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, 2005

     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 [ ]

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

                        Item 17 [ ]           Item 18 [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.................  49
Item 8.   Financial Information.............................................  53
Item 9.   The Offer and Listing.............................................  53
Item 10.  Additional Information............................................  54
Item 11.  Quantitative and Qualitative Disclosures about Market Risk........  59
Item 12.  Description of Securities Other Than Equity Securities............  59

PART II
Item 13.  Defaults, Dividend Arrearages and Delinquencies...................  60
Item 14.  Material Modifications to the Rights of Security Holders
            and Use of Proceeds.............................................  60
Item 15.  Controls and Procedures...........................................  60
Item 16.  Reserved..........................................................  61
Item 16A. Audit Committee Financial Expert..................................  61
Item 16B. Code of Ethics....................................................  61
Item 16C. Principal Accountant Fees and Services............................  61
Item 16D. Exemptions from the Listing Standards for Audit Committees........  63
Item 16E. Purchases of Equity Securities by the Issuer and
            Affiliates Purchasers ..........................................  63

PART III
Item 17.  Financial Statements..............................................  63
Item 18.  Financial Statements..............................................  63
Item 19.  Exhibits..........................................................  64
SIGNATURES..................................................................  65



                                        i
<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, 2004 and 2005 and
for each of the three fiscal years ended March 31, 2005 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, 2001, 2002 and 2003, and for each of the two fiscal
years in the period ended March 31, 2002 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 and 2005 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 years ending March 31, 2002
and 2001 does not include information relating to Gram Precision. The
consolidated financial data the fiscal years ending March 31, 2002, March 31,
2003, March 31, 2004 and March 31, 2005 reflects the acquisition of 100% of
KORONA Haushaltswaren GmbH & Co. KG ("Korona"), which was effective as of May 1,
2001. Data for the fiscal year ending March 31, 2001 does not include
information relating to Korona.




                                        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,
                                      -----------------------------------------------------------------------
                                        2001(3)      2002(2)(3)    2003(1)(2)(3)  2004(1)(2)(3)   2005(1)(2)
                                      -----------    -----------   ------------   ------------    -----------
<S>                                   <C>            <C>            <C>            <C>            <C>
Net Sales                             $    29,719    $    53,413    $    46,400    $    74,964    $    69,602

Cost of Sales                             (22,400)       (40,192)       (35,528)       (57,481)       (53,138)
Gross Margin                                7,319         13,221         10,872         17,483         16,464
Selling Expenses                             (382)        (2,476)        (2,467)        (3,122)        (2,595)
Salaries and related costs                 (2,334)        (3,880)        (4,563)        (5,150)        (5,216)
Research and Development expenses            (298)          (427)          (393)          (740)          (710)
Administration and general expenses        (2,411)        (3,411)        (3,957)        (5,439)        (4,079)
Amortization of brand name                   --             (203)          (200)          (200)          (200)
Income (loss) from operations               1,894          2,824           (708)         2,832          3,664
Interest income                               458            167             85             57             81
Interest expense                             (338)          (645)          (533)          (500)          (417)
Foreign Exchange gain/(loss)                   43            (40)           (96)            15            (98)
Other Income                                   53             71             99            225            372

Consultancy Fee                              (381)          (381)          (381)          --             --
Income/(loss) before income                 1,729          1,996         (1,534)         2,629          3,602
taxes and minority interest
Income tax benefit/(expense)                 (125)          (190)           (37)          (402)          (266)
Net income/(loss) before              $     1,604    $     1,806         (1,571)         2,227          3,336
minority interest
Minority interest                              __             __            (72)            41             14
Net income/(loss)                     $     1,604    $     1,806    ($    1,643)         2,268          3,350

Earning (loss) per share
   - Basic                            $    0.2882    $    0.3232    ($   0.2936)   $    0.3979    $    0.5932
   - Diluted                          $    0.2824    $    0.3194    ($   0.2936)   $    0.3743    $    0.5533

Weighted average shares                 5,564,536      5,586,920      5,599,238      5,702,015      5,646,676
Diluted weighted average shares         5,679,911      5,652,852      5,599,238      6,060,264      6,054,303


(1)  Includes financial results of the acquisition of Gram Precision Scales that
     was effective as of August 1, 2002.
(2)  Includes financial results of the acquisition of Korona that was effective
     as of May 1, 2001.
(3)  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)

                                                              Fiscal Year ended March 31,
                                      ------------------------------------------------------------------------
                                        2001          2002 (2)       2003(1)(2)      2004(1)(2)      2005(1)(2)
                                      -------         -------        ---------       ---------       ---------
Cash and cash equivalents             $ 5,322         $ 1,878         $ 3,633         $10,815         $ 9,708
Working capital                       $ 9,323         $ 9,599         $ 9,777         $12,901         $15,370
Total assets                          $37,497         $44,451         $48,911         $53,598         $52,463
Current Liabilities                   $ 9,420         $13,488         $18,424         $20,190         $18,319
Long-term debt and capital lease      $   404         $   317         $   606         $ 1,158         $   168
Deferred income tax assets            $    97         $   112         $   167         $    67         $    99
Common Stock                          $    16         $    16         $    17         $    17         $    17
Shareholders' Equity                  $27,673         $29,200         $28,379         $30,750         $33,932
Dividends declared per share          $  0.10         $  0.10            --           $  0.05         $  0.10


(1)  Includes financial results of the acquisition of Gram Precision Scales that
     was effective as of August 1, 2002.
(2)  Includes financial results of the acquisition of Korona that was effective
     as of May 1, 2001.

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 June 1, 2005 were
U.S. $1.00 = CDN $ 1.2471, U.S. $1.00 = RMB 8.2765, U.S. $1.00 = HK 7.7842, U.S.
$1.00 = Euro 1.2232, U.S $1 = 1.8120 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, 2005.

                                                 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
              ------     ------     ------     ------     ------     ------     ------      ------     ------    ------
Jan. 2005     1.2422     1.1982     8.2765     8.2765     7.7994     7.7775     1.3476      1.2954     1.9058    1.8647
Feb. 2005     1.2511     1.2295     8.2765     8.2765     7.7999     7.7984     1.3274      1.2773     1.9249    1.8792
Mar. 2005     1.2425     1.2017     8.2765     8.2765     7.7998     7.7987     1.3465      1.2877     1.9292    1.8657
Apr. 2005     1.2568     1.2146     8.2765     8.2765     7.7995     7.7946     1.3093      1.2819     1.9165    1.8733
May 2005      1.2703     1.2373     8.2765     8.2765     7.7995     7.7767     1.2936      1.2349     1.9048    1.8205
June 2005     1.2578     1.2256     8.2765     8.2765     7.7692     7.7842     1.2320      1.2035     1.8368    1.7930
July 2005     1.2437     1.2048     8.2765     8.1056     7.7792     7.7685     1.2129      1.1917     1.7753    1.7303
Aug. 2005     1.2185     1.1893     8.1090     8.0954     7.7734     7.7684     1.2434      1.2147     1.8148    1.7695


     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 2000,
2001, 2002, 2003 and 2004 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.

