
products, and believe that we can be assured a supply of compliant components
from suppliers.

     Patents, Licenses, Trademarks, Franchises, Concessions and Royalty
     Agreements

     We have obtained a trademark registration in Hong Kong and China for the
marks BONSO and MODUS in connection with certain electronic apparatus. Also, we
have acquired the trademark registration rights to the KORONA mark for 16
European countries and in the United States. Gram Precision has one patent for a
digital scale and fifteen trademarks.

     We rely on a combination of patent, trademark and trade secret laws,
employee and third 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 was 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

                                       20
<PAGE>

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/Competition

     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. We have successfully lowered the costs for our research and
development team by moving most research and development activities to our
facility in China. We principally employ Chinese engineers and technicians at
costs that are substantially lower than that would be required in Hong Kong. At
March 31, 2006, we employed 84 individuals in Hong Kong and China for our
engineering staffs, which are at various times engaged in research and
development. The major responsibility of the product design and research and
development personnel is to develop and produce designs of scales products to
the satisfaction of and in accordance with the specifications provided by the
ODMs and OEMs. We anticipate hiring additional research and development
personnel to meet the increased demand for scales products.

     The manufacturing 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 $739,730 during the fiscal year ended March 31, 2004,
$710,355 during the fiscal year ended March 31, 2005 and $847,401 during the
fiscal year ended March 31, 2006.

     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 both
scales and telecommunications products usually dip following the increase in
sales during the Christmas season. A greater number of our sales of scales and
telecommunications products occur between the months of April and September for
shipment in the summer in preparation of the Christmas holiday. Throughout the

                                       21
<PAGE>

remainder of the year, our products do not appear to be subject to significant
seasonal variation. The summer months are generally the lowest sales point of
the calendar year for Gram Precision and Korona. Sales of telecommunication
products are generally higher in the summer months off-setting Gram Precision's
and Korona's decline in sales. However, past sales patterns may not be
indicative of future performance.

     Employee incentive compensation is conditioned on the employee's return to
work following the Chinese New Year and is paid to employees following the
reopening of the factory after the holidays. We believe that this method has
resulted in lower employee turnover than might otherwise have occurred.

     Transportation

     Typically, we sell products either F.O.B. Hong Kong or Yantian (Shenzhen),
which means that our customers are responsible for the transportation of
finished products from Hong Kong or Yantian (Shenzhen) 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 into the United States, 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.

     Government Regulation

     We are subject to comprehensive and changing foreign, federal, state and
local environmental requirements, including those governing discharges to 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.

     Foreign Operations

     A significant amount of 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 arise that
threaten the status quo involving trade between the United States and China.
These controversies could materially and adversely affect our business by, among
other things, causing our products in the United States to become more expensive
resulting in a reduction in the demand for our products by customers in the
United States.

     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

                                       22
<PAGE>

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 Structure.

     We have one wholly-owned Hong Kong subsidiary - Bonso Electronics Limited
("BEL"). BEL was organized under the laws of Hong Kong and is responsible for
the design, development, manufacture and sale of 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 property investments in Hong Kong and China.

     BEL also has one active PRC subsidiary - Bonso Electronics (Shenzhen)
Company Limited, which is organized under the laws of the PRC, and is used to
manufacture all of our products.

     We also have another wholly-owned British Virgin Islands subsidiary - Modus
Enterprise International Inc., which owns 100% of Korona and 51% of Gram
Precision. Korona is engaged in marketing, distributing and retailing of
consumer bathroom and kitchen scale products throughout Europe. Gram Precision
is primarily engaged in the distribution and marketing of pocket and industrial
scales in the United States, Canada and Europe.

Property, Plant and Equipment.


     British Virgin Islands

     Our offices are located at Cragmuir Chambers, Road Town, Tortola, British
Virgin Islands. Only corporate administrative matters are conducted at such
offices, through our registered agent, HWR Services Limited.

                                       23
<PAGE>


     Hong Kong

     We own approximately 5,000 square feet of office space located at Unit 1106
- 1110, 11/F, Star House, 3 Salisbury Road, Tsimshatsui, Kowloon, Hong Kong as
our principal executive office.

     We own approximately 4,593 square feet on the 8th floor of the Universal
Industrial Centre, 23-25 Shan Mei Street, Fo Tan, Shatin, New Territories, Hong
Kong. This facility now is used exclusively as warehouse space.

     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 to Mr. Anthony So
as part of his compensation. See Item 6 - "Directors, Senior Management and
Employees."

     China

     Our existing factory in China is located at Shenzhen in the DaYang
Synthetical Development District, close to the border between Hong Kong and
China. This factory consists of five factory buildings, which contain
approximately 333,000 square feet, four workers' dormitories, containing
approximately 181,000 square feet, a canteen and recreation center of
approximately 25,500 square feet, an office building, consisting of
approximately 25,500 square feet, and two staff quarters for our supervisory
employees, consisting of approximately 35,000 square feet, for a total of
approximately 600,000 square feet. All of the facilities noted above are
wholly-owned, except three factory buildings and two workers' dormitories with
approximately 200,000 square feet. We pay a monthly management fee of $2,175
pursuant to a Contract on the Management of Land with Shenzhen Baoan Fuan
Industrial Company for our own premises.

     We also own three residential properties described as follows:

o    Lijingge Court, Unit F, 15th Floor, Hai Li Building, Shenzhen, China,
     consisting of approximately 1,000 square feet.

o    Lakeview Mansion, B-20C, Hujinju Building No. 63, Xinan Road, Boacheng
     Baoan Shenzhen, China, consisting of approximately 1,591 square feet.

o    Lakeview Mansion, B-11B, Hujinju Building No. 63, Xinan Road, Boacheng
     Baoan Shenzhen, China, consisting of approximately 1,335 square feet.

     The property for the Lakeview Mansion, B-11B is rented to an unaffiliated
third party for RMB3,800 per month (approximately $473). The Lakeview Mansion
property B-20C is utilized by directors when they require accommodations in
China. The Hai Li Building is vacant.

     We also own two office units in Beijing, namely Units 12 and 13 on the 3rd
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. Both Units are rented to
unaffiliated third parties for an aggregate monthly rental of RMB16,215, or
approximately $2,018.

                                       24
<PAGE>

     On August 13, 2006, Bonso entered into a letter of intent to acquire
approximately 100,000 square meters of land for future expansion. Under the
terms of the letter of intent the cost of the land is approximately $760,000.

     This new piece of land is more than triple the size of the land upon which
the Company's existing facilities are located in Shenzhen, China. It is expected
that the land transfer will be completed in 2007 and the first phase of
construction of the new manufacturing facilities will be completed in 2009. The
projected capital expenditure for the first phase of investment is approximately
$8,000,000.

     Germany

     Korona leases approximately 885 square meters of office space located at
Auf den Huttenberg 1-3, 35428 Langgons-Niederkleen, Germany. This facility is
used as Korona's principal executive offices and the monthly rent for this
facility is (euro) 6,427.12.

     Poland

     Korona leases approximately 86 square meters of office space located at ul.
Podmiejska 18, 01-498 Warszawa. The facility is used as office space and the
monthly rent for this facility is (euro) 533.

     United States

     Vector Distribution Systems Inc., a subsidiary of Gram Precision, leases
approximately 7,000 square feet of office and warehouse space located at. 5075
West Diablo Drive, Suite 206, Las Vegas, NV 89118-6071.This facility is used as
warehouse and the monthly rent for this facility is approximately $7,611.

     Canada

     Gram Precision, through an affiliated entity, owns approximately 5,028
square feet of office space located at 31-5155 Spectrum Way, Mississauga,
Ontario, L4W 5A1, Canada. This facility is used as Gram Precision's principal
executive offices and the monthly payment to the affiliated entity for this
facility is CDN 4,250 including Goods & Services Tax. Gram Precision sold this
facility effective April 1, 2005 and moved to a new facility located at 2855
Argentia Road, Unit 1, Mississauga, Ontario, L5N8G6, with approximately 10,800
square feet of office space. The monthly rent for this facility is CDN 11,123
including Goods & Services Tax.

Adequacy of Facilities

     We believe the manufacturing complex will be adequate for our reasonably
foreseeable needs.

Item 5. Operating and Financial Review and Prospects

                                       25
<PAGE>

     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 attached
elsewhere in this Annual Report.

Overview

     We derive our revenues principally from the sale of sensor-based and
wireless products manufactured in China, which represent 67% and 32% of total
sales for fiscal year ended March 31, 2006, respectively. As mentioned in Item 3
- "Key Information - Risk factors relating to our business," we are dependent
upon a limited number of major customers for a significant portion of our
revenues. Our revenues and business operation will be subject to fluctuation if
there is loss of orders from any of our largest customers. Further, the pricing
of our scales and telecommunication products are becoming increasingly
competitive, especially to our customers in the United States and Germany, who
contributed over 79% of our revenue during the year ended March 31, 2006.

     In the fiscal year ended March 31, 2004, net sales was $74,964,000 and net
income was approximately $2,269,000, in the fiscal year ended March 31, 2005,
net sales decreased to approximately $69,602,000 and net income increased to
approximately $3,350,000. During the fiscal year ended March 31, 2006 net sales
decreased to approximately $64,543,000 and net income decreased to approximately
$484,000.

     Although labor costs are increasing in China, our labor costs continue to
represent a relatively small percentage of our total production costs. We
believe that increased labor costs in China will not have a significant effect
on our total production costs or results of operations, and that we will be able
to continue to increase our production at our manufacturing facility without
substantially increasing our non-production salaries and related costs. However,
there can be no assurance that labor costs will not increase or that any
increase in labor costs will not have a material adverse effect upon our results
of operations.

     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.

Operating Results

     The following table sets forth selected income data as a percentage of net
sales for the periods indicated.






                                       26
<PAGE>

                                                    Fiscal Year Ended
                                            -------------------------------
Income Statement Data                       2004          2005         2006
---------------------                       ----          ----         ----
Net Sales
Cost of Sales                              (76.7)        (76.3)       (79.2)
Gross Margin                                23.3          23.7         20.8
Selling Expenses                            (4.1)         (3.7)        (3.3)
Salaries and related costs                  (6.8)         (7.5)        (8.8)
Research and Development expenses           (1.0)         (1.0)        (1.3)
Administration and general expenses         (7.3)         (5.9)        (5.3)
Amortization of brand name                  (0.3)         (0.3)        (0.3)
Impairment of Goodwill                        -             -          (0.4)

Income (Loss) from Operations
-----------------------------
Interest income                              0.1           0.1          0.3
Interest Expense                            (0.7)         (0.6)        (0.8)
Foreign Exchange gain/(Loss)                 0.0          (0.1)        (0.3)
Other income                                 0.3           0.5          0.3
Income before income taxes
  and minority interest                      3.5           5.2          1.0
Income Tax Expense                          (0.5)         (0.4)        (0.2)
Minority Interest                            0.0           0.0          0.0
Net income                                   3.0           4.8          0.8


Fiscal year ended March 31, 2006 compared to fiscal year ended March 31, 2005

     Net Sales. Our sales decreased approximately $5,059,000 or 7.27% from
approximately $69,602,000 for the year ended March 31, 2005, to approximately
$64,543,000 for the year ended March 31, 2006. The decrease in sales was
primarily the result of decreased of scales products caused by the decreased
orders from our major scale customers. Sales of our scales and others business
decreased from approximately $48,946,000 for the year ended March 31, 2005, to
approximately $43,792,000 for the year ended March 31,2006, and sales for
telecommunications products increased 0.45% from approximately $20,656,000 for
the year ended March 31, 2005, to approximately $20,751,000 for the year ended
March 31, 2006.

     Gross Margin. Gross margin as a percentage of revenue declined to
approximately 20.8% during the year ended March 31, 2006 as compared to
approximately 23.7% during the year ended March 31, 2005. This decline was
primarily the result of our cost increase in the area of materials and labor and
the increased pressure on the sales prices from our customers for both our
telecommunication products and scales products.

     Selling Expenses. Selling expenses decreased by approximately $485,000 or
18.67% from approximately $2,595,000 for the period ended March 31, 2005 to
approximately $2,111,000 for the period ended March 31, 2006. This decrease was
primarily the result of decreased commissions paid as a result of our decreased
sales. As a percentage of revenue, selling expenses decreased to 3.27% during
the year ended March 31, 2006 as compared to 3.73% during the year ended March
31, 2005.

                                       27
<PAGE>

     Salaries And Related Costs. Salaries and related costs increased by
approximately $465,000 or 8.91% from approximately $5,216,000 for the year ended
March 31, 2005 to approximately $5,681,000 for the year ended March 31, 2006.
This increase is due to both the increase in the number of staff and the
increase in salaries to our employees.

     Research And Development. Research and development expenses increased
approximately $137,000 or 19.30% from approximately $710,000 for the year ended
March 31, 2005 to approximately $847,000 for the year ended March 31, 2006. The
increase in research and development was primarily due to increased research and
development activities, such as hiring of additional staff, certification, etc.
for both the telecommunications products and new scale models. Research and
Development as a percentage of revenue increased to 1.31% during the year ended
March 31, 2006 as compared to 1.02% during the year ended March 31, 2005.

     Administration And General Expenses. Administration and general expenses
decreased by approximately $659,000 or 16.13% from approximately $4,079,000 for
the year ended March 31, 2005 to approximately $3,420,000 for the year ended
March 31, 2006. This decrease was primarily due to reduced legal & professional
fee and no consultancy fee during the year ended March 31, 2006.

     Amortization Of Brand Name. During the years ended March 31, 2005 and 2006,
we amortized $200,000 relating to the brand names acquired upon the acquisition
of Korona. Brand names are amortized using the straight-line method over the
related estimated useful life of 15 years.

     Impairment of Goodwill. Based on the assessment for the year ended March
31, 2006, the Group made a provision for impairment of goodwill of approximately
$258,000 for one of the subsidiaries, Korona Hauschaltswaren Gmbh & Co.KG, due
to the continued weak performance of the scales business

     Income From Operations. As a result of the above changes, income from
operations decreased by 75.13% from approximately $3,663,000 for the year ended
March 31, 2005 to approximately $911,000 for the year ended March 31, 2006.

     Interest Income. Interest income increased by $121,000 or 60% from
approximately $81,000 for the year ended March 31, 2005 to $202,000 for the year
ended March 31, 2006. The increase were primarily the result of depositing our
cash into higher yield accounts and the increase in interest rates.

     Interest Expense. Interest expense increased approximately $88,000 or
20.86% from approximately $417,000 for the year ended March 31, 2005 to
approximately $504,000 for the year ended March 31, 2006. This increase was
primarily due to the increase in interest rates on funds borrowed during the
year ended March 31, 2006.

     Foreign Exchange Losses/Gains. Foreign exchange loss increased from a loss
of approximately $98,000 for the year ended March 31, 2005 to a loss of
approximately $184,000 for the year ended March 31, 2006. The increase was
primarily attributable to the increased strength of the Canadian Dollar and

                                       28
<PAGE>

especially the value of the Chinese Renminbi against the U.S. Dollar. On top of
that, the RMB will no longer be linked to the US currency but rather to a basket
of currencies with a 0.3% margin of fluctuation. This change in policy has
resulted in an approximately 3.7% appreciation of the RMB against the U.S.
dollar between July 21, 2005 and August 21, 2006.

     Other Income. Other income decreased approximately $182,000 or 48.92% from
approximately $372,000 for the year ended March 31,2005, to approximately
$190,000 for the year ended March 31, 2006. The decrease was primarily due to a
decrease in the disposal of fixed assets and decreased rental income from 2 of
the properties in PRC

     Income Tax Expense. Income tax expense decreased approximately $135,000 or
50.6% from approximately $266,000 during the year ended March 31, 2005 to
$131,000 during the year ended March 31, 2006, representing approximately 0.4%
and approximately 0.2% of net sales respectively. The decrease was primarily the
result of decrease profit in the current year.