                                       4
<PAGE>

                                   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
       ----------------   ---------------   ---------------   ----------------   -------------
2000       1.4855             8.2784            7.7924         Not Applicable        1.5156
2001       1.5487             8.2770            7.7997                 0.8952        1.4396
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

</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. The move
initially values the RMB at 8.11 per dollar. Under the new rules, the RMB will
be allowed to move 0.3 percent on a daily basis against the 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,
with a 2.1% revaluation versus the United States Dollar. This move initially
values the RMB at 8.11 per United States 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. However, there remains pressure on the Chinese
government to adopt an even more flexible 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. However, there can be no assurance that the Hong Kong
Dollar will remain pegged against the U.S. Dollar or the Chinese Renminbi will
not be revaluated once more 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

                                       5
<PAGE>

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.

     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 currently there can
be no 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 is 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.

                                       6
<PAGE>

     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 $23,660,000 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.

     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 PRC national and local governments and foreign governments
and agencies and has been subject to increasing regulation. As of the date of
this Annual Report, our company is not aware of any new environmental
regulations. However, 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 the PRC may result in the Continued
Increase in Labor Costs. During the fiscal year ended March 31, 2005, 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

                                       7
<PAGE>

customers for a significant portion of our sales during the fiscal year. Four
customers accounted for approximately 37% in the fiscal year ended March 31,
2003, 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, 2004. During the fiscal year ended March 31, 2005, three customers accounted
for approximately 45% 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.

     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. With the acquisition of Korona, a significant portion of
our net sales involve 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.

                                       8
<PAGE>

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
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, 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.

                                       9
<PAGE>

     Increased Prices for Raw Materials May have a negative impact upon us.
During the fiscal year ended March 31, 2005, 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
year ended 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
manufacturers; however, as a contract and OEM and original design manufacturer,
we compete with all companies engaged in the contract and OEM business. Further,
subsequent to the acquisitions of Korona and Gram Precision, we compete with
distributors of scales in Europe and Canada. 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 35.55% of the outstanding shares of
common stock, including shares underlying his outstanding options, or 28.39%
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

                                       10
<PAGE>

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, 2005 and 2004, our financial
results were affected by currency fluctuations, resulting in a total foreign
exchange loss of $98,051 and a gain of $15,081, 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 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 the 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.

                                       11
<PAGE>

     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
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. Our principal executive
offices are located in Hong Kong, 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.

                                       12
<PAGE>

         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. On
October 10, 2001, our shareholders approved the amendment to our Memorandum and
Articles of Association to create from time to time and 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 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
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 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.

                                       13
<PAGE>

     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, 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 operate under the
International Business Companies Ordinance, 1984, of the British Virgin Islands.

     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
from a third party for approximately $231,000 in cash, a promissory note in the
gross amount of $231,000, and the issuance of 125,000 shares of our common stock
valued at approximately $300,000. The purchase price was determined through
arms-length negotiations between us and the third party, which negotiations took
into consideration Gram Precision's business, financial position, operating
history, products, and other factors relating to Gram Precision's business. 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. We
originally acquired Korona for approximately $3,634,000. Augusta exercised its
option to redeem the stock it received as part of the purchase price for a
promissory note. Korona markets consumer scale products throughout Europe to
retail merchandisers and distributors. These products feature contemporary
designs using the latest materials and attractive packaging. Since 2000, we have
manufactured a portion of Korona's product line under an Original Design
Manufacturers agreement and are familiar with Korona's stature in Europe and its
potential for wider global distribution.

     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 include the following:

                                    2003              2004             2005
                                    ----              ----             ----
Property Plant & Equipment       $1,754,713        $3,089,656        $684,398


                                       14
<PAGE>

     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 and our current plan is to continue to use internally
generated funds principally to finance future capital expenditures. While we
currently have no future plans for capital expenditures during the fiscal year
ending March 31, 2006, our plans for capital expenditures 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).

     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 59% of
revenue for the fiscal year ended March 31, 2003, 61% for 2004 and 68% for 2005.
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 34% of revenue for the fiscal year
ended March 31, 2003, 37% for 2004 and 30% for 2005.

     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 and sale 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 7% of net sales for the fiscal year ended March 31,
2003, 2% for 2004 and 2% for 2005.

     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, 2003, 2004,
and 2005.

                                       15
<PAGE>

                                             Year ended March 31,
                                   --------------------------------------
Product Line                       2003              2004            2005
------------                       ----              ----            ----
Scales                              59%               61%             68%
Telecommunications Products         34%               37%             30%
Other products and services          7%                2%              2%
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" below.

     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.

                                       16
<PAGE>

     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. 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 scales in the United 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, 2003, 2004 and 2005.

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

<TABLE>
<CAPTION>

                                                      Year ended March 31,
                             ---------------------------------------------------------------------
                                    2003                      2004                     2005
                             -------------------      -------------------      -------------------
<S>                          <C>                      <C>                      <C>
Canada                        $2,397,000      5%       $3,768,000      5%       $2,686,951      4%
United States of America     $19,620,956     43%      $41,302,191     55%      $38,638,906     55%
Germany                      $11,652,592     25%      $17,429,011     23%      $15,025,103     22%
United Kingdom                $4,167,505      9%       $3,879,272      5%       $2,769,900      4%
Other EC Countries            $5,239,130     11%      $ 6,483,109      9%       $7,948,970     11%
Asia and Others               $3,322,958      7%      $ 2,102,502      3%       $2,532,362      4%
                             -------------------      -------------------      -------------------
Total                        $46,400,141    100%      $74,964,085    100%      $69,602,192    100%
                             ===================      ===================      ===================

                                       17
</TABLE>
<PAGE>

     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 years ended March 31, 2004 and 2005, we had recorded a total
commission payment of $445,376 and $440,743, 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:

                     Percent of Sales - Year ended March 31,
                     ---------------------------------------

Electronics Sensor Customers                   2003         2004         2005
----------------------------                   ----         ----         ----
Sunbeam Products, Inc.                          0%           14%         17%
Salter Housewares Ltd.                         10%           6%           3%
Media Markt und Saturn Verwaltungs GmbH         0%           5%           6%
Pitney Bowes, Inc.                              2%           2%           6%


     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           2003         2004         2005
   ---------------------------           ----         ----         ----
  Trisquare Communications (HK)
           Company Ltd.                   14%           0%           0%
        TTI Tech Co., Ltd.                 8%          25%          11%
   Global Link Corporation Ltd.            5%          11%          17%


     Sales of our products to OEMs and ODM's accounted for approximately 34% of
our total net sales in the year ended March 31, 2003, 70% for the year ended
2004 and 67% for the year ended 2005. Korona contributed $16,959,313 of our
total net sales or 24% of total net sales for the year ended March 31, 2005.
Gram Precision contributed $5,961,367 of our total net sales or 9% of total net
sales for the year ended March 31, 2005.