     Net Income. As a result of the above changes, net income decreased from
approximately $3,350,000 for the period ended March 31, 2005 to $484,000 for the
period ended March 31, 2006, a decrease of approximately $2,866,000, or 85.55%.

Fiscal year ended March 31, 2005 compared to fiscal year ended March 31, 2004

     Net Sales. Our net sales decreased $5,361,893, or 7.2% from $74,964,085 for
the fiscal year ended March 31, 2004, to $69,602,192 for the fiscal year ended
March 31, 2005. The decrease in net sales was primarily the result of decreased
demand for our telecommunications products. Sales for telecommunications
products were down $6,793,831 or 24.7% from $27,450,322 during the fiscal year
ended March 31, 2004, to $20,656,491 for the fiscal year ended March 31, 2005.
The sales decreased from our telecommunications segment as a result of decrease
demand from one of our major existing telecommunications customer, TTI Tech Co.,
Ltd. The sales to this customer dropped from $18,664,970 during the fiscal year
ended March 31, 2004 to $7,309,546 during the fiscal year ended March 31, 2005,
a total of $11,355,424. Sales of our scales business increased $1,045,535 or
2.3% from $46,211,039 during the fiscal year ended March 31, 2004, to
$47,256,574 during the fiscal year ended March 31, 2005, and the increased sales
from our scales business was primarily the result of increase sales to existing
customers. See "Customers and Marketing".

     Costs of Good Sold. Costs of goods sold decreased $4,342,693 or 7.6 % from
$57,481,103 for the fiscal year ended March 31, 2004, to $53,138,410 for the
fiscal year ended March 31, 2005. The decreased costs of good sold were
primarily the result of decreased sales and the ability to offset some of the
increased material and labor cost by initiating design and manufacturing process
changes.

     Gross Margin. Gross margin increased slightly from 23.3% for the fiscal
year ended March 31, 2004, to 23.7% for the fiscal year ended March 31, 2005 as
a result of the decrease in costs of goods sold.

     Selling Expenses. Selling expenses decreased $526,678 or 16.9% from
$3,121,900 during the fiscal year ended March 31, 2004 to $2,595,222 during the
fiscal year ended March 31, 2005. The decrease in selling expenses were

                                       29
<PAGE>

primarily the result of decreased sales experienced during the year ended March
31, 2005 when compared to the same period in the prior year and the
consolidation of shipments in containers to save local freight costs arising
from the transportation from the Company's manufacturing facility in the PRC to
the HK/PRC port.

     Salaries And Related Costs. Salaries and related costs increased by $65,453
or 1.3% from $5,150,345 for the fiscal year ended March 31, 2004 compared to
$5,215,798 for the fiscal year ended March 31, 2005. The increase in salaries
and related costs was primarily the result of an increase in the number of
employees in the production department during the fiscal year ended March 31,
2005.

     Research And Development Expenses. Research and development expenses
decreased $29,375 or 4.0% from $739,730 during the fiscal year ended March 31,
2004, to $710,355 during the fiscal year ended March 31, 2005. The decrease in
research and development expenses was primarily the result of decreased research
and development activities for our telecommunications products. Engineering
salaries composed the largest part of Research and Development expenses and
amounted to $559,855.

     Administration And General Expenses. Administration and general expenses
decreased by $1,359,794 or 25% from $5,438,995 during the fiscal year ended
March 31, 2004 to $4,079,201 during the fiscal year ended March 31, 2005. This
decrease was primarily the result of higher legal and professional fees as a
result of the arbitration of Augusta in fiscal year ended March 31, 2004, which
was resolved in fiscal year ended March 31, 2005.

     Amortization Of Brand Name. During the fiscal years ended March 31, 2004
and 2005 we amortized $200,000 relating to the brand name acquired upon the
acquisition of Korona. The brand name is amortized using the straight line
method over the related estimated useful life of 15 years.

     Income From Operations. As a result of the above changes, income from
operations increased by $831,194 or 29.4% from $2,832,012 during the fiscal year
ended March 31, 2004 to $3,663,206 during the fiscal year ended March 31, 2005.

     Interest Income. Interest income increased by $23,786 or 41.6% from $57,169
during the fiscal year ended March 31, 2004, to $80,955 during the fiscal year
ended March 31, 2005. The increase was primarily the result of depositing our
cash into higher yield accounts.

     Interest Expense. Interest expense decreased by $82,738 or 16.6% from
$499,512 during the fiscal year ended March 31, 2004 to $416,774 during the
fiscal year ended March 31, 2005. This decrease in interest expenses were
primarily the result of the decrease in the amount borrowed from lenders and
lower interest rates on the amounts borrowed.

     Foreign Exchange Gain/Loss. Foreign currency exchange rates produced a loss
of $98,051 during the fiscal year ended March 31, 2005, as compared to a gain of
$15,081 during the fiscal year ended March 31, 2004. The foreign currency loss
was primarily attributable to the devaluation of the United States dollar
compared to other foreign currencies, especially the Euro and the Canadian
dollar.

                                       30
<PAGE>

     Other Income. Other income increased $147,841 or 65.9% from $224,292 during
the fiscal year ended March 31, 2004 to $372,133 during the fiscal year ended
March 31, 2005. The increase was primarily the result of rental income during
the year.

     Income Tax Expense. Income tax expense decreased $135,445 or 33.8% from
$401,504 during the fiscal year ended March 31, 2004 as compared to $266,059
during the fiscal year ended March 31, 2005, representing 0.5% and 0.4% of net
sales respectively. The decrease was primarily the result of the decrease in
amount paid and payable in taxes as a result of the decrease in our income of
the subsidiaries in Germany and Canada during the fiscal year ended March 31
2005.

     Net Income. As a result of the above changes, net income during the fiscal
year ended March 31, 2005 was $3,349,612, compared to $2,268,610 during the
fiscal year ended March 31, 2004, an increase of $1,081,002 or approximately
47.7%.

Impact of Inflation

     We believe that inflation has not had a material affect on our business
during the fiscal year ended March 31, 2006. During the fiscal years ended March
31, 2002 to March 31, 2006, Hong Kong experienced a period of deflation and
Germany sustained a low inflation rate. 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 cost in order to keep pace with inflation.
Although our costs of components used in the manufacture of our products have
been relatively stable, we believe that any possible significant increase in
material costs would affect the entire electronics industry. Thus, it would not
have a negative material impact on our competitive position in the industry.

Taxation

     Under current British Virgin Islands law, we are not subject to tax on our
income. The basic corporate tax rate for Foreign Investment Enterprises in China
is currently 33% (30% state tax and 3% local tax). However, because we are
located in Shenzhen and are involved in production operations, we paid state tax
at a special reduced state tax rate of 7.5% for the period from April 1, 2005 to
December 31, 2005. The state tax rate applicable from January 1, 2006 to March
31, 2006 is 10%. In addition, the local tax authorities in the regions in which
our subsidiaries operate in Shenzhen are not currently assessing any local tax.

     Most of our subsidiaries' profits accrue in Hong Kong, Canada and Germany
where the corporate tax rates are currently 17.5%, 36% and 28%, respectively.
However, as Korona is a partnership, it is only subject to a local statutory tax
rate in Germany of 14.17%. 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, Germany, Canada, Hong Kong or China.

                                       31
<PAGE>

     Efforts by the Chinese central government to strictly enforce tax laws and
to fulfill its commitments upon entry into the World Trade Organization, by
unifying the income tax laws applicable to domestic companies and foreign
investment enterprises respectively, could result in decisions affecting and/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 us
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.

     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% 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
(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 pay for our material components principally in United States Dollars
and Hong Kong Dollars. A very small portion of the components used are paid for
in Japanese Yen. 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 previously arose from potential
fluctuations in the Chinese Renminbi and the devaluation in United States
Dollars; management believes that it may be possible that there will be some
fluctuation in the coming year.

     Gram Precision principally pays for its products in United States Dollars
and Canadian dollars and sells its products in Canadian, United States Dollars,
and United Kingdom Pound Sterling. Korona primarily pays for its products in
United States Dollars and Euros and sells its products in Euros. During the
fiscal year ended March 31, 2006, we experienced a foreign currency loss of
$183,887. We don't currently engage in hedging transactions; however we may
undertake hedging activities in the future.

     A summary of our debts from our banking facilities utilized as at March 31,
2006 which was subjected to foreign currency risk is as below:

                                       32
<PAGE>

     Currencies:                             March 31, 2006
     -----------                             --------------

     Euro                                        $2,936,467

     Hong Kong Dollars                           $2,261,593

     United States Dollars                       $1,041,883

     Canadian Dollars                              $526,780
                                             --------------

     Total                                       $6,766,723

     All the balances above are 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. On July 21, 2005, the Peoples Bank of China
announced it would revalue the RMB by 2.1%, linking the RMB to a "basket of
currencies" of China's main trading partners, rather than directly at 8.28 RMB
to the dollar as it has for a decade. However, the announcement did not define
the composition of the basket. Under the new rules, the RMB will be allowed to
move 0.3 percent on a daily basis against the dollar. As of September 15, 2006,
the RMB was valued at 7.9465 per US Dollar. There can be no assurance that these
currencies will remain stable or will fluctuate to our benefit.

     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. Management intends to take corrective action in an effort to attempt to
minimize any negative impact foreign currency fluctuations may have upon us.
However, to date we have not done so. If we are unsuccessful in hedging against
currency fluctuations, it may have a material adverse effect on us.

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

                                       33
<PAGE>

access to assets through special purpose entities, as sources of liquidity. Our
primary uses of cash have been to fund expansions and upgrades of our
manufacturing facilities, to make strategic acquisitions and to fund increases
in inventory and accounts receivable resulting from increased sales.

     Operating activities provided $2,997,567 of net cash for the fiscal year
ended March 31, 2006 compared to $1,935,677 of net cash for the fiscal year
ended March 31, 2005. This increase in the amount of cash provided by operating
activities was primarily attributed able to an increase in cash provided by the
receipt of trade receivables offset by an increase in inventory.

     As of March 31, 2006, we had $8,582,257 in cash and cash equivalents as
compared to $9,707,588 as of March 31, 2005. Working capital at March 31, 2006,
was $16,847,370 compared to $15,345,432 at March 31, 2005. There are no other
material unused sources of liquid assets. 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, 2006, we had $6,740,229 in trade receivable as compared to
$10,585,968 as of March 31, 2005. The decrease of $3,845,739 from March 31, 2005
was caused by faster repayment from customers following the change of payment
terms for selected customers from 60 days open account to 30 days open account.

     As of March 31, 2006, we had $15,035,216 in inventories as compared to
$11,402,239 as of March 31, 2005. The increase of $3,632,977 was primarily
attributable to the increase of work in progress and finished goods to meet
shipment demands in April 2006.

     As of March 31, 2006, we had a total of $9,598,886 in notes payable and
accounts payable as compared to $10,683,304 as of March 31, 2005. The decrease
of $1,084,418 was primarily attributable to timely payment to our vendors.

     As of March 31, 2006 we had in place general banking facilities with 9
financial institutions with amounts available aggregating $36,018,301. Such
facilities include the ability to obtain overdrafts, letters of credit,
short-term notes payable, short-term loans and long-term loans. As of March 31,
2006, we had utilized $6,766,723 from these general banking facilities. Interest
on this indebtedness fluctuates with the prime rate and HIBOR as set by the Hong
Kong Bankers Association; the EONIA as set by the Germany Bankers Association
and the Prime rate as set by the Canada Bankers Association. The bank credit
facilities are collateralized by certain of our bank deposits, and bank
guarantees. Our bank credit facilities are 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. Excluding the current portion of long-term debt and
capital lease obligations, the amounts of total short-term bank borrowings
outstanding as of March 31, 2006 and 2005 were $2,936,467 and $4,742,685,
respectively. During the fiscal years ended March 31, 2006 and 2005, we paid a
total of $494,310 and $416,774, respectively, in interest on indebtedness.

                                       34
<PAGE>

     Our current ratio (current assets divided by current liabilities) increased
from 1.84 as of March 31, 2005 to 2.08 as of March 31, 2006. Our quick ratio
(cash and cash equivalents, restricted cash deposits and receivables divided by
current liabilities) decreased from 1.22 as of March 31, 2005 to 1.12 as of
March 31, 2006.

     We believe that our cash flows from operations, our current cash balance
and funds available under our working capital and credit facilities will be
sufficient to meet our working capital needs and planned capital expenditures
for the next 12 months. However, a decrease in the demand for our products may
affect our internally generated funds, and we would further look to our banking
facilities to meet our working capital demands.

     Commitments

     The following table sets forth information with respect to our commitments
as of March 31, 2006.
<TABLE>
<CAPTION>

                                                       Payments due by Period
                                     -------------------------------------------------------------
                          Total      Within 1 year   Within 1 to 3    Within 3 to     More than 5
                                                         years          5 years          years
                          -----      -------------   -------------    -----------     -----------
<S>                   <C>             <C>             <C>             <C>             <C>
Letters of credit     $ 3,310,673     $ 3,310,673     $         0     $         0     $         0

Short-term loans      $ 2,936,467     $ 2,936,467     $         0     $         0     $         0

Long-term loans       $    48,329     $    48,329     $         0     $         0     $         0

Operating Leases      $ 3,902,878     $ 1,032,270     $ 1,758,307     $ 1,112,301     $         0

 Capital Leases       $   166,802     $   166,802     $         0     $         0     $         0

Acquisitions of
Plant & Machineries   $    33,085     $    33,085     $         0     $         0     $         0

Interest on loans
and capital leases    $   119,905     $   119,905     $         0     $         0     $         0


Total                 $10,518,139     $ 7,647,531     $ 1,758,307     $ 1,112,301     $         0


</TABLE>

Interest on loans and capital leases is estimated based on the interest rate of
HIBOR+ 1.5% to +1.8%

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
inventories, impairment, brand name, trade receivables, and deferred income
taxes.

                                       35
<PAGE>

     Below, we discuss these policies further, as well as the estimates and
judgments involved. We also have other key accounting policies, such as revenue
recognition. We believe that these 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. See discussion of all our
significant accounting policies in footnote 1 to the Consolidated Financial
Statements included elsewhere in this Annual Report.

     Inventories

     Inventories are stated at the lower of cost or net realizable value with
cost determined on a first-in, first-out basis. Net realizable value is the
price at which inventories can be sold in the normal course of business after
allowing for the costs of completion and disposal. Inventories are reduced by
the write-off of obsolete and slow moving parts, which are determined based on
management's assessment of their current status.

     This provision requires judgment regarding the marketability of certain
inventories as certain inventories may be identified as in good condition that
are subsequently obsolete and which could result in a subsequent write-off of
the related inventories to the statement of operations. Any change in the
marketability of inventories that were not previously provided for could
significantly change the calculation of reserves and the results of our
operations.

     Revenue recognition

     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 transfers to the customer, which is
generally when the product is shipped to the customer from our facility.
Shipping costs billed to our customers are included within revenue. Associated
costs are classified in cost of goods sold.

     The Company provides to certain customers an additional 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 at the time of sale and estimated based on past
history. Historically, we have not experienced material differences between our
estimated amounts of quality returns, refunds, rebates and discounts and the
actual results. In all contracts, there is no price protection or similar
privileges in relation to the sale of goods.

     The Company's revenue recognition policies do not differ among its
significant product lines (i.e. sensor based versus wireless products) and among
various marketing venues use by the Company (i.e. distributors and direct sales
force), and do not vary in different parts of the world.

                                       36
<PAGE>

     Long-Lived Assets Including Goodwill and Other Acquired Intangible Assets

     Long-lived assets held and used by the Company and intangible assets,
excluding goodwill, 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. For the year ended March 31, 2006, the
Company made a provision for impairment of approximately $69,077, on investment
properties due to the decline in market value.

     Goodwill is subject to an annual impairment review. The evaluation of
goodwill for impairment involves two steps: (1) the identification of potential
impairment by comparing the fair value of a reporting unit with its carrying
amount, including goodwill and (2) the measurement of the amount of goodwill
loss by comparing the implied fair value of the reporting unit goodwill with the
carrying amount of that goodwill and recognizing a loss by the excess of the
latter over the former. The Company measures fair value based upon internal
models. Based on the assessment for the year ended March 31, 2006, the Company
made a provision for impairment of goodwill of approximately $258,141 for Korona
due to the continued weak performance of the scales business.

     Brand Name

     Brand name acquired as part of the purchase of a business is capitalized
based on the estimated fair value as at the date of acquisition and amortized
using the straight-line method over the related estimated useful life of 15
years.

     Expected useful lives are reviewed at each balance sheet date and, where
these differ significantly from previous estimates, amortization periods are
changed accordingly. Where an indication of impairment exists, such as the down
turn of economic inflow from the brand name, changes in business plan and so on,
the carrying amounts of brand name is assessed and written down to their
recoverable amounts. The measurement of the fair value of brand name is subject
to management's assumptions regarding future estimated cash flows, discount
rates, etc. Changes in these assumptions could significantly affect the
recording of an impairment charge related to this asset.

     Trade Receivables

     Provision is made against trade receivables to the extent that collection
is considered to be doubtful. This provision is primarily determined from our
monthly aging analysis. It also requires judgment regarding the collectibility
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. Any change
in the collectibility of accounts receivable that were not previously provided
for could significantly change the calculation of such provision and the results
of our operations.

                                       37
<PAGE>

     Deferred Income Taxes

     Amounts in the consolidated financial statements related to income taxes
are calculated using the principles of SFAS No. 109, "Accounting for Income
Taxes". SFAS No. 109 requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred tax assets
and liabilities are determined based on the temporary differences between the
financial reporting basis and tax basis of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse. As part of this process we are required to estimate our income taxes
and tax bases of assets and liabilities in each of the jurisdictions in which we
operate. This process involves us estimating our current tax exposure together
with assessing temporary differences resulting from differing treatment of items
for tax and accounting purposes. We must then assess the likelihood of the
recoverability of future tax benefits, such as net operating loss carry
forwards, based on estimated future taxable income and recognize such benefits
to the extent that realization is more likely than not to occur. To the extent
we establish a valuation allowance or increase this allowance in a period, we
must include an expense within the tax provision in the statement of operations.
Any change in the recoverability of the deferred tax assets could significantly
affect the results of our operations or cash flows.

Research and Development, Patents and Licenses, etc.

     We believe that our engineering and product development capabilities are
important to the future success of our business. We have successfully lowered
the costs of our research and development team by moving most research and
development activities to our facility in China and principally employing
Chinese engineers and technicians at costs that are substantially lower than
that would be required in Hong Kong.

Trend Information

     Although we are optimistic about our future in the manufacture and sale of
telecommunications and scale products, we are dependent upon a limited number of
customers, and the loss of any of these customers could have a material adverse
effect upon us. At March 31, 2006, our backlog of manufacturing orders was
$10,145,015 compared to $14,580,461 at March 31, 2005. We believe that in the
fiscal year ended March 31, 2007, the trend of sales from telecommunications
products and scales will be similar to the year ended March 31, 2006.

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.

                                       38
<PAGE>

Recent Accounting Pronouncements

     The new accounting pronouncements in the United States that may be relevant
to the Group are as follows:

     In May 2005, the FASB issued SFAS No.154, "Accounting Changes and Error
Corrections," a replacement of APB Opinion No.20, " Accounting Changes" and SFAS
No.3, "Reporting Accounting Changes in Interim Financial Statements" ("SFAS
154"). SFAS 154 changes the requirements of the accounting for, and reporting
of, a change in accounting principle. Previously, voluntary changes in
accounting principles were generally required to be recognized by way of a
cumulative effect adjustment within net income during the period of the change.
SFAS 154 requires retrospective application to prior periods' financial
statements, unless it is impracticable to determine either the period-specific
effects or the cumulative effect of the change. SFAS 154 is effective for
accounting changes made in fiscal years beginning after December 15, 2005;
however, the statement dose not change the transitional provisions of any
existing accounting pronouncements. The Company does not believe the adoption of
SFAS 154 will have a material effect on its financial position, cash flows or
results of operations.

     In March 2005, the SEC issued SAB No.107 "Share Based Payment" which offers
guidance on SFAS No.123(R). SAB No.107 was issued to assist preparers by
simplifying some of the implementation challenges of SFAS No.123(R) while
enhancing the information that investors receive. SAB No.107 creates a framework
that is premised on two overarching themes: (i) considerable judgement will be
required by preparers to successfully implement SFAS No.123(R), specifically
when valuing employee stoke options; and (ii) reasonable individuals, acting in
good faith, may reach different conclusions on the fair value of employee stock
options. Key topics covered by SAB No.107 include valuation models, expected
volatility and expected term. The Company will adopt SAB No.107 concurrently
with the adoption of SFAS No.123(R) with effect from April 1, 2006. The Company
does not expect the adoption of this SAB to have a material impact on its
consolidated financial position or results of operations.

     In October 2005, the FASB issued FSP FAS 123(R)-2, "Practical Accommodation
to the Application of Grant Date as Defined in FASB Statement No.123(R)." The
FSP provides an exception to the application of the concept of "mutual
understanding" in the determination of whether a grant date has occurred. The
exception permits companies to measure compensation cost for equity awards to
employees on the Board approval date if certain conditions are met, provided
that the communication to the employee occurs within a "relatively short period
of time" from the approval date. The Group will adopt the provisions of this FSP
concurrently with the adoption of SFAS No.123(R) with effect from April 1, 2006.
The Company does not expect the adoption of this FSP to have a material impact
on its consolidated financial position or results of operations.

     In November 2005, the FASB issued FSP FAS 123(R)-3, "Transition Election
Related to Accounting for the Tax Effects of Share-Based Payment Award" which
provides an elective shortcut approach when a company transitions to SFAS
123(R). The alternative method significantly simplifies the calculation of the
beginning pool. The FSP provides guidance for the presentation of excess tax
benefits in the statement of cash flows for companies that elect to adopt the

                                       39
<PAGE>

simplified alternative method of calculating the pool. The guidance in the FSP
is effective on November 10, 2005. The FSP allows up to one year from initial
adoption of SFAS 123(R) on April 1, 2006 to evaluate the available transition
alternatives. The Company does not expect the adoption of this FSP to have a
material impact on its consolidated financial position or results of operation.

     In November 2005, the FASB issued FAS 123(R)-4, "Classification of Options
and Similar Instruments Issued as Employee Compensation That Allow for Cash
Settlements upon the Occurrence of a Contingent Event" which provides that an
option or similar instrument that is classified as equity, but subsequently
becomes a liability because the contingent cash settlement event is probable of
occurring, shall be accounted for similar to a modification from an equity to
liability award. The Company does not expect the adoption of this FSP to have a
material impact on its consolidated financial position or results of operations.

     In July 2006, the FASB released FIN 48, Accounting for Uncertainty in
Income Taxes - an interpretation of FASB Statement 109 ("FIN 48"). FIN 48
prescribes a comprehensive model for how a company should recognize, measure,
present, and disclose in its financial statements uncertain tax positions that
the company has taken or expects to take on a tax return (including a decision
whether to file or not to file a return in a particular jurisdiction). Under FIN
48, the financial statements will reflect expected future tax consequences of
such positions presuming the taxing authorities' full knowledge of the position
and all relevant facts, but without considering time values. FIN 48 is effective
for annual periods beginning after December 15, 2006. The Company is in the
process of assessing the impact of the recent accounting pronouncement.

     In September 2006, the FASB issued FAS 157, Fair Value Measurements. FAS
157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. FAS 157 applies under other accounting pronouncements that
require or permit fair value measurements, the FASB having previously concluded
in those accounting pronouncements that fair value is the relevant measurement
attribute. Accordingly, this Statement does not require any new fair value
measurements. FAS 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007. The Company is in the process of
assessing the impact of the recent accounting pronouncement.

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                63    Chairman of the Board, Secretary, Treasurer,
                                Chief Financial Officer, and Director

George O'Leary            68    Chief Executive Officer, President, and Director

Kim Wah Chung             48    Director of Engineering and Research and
                                Development and Director

Cathy Kit Teng Pang       44    Director of Finance and Director

Woo-Ping Fok              57    Director

J. Stewart Jackson, IV    70    Director

Henry F. Schlueter        55    Director and Assistant Secretary

     ANTHONY SO is the founder of Bonso. He has been our Chairman of the Board
of Directors, Chief Financial Officer and Treasurer since inception and our
Secretary since July 1991. Mr. So received his BSE degree in civil engineering
from National Taiwan University in 1967 and a master's 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.

     GEORGE O'LEARY is our Chief Executive Officer and President and has served
in this capacity since January 2005. He has been a director since January 1997.
From November 1994 to 2005, Mr. O'Leary served as the President of Pacific Rim
Products, Newport Beach, California, a trading company that provides offshore
sourcing alternatives to U.S. based electronics companies. For eight years prior
to 1994, Mr. O'Leary was President, CEO and a director of Micro General
Corporation, Santa Ana, California, a manufacturer and distributor of mechanical
and electronic scale products. For eight years prior to that, Mr. O'Leary was

                                       40
<PAGE>

Vice President and General Manager of Lanier Business Products, Atlanta,
Georgia, a manufacturer and distributor of office products. Mr. O'Leary has a
Bachelor of Science degree in Electrical Engineering from Northeastern
University, Boston, Massachusetts.

     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.

     CATHY KIT TENG PANG has been a director of Bonso since January 1, 1998. Ms.
Pang was first employed by us as Financial Controller in December 1996 and was
promoted to Director of Finance on April 1, 1998. Ms. Pang was employed as an
auditor in an international audit firm from 1987 to 1991, at which time she
joined a Hong Kong listed company as Assistant Financial Controller. From 1994
until she joined us in 1996, she was employed as Deputy Chief Accountant in a
management and property development company in Hong Kong and China. Ms. Pang has
a Bachelor of Business Administration degree from York University in Toronto,
Canada. She is a member of the American Institute of Certified Public
Accountants and of the Hong Kong Society of Accountants.

     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 partner with Wong &
Fok. Mr. Fok's major areas of practice include conveyancing or real property
law, corporations and business law, commercial transactions and international
trade with a special emphasis in China trade matters. 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.

     J. STEWART JACKSON IV has been a director since January 10, 2000. From 1962
until its merger with Republic Industries in 1996, Mr. Jackson served in various
management capacities, including president, of Denver Burglar Alarm Co., Inc., a
business founded by his family. In addition, in the mid-1960's, Mr. Jackson
founded Denver Burglar Alarm Products, a separate company which invented,
patented, manufactured, distributed and installed contained ionization smoke
detectors and which was later sold to a conglomerate manufacturer. After the
merger of Denver Burglar Alarm Co., Inc., Mr. Jackson founded Jackson Burglar
Alarm Co., Inc. Mr. Jackson served as Chief Executive Officer of Jackson Burglar
Alarm Co. from February 1998 to October 2005. Mr. Jackson has served as the
Chief Executive Officer of J S J Corporation. Mr. Jackson served on the advisory
board of directors for Underwriter's Laboratories for burglar and fire alarm
systems for 25 years and has been an officer in the Central Station Protection
Association, which, along with the National Burglar Alarm Association, was
formed by his family in the late 1940's. Mr. Jackson graduated from the
University of Colorado in 1962 with a degree in Business Management and
Engineering.

                                       41
<PAGE>

     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.

     There are no family relationships between any of our directors and
executive officers.

     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.

Provident Fund Plan

     With effect from January 1, 1988, Bonso Electronics Limited ("BEL"), our
wholly-owned foreign subsidiary, started a Provident Fund Plan (the "Plan") with
a major international assurance company to provide life insurance and retirement
benefits for its employees. All permanent full time employees who joined BEL
before December 2000, excluding factory workers, are eligible to join the Plan.

     Members of the Plan are required to contribute 5% of their monthly salary.
The contribution by BEL is as follows:

      Years of Service              % of salary as BEL's contribution
      ----------------              ---------------------------------

     Less than 5 years                            5.0%
     5 to 10 years                                7.5%
     More than 10 years                           10.0%

     The Mandatory Provident Fund (the "MPF") was introduced by the Hong Kong
Government commencing in December 2000. BEL joined the MPF with a major
international assurance company. All permanent full time employees who joined
BEL in or after December 2000, excluding factory workers, are eligible to join
the MPF. Members' and employers' contributions to the MPF are both at 5% of the
members' monthly salaries and are subject to a maximum contribution of HK $1,000
monthly.

     At normal retirement age, death or ill health, the member shall be entitled
to receive from the Plan a lump sum equal to the total of the member's and BEL's
contributions plus the return on their investment. On resignation prior to
normal retirement age, a member shall be entitled to receive from the Plan a
lump sum equal to the member's contributions plus a percentage of the employer's
balance determined in accordance with a predetermined set scale.

                                       42
<PAGE>

     BEL's total contributions to the Plan and the MPF for the years ended March
31, 2004, 2005 and 2006 amounted to $77,402, $83,277 and $95,339, respectively.

Board Practices

     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 its 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 the 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:

     o    A majority of Bonso's board of directors will not independent;
     o    Bonso will not have a nominating committee;
     o    Bonso will not have a compensation committee;
     o    Bonso's independent directors will not meet in executive session; and
     o    Bonso's audit committee will have only one member.

Audit Committee

     Mr. Woo Ping Fok is the sole member of the Audit Committee. Mr. Fok is
"independent" as defined in the NASDAQ listing standards.

     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 and to discharge such other
responsibilities as may be delegated to it from time to time by the Board of
Directors. Effective as of August 17, 2000, the Board of Directors adopted a
formal charter for its Audit Committee, which was amended effective June 30,
2005.

                                       43
<PAGE>

Employees

     At March 31, 2006, we employed a total of 3,460 persons, compared with
3,050 persons at March 31, 2005 and 2,899 persons at March 31, 2004; 45
employees in Hong Kong (42 in 2005 and 39 in 2004), 3,380 employees in China
(2,973 in 2005 and 2,820 in 2004), 20 employees in Germany, (22 in 2005 and
2004), 2 employees in Poland (2 in 2005 and 2004), no employee in the United
Kingdom (0 in 2005 and 2 in 2004), 4 employees in the United States (2 in 2005
and 4 in 2004) and 9 in Canada (9 in 2005 and 10 in 2004). Employees are not
covered by collective bargaining agreements. We consider our global labor
practices and employee relations to be good.

Share Ownership

     The following table shows the number of shares of common stock beneficially
owned by our directors and executive officers as of September 8, 2006:
<TABLE>
<CAPTION>
                                                                               Total
                                                                             Number of
                                                                             Shares of
                             Shares of                                        Common         Percent
                            Common Stock                                       Stock           of
                             Owned of               Options and             Beneficially    Beneficial
          Name                Record               Warrants Held               Owned        Ownership
-----------------------     ------------      -------------------------     ------------    ----------
<S>                         <C>               <C>                            <C>             <C>
Anthony So                  1,626,195(1)      636,500(2)                     2,262,695       36.41%

Kim Wah Chung                     93,700      115,000(3)(4)(5)                 208,700        3.67%

Cathy Kit Teng Pang               35,438      115,000(3)(4)(5)                 150,438        2.64%

Henry F. Schlueter                34,000      40,000(6)(11)(12)(13)             74,000        1.32%

Woo-Ping Fok                      64,407      50,000(8)(10)(11)(12)(13)        114,407        2.03%

George O'Leary                         0      40,000(8)(10)(11)(12)             40,000        0.71%

J. Stewart Jackson IV         462,575(9)      60,000(7)10)(11) (12)(13)        522,575        9.27%

All Directors and Officers     2,316,315      1,056,500                      3,372,815       56.05%
as a group (7 persons)
</TABLE>
----------
(1)  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.