     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 the PRC.

                                       18
<PAGE>

     During the fiscal year ended March 31, 2005, 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 has 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.

     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, the
manufacturing plant. Further, we have received TL 9000 certification for our
telecommunications products.

     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.

     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 are currently working to ensure that we
can manufacture compliant products, and that we can be assured a supply of
compliant components from suppliersThe implementation process is running very
smoothly. However, if we fail to timely provide RoHS compliant products, our
European customers may refuse to purchase our products, and our business,
financial condition and operating results could suffer.

     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.

                                       19
<PAGE>

     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
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.

     Both the electronic sensor-based and wireless products are highly
competitive. Competition is primarily based upon unit price, product quality,
reliability, product features and management's reputation for integrity.
Accordingly, reliance is placed on research and development of new products,
line extensions and technological, quality and other continuous product
improvement. There can be no assurance that we will enjoy the same degree of
success in these efforts in the future. Research and development expenses,
aggregated approximately $393,000 for 2003, $740,000 for 2004 and $710,000 for
2005.

     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

                                       20
<PAGE>

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
remainder of the year, our products do not appear to be subject to significant
seasonal variation. Throughout the 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; however, 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 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 Shenzhen 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.

                                       21
<PAGE>

     Sovereignty over Hong Kong reverted to China on July 1, 1997. The 1984
Sino-British Joint Declaration, the 1990 Basic Law of Hong Kong, the 1992 United
States-Hong Kong Policy Act and other agreements provide some indication of the
business climate we believe will continue to exist in Hong Kong. Hong Kong
remains a Special Administrative Region ("SAR") of China, with certain
autonomies from the Chinese government. Hong Kong is a full member of the World
Trade Organization. It has separate customs territory from China, with separate
tariff rates and export control procedures. It has a separate intellectual
property registration system. The Hong Kong Dollar is legal tender in the SAR,
freely convertible and not subject to foreign currency exchange controls by
China. The SAR government has sole responsibility for tax policies, though the
Chinese government must approve the SAR's budgets. Notwithstanding the
provisions of these international agreements, we cannot be assured of the
continued stability of political, legal, economic or other conditions in Hong
Kong. No treaty exists between Hong Kong and the United States providing for the
reciprocal enforcement of foreign judgments. Accordingly, Hong Kong courts might
not enforce judgments predicated on the federal securities laws of the United
States, whether arising from actions brought in the United States or, if
permitted, in Hong Kong.

Organizational 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 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.

                                       22
<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 -- Compensation."

     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 four factory buildings, which contain
approximately 300,000 square feet, four workers' dormitories, containing
approximately 200,000 square feet, a canteen and recreation center of
approximately 25,500 square feet, an office building, consisting of
approximately 25,500 square feet, and staff quarters for our supervisory
employees, consisting of approximately 35,000 square feet, for a total of
approximately 586,000 square feet. All of the facilities noted above are
wholly-owned, except two factory buildings and two workers' dormitories with
approximately 180,000 square feet. We are planning to replace the lease with
these two old workers dormitories by a lease with two new workers dormitories in
Mid April. However we continue to pay a monthly management fee of $2,175
pursuant to a Contract on the Use of Land and Supply of Workers with Shenzhen
Baoan Fuan Industrial Company.

     In January 2005, we entered into a lease for a factory building and two
workers' dormitories that are adjacent to our factory, which aggregate
approximately 114,000 square feet. The term of the lease is five years beginning
in April 2005 and we pay approximately $16,000 per month for rent. During the
years ended March 31, 2004 and 2005, we deposited $136,000 to the owner to help
finance the construction of these properties. The $136,000 deposit is being used
to offset the initial rental payments until the deposit is reduced to nil.



                                       23
<PAGE>

     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 RMB3,500 per month (approximately $422). 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 RMB 21,000, or
approximately $2,537.

     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 annual rent for this facility is $91,332.

     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.

                                       24
<PAGE>

Adequacy of Facilities

     We believe the manufacturing complex, including the newly leased space,
will be adequate for our reasonably foreseeable needs.

Item 5. Operating and Financial Review and Prospects

     The following discussion and analysis should be read in conjunction with
Item 3 - "Key Information - Selected Financial Data" and the Consolidated
Financial Statements and Notes to Consolidated Financial Statements attached
elsewhere in this Annual Report.

     The income statement data for the fiscal year ended March 31, 2003 reflects
the acquisition of a 51% interest in Gram Precision for an eight month period
because the acquisition was effective as of August 1, 2002. Therefore, income
statement data for the fiscal year ended March 31, 2003 will not be comparable
with the financial information as of or for any past dates or periods and will
not be indicative of results of operations for future periods.

Overview

     We derive our revenues principally from the sale of sensor-based and
wireless products manufactured in China, which represent 68% and 30% of total
sales for fiscal year ended March 31, 2005 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 77% of our revenue during fiscal 2005.

     In the fiscal year ended March 31, 2003, net sales was $46,400,000 and net
loss was $1,644,000. In the fiscal year ended March 31, 2004, net sales was
$74,964,000 and net income increased to 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.

     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.

                                       25
<PAGE>

     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.