(2)  Includes options to purchase 158,000 shares of common stock at an exercise
     price of $8.00 per share expiring January 6, 2010, options to purchase
     128,000 shares of common stock at an exercise price of $3.65 per share
     expiring on April 9, 2011, options to purchase 128,000 shares of common
     stock at an exercise price of $2.50 per share expiring on March 6, 2012,
     and options to purchase 222,500 shares of common stock at an exercise price
     of $1.61 per share expiring on March 31, 2013.

(3)  Includes options to purchase 20,000 shares of common stock at an exercise
     price of $8.00 per share expiring January 6, 2010.

(4)  Includes options to purchase 20,000 shares of common stock at an exercise
     price of $3.65 per share expiring on April 9, 2011, and options to purchase
     20,000 shares of common stock at an exercise price of $2.50 per share
     expiring on March 6, 2012.

(5)  Includes options to purchase 55,000 shares of common stock at an exercise
     price of $1.61 per share expiring on March 31, 2013.

                                       44
<PAGE>

(6)  Includes options to purchase 10,000 shares of common stock at an exercise
     price of $8.00 per share expiring January 6, 2010.

(7)  Includes options to purchase 10,000 shares of common stock at an exercise
     price of $2.55 expiring on October 15, 2011 and 10,000 shares of common
     stock at an exercise price of $1.61 per share expiring on March 31, 2013.

(8)  Includes options to purchase 10,000 shares of common stock at an exercise
     price of $8.125 per share expiring January 12, 2010.

(9)  Includes 461,975 shares held by Mr. Jackson and 600 shares held by Mr.
     Jackson's wife.

(10) Includes options to purchase 10,000 shares of common stock at an exercise
     price of $7.875 per share expiring on January 9, 2011.

(11) Includes options to purchase 10,000 shares of common stock at an exercise
     price of $6.12 expiring on March 25, 2014.

(12) Includes options to purchase 10,000 shares of common stock at an exercise
     price of $6.20 per share expiring on September 12, 2014.

(13) Includes options to purchase 10,000 shares of common stock at an exercise
     price of $4.50 per share expiring on December 4, 2015.


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 provides 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 fair market value of the underlying shares
of common stock. No options granted under the Employee 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.

The 1996 Non-Employee Directors' Stock Option Plan

     In October 1996, our stockholders adopted the 1996 Non-Employee Directors'
Stock Option Plan (the "Non-Employee Directors' Plan") which provides for the
grant of options to purchase an aggregate of not more than 100,000 shares of
common stock. In January 2000, our shareholders approved the proposal of the
Board of Directors to increase from 100,000 to 600,000 in the aggregate the
number of options to purchase common stock under the Non-Employee Directors'
Plan. The purpose of the Non-Employee Directors' Plan is to promote the

                                       45
<PAGE>

long-term success of the Company by creating a long-term mutuality of interests
between the non-employee directors and the stockholders, to provide an
additional inducement for such directors to remain with us and to provide a
means through which we may attract able persons to serve as directors. The
Non-Employee Directors' Plan is administered by a committee (the "Committee")
appointed by the Board of Directors.

     Under the Non-Employee Directors' Plan, on the third business day following
each Annual Meeting of the stockholders, each director who is not then an
employee of the Company or any of its subsidiaries is automatically granted a
stock option to purchase 10,000 shares of common stock. The exercise price of
all options granted under the Non-Employee Directors' Plan is equal to the fair
market value of the underlying shares on the date of grant, based on guidelines
set forth in the Non-Employee Directors' Plan. The exercise price may be paid in
cash, by the surrender of options, in common stock, in other property, including
the optionee's promissory note, or by a combination of the above, at the
discretion of the Company. The term of each option granted pursuant to the
Non-Employee Directors' Plan is ten years from the date of grant; however, no
such option may be exercised during the first six months of its term. The term
of an option granted pursuant to the Non-Employee Directors' Plan may be reduced
in the event that the optionee ceases to be a director. No option granted
pursuant to the Non-Employee Directors' Plan is transferable otherwise than by
will or the laws of descent and distribution.

     During the fiscal year ended March 31, 2006, 30,000 options were granted
under the 1996 Non-Employee Directors' Plan.

The 2004 Stock Option Plan

     On March 23, 2004, our 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.

     The purpose of the 2004 Plan is to secure 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 Corporation. 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 who shall be a non-employee of the Company. The committee members
currently are Anthony So, Woo Ping Fok and George O'Leary. 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 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.

                                       46
<PAGE>

     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 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 Corporation's Common Stock in the form of stock
a stock bonus.

     The purpose of this Stock Bonus Plan is to: (i) induce key employees to
remain in the employ of the Corporation, or of any subsidiary of the
Corporation; (ii) encourage such employees to secure or increase their stock
ownership in the Corporation; and (iii) reward employees, non-employee
directors, advisors and consultants for services rendered or to be rendered to
or for the benefit of the Corporation, or any of its subsidiaries. The
Corporation believes that Stock Bonus Plan will promote continuity of management
and increased incentive and personal interest in the welfare of the Corporation.

     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 who shall be a non-employee of the Corporation. The
initial Committee members are Anthony So, Woo Ping Fok and George O'Leary. 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 September 15, 2006, no shares have been granted under the Stock Bonus
Plan.

Item 7. Major Shareholders and Related Party Transactions

Major shareholders

     We are not directly or indirectly owned or controlled by any foreign
government or by another corporation. The following table sets forth, as of
September 8, 2006, beneficial ownership of our common stock by each person known
by us 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.


                                       47
<PAGE>
<TABLE>
<CAPTION>

        Name                            Amount Owned
        ----                    ---------------------------
                                                                      Percent of
                             Shares of      Options/Warrants to        Class (1)
                           Common Stock    Purchase Common Stock   Beneficially Owned
                           ------------    ---------------------   ------------------
<S>                        <C>                    <C>                   <C>
Anthony So                 1,626,195(2)           636,500(3)            36.41%
John Stewart Jackson IV        462,575             60,000(3)             9.27%
W. Douglas Moreland            501,400                    0              8.99%
Royce & Associates LLC         297,000                    0              5.32%

----------
(1)  Based on beneficial ownership of both shares of common stock and of options
     to purchase common stock that is immediately exercisable.

(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)  See "Share Ownership" for additional information.
</TABLE>

     There are no arrangements known to us , which may at a subsequent date,
result in a change in control of the Company.

     Of the 5,577,639 shares of common stock outstanding as of July 31, 2006,
3,713,550 were held in the United States by 209 holders of record. We have 216
shareholders of record and estimate that we have approximately 1,420
shareholders holding their stock in street name (who have not objected to their
names being disclosed to us).

Related Party Transactions

     During the fiscal year ended March 31, 2006 we paid Schlueter & Associates,
P.C. an aggregate of $23,519 for legal fees and expenses. Mr. Henry F.
Schlueter, a director, is the Managing Director of Schlueter & Associates, P.C.

Interests of Experts and Counsel

     Not Applicable.

Legal Proceedings

     Not Applicable.

Item 8. Financial Information
Financial Statements

     Our Consolidated Financial Statements are set forth under Item 18.
Financial Statements.

                                       48
<PAGE>

Item 9. The Offer and Listing


Listing Details

     Our common stock is traded only in the United States over-the-counter
market. It is quoted on the Nasdaq Global Market ("NASDAQ") 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, 2001 to March 31, 2002               $7.625                $2.38
     April 1, 2002 to March 31, 2003               $3.45                 $1.41
     April 1, 2003 to March 31, 2004               $9.71                 $1.70
     April 1, 2004 to March 31, 2005               $9.09                 $3.90
     April 1, 2005 to March 31, 2006               $7.00                 $3.40

     The following table sets forth the high and low sale prices during each of
the quarters in the two-year period ended June 30, 2006.

                   Period                          High                   Low
                   ------                          ----                   ---
     April 1, 2004 to June 30, 2004                $8.28                 $5.02
     July 1, 2004 to September 30, 2004            $9.09                 $5.11
     October 1, 2004 to December 31, 2004          $5.63                 $4.28
     January 1, 2005 to March 31, 2005             $6.20                 $3.90
     April 1, 2005 to June 30, 2005                $5.48                 $3.40
     July 1, 2005 to September 30, 2005            $7.00                 $4.80
     October 1, 2005 to December 31, 2005          $5.35                 $3.75
     January 1, 2006 to March 31, 2006             $5.93                 $4.04
     March 31, 2006 to June 30, 2006               $5.28                 $4.02

     The following table sets forth the high and low sale prices during each of
the most recent six months.

       Period                         High               Low
       ------                         ----               ---

     March 2006                       $5.44             $4.04
     April 2006                       $5.28             $4.33
     May 2006                         $4.97             $4.20
     June 2006                        $4.68             $4.02
     July 2006                        $4.25             $3.45
     August 2006                      $3.75             $3.01

                                       49
<PAGE>

     On September 18, 2006, the closing price of our common stock was $3.50.

Transfer and Warrant Agent

     The transfer agent and registrar for the common stock and the warrant agent
for the warrants is U.S. Stock Transfer Corporation, 1745 Gardena Avenue #200,
Glendale, California 91204.

Item 10. Additional Information
Share Capital

     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 Shareholders' Equity
for the fiscal years ended March 31, 2004, 2005 and 2006 included herein in Item
18.

     At September 8, 2006, there were 5,577,639 shares of our common stock
outstanding, all of which were fully paid. In addition, we had outstanding
1,104,500 options to purchase common stock as follows:

             Number of             Exercise Price              Expiration
              Options                per Share                    Date
              -------                ---------                    ----

              228,000                  $8.00                  January 6, 2010
               20,000                  $8.125                January 12, 2010
               30,000                  $7.875                 January 9, 2011
              196,000                  $3.65                    April 9, 2011
               10,000                  $2.55                 October 15, 2011
              168,000                  $2.50                    March 6, 2012
              342,500                  $1.61                   March 31, 2013
               40,000                  $6.12                   March 25, 2014
               40,000                  $6.20               September 12, 2014
               30,000                  $4.50                 December 4, 2015

     At September 15, 2006 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 and is 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

                                       50
<PAGE>

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 under British Virgin Islands law. In
the event of our liquidation, all assets available for distribution to the
holders of our common shares are distributable among them according to their
respective holdings. Holders of our common stock have no preemptive rights to
purchase any additional un-issued 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 to 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.

                                       51
<PAGE>

     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, has been
filed as an exhibit to the Registration Statement on Form F-2 (SEC File No.
333-32524).

Material Contracts

     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 Facility Letter dated July 11, 2005 between Bonso and
KBC Bank Hong Kong Branch for a HK $40,000,000 discount of export invoice,
negotiation of export letter of credit discrepancies, packing loan, export bills
and standby letter of credit.

     We signed a Banking Facility Letter, dated June 8, 2005 between Bonso and
Standard Chartered Bank for a working capital facility for a HK $55,000,000
current account overdraft and discrepant credit bills negotiated and a HK
$22,000,000 standby letter of credit.

     We signed a Banking Facility Letter, dated May 24, 2005 between Bonso and
the Hong Kong and Shanghai Banking Corporation Limited for a HK $37,000,000
overdraft facility, import/export facility, trust receipt facility and a D/A
bill facility.

     We signed a Banking Facility Letter, dated February 2, 2006 between Bonso
and Hang Seng Bank Limited for a HK $48,000,000 letter of credit, trust receipt
facility, export D/P bills, export trade loan and overdraft facility.

                                       52
<PAGE>

     We signed a Banking Facility Letter, dated August 19, 2005 between Bonso
and the Natexis Banques Populaires Hong Kong Branch for a U.S. $2,500,000
discount of export invoice, negotiation of export letter of credit
discrepancies, packing loan and export bills.

Exchange Controls

     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. 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.

Taxation

     Under current British Virgin Islands law, we are not subject to tax on our
income. Most of our subsidiaries' profits accrue in Hong Kong, Canada and
Germany where the corporate tax rates are currently 17.5%, 36% and 28%,
respectively. However, as Korona is a partnership, it is only subject to 14.17%
of the local statutory rate in Germany. 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, Germany, Hong Kong or China.

     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% 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
(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

                                       53
<PAGE>

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 U.S. Holders
could also be subject to an interest charge. In addition, we would not provide
information to our U.S. 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.

Documents on Display

     You may read and copy documents referred to in this Annual Report on Form
20-F that have been filed with the Securities and Exchange Commission (the
"Commission") at the Commission'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 Commission at 1-800-SEC-0330. You can also obtain
copies of our Commission filings by going to the Commission'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.

Interest Rate Risk

     Our interest rate risk primarily arises from our long-term debt and our
general banking facilities. At March 31, 2006 our total long-term debt was $0,
and we had utilized $6,766,723 of our total banking facilities of $36,018,301.
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.

                                       54
<PAGE>

     A summary of our debts as at March 31, 2006 which were subjected to
variable interest rates is as below:

                                 March 31,                  Interest
                                   2006                       rate
                                   ----                       ----

     Notes payable              $3,310,673                 HIBOR + 1.5%



     Short-term loans           $2,936,467          Prime rate minus 0.5% or
                                                      EONIA +1.15% to 1.95%
                                                           HIBOR + 1.5%

HIBOR: Hong Kong Interbank Offered Rate
Prime rate: The prime rate as determined by the Hong Kong Bankers Association
EONIA : Euro OverNight Index Average.

     All the balances above are due within one year.

     For further information concerning our banking facilities the interest
rates payable, and repayment terms please see Note 7 to our Consolidated
Financial Statements.

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.

                                     PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies.

     None.

Item 14. Material Modifications to the Rights of Security Holders and Use of
         Proceeds.

     None.

Item 15. Controls and Procedures

     Based on an evaluation carried out under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer, as of the end of the period covered by this report, our Chief
Executive Officer and Chief Financial Officer believe that our disclosure
controls and procedures, as defined in Securities Exchange Act Rules 13a-15(d)
and 15d-15(e), were, as of the end of the period covered by this report, to the

                                       55
<PAGE>

best of their knowledge, effective. There has been no change in our internal
control over financial reporting during the year ended March 31, 2006 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

     Our officers also concluded that disclosure controls and procedures are
also effective to ensure that information required to be disclosed in the
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission and is accumulated and communicated to
management to allow timely decisions regarding required disclosure.

     During the period covered by this annual report and during the last fiscal
quarter, no change has occurred in our internal controls over financial
reporting that has materially affected, or is reasonably likely to materially
affect, our internal controls over financial reporting.

     We are aware of the importance of maintaining controls and procedures and
are continuing to work towards improving our controls and procedures. Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002, ("Section 404"), we will be
required to include an internal control report of management with our annual
report on Form 20-F, beginning with the fiscal year ending March 31, 2008.

     In connection with this required Section 404 evaluation, we are planning to
perform the system and process evaluation and testing required (and any
necessary remediation) in an effort to comply with such requirements by the
effective date for compliance. Our efforts to implement standardized internal
control procedures and develop the internal tests necessary to verify the proper
application of the internal control procedures and their effectiveness will be a
key area of focus for our board of directors, our audit committee and our senior
management. This evaluation is expected to underlie the internal control report
of management and auditor attestation requirements of Section 404.

Item 16. Reserved

Item 16A. Audit Committee Financial Expert

     Bonso does not have an independent member of the audit committee that is
deemed to be a financial expert.

Item 16B. Code of Ethics

     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 Director of Finance at:

Bonso Electronics International, Inc.
Unit 1106 - 1110
11/F, Star House
3 Salisbury Road
Tsimshatsui
Kowloon, Hong Kong

                                       56
<PAGE>

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 engages the independent auditor to render a service, the
engagement must be either:

     (1)  specifically approved by the Audit Committee; or

     (2)  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.

                                       57
<PAGE>

     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's rules on
auditor independence.

     The audit fee indicated below was pre-approved by the Audit Committee
before the auditor commenced their work.

     Audit Fees

     The aggregate fees billed by PricewaterhouseCoopers for professional
services rendered for the audit of the Corporation's annual consolidated
financial statements for the fiscal year ended March 31, 2006 were $236,538 and
for the fiscal year ended March 31, 2005 were $220,000.

     Audit Related Fees

     There were no fees billed by PricewaterhouseCoopers for professional
services rendered for assurance and related services provided by
PricewaterhouseCoopers 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, 2006 and for the fiscal year ended March 31, 2005.

     Tax Fees

     The aggregate fees billed by PricewaterhouseCoopers for professional
services rendered for tax compliance for the fiscal year ended March 31, 2006
were $6,000 and for the fiscal year ended March 31, 2005 were $6,000.

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 one director who is deemed to be "independent" as defined in NASDAQ
Marketplace Rule 4200. The Company has obtained a written statement from
independent counsel in the British Virgin Islands certifying that the Company's
corporate governance practices relating to the single member audit committee is
not prohibited by British Virgin Island law. See "NASDAQ Exemptions and Home
Country Practices."

Item 16E. Purchasers of Equity Securities by the Issuer and Affiliated
          Purchasers.

     In August 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

                                       58
<PAGE>

or acquire shares over any specified period of time. The Company did not
repurchase any shares during the fiscal year ended March 31, 2006. However, the
Company may from time to time repurchase shares of its Common Stock under this
program.

                                    PART III


Item 17. Financial Statements.

     Not applicable.

Item 18. Financial Statements.

     The following Financial Statements are filed as part of this Annual Report:

                                                                            Page
                                                                            ----
     Report of Independent Registered Public Accounting Firm                 F-1
     Index to Consolidated Financial Statements                              F-2
     Consolidated Balance Sheets as of March 31, 2005 and 2006               F-4
     Consolidated Statements of Income (Loss) and Comprehensive              F-5
     Income (Loss) for the years ended March 31, 2004, 2005 and 2006
     Consolidated Statements of Changes in Shareholders' Equity for the      F-6
     years ended March 31, 2004, 2005 and 2006
     Consolidated Statements of Cash Flows for the years ended               F-7
     March 31, 2004, 2005 and 2006

     Notes to Consolidated Financial Statements                 F-8 through F-34









                                       59
<PAGE>

Item 19. Exhibits.

     4.1  Banking Facility Letter dated July 11, 2005 between Bonso and KBC Bank
          Hong Kong Branch.

     4.3  Banking Facility Letter, dated June 8, 2005 between Bonso and Standard
          Chartered Bank (1)

     4.4  Banking Facility Letter, dated August 19, 2005 between Bonso and
          Natexis Banques Populaires Hong Kong Branch (1)

     4.5  Banking Facility Letter, dated May 24, 2005 between Bonso and the Hong
          Kong and Shanghai Banking Corporation Limited (1)

     4.6  Banking Facility Letter, dated February 2, 2006 between Bonso and Hang
          Seng Bank Limited (1)

     11.1 Code of Ethics For Chief Executive Officer and Chief Financial Officer
          (2)

     12.1 Certification of Officer Pursuant to Section 1350, as adopted pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002.

     12.2 Certification of Officer Pursuant to Section 1350, as adopted pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002.

     12.3 Certification Pursuant to 18 U.S.C. 1350 as adopted pursuant to
          Section 906 of the Sarbanes-Oxley Act of 2002.

----------
     (1)  These documents previously filed as Exhibits to our Annual Report for
          the fiscal year ended March 31, 2004 on Form 20-F and is hereby
          incorporated by reference.

     (2)  Filed as an Exhibit on Form 20-F filed with the Commission on August
          13, 2004.


                                       60
<PAGE>



                                    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.


                                          BONSO ELECTRONICS INTERNATIONAL INC.



Dated September 29, 2006                  /s/ Anthony So
                                          --------------------------------------
                                          Anthony So, Chairman of the Board,
                                          Secretary, Treasurer, Chief Financial
                                          Officer, and Director




















                                       61
<PAGE>









                        Consolidated Financial Statements

                      Bonso Electronics International Inc.
                  (Incorporated in the British Virgin Islands)


                                 March 31, 2006



<PAGE>

                      Bonso Electronics International Inc.
                   Index to Consolidated Financial Statements



Contents                                                              Pages
--------                                                              -----



Report of Independent Registered Public Accounting Firm.................F-1



Consolidated Balance Sheets as of March 31, 2005 and 2006...............F-2



Consolidated Statements of Income (Loss) and Comprehensive Income
(Loss) for the years ended March 31, 2004, 2005 and 2006................F-3



Consolidated Statements of Changes in Shareholders' Equity for
the years ended March 31, 2004, 2005 and 2006...........................F-4



Consolidated Statements of Cash Flows for the years ended
March 31, 2004, 2005 and 2006........................................F-5 and F-6



Notes to Consolidated Financial Statements...........................F-7 to F-28



<PAGE>



             Report of Independent Registered Public Accounting Firm
             -------------------------------------------------------



Board of Directors and Shareholders of
Bonso Electronics International Inc.


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and comprehensive income, of cash flows and of
changes in shareholders' equity present fairly, in all material respects, the
financial position of Bonso Electronics International Inc. and its subsidiaries
at March 31, 2006 and 2005, and the results of their operations and their cash
flows for each of the three years in the period ended March 31, 2006 in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.





PricewaterhouseCoopers

Hong Kong,
September 29, 2006



                                       F-1
<PAGE>
<TABLE>
<CAPTION>

                                Bonso Electronics International Inc
                                    Consolidated Balance Sheets
                               (Expressed in United States Dollars)

                                                                                  March 31
                                                                      -------------------------------
                                                          Note                2005             2006
                                                                                 $                $
Assets
<S>                                                                      <C>              <C>
Current assets
  Cash and cash equivalents                                              9,707,588        8,582,257
  Restricted cash deposits                                                   4,848             --
  Trade receivables, net                                     2          10,585,968        6,740,229
  Inventories                                                3          11,402,239       15,035,216
  Tax recoverable                                                          486,618          183,393
  Deferred income tax assets - current                       5              52,057             --
  Other receivables, deposits and prepayments                            1,425,297        1,963,007
                                                                       -----------      -----------

  Total current assets                                                  33,664,615       32,504,102
                                                                       -----------      -----------

Deposits                                                                    97,814          188,525
Long term investment                                                       500,000          500,000
Deferred income tax assets - non current                     5              46,849           82,529
Goodwill                                                    10           1,100,962          842,821
Brand name and other intangible assets, net                 10           2,740,530        2,526,982
Property, plant and equipment
  Leasehold land and buildings                                          12,478,098       13,787,334
  Plant and machinery                                                   15,657,016       16,286,028
  Furniture, fixtures and equipment                                      6,097,481        4,341,105
  Motor vehicles                                                           357,343          456,237
                                                                       -----------      -----------
                                                                        34,589,938       34,870,704
  Less: accumulated depreciation and impairment                        (20,277,952)     (22,036,775)
                                                                       -----------      -----------
  Property, plant and equipment, net                                    14,311,986       12,833,929
                                                                       -----------      -----------
  Total assets                                                          52,462,756       49,478,888
                                                                       ===========      ===========

Liabilities and shareholders' equity

Current liabilities
  Bank overdraft                                             7             281,085          471,254
  Notes payable                                              7           3,744,726        3,310,673
  Accounts payable                                                       6,938,578        6,288,213
  Accrued charges and deposits                                           1,978,222        2,434,994
  Short-term loans                                           7           4,742,685        2,936,467
  Current portion of long-term debt                          4             249,271           48,329
  Current portion of capital lease obligations               6             384,616          166,802
                                                                       -----------      -----------
  Total current liabilities                                             18,319,183       15,656,732
                                                                       -----------      -----------
Long-term debt, net of current maturities                    4               7,479             --
Capital lease obligations, net of current maturities         6             160,256             --
Deferred tax liability                                       5              43,856           19,863
Commitments and contingencies (Notes 6 and 11)


Shareholders' equity

Preferred stock par value $0.01 per share
  - authorized shares - 10,000,000
  - issued and outstanding shares: 2005 & 2006-Nil                            --               --
Common stock par value $0.003 per share
  - authorized shares - 23,333,334
  - issued and outstanding shares : 2005 & 2006-5,577,639                   16,729           16,729
Additional paid-in capital                                              21,764,788       21,764,788
Retained earnings                                                       11,307,642       11,234,006
Accumulated other comprehensive income                                     842,823          786,770
                                                                       -----------      -----------
                                                                        33,931,982       33,802,293
                                                                       -----------      -----------
Total liabilities and shareholders' equity                              52,462,756       49,478,888
                                                                       ===========      ===========


                       See notes to these consolidated financial statements

                                              F-2
<PAGE>

                                  Bonso Electronics International Inc
               Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
                                 (Expressed in United States Dollars)



                                                                         Year ended March 31,
                                                   Note              2004           2005           2006
                                                             -------------------------------------------
                                                                        $              $              $

Net sales                                           15         74,964,085     69,602,192     64,542,963
Cost of sales                                                  57,481,103     53,138,410     51,114,155
                                                              -----------    -----------    -----------
Gross margin                                                   17,482,982     16,463,782     13,428,808

Selling expenses                                                3,121,900      2,595,222      2,110,563
Salaries and related costs                                      5,150,345      5,215,798      5,681,175
Research and development expenses                                 739,730        710,355        847,401
Administration and general expenses                             5,438,995      4,079,201      3,420,485
Amortization of brand name                          10            200,000        200,000        200,000
Impairment of goodwill                              10               --             --          258,141
                                                              -----------    -----------    -----------
Income from operations                              15          2,832,012      3,663,206        911,043
Interest income                                                    57,169         80,955        202,155
Interest expenses                                                (499,512)      (416,774)      (504,280)
Foreign exchange gain/(loss)                                       15,081        (98,051)      (183,887)
Other income                                                      224,292        372,133        190,571
                                                              -----------    -----------    -----------
Income before income taxes and minority interest                2,629,042      3,601,469        615,602
Income tax expense                                   5           (401,504)      (266,059)      (131,474)
                                                              -----------    -----------    -----------
Net income before minority interest                             2,227,538      3,335,410        484,128
Minority interest                                                  41,072         14,202           --
                                                              -----------    -----------    -----------
Net income                                                      2,268,610      3,349,612        484,128

Other comprehensive income, net of tax:
Foreign currency translation adjustments net of tax               142,777        290,354        (56,053)
                                                              -----------    -----------    -----------
Comprehensive income                                            2,411,387      3,639,966        428,075
                                                              ===========    ===========    ===========

Earnings per share                                  12
  Basic                                                       $      0.40    $      0.59    $      0.09
                                                              ===========    ===========    ===========

  Diluted                                                     $      0.37    $      0.55    $      0.08
                                                              ===========    ===========    ===========


                        See notes to these consolidated financial statements

                                                F-3
<PAGE>

                                             Bonso Electronics International Inc.
                                 Consolidated Statements of Changes in Shareholders' Equity
                                             (Expressed in United States Dollars)


                                       Common stock
                                --------------------------                                           Accumulated
                                                                                                           other
                                                                                                   comprehensive
                                     Shares                   Additional       Common             income-foreign          Total
                                 issued and         Amount       paid-in   Stock held    Retained       currency   shareholders'
                                outstanding    outstanding       capital  at treasury    earnings    adjustments         equity
                                -----------    -----------       -------  -----------    --------    -----------         ------
                                                         $             $            $           $              $              $

Balance, March 31, 2003          5,529,133         16,583     21,458,376    (38,832)    6,533,224        409,692     28,379,043

Net income                            --             --             --         --       2,268,610           --        2,268,610
Common stock issued upon
  exercise of warrants              32,982             99        272,003       --            --             --          272,102
Purchase of common stock           (14,576)           (43)       (25,806)      --            --             --          (25,849)
Retirement of common stock         (19,900)           (60)       (38,772)    38,832          --             --             --
Dividend paid                         --             --             --         --        (286,041)          --         (286,041)
Foreign exchange translation
  adjustment                          --             --             --         --            --          142,777        142,777
                               -----------    -----------    -----------    -------   -----------    -----------    -----------
Balance, March 31, 2004          5,527,639         16,579     21,665,801       --       8,515,793        552,469     30,750,642
                               ===========    ===========    ===========    =======   ===========    ===========    ===========

Net income                            --             --             --         --       3,349,612           --        3,349,612
Common stock issued upon
  exercise of warrants              50,000            150         98,987       --            --             --           99,137
Dividend paid                         --             --             --         --        (557,763)          --         (557,763)
Foreign exchange translation
  adjustment                          --             --             --         --            --          290,354        290,354
                               -----------    -----------    -----------    -------   -----------    -----------    -----------
Balance, March 31, 2005          5,577,639         16,729     21,764,788       --      11,307,642        842,823     33,931,982
                               ===========    ===========    ===========    =======   ===========    ===========    ===========

Net Income                            --             --             --         --         484,128           --          484,128
Dividend Paid                         --             --             --         --        (557,764)          --         (557,764)
Foreign exchange translation
  adjustment                          --             --             --         --            --          (56,053)       (56,053)
                               -----------    -----------    -----------    -------   -----------    -----------    -----------
Balance, March 31, 2006          5,577,639         16,729     21,764,788       --      11,234,006        786,770     33,802,293
                               ===========    ===========    ===========    =======   ===========    ===========    ===========


                                    See notes to these consolidated financial statements

                                                          F-4
<PAGE>

                                Bonso Electronics International Inc.
                                Consolidated Statements of Cash Flows
                                (Expressed in United States Dollars)



                                                                      Year Ended March 31,
                                                                  2004          2005          2006
                                                            ----------------------------------------
                                                                     $             $             $


Cash flows from operating activities

  Net income                                                 2,268,610     3,349,612       484,128
    Adjustments to reconcile net income to net cash
   provided by operating activities :
   Depreciation                                              2,675,549     2,206,099     2,149,590
   Amortization                                                553,491       566,987       520,596
   Impairment on property                                      161,499       148,198        69,077
   Reversal of software impairment                            (150,000)         --            --
   Loss/(gain) on disposal of fixed assets                      39,867        35,392      (110,936)
   Minority interest                                           (41,072)      (14,203)         --
   Impairment on goodwill                                         --            --         258,141
   Other                                                      (296,957)      (28,029)      (59,386)


  Changes in assets and liabilities:
   Trade receivable                                         (4,198,142)     (196,199)    3,845,739
   Other receivables, deposits and prepayments                 277,576      (561,664)     (537,710)
   Deposits                                                       --            --         (90,711)
   Notes receivable                                            358,188          --            --
   Inventories                                               1,774,586      (520,307)   (3,632,977)
   Accounts payable                                          1,929,512    (1,341,461)     (650,365)
   Accrued charges and deposits                              1,274,511      (973,575)      456,772
   Tax recoverable                                             (58,464)     (428,154)      303,225
   Income tax payable                                          331,572      (279,485)         --
   Deferred tax                                                139,718       (27,534)       (7,616)
                                                            ----------    ----------    ----------
 Net cash provided by operating activities                   7,040,044     1,935,677     2,997,567
                                                            ----------    ----------    ----------


Cash flows from investing activities

  Restricted cash deposits                                   4,099,831          (511)        4,848
  Deposits for property, plant and equipment                  (617,056)         --            --
  Proceeds from disposal of property, plant and equipment      115,721        22,256       579,896
  Acquisition of property, plant and equipment              (2,543,734)     (684,398)   (1,340,134)
  Acquisition of long term investment                             --        (500,000)         --
                                                            ----------    ----------    ----------
  Net cash provided by/(used in) investing activities        1,054,762    (1,162,653)     (755,390)
                                                            ----------    ----------    ----------



                                               F-5
<PAGE>

                              Bonso Electronics International Inc.
                        Consolidated Statements of Cash Flows (continued)
                              (Expressed in United States Dollars)


Cash flows from financing activities

  Issue of shares on exercise of warrants and options        272,102         99,137           --
  Repurchase of redeemable common stock                         --       (1,445,808)          --
  Repurchase of common stock                                 (25,849)          --             --
  Proceeds from long-term borrowings                          79,025           --             --
  Capital lease inception/(payments)                         668,025       (433,869)      (454,036)
  Net (repayment)/advance under banking facilities        (1,763,094)       167,234     (2,299,655)
  Payment of dividends to stockholders                      (286,041)      (557,763)      (557,764)
                                                         -----------    -----------    -----------
  Net cash used in financing activities                   (1,055,832)    (2,171,069)    (3,311,455)
                                                         -----------    -----------    -----------



  Net increase/(decrease) in cash and cash equivalents     7,038,974     (1,398,045)    (1,069,278)
  Net effect of cumulative translation adjustment            142,777        290,354        (56,053)
  Cash and cash equivalents, beginning of year             3,633,528     10,815,279      9,707,588
                                                         -----------    -----------    -----------
  Cash and cash equivalents, end of year                  10,815,279      9,707,588      8,582,257
                                                         ===========    ===========    ===========

                                                                2004           2005           2006
                                                                   $              $              $
Supplemental disclosure of cash flow information

Cash paid during the year for:
    Interest paid                                            499,512        416,774        494,310
    Income tax paid, net of (refund)                         (21,123)       329,483        153,008

Non-cash investing and financing activities
    Other intangible assets reclassified from deposit           --          544,267           --
    Property, plant and machinery acquired under
      capital leases                                       1,551,119           --          188,718



                                               F-6
</TABLE>
<PAGE>

                      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. ("the Company") and its subsidiaries
     (collectively, the "Group") are engaged in the designing, manufacturing and
     selling of a comprehensive line of electronic scales and weighing
     instruments, electronic consumer products and telecommunication products.