                                                    Year ended March 31,
                                                ----------------------------
     Income Statement Data                      2003        2004        2005
                                                ----        ----        ----
     Cost of sales                             (76.6)      (76.7)      (76.3)
     Gross margin                               23.4        23.3        23.7
     -----------------------------------------------------------------------
     Selling expenses                           (5.3)       (4.1)       (3.7)
     Salaries and related costs                 (9.8)       (6.8)       (7.5)
     Research and development expenses          (0.8)       (1.0)       (1.0)
     Administration and general expenses        (8.6)       (7.3)       (5.9)
     Amortization of brand name                 (0.4)       (0.3)       (0.3)
     Interest income                             0.2         0.1         0.1
     Interest expense                           (1.2)       (0.7)       (0.6)
     Foreign exchange gains/(loss)              (0.2)        0.0        (0.1)
     Other income                                0.2         0.3         0.5
     ------------------------------------------------------------------------
     Consultancy fee                            (0.8)        0.0         0.0
     Income (loss) before income taxes and
        minority interest                       (3.3)        3.5         5.2
     ------------------------------------------------------------------------
     Net income (loss)                          (3.5)        3.0         4.8
                                                -----------------------------

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.

                                       26
<PAGE>

     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
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.

                                       27
<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%.

Fiscal year ended March 31, 2004 compared to fiscal year ended March 31, 2003

     Net Sales. Our sales increased 61.6% from $46,400,141 for the fiscal year
ended March 31, 2003, to $74,964,085 for the fiscal year ended March 31, 2004,
primarily as a result of strong demand from both our scales & telecommunications
products. Sales of our scales business increased from $27,443,774 for the fiscal
year ended March 31, 2003, to $46,211,039 for the fiscal year ended March 31,
2004, and sales for telecommunications products were up from $15,729,490 for the
fiscal year ended March 31, 2003, to $27,450,322 for the fiscal year ended March
31, 2004. The increased sales mainly came from both new customer, such as
Sunbeam Products, Inc. and previous customers, such as TTI Tech Co., Ltd, as
indicated in the section "Customers and Marketing".

     Gross Margin. Gross margin was consistent at 23.4% during the fiscal years
ended March 31, 2003 as compare to 23.3% for the year ended March 31, 2004.

     Selling Expenses. Total selling expenses increased approximately 26.6% from
$2,466,653 during the fiscal year ended March 31, 2003 to $3,121,900 during the
fiscal year ended March 31, 2004. This increase was primarily attributable to
the increased sales volume experienced during the year ended March 31, 2004 when
compared to the same period in the prior year. However, selling expenses
decreased as a percentage of net sales from approximately 5.3% for the fiscal
year ended March 31, 2003, to approximately 4.2% for the fiscal year ended March
31, 2004 because of a tighten control in cost, such as to consolidate shipments
in containers to save freight costs.

     Salaries And Related Costs. Salaries and related costs increased by 12.8%
from $4,563,453 for the fiscal year ended March 31, 2003 to $5,150,345 for the
fiscal year ended March 31, 2004. This increase was primarily due to the
strength of the Euro and Canadian Dollar against the U.S. Dollar in translating
our overseas subsidiaries' expenses. Apart from foreign exchange effect, the
increase was also caused by the inclusion of an additional four months of Gram
Precision salaries, which was acquired by Bonso on August 1, 2002 (only 8 months
of Gram Precision's result were included in 2002-2003).

                                       28
<PAGE>

     Research And Development Expenses. Research and development expenses
increased approximately 88.3% from $392,926 during the fiscal year ended March
31, 2003, to $739,730 during the fiscal year ended March 31, 2004 due to
increased research and development activities for both telecommunications
products and new scale models. Salary of engineers composed the largest part of
Research and Development expense and amounted to $504,756.

     Administration And General Expenses. Administration and general expenses
increased by approximately 37.5% from $3,956,858 during the fiscal year ended
March 31, 2003 to $5,438,995 during the fiscal year ended March 31, 2004. This
increase was primarily the result of a provision of $1.2 million to account for
the accrued interest, attorney fees and expenses arising from the arbitration
with Augusta; the increase in foreign currency exchange rate of the Euro and
Canadian Dollar as compared the United States Dollar. During the fiscal year
ended March 31, 2004, the exchange rate of Euros and Canadian Dollars against
the United States Dollar increased approximately 12.1% and 12.8% respectively.
Additionally, an additional four months of administration cost was included for
Gram Precision for the fiscal year ended March 31, 2004.

     Amortization Of Brand Name. During the fiscal years ended March 31, 2003
and 2004 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 (loss) From Operations. As a result of the above changes, income
from operations increased by 500.2% from a loss of approximately $707,692 during
the fiscal year ended March 31, 2003 to income of $2,832,012 during the fiscal
year ended March 31, 2004.

     Interest Income. Interest income decreased by approximately 32.9% from
$85,178 during the fiscal year ended March 31, 2003, to $57,169 during the
fiscal year ended March 31, 2004. The decrease was the result of lower interest
rates in Hong Kong.

     Interest Expense. Interest expense decreased by approximately 6.2% from
$532,624 during the fiscal year ended March 31, 2003 to $499,512 during the
fiscal year ended March 31, 2004. This decrease was the result of lower interest
rates in Hong Kong.

     Foreign Exchange Gain/Loss. Foreign currency exchange rates produced a gain
of $15,081 during the fiscal year ended March 31, 2004, as compared to a loss of
$96,592 during the fiscal year ended March 31, 2003, an increased gain of
115.6%. The gain was primarily the result of increased strength of the Canadian
Dollar against the United States Dollar.

     Other Income. Other income increased approximately 126% from $99,369 during
the fiscal year ended March 31, 2003 to $224,292 during the fiscal year ended
March 31, 2004. The increase was primarily the result of increase in rental
income.

                                       29
<PAGE>

     Consultancy Fee. In 2000, we entered into an agreement with a third party
to provide consulting/advisory services relating to our capital structure and
fund-raising activities. The period of service was from July 2000 to January
2003. A total consultancy fee of $1,144,260 was deferred in 2000 and was
amortized over the three years of the contract, resulting in a non-cash
consultancy fee of $381,420 for the fiscal year ended March 31, 2003, relating
to warrants that were issued to the consultant. There was no consultancy fee
during the fiscal year ended March 31, 2004.

     Income Tax Expense. Income tax expense increased from $37,314 during the
fiscal year ended March 31, 2003 to $401,504 during the fiscal year ended March
31, 2004, representing 0.08% and 0.5% of net sales respectively. This increase
was primarily the result of the increase in our net profit tax for the fiscal
year ended March 31 2004.

     Net Income (loss). As a result of the above changes, net income during the
fiscal year ended March 31, 2004 was $2,268,610, compared to a net loss of
$1,643,734 during the fiscal year ended March 31, 2003, an increase of
$3,912,344 or approximately 238%.

     Impact of Inflation

     We believe that inflation has not had a material affect on our business
during the fiscal year ended March 31, 2005. During the fiscal years ended March
31, 2002 to March 31, 2005, 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. We
believe any increases in labor costs will not materially impact our operations
because of the lower labor costs of operating in China.