     The consolidated financial statements have been prepared in United States
     dollars and in accordance with generally accepted accounting principles in
     the United States of America. The preparation of consolidated financial
     statements requires management to make estimates and assumptions that
     affect the reported amounts of assets and liabilities and disclosure of
     contingent assets and liabilities at the dates of the consolidated
     financial statements and the reported amounts of revenues and expenses
     during the reporting periods. Significant estimates made by management
     include provisions made against inventories and trade receivable, the
     valuation of long-lived assets, and the impairment of goodwill. Actual
     results could differ from those estimates.

     The significant accounting policies are as follows:

(a)  Principles of consolidation

     The consolidated financial statements include the accounts of the Group.
     All significant intercompany accounts and transactions are eliminated in
     consolidation.

     Acquisitions of companies have been consolidated from the date on which
     control of the net assets and operations was transferred to the Group.

     Acquisitions of companies are accounted for using the purchase method of
     accounting. Goodwill represents the excess of the purchase cost over the
     fair value of assets acquired less liabilities assumed of acquired
     companies.

(b)  Cash and cash equivalents

     Cash and cash equivalents are short-term, highly liquid investments with
     original maturities of three months or less. Cash equivalents are stated at
     cost, which approximates fair value because of the short-term maturity of
     these instruments.

(c)  Inventories

     Inventories are stated at the lower of cost or net realizable value with
     cost determined on a first-in, first-out basis. Net realizable value is the
     price at which inventories can be sold in the normal course of business
     after allowing for the costs of completion and disposal. 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.



                                       F-7
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


1    Description of business and significant accounting policies

(d)  Revenue recognition

     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 transfers to the
     customer, which is generally when the product is shipped to the customer
     from our facility. Shipping costs billed to our customers are included
     within revenue. Associated costs are classified in cost of goods sold.

     The company provides to certain customers an additional 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 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, we have not experienced material differences
     between our 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.

(e)  Long Term Investment

     Long term investment is related to a 7% zero coupon capital guaranteed fund
     with maturity on October 11, 2007. Long term investment is recorded at
     amortized cost. The company is intended to hold this investment until
     maturity.

(f)  Long-Lived Assets Including Goodwill and Other Acquired Intangible Assets

     Long-lived assets held and used by the Group and intangible assets,
     excluding goodwill, are reviewed for impairment whenever events or changes
     in circumstances indicate that the carrying amount of such assets may not
     be recoverable. The Group 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. For the
     year ended March 31, 2006, the Group made a provision for impairment of
     approximately $69,077 on investment properties due to the decline in market
     value.

     Goodwill is subject to an annual impairment review. The evaluation of
     goodwill for impairment involves two steps: (1) the identification of
     potential impairment by comparing the fair value of a reporting unit with
     its carrying amount, including goodwill and (2) the measurement of the
     amount of goodwill loss by comparing the implied fair value of the
     reporting unit goodwill with the carrying amount of that goodwill and
     recognizing a loss by the excess of the latter over the former. The company
     measures fair value based upon internal models. Based on the assessment for
     the year ended March 31, 2006, the Group made a provision for impairment of
     goodwill of approximately $258,141 for Korona Hauschaltswaren GmbH & Co.KG
     due to the continued weak performance of the scales business.

                                       F-8
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


1    Description of business and significant accounting policies

(g)  Brand name

     Brand name acquired as part of the purchase of a business is capitalized
     based on the estimated fair value as at the date of acquisition and
     amortized using the straight-line method over the related estimated useful
     life of 15 years. Where an indication of impairment exists, the carrying
     amount of the brand name is assessed and written down to its recoverable
     amount.

(h)  Other intangible assets

     Other intangible assets represent taxi licenses which are stated at cost
     and are amortized on a straight-line basis over the related granted useful
     life of 50 years, representing the shorter of the remaining term of the
     lease or the expected useful life to the Group.

(i)  Property, plant and equipment

     (i)  Property, plant and equipment are stated at cost. Leasehold land and
          buildings are amortized on a straight-line basis over 15 to 50 years,
          representing the shorter of the remaining term of the lease or the
          expected useful life to the Group.

     (ii) Other fixed assets are carried at cost and depreciated using the
          straight-line method over their expected useful lives to the Group.
          The principal annual rates used for this purpose are:

          Plant and machinery                       - 14% to 33.3%
          Furniture, fixtures and equipment         - 20%
          Motor vehicles                            - 20%

    (iii) The cost of major improvements and betterments is capitalized,
          whereas the cost of maintenance and repairs is expensed in the year
          incurred.

     (iv) Any gain or loss on disposal is included in the Consolidated
          Statements of Income (Loss) and Comprehensive Income (Loss).

(j)  Trade receivable

     Provisions are made against trade receivables to the extent that collection
     is considered to be doubtful.

(k)  Research and development costs

     Research and development costs are expensed in the financial period during
     which they are incurred.

(l)  Advertising

     Advertising costs are expensed as incurred and are included within selling
     expenses. (2006: 255,006, 2005: $246,193 and 2004: $363,160).

                                       F-9
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


1    Description of business and significant accounting policies

(m)  Deferred income taxes

     Amounts in the consolidated financial statements related to income taxes
     are calculated using the principles of SFAS No. 109, "Accounting for Income
     Taxes". SFAS No. 109 requires recognition of deferred tax assets and
     liabilities for the expected future tax consequences of events that have
     been included in the financial statements or tax returns. Under this
     method, deferred tax assets and liabilities are determined based on the
     temporary differences between the financial reporting basis and tax basis
     of assets and liabilities using enacted tax rates in effect for the year in
     which the differences are expected to reverse. Future tax benefits, such as
     net operating loss carry forwards, are recognized to the extent that
     realization of such benefits is more likely than not to occur.

(n)  Foreign currency translations

     (i)  The Group'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 certain 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).
          Translations for transactions are recorded on their respective dates.
          Exchange differences are recorded in the Statements of Income (Loss)
          and Comprehensive Income (Loss).

     (ii) The financial statements of foreign subsidiaries, where the 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 income. Adjustments resulting from
          translation of these financial statements are reflected as a separate
          component of shareholders' equity in accumulated other comprehensive
          income.

(o)  Stock options

     Stock options have been granted to employees, directors and non-employee
     directors. Upon exercise of the options, the holder can acquire share of
     common stock of the Group 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 Group follows the
     intrinsic method of accounting for these options.

     The Company applies Accounting Principles Board ("APB") Opinion No. 25,
     "Accounting for Stock Issued to Employees" and related interpretations in
     accounting for its employee stock options. Under APB Opinion No. 25, as the
     exercise price of all the options issued by the Company was equal to or
     higher than the market price of the underlying stock on the date of grant,
     no compensation expense had been recognized for the years ended March 31,
     2004, 2005 and 2006.

     The Company has applied the pro forma fair value disclosures as permitted
     under SFAS No.123. If the Company had accounted for its stock option plans
     by recording compensation based on the fair value at grant date for such
     awards consistent with the method of SFAS No.123, the Company's net (loss)
     income and net (loss) income per share would have been increased/reduced to
     the pro forma amounts as follows:

                                      F-10
<PAGE>
<TABLE>
<CAPTION>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


1    Description of business and significant accounting policies

                                                       2004          2005          2006
                                                          $             $             $
<S>                                               <C>           <C>             <C>
     Net income as reported                       2,268,610     3,349,612       484,128

     Deduct:
     Total stock-based employee compensation
     expense determined under fair value based
     method for all stock options, net of
     related tax effects                           (844,525)     (191,712)      (83,605)
                                                 ----------    ----------    ----------

     Pro forma net income                         1,424,085     3,157,900       400,523

         Basic earnings per share

           As reported                                $0.40         $0.59         $0.09
           Pro forma                                  $0.25         $0.56         $0.07

         Diluted earnings per share

           As reported                                $0.37         $0.55         $0.08
           Pro forma                                  $0.23         $0.52         $0.07

</TABLE>

(p)  Warrants issued for non - cash consideration

     Warrants issued in consideration for services rendered are recorded at fair
     value and a charge equivalent to fair value is included in the Consolidated
     Statements of Income (Loss) and Comprehensive Income (Loss). The warrants
     have been accounted for in accordance with EITF 96-18 "Accounting for
     equity instruments that are issued to other than employees for acquiring,
     or in conjunction with selling, Goods or Services". The fair value for
     these warrants is estimated at the date of grant using a Black-Scholes
     Option Valuation model.

(q)  Recent accounting pronouncements

     In May 2005, the FASB issued SFAS No.154, "Accounting Changes and Error
     Corrections", a replacement of APB Opinion No.20, "Accounting Changes" and
     SFAS No.3, "Reporting Accounting Changes in Interim Financial Statements"
     ("SFAS 154"). SFAS 154 changes the requirements of the accounting for, and
     reporting of, a change in accounting principle. Previously, voluntary
     changes in accounting principles were generally required to be recognised
     by way of a cumulative effect adjustment within net income during the
     period of the change. SFAS 154 requires retrospective application to prior
     periods' financial statements, unless it is impracticable to determine
     either the period-specific effects or the cumulative effect of the change.
     SFAS 154 is effective for accounting changes made in fiscal years beginning
     after 15 December 2005; however, the statement does not change the
     transitional provisions of any existing accounting pronouncements. The
     Group does not believe the adoption of SFAS 154 will have a material effect
     on its financial position, cash flows or results of operations.

     In March 2005, the SEC issued SAB No.107"Share Based Payment" which offers
     guidance on SFAS No.123(R). SAB No.107 was issued to assist preparers by
     simplifying some of the implementation challenges of SFAS No.123(R) while
     enhancing the information that investors receive. SAB No.107 creates a
     framework that is premised on two overarching themes: (i) considerable
     judgement will be required by preparers to successfully implement SFAS
     No.123(R), specifically when valuing employee stock options; and (ii)
     reasonable individuals, acting in good faith, may reach different

                                      F-11
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


1    Description of business and significant accounting policies

     conclusions on the fair value of employee stock options. Key topics covered
     by SAB No.107 include valuation models, expected volatility and expected
     term. The Group will adopt SAB No.107 concurrently with the adoption of
     SFAS No.123(R) with effect from April 1, 2006. The Group does not expect
     the adoption of this SAB to have a material impact on its consolidated
     financial position or results of operations.

     In October 2005, the FASB issued FSP FAS 123(R)-2, "Practical Accommodation
     to the Application of Grant Date as Defined in FASB Statement No.123(R)".
     The FSP provides an exception to the application of the concept of "mutual
     understanding" in the determination of whether a grant date has occurred.
     The exception permits companies to measure compensation cost for equity
     awards to employees on the Board approval date if certain conditions are
     met, provided that the communication to the employee occurs within a
     "relatively short period of time" from the approval date. The Group will
     adopt the provisions of this FSP concurrently with the adoption of SFAS
     No.123(R) with effect from April 1, 2006. The Group does not expect the
     adoption of this FSP to have a material impact on its consolidated
     financial position or results of operations.

     In November 2005, the FASB issued FSP FAS 123(R)-3, "Transition Election
     Related to Accounting for the Tax Effects of Share-Based Payment Award"
     which provides an elective shortcut approach when a company transitions to
     SFAS 123(R). The alternative method significantly simplifies the
     calculation of the beginning pool. The FSP provides guidance for the
     presentation of excess tax benefits in the statement of cash flows for
     companies that elect to adopt the simplified alternative method of
     calculating the pool. The guidance in the FSP is effective on November 10,
     2005. The FSP allows up to one year from initial adoption of SFAS 123(R) on
     April 1, 2006 to evaluate the available transition alternatives. The Group
     does not expect the adoption of this FSP to have a material impact on its
     consolidated financial position or results of operations.

     In November 2005, the FASB issued FAS 123(R)-4, "Classification of Options
     and Similar Instruments Issued as Employee Compensation That Allow for Cash
     Settlements upon the Occurrence of a Contingent Event" which provides that
     an option or similar instrument that is classified as equity, but
     subsequently becomes a liability because the contingent cash settlement
     event is probable of occurring, shall be accounted for similar to a
     modification from an equity to liability award. The Group does not expect
     the adoption of this FSP to have a material impact on its consolidated
     financial position or results of operations.

     In July 2006, the FASB released FIN 48, Accounting for Uncertainty in
     Income Taxes - an interpretation of FASB Statement 109 ("FIN 48"). FIN 48
     prescribes a comprehensive model for how a company should recognize,
     measure, present, and disclose in its financial statements uncertain tax
     positions that the company has taken or expects to take on a tax return
     (including a decision whether to file or not to file a return in a
     particular jurisdiction). Under FIN 48, the financial statements will
     reflect expected future tax consequences of such positions presuming the
     taxing authorities' full knowledge of the position and all relevant facts,
     but without considering time values. FIN 48 is effective for annual periods
     beginning after December 15, 2006. The Group is in the process of assessing
     the impact of the recent accounting pronouncement.

     In September 2006, the FASB issued FAS 157, Fair Value Measurements. FAS
     157 defines fair value, establishes a framework for measuring fair value in
     generally accepted accounting principles, and expands disclosures about
     fair value measurements. FAS 157 applies under other accounting
     pronouncements that require or permit fair value measurements, the FASB
     having previously concluded in those accounting pronouncements that fair
     value is the relevant measurement attribute. Accordingly, this Statement
     does not require any new fair value measurements. FAS 157 is effective for
     financial statements issued for fiscal years beginning after November 15,
     2007. The Group is in the process of assessing the impact of the recent
     accounting pronouncement.

(r)  Comparatives

     Certain of the comparative figures have been reclassified to confirm with
     the current year's presentation.



                                      F-12
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


2    Allowance for doubtful accounts

     Changes in the allowance for doubtful accounts comprise:

                                              2004        2005        2006
                                                 $           $           $
     Balance, April 1                      421,339     383,770     399,006

     Exchange adjustment                    24,076      18,744     (21,415)
     Additions charged to expense          187,679     197,310     223,388
     Write-off                            (249,324)   (200,818)   (373,978)
                                          --------    --------    --------
     Balance, March 31                     383,770     399,006     227,001
                                          ========    ========    ========


3    Inventories

     The components of inventories are as follows:

                                                    2005               2006
                                                       $                  $
     Raw materials                             5,958,084          6,005,337
     Work in progress                          2,194,432          3,423,775
     Finished goods                            3,249,723          5,606,104
                                              ----------         ----------
                                              11,402,239         15,035,216
                                              ==========         ==========

     During the years ended March 31, 2004, 2005 and 2006 there were non-cash
     write-offs of specific inventories of $24,407, $233,246 and $26,592
     respectively.