     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, they qualify
for a special reduced state tax rate of 15%. 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%, 38% and 26.375%,
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, Hong Kong or China.

                                       30
<PAGE>

     Efforts by the Chinese government to increase tax revenues could result in
decisions or interpretations of the tax laws by the Chinese tax authorities that
are unfavorable to us and which increase our future tax liabilities, or deny 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, 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.

     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; however, the Chinese Renminbi was very
stable in the past fiscal year and management believes that it is unlikely that
there will be material 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. As a result of
our increased use of foreign currencies resulting from our acquisitions of Gram
Precision and Korona, we experience greater foreign exchange risk than we have
in the past; however, during the fiscal year ended March 31, 2005, we
experienced a foreign currency loss of $98,051. We don't currently engage in
hedging transactions, however we may undertake hedging activities in the future.

                                       31
<PAGE>

     A summary of our debts from our banking facility agreements as at March 31,
2005 which were subjected to foreign currency risk is as below:



          Currencies:                                  March 31, 2005
          -----------                                  --------------

          Euro                                              4,742,686

          Hong Kong Dollars                                 2,688,542

          Japanese Yen                                         44,822

          United States Dollars                             1,052,452

          Canadian Dollars                                    537,835
                                                       --------------
                                                            9,066,337
                                                       --------------

     All the balances above, except $215,618, 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. 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
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.

                                       32
<PAGE>

     Operating activities provided $1,935,677 of net cash for the fiscal year
ended March 31, 2005 compared to $7,040,044 of net cash for the fiscal year
ended March 31, 2004. This increase in the use of cash can be primarily
attributed to cash spent in the ordinary course of business. Our investing
activities included the acquisition of $500,000 investment fund, which was
related to a 7% zero coupon capital guaranteed fund with maturity on October 11,
2007.

     As of March 31, 2005, we had $9,707,588 in cash and cash equivalents as
compared to $10,815,279 as of March 31, 2004. Working capital at March 31, 2005,
was $15,370,457 compared to $12,900,503 at March 31, 2004. 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 do not anticipate incurring any
significant capital expenditures during this fiscal year. We believe our working
capital is sufficient for our present requirements.

     As of March 31, 2005, we had $10,585,968 in trade receivable as compared to
$10,389,769 as of March 31, 2004. The slight increase of $196,199 from March 31,
2004 was caused by the change of payment term for a few customers from L/C at
sight to 30 days open account. The significant increase of $4,198,142 or 68%
from $10,389,769 as of March 31, 2004 as compared to $6,191,627 as of March 31,
2003 was caused by the $28,563,944 or 62% increase in net sales. We do not
anticipate incurring any significant un-collectible receivable and we had
already provided adequate provision to the extend that collection was considered
to be doubtful.

     As of March 31, 2005, we had $11,402,239 in inventories as compared to
$10,881,932 as of March 31, 2004. The slight increase of $520,307 was primarily
attributable to the increase of plastic resin as recorded in raw material. We
anticipated a rise of plastic resin price subsequent to year end date and thus
had made additional purchases before year end so as to minimize the cost
increase impact.

     As of March 31, 2005, we had a total of $10,683,304 in notes payable and
accounts payable as compared to $11,524,233 as of March 31, 2004. The slight
decrease of $840,929 was primarily attributable to timely payment to our
vendors.

     As of March 31, 2005 we had in place general banking facilities with 9
financial institutions with amounts available aggregating $29,909,886. 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,
2005, we had utilized $9,066,337 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

                                       33
<PAGE>

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, 2005 and 2004 were $8,809,587 and $8,096,125,
respectively. During the fiscal year ended March 31, 2005 and 2004, we paid a
total of $416,774 and $499,512, respectively, in interest on indebtedness.

     Our current ratio (current assets divided by current liabilities) increased
from 1.64 as of March 31, 2004 to 1.84 as of March 31, 2005. Our quick ratio
(cash and cash equivalents, restricted cash deposits and receivables divided by
current liabilities) increased from 1.10 as of March 31, 2004 to 1.22 as of
March 31, 2005.

     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 set forth information with respect to our commitments
as of March 31, 2005.

<TABLE>
<CAPTION>

                                                        Payments due by Period
                                     ----------------------------------------------------------
                                                     Within 1 to 3   Within 3 to 5   More than
                           Total     Within 1 year       years           years        5 years
                        -----------  -------------    -----------     -----------   -----------
<S>                     <C>           <C>             <C>             <C>           <C>
Letters of credit       $ 3,785,817   $ 3,785,817               0               0             0
Short-term loans        $ 4,742,685   $ 4,742,685               0               0             0
Long-term loans         $   256,750   $   249,271     $     7,479               0             0
Operating Leases        $ 2,407,106   $   670,547     $   919,060     $   809,502         7,997
Capital Leases          $   544,872   $   384,616     $   160,256               0             0
Acquisitions of Plant
& Machineries           $   143,488   $   143,488               0               0             0
                        -----------   -----------     -----------     -----------   -----------

Total                   $11,880,718   $ 9,976,424     $ 1,086,795     $   809,502         7,997
                        ===========   ===========     ===========     ===========   ===========
</TABLE>

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.

                                       34
<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.

     Principles of Consolidation

     All the consolidated subsidiaries were wholly owned by Bonso except for
Gram Precision Scales Inc. and its subsidiaries (i.e. Vector Distribution
Systems Inc., Vector Europe Ltd. and Scale Works Inc.), in which Bonso owned 51%
of the equity interest. Bonso does not hold any subsidiaries that are not
consolidated. Further, Bonso's management confirms that Bonso Electronics Ltd.
("BEL") consolidated Bonso Investment Limited ("BIL") and Bonso Electronics
(Shenzhen) Company Limited ("Bonso Electronics") for the purpose of preparing
the Financial Statements. All significant intercompany accounts and transactions
are eliminated in consolidation.

     The companies acquired during the financial period 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 less liabilities of acquired companies.

     During the financial year ending March 31, 2003, the Group adopted
Statement of Financial Accounting Standard ("SFAS") No. 142 "Goodwill and Other
Intangible Assets," which requires discontinuance of goodwill amortization and
an annual impairment review. Where an indication of impairment exists, the
carrying amount of goodwill is assessed and written down to its recoverable
amount.

     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.

                                       35
<PAGE>

     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 confirms that its 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.