4    Long-term debt

     Long-term debt comprises:

                                                            March 31
                                                      --------------------
                                                          2005        2006
                                                             $           $

     Long term bank loan at bank's floating base
      rate + 4%, denominated in Canadian dollars        48,611       7,197
     Mortgage loan at bank's prime interest rate
      + 1.15%, denominated in Canadian dollars         171,093      41,132
     Business loans at bank's prime interest
      rate + 1.10%, denominated in Canadian
      dollars                                           37,046        --
                                                      --------    --------

     Long-term debt                                    256,750      48,329

     Less: current portion                            (249,271)    (48,329)
                                                      --------    --------
     Long-term debt, less current maturities             7,479        --
                                                      ========    ========


                                      F-13
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


5    Taxation

(a)  The companies comprising the Group are subject to tax on an entity basis on
     income arising in or derived from Hong Kong, the Peoples' Republic of China
     ("PRC"), Germany, the United States, the United Kingdom and Canada. The
     current rates of taxation of the subsidiaries operating in Hong Kong and
     Shenzhen in the PRC are 17.5% and 7.5% respectively. The subsidiary of the
     Group in Germany is registered as a partnership in Germany which is subject
     to a statutory tax rate of 14.17%. The Group is not subject to income taxes
     in the British Virgin Islands. The statutory tax rates in the United
     States, the United Kingdom and Canada are 15%, 30%, and 36% respectively.

(b)  Pursuant to the relevant income tax laws in the PRC, Bonso Electronics
     (Shenzhen) Co., Ltd, a wholly owned subsidiary of the Company, was fully
     exempt from PRC state income tax for two years starting from the first
     profit-making year followed by a 50% reduction over the ensuing three
     years. The first profit-making year of Bonso Electronics (Shenzhen) Co.,
     Ltd. was deemed to be the financial year ended December 31, 1998 and the
     last year it was entitled to this benefit was December 31, 2002. In 2003,
     Bonso Electronics (Shenzhen) Co., Ltd was accredited as an "Advanced
     Corporation" A further 50% tax reduction was granted for another three
     years and the last year it is entitled to this benefit is December 31,
     2005. With effect from January 1, 2006, Bonso Electronics (Shenzhen) Co.,
     Ltd is subject to a 10% income tax.

(c)  The components of the income tax benefit (expense) are as follows:

                                                 2004        2005        2006
                                                    $           $           $

     Deferred income tax benefit (expense)   (149,468)     27,434      21,194
     Current income tax expense              (252,036)   (293,493)   (152,668)
                                             --------    --------    --------
     Total income tax expense                (401,504)   (266,059)   (131,474)
                                             ========    ========    ========

(d)
                                                         2005          2006
                                                            $             $

     Deferred income tax                               98,906        82,529
     Deferred income liabilities                       43,856        19,863


     Deferred tax assets comprise the following:

                                                      2005            2006
                                                         $               $

     Tax loss carry forwards                       479,341         349,914
     Others                                        (42,779)        (55,185)
     Less: Valuation allowance                    (337,656)       (212,200)
                                                  --------        --------
     Net deferred tax assets                        98,906          82,529
     Less: current portion                         (52,057)           --
                                                  --------        --------
     Non-current portion                            46,849          82,529
                                                  ========        ========


     As of March 31, 2006, the Group had accumulated tax losses amounting to
     $2,469,400 (the tax effect thereon is $349,914), which may be carried
     forward and applied to reduce future taxable income which is earned in or
     derived from Germany. Realization of deferred tax assets associated with
     tax loss carry forwards is dependent upon generating sufficient taxable

                                      F-14
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


     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, 2006, the Group's accumulated tax losses have no definite
     period of expiration.


5    Taxation (Continued)

(e)  Changes in the valuation allowance consist of:

                                                    2004       2005       2006
                                                       $          $          $

     Balance, April 1                            163,645    251,429    337,656

     Charged/(credited) to income tax expense     87,784     86,227   (125,456)
                                                --------   --------   --------
     Balance, March 31                           251,429    337,656    212,200
                                                ========   ========   ========


(f)  The actual income tax expense attributable to earnings for the years ended
     March 31, 2004, 2005 and 2006 differed from the amounts computed by
     applying the Hong Kong statutory tax rate in accordance with the relevant
     income tax law as a result of the following:
<TABLE>
<CAPTION>

                                                           2004        2005        2006
                                                              $           $           $
<S>                                                    <C>         <C>         <C>
     Hong Kong statutory tax rate                          17.5%       17.5%       17.5%

     Income tax expense at the Hong Kong statutory
       tax rate                                        (460,082)   (630,257)   (107,730)
     Offshore profit not subject to income tax          348,194     688,668     154,444
     Expenses not deductible for income tax purposes   (158,710)   (169,596)   (370,962)
     Changes in valuation allowance                     (87,784)    (86,227)    125,456
     (Under)/over provision for Hong Kong tax in
     prior years                                        (30,987)    (69,389)      6,623
     Income tax rate differentials                      (22,310)     (4,424)     55,602
     Tax losses utilized                                 10,175       5,166       5,093
                                                       --------    --------    --------
     Total income tax expense                          (401,504)   (266,059)   (131,474)


6    Leases

(a)  Capital leases

     Motor vehicles and plant and machinery include the following amounts for
     capitalized leases:

                                           Motor vehicles           Plant and machinery
                                           ---------------          -------------------
                                              March 31                    March 31
                                              --------                    --------
                                            2005          2006         2005          2006
                                               $             $            $             $

     Cost                                110,065          --      2,316,002     1,731,894
     Less: accumulated amortization     (110,065)         --     (1,527,540)     (388,894)
                                      ----------    ----------   ----------    ----------
                                            --            --        788,462     1,343,000
                                      ==========    ==========   ==========    ==========

                                      F-15
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


6    Leases (Continued)

     During the years ended March 31, 2004, 2005 and 2006, the Group entered
     into additional capital lease obligations amounting to $1,551,119, $Nil and
     $188,718 respectively.

     Future minimum payments under capital leases as of March 31, 2006 with an
     initial term of more than one year are as follows:

                                                                     $

     2007                                                      180,470
                                                              --------
     Total minimum lease payments                              180,470

     Less: amount representing interest                        (13,668)
                                                              --------
     Present value of net minimum lease payments (including
     current portion of 166,802 as of March 31, 2006)          166,802
                                                              ========


(b)  Operating leases

     As of March 31, 2006, future minimum lease payments in respect of
     non-cancellable operating leases for factory, office premises and staff
     quarters in Hong Kong, the PRC, Germany, the United States, the United
     Kingdom and Canada are as follows:

                                                                     $

     2007                                                    1,032,270
     2008                                                      910,346
     2009                                                      847,961
     2010                                                    1,095,197
     Thereafter                                                 17,104
                                                             ---------
                                                             3,902,878
                                                             =========

     Rental expense for all operating leases amounted to $478,986, $521,819 and
     $688,469 for the year ended March 31, 2004, 2005 and 2006, respectively.




                                      F-16
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


7    Banking facilities

     As of March 31, 2006, the Group had general banking facilities for bank
     overdrafts, letters of credit, notes payable and short-term loans. The
     facilities are interchangeable with total amounts available of $36,018,301
     (2005: $29,909,886). The general banking facilities utilized by the Group
     are denominated in United States dollars, Hong Kong dollars, Japanese Yen
     and Canadian dollars.

     The Group's general banking facilities, expressed in United States dollars,
     are further detailed as follows:

                                                                                       Terms of banking facilities as of
                                                                                       ---------------------------------

                                 Amount available              Amount utilized                   March 31, 2006
                                 ----------------              ---------------                   --------------
                                     March 31                      March 31
                             ------------------------      -----------------------
                                   2005          2006           2005          2006               Interest        Repayment
                                      $             $              $             $                   rate            terms
     Import and export
      Facilities

     Letters of credit       21,987,179    26,602,564      3,785,817     3,310,673

     Including sub-limit
      of:

      Notes payable          20,846,154    20,846,154      3,744,726     3,310,673            HIBOR +1.5%     Repayable in
                                                                                                               full within
                                                                                                               four months


     Short-term loans          6,231,026     7,246,526     4,742,685     2,936,467             Prime rate     Repayable in
                                                                                               minus 0.5%      full within
                                                                                           or EONIA+1.15%    twelve months
                                                                                                to +1.95%
                                                                                           or HIBOR +1.5%

     Other facilities

                                                                                                    Prime
     Bank overdrafts           1,434,931     1,912,461       281,085       471,254                   rate        Repayable
                                                                                             +0.5% to +1%        on demand
                                                                                           or HIBOR+2.25%


     Long-term debt              256,750        256,750      256,750        48,329             Prime rate     Repayable in
      (Note 4)                                                                              +1% to +1.15%      full within
                                                                                           or HIBOR+2.25%       thirty-six
                                                                                                                    months

                             ----------    ----------      ---------     ---------
                             29,909,886    36,018,301      9,066,337     6,766,723
                             ==========    ==========      =========     =========


                                      F-17
</TABLE>
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


7    Banking facilities (Continued)

     The amounts of banking facilities utilized by the Group are denominated in
     the following currencies:

                                                      Amount utilized
                                                 --------------------------
                                                          March 31
                                                 --------------------------
                                                      2005             2006
                                                         $                $
     Euro                                        4,742,686        2,936,467

     Hong Kong dollars                           2,688,542        2,261,593

     Japanese Yen                                   44,822             --

     United States dollars                       1,052,452        1,041,883

     Canadian dollars                              537,835          526,780
                                                 ---------        ---------

                                                 9,066,337        6,766,723
                                                 =========        =========


     The Prime Rate and HIBOR rate were 8% and 4.4846% per annum, respectively,
     as of March 31, 2006. The Prime Rate is determined by the Hong Kong Bankers
     Association and is subject to revision from time to time.

     The banking facilities are collateralised by the following:

     (a)  bank guarantee of $6,618,333 (2005: $5,740,000) and restricted cash
          deposits of $Nil (2005: $4,848). The restricted cash deposits have
          original maturities of less than three months;

     (b)  a legal charge over a leasehold property of one of the Group's
          subsidiaries with net book value of $Nil (2005: $449,428);

     (c)  a personal guarantee of $102,000 (2005: $102,000) by a director of one
          of the Group's subsidiaries.


     The weighted average interest rate of short-term borrowings of the Group is
     as follows:

                                                      Year ended March 31
                                                   -------------------------
                                                    2005                2006

     Bank overdrafts                               5.00%               6.01%
     Notes payable                                 3.33%               4.83%
     Short-term loans                              3.33%               4.35%


                                      F-18
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


8    Related party transactions

(a)  The Group paid emoluments, commissions and/or consultancy fees to its
     directors as follows:

     Year ended

                         Mr. So Hung Gun,  Ms. Pang Kit     Mr. Chun Kim
     March 31                    Anthony    Teng, Cathy              Wah
     --------            ---------------   ------------     ------------

     2004                   $630,821(iii)      $128,015      $152,554(ii)
     2005                   $700,000(iii)      $111,912      $134,350(ii)
     2006                   $583,215(iii)      $113,913      $137,990(ii)

                  Mr. Fok Woo      Mr. George  Mr. J Stewart     Mr. Henry
                         Ping         O'Leary        Jackson     Schlueter
                  -----------      ----------  -------------   -----------

     2004                 Nil      $172,125(i)           Nil   $230,909(iv)
     2005                 Nil      $158,766(v)           Nil   $119,201(iv)
     2006                 Nil      $240,000              Nil   $ 23,519(iv)

     (i)  This represented consultancy fee paid to Mr. George O'Leary. Since
          April 1, 2001, a monthly consultancy fee was paid to Mr. O'Leary for
          provision of support and marketing services in the United States.

     (ii) Included in the emoluments is a housing allowance for $38,462 for each
          of the three years in the period ended March 31, 2006 payable to a
          company in which Mr. Chung Kim Wah has a beneficial interest.

    (iii) Apart from the emoluments paid by the Group as shown above, one of
          the properties of the Group in Hong Kong is also provided to Mr. So
          Hung Gun, Anthony as part of his compensation.

     (iv) Mr. Henry Schlueter was appointed as a director of the Company on
          October 10, 2001. The amount for the years ended March 31, 2004, 2005
          and 2006 represented professional fees paid to Schlueter & Associates,
          P.C., the Group's SEC counsel in which Mr. Henry Schlueter is one of
          the principals.

     (v)  Included in the emoluments is a monthly consultancy fee to Mr. O'Leary
          for provision of support and marketing services in the United States
          and director fee since January 17, 2005.

(b)  For the year ended March 31, 2005, the Group sold scales to Tantric Europe
     Ltd. ("Tantric") amounting to $99,410. There was no such transaction in the
     year ended March 31, 2006. Tantric is 100% (2005: 100%) owned by Mohan
     Thadani, the Chief Executive Officer and minority shareholder of one of the
     subsidiaries of the Company.

                                      F-19
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


9    Provident fund plan

(a)  With effect from January 1, 1988, Bonso Electronics Limited ("BEL"), a
     wholly-owned foreign subsidiary of the Company, 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 time employees who joined BEL before December 2000,
     excluding factory workers, are eligible to join the provident fund plan.

     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 in or after December
     2000, excluding factory workers, are eligible to join the MPF.

(b)  Members of the Plan are required to contribute 5% of their monthly salary.
     The contribution by BEL is as follows:

     Years of service                    % of salary as BEL's contribution
     ----------------                    ---------------------------------

     Less than 5 years                   5.0%
     5 to 10 years                       7.5%
     More than 10 years                  10.0%

     Members' and employers' contributions to the MPF are both at 5% of the
     members' monthly salaries and are subject to a maximum contribution of
     HK$1,000 monthly.

(c)  At normal retirement age, death or ill health, the member shall be entitled
     to receive from the Plan a lump sum equal to the total of the member's and
     BEL's contributions plus the return on their investment. On resignation
     prior to normal retirement age, a member shall be entitled to receive from
     the Plan a lump sum equal to the member's contributions plus a percentage
     of the employer's balance determined in accordance with a predetermined set
     scale.

     On resignation or at normal retirement age, death or ill health, the member
     of the MPF shall be entitled to a lump sum equal to the total of the
     member's and BEL's contributions plus the return on their investment.

(d)  BEL's total contributions to the Plan and the MPF for the years ended March
     31, 2004, 2005 and 2006 aggregated $77,402, $83,277 and $95,339
     respectively.



                                      F-20
<PAGE>
<TABLE>
<CAPTION>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


10   Goodwill, Brand name and Other intangible assets

     Goodwill, brand name and other intangible assets are analysed as follows:

                                  Goodwill                   Brand name            Other intangible assets
                                  --------                   ----------            -----------------------
                                  March 31                    March 31                     March 31
                                  --------                    --------                     --------
                                2005         2006          2005          2006          2005          2006
                                   $            $             $             $             $             $

<S>                        <C>          <C>           <C>           <C>             <C>           <C>
     Cost                  1,100,962    1,100,962     3,000,000     3,000,000       544,267       544,267
     Less: accumulated
      amortization              --           --        (802,608)   (1,002,608)       (1,129)      (14,677)
     Less: impairment
      loss for the year         --       (258,141)         --            --            --            --
                          ----------   ----------    ----------    ----------    ----------    ----------
                           1,100,962      842,821     2,197,392     1,997,392       543,138       529,590
                          ==========   ==========    ==========    ==========    ==========    ==========

</TABLE>

     Goodwill of the Group of $842,821 as at March 31, 2006 (2005: $1,100,962)
     was not subject to amortization. Amortization expense in relation to brand
     name was $200,000 for each of the years ended March 31, 2004, 2005 and
     2006. Amortization expense in relation to other intangible assets was $Nil,
     $1,129, $13,548 for each of the years ended March 31, 2004, 2005 and 2006.