     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 sensitivity
analysis on cash flow projections, judgement involved in determining the cash
flow projection, risk free rate, expected return on the equity market and
discount rate. For the year ended March 31, 2005, the Group made a provision for
$148,198 on leasehold land and buildings 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.

                                       36
<PAGE>

     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.

     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

                                       37
<PAGE>

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.

     At March 31, 2005, we employed 58 individuals in Hong Kong and China for
our engineering staff, who 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.

     During the fiscal year ended March 31, 2005, we spent approximately
$710,000 on research and development as opposed to $740,000 for the fiscal year
ended March 31, 2004, and approximately $393,000 during the fiscal year ended
March 31, 2003.

     Trend Information.

     During the past three years we have expanded into the telecommunications
sector and are manufacturing cordless telephones and family radios
(walkie-talkies). Significant expenditures were made to acquire additional
production facilities and equipment to support our expansion into the
telecommunications market. Although we are optimistic about our future in the
manufacture and sale of telecommunications 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, 2005, our backlog of manufacturing
orders was $14,580,461 compared to $11,782,520 at March 31, 2004. We believe
that in the fiscal year ended March 31, 2006, the trend of sales from
telecommunications products and scales will be similar to the year ended March
31, 2005.

     Off-Balance Sheet Arrangements

     We do not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
investors.

     Recent Accounting Pronouncements

     In November 2004, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 151 "Inventory Costs" ("SFAS No. 151"). This statement amends the
guidance in Accounting Research Bulletin No. 43, Chapter 4, "Inventory Pricing,"
to clarify the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). SFAS No. 151 requires
that those items be recognized as current-period charges. In addition, this
statement requires that allocation of fixed production overhead to costs of
conversion be based upon the normal capacity of the production facilities. The
provisions of SFAS No. 151 are effective for inventory costs incurred in fiscal
years beginning after June 15, 2005. As such, we are required to adopt these
provisions at the beginning of fiscal 2007. We do not expect the adoption of
SFAS No. 151 to have a material impact on its consolidated financial statements.

                                       38
<PAGE>

     In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment--An
Amendment of FASB Statements No. 123 and 95 ("SFAS No. 123R"), which requires
all companies to measure compensation cost for all share-based payments,
including employee stock options, at fair value, effective for public companies
for annual periods beginning after June 15, 2005. Generally, the approach in
SFAS No. 123R is similar to the approach described in SFAS No. 123. However,
SFAS No. 123R requires all share-based payments to employees, including grants
of employee stock options, to be recognized in the income statement based on
their fair values. Pro forma disclosure is no longer an alternative. The
adoption of SFAS No. 123R may have a significant impact on the Company's results
of operations, although it will have no impact on the Company's overall
financial position. The Company is evaluating SFAS No. 123R and has not yet
determined the amount of stock option expense which will be incurred in future
periods.

     In December 2004, the FASB issued SFAS No. 153, "Exchange of Nonmonetary
Assets, anamendment of APB Opinion No. 29, 'Accounting for Nonmonetary
Transactions."' SFAS No. 153 is based on the principle that exchange of
nonmonetary assets should be measured based on the fair market value of the
assets exchanged. SFAS No. 153 eliminates the exception of nonmonetary exchanges
of similar productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial substance. SFAS No.
153 is effective for nonmonetary asset exchanges in fiscal periods beginning
after June 15, 2005. Adoption of the provisions of SFAS No. 153 is not expected
to have a material impact on the Company's financial condition, results of
operations, or liquidity.

     In March 2005, the SEC issued Staff Accounting Bulletin No. 107 ("SAB
107"). SAB 107 includes interpretive guidance for the initial implementation of
FAS 123R. We will apply the principles of SAB 107 in conjunction with our
adoption of FAS 123R.

     In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3." SFAS
No. 154 requires retrospective application for voluntary changes in accounting
principle unless it is impracticable to do so. In addition, indirect effects of
a change in accounting principle should be recognized in the period of the
accounting change. SFAS No. 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005. We
do not expect the adoption of SFAS No. 154 to have a material impact on its
consolidated financial statements.

     In March 2005, the FASB issued FASB Interpretation No. 47 ("FIN 47"),
"Accounting for Conditional Asset Retirement Obligations--an interpretation of
FASB Statement No. 143." FIN 47 clarifies that the term "conditional asset
retirement obligation" as used in FASB Statement No. 143, "Accounting for Asset
Retirement Obligations," refers to a legal obligation to perform an asset
retirement activity in which the timing and (or) method of settlement are
conditional on a future event that may or may not be within the control of the
entity. Accordingly, an entity is required to recognize a liability for the fair
value of a conditional asset retirement obligation if the fair value of the
liability can be reasonably estimated. FIN 47 is effective for fiscal years
ending after December 15, 2005. The Company has yet to determine the impact, if
any, of FIN 47 on its consolidated financial statements.

                                       39
<PAGE>

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                62       Chairman of the Board, Secretary, Treasurer,
                                   Chief Financial Officer, and Director
George O'Leary            67       Chief Executive Officer, President, and
                                   Director
Kim Wah Chung             47       Director of Engineering and Research and
                                   Development and Director
Cathy Kit Teng Pang       43       Director of Finance and Director
Woo-Ping Fok              56       Director
J. Stewart Jackson, IV    69       Director
Henry F. Schlueter        54       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 year. 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 the present time, Mr. O'Leary has been President of
Pacific Rim Products, Newport Beach, California, a trading company that provides
offshore sourcing alternatives to U.S. based electronics companies. For eight
years prior to 1994, Mr. O'Leary was President, CEO and a director of Micro
General Corporation, Santa Ana, California, a manufacturer and distributor of
mechanical and electronic scale products. For eight years prior to that, Mr.
O'Leary was Vice President and General Manager of Lanier Business Products,
Atlanta, Georgia, a manufacturer and distributor of office products. Mr. O'Leary
has a Bachelor of Science degree in Electrical Engineering from Northeastern
University, Boston, Massachusetts.

     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.

                                       40
<PAGE>

     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., of which he is currently president. 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.

     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.

                                       41
<PAGE>

     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.

Compensation.

     The aggregate amount of compensation paid by us and our subsidiaries during
the year ended March 31, 2005 to all directors and officers as a group for
services in all capacities was approximately $1,187,984 including compensation
in the form of housing in Hong Kong for our Chairman and Chief Executive Officer
and Director of Engineering and Research and Development consistent with the
practice of other companies in Hong Kong. Total compensation for the benefit of
Anthony So was $700,000, for the benefit of Cathy Kit Teng Pang was $111,912,
for the benefit of Kim Wah Chung was $134,349, for the benefit of Mr. George
O'Leary was $158,766 and for the benefit of Henry F. Schlueter was an aggregate
of $119,201. We currently pay George O'Leary, our President and Chief Executive
Officer compensation in the amount of $20,000 per month or an aggregate of
$240,000 per year for his services. The $119,201 listed as having been paid for
the benefit of Mr. Schlueter was paid to his law firm, Schlueter & Associates,
P.C. for legal services rendered and expenses incurred.