     As of March 31, 2006, future minimum amortization expenses in respect of
     brand name and other intangible assets are as follows:

                                                            Other intangible
                                            Brand name                assets
                                                    $                      $

     2007                                     200,000                 13,548
     2008                                     200,000                 13,548
     2009                                     200,000                 13,548
     2010                                     200,000                 13,548
     2011                                     200,000                 13,548
     Thereafter                               997,392                461,850
                                            ---------               --------
     Total                                  1,997,392               $529,590
                                            =========               ========

     Based on the assessment for the year ended March 31, 2006, the Group made a
     provision for impairment of goodwill of approximately $258,141 for Korona
     Hauschaltswaren GmbH & Co.KG due to the continued weak performance of the
     scales business.

11   Commitments and contingencies

     As of March 31, 2006, the Group had commitments to acquire plant and
     machineries from third parties for an aggregate consideration of $65,692
     (2005: $230,055), of which $32,607 (2005: $86,567) had been paid as
     deposits.

     Contractual arrangements we have entered into among our us and our
     subsidiary in China may be subject to scrutiny by China tax authorities and
     a finding against Bonso and its subsidiary in China may result in
     additional tax liabilities that could substantially reduce our consolidated
     net income and the value of our investment. Under Chinese laws and
     regulations, arrangements and transactions among related parties may be
     subject to audit or challenge by the PRC tax authorities. We could face
     material and adverse tax consequences if the Chinese tax authorities
     determine that the contractual arrangements among our wholly owned
     subsidiary in China and Bonso do not represent an arm's length price and
     adjust Bonso or its China subsidiary's income in the form of a transfer
     pricing adjustment. A transfer pricing adjustment could, among other
     things, increase its tax liabilities for Chinese tax purposes. Our
     consolidated net income may be materially and adversely affected if our
     affiliated entities' tax liabilities increase.


                                      F-21
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


12   Earnings per share

                                                  Year ended March 31
                                           ---------------------------------
                                                2004        2005        2006
                                                   $           $           $

     Income available to common
     Shareholders                          2,268,610   3,349,612     484,128

     Weighted average shares outstanding   5,702,015   5,646,676   5,577,639
     Incremental shares from assumed
      exercise of:
       Warrants                                3,746        --          --
       Stock options                         354,503     407,627     360,005
                                           ---------   ---------   ---------
     Dilutive potential common shares        358,249     407,627     360,005
                                           ---------   ---------   ---------
     Diluted weighted average shares       6,060,264   6,054,303   5,937,644
                                           =========   =========   =========

     Basic earnings per share                  $0.40       $0.59        0.09
     Diluted earnings per share                $0.37       $0.55        0.08


     Basic earnings per share is computed by dividing net income/(loss)
     available to common shareholders by the weighted average number of shares
     of common stock issued and 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 warrants and stock options.

     Options to purchase 40,000 shares, 40,000 shares, 30,000 shares, 228,000
     and 20,000 shares of common stock at $6.20, $6.12, $7.875, $8.00 and
     $8.125, respectively, were outstanding as at March 31, 2006 but were not
     included in the calculation of diluted earnings per share during the year
     ended March 31, 2006 due to their anti-dilutive effect.

13   Shareholders' equity

     Preferred stock

     The Company had authorized share capital of $100,000 or 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 shareholders 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 had not issued any
     shares of preferred stock as of March 31, 2006.

                                      F-22
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


14   Stock option and bonus plans

(a)  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 stock bonus.

     The purpose of this 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 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 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 who shall be a non-employee of the Company.
     The initial Committee members are Anthony So, Woo Ping Fok and George
     O'Leary. 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.

     On March 23, 2004, our 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.

     The purpose of the 2004 Plan is to secure 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 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 who shall be a non-employee of the Company. The committee
     members currently are Anthony So, Woo Ping Fok and George O'Leary. 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 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 Stock Option
     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.

     In October 1996, the Board of Directors approved the 1996 Stock Option Plan
     and 1996 Non-Employee Directors' Stock Option Plan. Under the 1996 Stock
     Option Plan, the Company may grant options of common stock to certain
     employees and directors of the Company for a maximum of 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.

                                      F-23
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


     Under the 1996 Non-Employee Directors' Stock Option Plan, the non-employee
     directors are automatically granted stock options on the third business day
     following the day of each annual general meeting of the Company to purchase
     an aggregate of 600,000 shares of common stock. The exercise price of all
     options granted under the 1996 Non-Employee Directors' Stock Option Plan
     shall be one hundred percent of the fair market value per share of the
     common shares on the date of grant. The maximum term of options granted
     under the 1996 Non-Employee Directors' Stock Option Plan is 10 years. No
     stock option may be exercised during the first six months of its term
     except for certain conditions provided in the 1996 Non-Employee Directors'
     Stock Option Plan. The right to acquire the common shares is not assignable
     except for 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
     options shall expire on March 31, 2013 and can be exercised at any time
     after granting. The exercise prices of these options were equal to the fair
     market value at the time of grant. 30,000 options have been exercised
     during the year ended March 31, 2005 and no option was exercised during the
     year ended March 31, 2006.

     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 options shall expire on
     March 25, 2014 and can be exercised at any time after granting. The
     exercise prices of these options were equal to the fair market value at the
     time of grant. No such option was exercised during the year ended March 31,
     2006.

     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 options
     shall expire on September 12, 2014 and can be exercised at any time after
     granting. The exercise prices of these options were equal to the fair
     market value at the time of grant. No such option was exercised during the
     year ended March 31, 2006.

     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 options
     shall expire on December 4, 2015 and can be exercised at any time after
     granting. The exercise prices of these options were equal to the fair
     market value at the time of grant. No such options had been exercised
     during the year ended March 31, 2006.

(b)  The stock options summary as of March 31, 2006 is as follows:

                                                          Average per share
                                                Number             Exercise
                                             of shares                price

     Balance, March 31, 2004                 1,084,500               $ 3.95

     Exercised                                 (50,000)              ($1.99)

     Granted                                    40,000               $ 6.20
                                            ----------               ------

     Balance, March 31, 2005                 1,074,500               $ 4.13

     Granted                                    30,000               $ 4.50

     Balance, March 31, 2006                 1,104,500               $ 4.13


                                      F-24
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


(c)  The following table summarizes the information about all stock options of
     the Company outstanding as at March 31, 2006:

                                                      Weighted
                                        Number         average     Exercisable
     Weighted average           outstanding at  remaining life       shares at
     exercise price             March 31, 2006         (years)  March 31, 2006
     --------------             --------------         -------  --------------

     $8.125                            20,000             3.8           20,000
     $8.000                           228,000             3.8          228,000
     $7.875                            30,000             4.8           30,000
     $3.650                           196,000             5.0          196,000
     $2.550                            10,000             5.5           10,000
     $2.500                           168,000             5.9          168,000
     $1.610                           342,500             7            342,500
     $6.120                            40,000             8             40,000
     $6.200                            40,000             8.5           40,000
     $4.500                            30,000             9.75          30,000
                                    ---------                        ---------

     $4.009                         1,104,500             5.85       1,104,500
                                    =========                        =========

(d)  Pro forma information regarding net income and earnings per share is
     required by SFAS No. 123 "Accounting for Stock-Based Compensation", and has
     been determined as if the Company had accounted for its employee stock
     options under the fair value method of SFAS No. 123. The weighted average
     fair value of options granted during the years ended March 31, 2004, 2005
     and 2006 were $844,525, $191,712 and $83,605 respectively. The fair value
     for these options was estimated at the date of grant using a Black-Scholes
     Option Valuation model with the following weighted-average assumptions for
     the years ended March 31, 2004, 2005 and 2006:

                                                       2004       2005      2006
                                                          $          $         $
     Weighted risk-free interest rate                 2.83%      4.46%     4.29%
     Dividend yield                                   1.53%      1.80%        2%
     Weighted volatility factor of the expected
       market price of the Company's common share    98.24%       110%    69.14%
     Weighted average expected life of the option   5 years  7.2 years  10 years

     The Company has applied the pro forma fair value disclosures as permitted
     under SFAS No.123.

15   Business segment information

(a)  The Group is organized based on the products it offers. This organizational
     structure, the Group's operation can be classified into three business
     segments, Scales, Telecommunications products and Other.

     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.

     Telecommunication products operations principally involve production and
     modification of two-way radios and cordless telephones that are used in
     consumer and commercial applications.

     The Group established the "Other" segment which principally includes the
     activities of (i) tooling and mould charges for scales and
     telecommunication products, and (ii) supporting service to customers
     including performing repair work for customers and sales of spare parts.

     The accounting policies of the Group's reportable segments are the same as
     those described in the description of business and significant accounting
     policies.

                                      F-25
<PAGE>
<TABLE>
<CAPTION>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


15   Business segment information

     Summarized financial information by business segment for 2004, 2005 and
     2006 is as follows:

                                                               Identifiable  Depreciation
                                                   Operating   assets as of           and       Capital
                                   Net sales    profit/(loss)      March 31  amortization   expenditure
                                   ---------    -------------      --------  ------------   -----------
                                            $              $              $             $             $

     2006
     ----

     <S>                          <C>             <C>           <C>              <C>           <C>
     Scales                        43,553,161      5,545,751     21,518,522       740,575       339,449
     Telecommunication products    20,750,920       (959,436)    15,856,567     1,110,862       509,173
     Other                            238,882         42,999        796,704        58,078          --
                                  -----------    -----------    -----------   -----------   -----------
     Total operating segments      64,542,963      4,629,314     38,171,793     1,909,515       848,622
     Corporate                           --       (3,718,271)    11,307,095       760,671       491,512
                                  -----------    -----------    -----------   -----------   -----------
     Group                         64,542,963        911,043     49,478,888     2,670,186     1,340,134
                                  ===========    ===========    ===========   ===========   ===========
     2005
     ----


     Scales                        47,256,574      3,345,455     21,193,423       443,740       169,357
     Telecommunication products    20,656,491        230,177      8,461,183       793,796       113,524
     Other                          1,689,127        304,595        716,479        58,078          --
                                  -----------    -----------    -----------   -----------   -----------
     Total operating segments      69,602,192      3,880,227     30,371,085     1,295,614       282,881
     Corporate                           --         (217,021)    22,091,671     1,477,472       401,517
                                  -----------    -----------    -----------   -----------   -----------
     Group                         69,602,192      3,663,206     52,462,756     2,773,086       684,398
                                  ===========    ===========    ===========   ===========   ===========

     2004
     ----


     Scales                        46,211,039      5,827,669     27,443,213     1,566,913     2,628,677
     Telecommunication products    27,450,322      1,026,131      8,718,211     1,238,270       181,237
     Other                          1,302,724        173,870        716,479        58,078       114,700
                                  -----------    -----------    -----------   -----------   -----------
     Total operating segments      74,964,085      7,027,670     36,877,903     2,863,261     2,924,614
     Corporate
                                         --       (4,195,658)    16,720,542       365,779        60,860
                                  -----------    -----------    -----------   -----------   -----------
     Group                         74,964,085      2,832,012     53,598,445     3,229,040     2,985,474
                                  ===========    ===========    ===========   ===========   ===========


     Operating profit by segment equals total operating revenues less expenses
     that are related to the segment's operating revenues. Operating loss of the
     corporate segment consists principally of salaries and related costs of
     administrative staff, and administration and general expenses of the Group.
     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, deferred income tax assets and other identifiable assets
     not related specifically to individual segments. Goodwill of $1,100,962,
     $1,100,962 and $842,821 arising from the purchase of Korona Hauschaltswaren
     GmbH & Co.KG and Gram Precision Scales, Inc. is included in identifiable
     assets of the Scales segment as of March 31, 2004, 2005 and 2006
     respectively. Impairment loss of goodwill of $258,141 in relation to Korona
     Hauschaltswaren GmbH & Co.KG is included in the operating results of the
     Scales segment for the year ended March 31, 2006.

                                      F-26
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


(b)  The Group primarily operates in Hong Kong, the PRC, Germany, Canada, the
     United States and the United Kingdom. The manufacture of components and
     their assembly into finished products is carried out in the PRC. The Hong
     Kong office is mainly responsible for various corporate activities, the
     purchase of raw materials, arrangement of shipments and research and
     development. Subsidiaries in Germany, Canada, the United States and the
     United Kingdom are responsible for the distribution of electronics scales
     and telecommunication products in Europe and North America. As the
     operations are integrated, it is not practicable to distinguish the net
     income derived among the activities in Hong Kong, the PRC, Germany, Canada,
     the United States and the United Kingdom.

     Total property, plant and equipment, net by geographical areas are as
     follows:

                                                          2005         2006
                                                             $            $

     Hong Kong                                       3,771,080    3,685,511
     The PRC                                         9,522,560    8,674,403
     Germany                                           275,946      136,495
     Canada                                            687,135      270,194
     United States of America                           42,316       66,474
     United Kingdom                                     12,949         --
     Poland                                               --            852
                                                    ----------   ----------
     Total property, plant and equipment, net       14,311,986   12,833,929
                                                    ==========   ==========


(c)  The following is a summary of net sales by geographical areas, which are
     defined by the final shipment destination, constituting 10% or more of
     total sales of the Group for the years ended March 31, 2004, 2005 and 2006:

                                                 Year ended March 31
                          ---------------------------------------------------------------
                                 2004       %          2005       %          2006       %
                                    $                     $                     $
     Canada                 3,768,000      5%   $ 2,686,951      4%     1,637,447      3%
     United States of
     America               41,302,191     55%    38,638,906     55%    37,352,618     58%
     Germany               17,429,011     23%    15,025,103     22%    13,302,506     21%
     United Kingdom         3,879,272      5%     2,769,900      4%     2,262,160      3%
     Other EC countries     6,483,109      9%     7,948,970     11%     7,997,740     12%
     Asia and Others        2,102,502      3%     2,532,362      4%     1,990,492      3%
                          -----------    ---    -----------    ---    -----------    ---
                           74,964,085    100%    69,602,192    100%    64,542,963    100%
                          ===========    ===    ===========    ===    ===========    ===






                                      F-27
<PAGE>

                      Bonso Electronics International Inc.
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)


(d)  The details of sales made to customers constituting 10% or more of total
     sales of the Group are as follows:

                                                                                Year ended March 31
                                                              ------------------------------------------------------
                                          Business                  2004     %         2005     %         2006     %
                                           segment                     $                  $                  $
     Sunbeam Products, Inc. (USA)           Scales            10,301,621    14   11,708,143    17   10,269,375    16

     TTI Tech Co., Ltd.                      Tele-
                                     communication
                                          products            18,664,970    25    7,309,546    11   10,264,500    16

     Global Link Corporation Ltd.            Tele-
                                     communication
                                          products             7,927,646    11   11,893,578    17   10,462,434    16
                                                              ----------   ---   ----------   ---   ----------   ---

                                                              36,894,237    50   30,911,267    45   30,996,309    48
                                                              ==========   ===   ==========   ===   ==========   ===

</TABLE>

16   Fair value of financial instruments

     SFAS No. 107, "Disclosures About Fair Value of Financial Instruments"
     defines the fair value of a financial instrument at which the instrument
     could be exchanged in a current transaction between willing parties.

     The carrying value of all of the Group's financial instruments classified
     as current assets or current liabilities are deemed to approximate fair
     value because of the short maturity of these instruments. These would
     include cash and cash equivalents, accounts receivable, accounts payable
     and accrued and other liabilities, which are reflected on the consolidated
     balance sheets.

     In the opinion of management, the carrying amount of the Group's long-term
     debt approximates fair value as the interest rate applicable is believed to
     approximate the market rates that would be offered to the Group for debts
     with same remaining maturities.



17   Post balance sheet date events

     On August 13, 2006, Bonso entered into a letter of intent to acquire
     approximately 100,000 square meters of land for future expansion. Under the
     terms of the letter of intent, the cost of the land is approximately
     $760,000. No payment has been made as of the date of this report.











                                      F-28