     We did not set aside or accrue any amounts to provide pension, retirement
or similar benefits for directors and officers for the fiscal year ended March
31, 2005, other than contributions to our Provident Fund Plan which aggregated
$35,092 for officers and directors during the fiscal year ended March 31, 2005.

Employment Agreements

     We have employment agreements with Anthony So, Kim Wah Chung and Cathy Kit
Teng Pang. The employment agreements expire on March 31, 2008; however, they are
automatically renewable on an annual basis for additional one-year increments.
Mr. So's employment agreement provides for a yearly salary of $700,000 per year
plus bonus. Mr. Chung's employment agreement provides for a yearly salary of
$150,000 per year plus bonus and Ms. Pang's employment agreement provides for a
yearly salary of $130,000 per year plus bonus. The employment agreements contain
provisions under which we will be obligated to pay Mr. So, Mr. Chung and Ms.
Pang all compensation for the remainder of their employment agreements and five
times their annual salary and bonus compensation if a change of control as
defined in the agreements occur.

     During the fiscal year ended March 31, 2005, the amounts paid to Mr. Chung
and Ms. Pang were less than the yearly salaries provided for in their employment
agreements. See "Compensation." Mr. Chung and Ms. Pang waived the right to be
paid the amount representing the deficiency between the actual amounts paid to
them and the amount provided for in their employment agreements.

                                       42
<PAGE>

Options of Directors and Senior Management

     The following table provides information concerning options owned by the
directors and senior management at May 31, 2005.

                      Number of Common Shares   Exercise
                            Subject to          Price Per
        Name              Stock Options           Share       Expiration Date
        ----              -------------           -----       ---------------

Anthony So                   158,000              $8.00       January  6, 2010
                             128,000              $3.65       April 9, 2011
                             128,000              $2.50       March 6, 2012
                             222,500              $1.61       March 31, 2013

Kim Wah Chung                 20,000              $8.00       January  6, 2010
                              20,000              $3.65       April 9, 2011
                              20,000              $2.50       March 6, 2012
                              55,000              $1.61       March 31, 2013

Cathy Kit Teng Pang           20,000              $8.00       January  6, 2010
                              20,000              $3.65       April 9, 2011
                              20,000              $2.50       March 6, 2012
                              55,000              $1.61       March 31, 2013

George O'Leary                10,000              $8.125      January 12, 2010
                              10,000              $7.875      January 9, 2011
                              10,000              $6.12       March 25, 2014
                              10,000              $6.20       September 12, 2014

Woo-Ping Fok                  10,000              $8.125      January 12, 2010
                              10,000              $7.875      January 9, 2011
                              10,000              $6.12       March 25, 2014
                              10,000              $6.20       September 12, 2014

J. Stewart Jackson IV         10,000              $7.875      January 9, 2011
                              10,000              $2.55       October 15, 2011
                              10,000              $1.61       March 31, 2013
                              10,000              $6.12       March 25, 2014
                              10,000              $6.20       September 12, 2014

Henry F. Schlueter            10,000              $8.00       January 6, 2010
                              10,000              $6.12       March 25, 2014
                              10,000              $6.20       September 12, 2014

Directors

     Except for that mentioned above, our directors do not receive any
additional monetary compensation for serving in their capacities. However,
outside directors receive stock options pursuant to the 1996 Non-Employee
Directors' Stock Option Plan and have been granted other options. (See "Stock
Option Plans -- The 1996 Non-Employee Directors' Stock Option Plan," below). All
directors are reimbursed for all reasonable expenses incurred in connection with
services as a director.

                                       43
<PAGE>

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.

     BEL's total contributions to the Plan and the MPF for the years ended March
31, 2003, 2004, and 2005 amounted to $73,945, $77,402 and $83,277, 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.

     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.

                                       44
<PAGE>

     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

     During the fiscal year ended March 31, 2005, Messrs. Woo Ping Fok and Henry
F. Schlueter were members of our Audit Committee. Effective July 4, 2005, Mr.
Schlueter resigned as a member of our audit committee. Accordingly, Mr. Fok is
now the sole member of the Audit Committee. Mr. Woo Ping 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..

Employees.

     At March 31, 2005, we employed 3,050 persons, compared with 2,899 persons
at March 31, 2004; 42 employees in Hong Kong (39 for 2004), 2,973 employees in
China (2,820 for 2004), 22 employees in Germany, (22 for 2004), 0 in the United
Kingdom (2 for 2004), 2 employees in Poland (2 for 2004), 2 employees in the
United States (4 for 2004) and 9 in Canada (10 for 2004). Employees are not
covered by collective bargaining agreements. We consider our global labor
practices and employee relations to be good.



                                       45
<PAGE>
<TABLE>
<CAPTION>

Share Ownership.

     The following table shows the number of shares of common stock beneficially
owned by our directors and executive officers as of May 31, 2005:

                                                                       Total Number of
                              Shares of                                   Shares of
                             Common Stock                                Common Stock   Percent 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          30,000(6)(11)(12)            64,000       1.15%

Woo-Ping Fok                     68,407          40,000(8)(10)(11)(12)       108,407       1.93%


George O'Leary                   20,000          40,000(8)(10)(11)(12)        60,000       1.06%

J. Stewart Jackson IV           462,575(9)       50,000(7)10)(11)(12)        512,575       9.11%


All Directors and Officers    2,340,315       1,026,500                    3,366,815      55.97%
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.
(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.

                                       46
<PAGE>

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 in our 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
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

                                       47
<PAGE>

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, 2005, 40,000 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 Plan.

     The purpose of the 2004 Plan is to secure key employees to remain in the
employ of the Corporation and to encourage such employees to secure or increase
on reasonable terms their Common Stock ownership in the Corporation. The
Corporation believes that the Plan promotes continuity of management and
increased incentive and personal interest in the welfare of the Corporation.

     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 Corporation. 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.

     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.

                                       48
<PAGE>

     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 May 31, 2005, 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 May
31, 2005, 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.

                                       Amount Owned
                          ------------------------------------
                                                                    Percent of
                                                                     Class (1)
                            Shares of     Options/Warrants to      Beneficially
Name                      Common Stock   Purchase Common Stock        Owned
----                      ------------   ---------------------        -----

Anthony So                  1,626,195(2)      636,500(3)              36.14%
John Stewart Jackson IV       462,575          50,000(3)               9.11%
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 are 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.

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

                                       49
<PAGE>

     Of the 5,577,639 shares of common stock outstanding as of May 31, 2005,
4,260,177 were held in the United States by 216 holders of record. We have 224
shareholders of record and estimate that we have approximately 1,100
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, 2005 we paid Schlueter & Associates,
P.C. an aggregate of $119,201 for legal fees and expenses. Mr. Henry F.
Schlueter, a director, is the Managing Director of Schlueter & Associates, P.C.

     For the year ended March 31, 2005, we sold scales to Tantric Europe Ltd.
("Tantric") amounting to $99,410. Tantric is 100% owned by the Chief Executive
Officer and minority shareholder of one of the subsidiaries of the Company. As
at March 31, 2005, there was no outstanding balance due from Tantric.

Interests of Experts and Counsel

     Not Applicable.

Legal Proceedings

     Jefferson County Colorado Litigation

     On or about August 20, 2003, Bonso and three of Bonso's directors were
served with a copy of a Complaint filed on July 23, 2003 in District Court of
Jefferson County, State of Colorado, Case No. 03CV2505. Plaintiffs Doug
Moreland, William Pinard, Richard Pinard, Leigh Investment Company, LP, Patricia
Johnson, Jason Pinard and Larry Rowe (collectively the "Plaintiffs") named
Anthony So, George O'Leary, Henry F. Schlueter, Cathy Pang, and John Stewart
Jackson (the "Individual Defendants") and Bonso as defendants in the case.

     The Complaint alleged that the Individual Defendants breached their
fiduciary duties for insider trading and misappropriation of information by
selling shares of Bonso's common stock while in possession of material adverse
non-public information pertaining to Bonso's financial outlook. The Complaint
also alleged that the Individual Defendants breached their fiduciary duties of
care, loyalty, and good faith by causing Bonso, through its directors, to
disseminate to the market materially misleading and inaccurate information and
its failure to correct such information. In addition, further the Complaint
alleged that each of the Individual Defendants failed to disclose materially
adverse information so the stock price would trade at artificially inflated
prices. The Complaint also alleged the Defendants committed corporate waste by
possessing confidential proprietary information and using such information for
their personal benefit by selling shares of Bonso's common stock while providing
no consideration to the Company for such benefit. The Complaint also alleged
negligent misrepresentations and fraud by Bonso and the Individual Defendants
for misrepresenting information concerning Bonso's financial outlook and its
intention to conduct a share buyback. The Complaint sought unspecified damages
in an amount to be determined at trial, plus pre- and post-judgment interest,
and attorneys' fees costs.

                                       50
<PAGE>

     On October 30, 2003, the Plaintiff's filed an amended complaint (the
"Amended Complaint") with the substantially the same factual allegations as
asserted in the original Complaint. The Amended Complaint alleged derivative
claims (the "Derivative Claims") against the Individual Defendants for breaches
of fiduciary duties for: (i) insider selling and misappropriation of
information, (ii) dissemination of misleading and inaccurate information and
(iii) waste of corporate assets. The Derivative Claims allege that Bonso has
sustained damages as a result of the Individual Defendants actions. The Amended
Complaint sought disgorgement of all profits realized by the Individual
Defendants, the imposition of a constructive trust in favor of Bonso for the
amount of profits received by the Individual Defendants as a result of their
sales of Bonso stock and damages in favor of Bonso for breaches of the
Individual Defendants fiduciary duties. In response, Bonso engaged an
independent counsel to review the validity and appropriateness of the Derivative
Claims.

     The Amended Complaint also alleged individual claims (the "Individual
Claims") against the Individual Defendants for breach of fiduciary duty against
the individual defendants for: (i) insider selling and misappropriation of
information, (ii) dissemination of misleading and inaccurate information, (iii)
negligent misrepresentations, and (iv) fraud.

     Thereafter, Plaintiffs filed a Verified Second Amended Complaint (the
"Second Amended Complaint") on January 21, 2004. While the Second Amended
Complaint asserts essentially the same derivative and direct claims as the
Amended Complaint, it includes new factual allegations concerning Bonso's
December 17, 2003 announcement to extend the expiration date of its December 31,
2003 warrants (the "Warrants") and reduce the exercise price.

     On October 25, 2004, we agreed to a Agreement and Stipulation with the
Plaintiffs whereby the trial date was cancelled and all pending deadlines were
stayed until the independent counsel makes his determination and recommendation
regarding the Derivatives Claims. Pursuant to the Agreement and Stipulation, the
Plaintiff's agreed that their investigation into the trading of the Warrants
would be completed by March 31, 2005.

     On April 8, 2005, the District Court of Jefferson County, State of Colorado
dismissed with prejudice this lawsuit filed against Bonso and certain of Bonso's
directors with each party paying their own costs and fees. The Parties'
Stipulation For Dismissal With Prejudice was based upon the Report of
Independent Counsel Richard R. Greengard. In his 57 page Independent Counsel's
Report, Mr. Greengard found no credible evidence to support the plaintiffs'
derivative claims after conducting an exhaustive review of the documents
provided by both the plaintiffs and the defendants and conducting interviews of
the individuals identified as having knowledge of the particular claims

Augusta Arbitration

     Effective May 1, 2001, the Group acquired 100% of the equity of Korona from
Augusta. Korona is a German company engaged in the distribution of electronic
scales in Europe.

     The acquisition was accounted for using the purchase method of accounting.
Under purchase accounting, the total purchase price has been allocated to the
acquired assets and liabilities of Korona based on management's best estimate of

                                       51
<PAGE>

the fair value of assets acquired and the liabilities assumed as of May 1, 2001.
Due to legal restrictions on the timing of the transfer of the title of certain
assets, the net assets purchased included a warehouse and an investment in a
wholly owned subsidiary of Korona. As required under the terms of the sale and
purchase agreement, in June and July 2001, respectively, Augusta repurchased the
warehouse and the investment from Korona at their approximate net book values
for cash.

     The purchase consideration included cash consideration of $2,730,000 and
common stock consideration by issuance of 180,726 shares of restricted common
stock based on an agreed-upon price of $8.00 per share pursuant to the Stock
Purchase Agreement (the "Agreement") with Augusta. For accounting purposes, the
issue of the shares was originally recorded at the value of $5.00 per share,
based on the average price per share for a total of 5 days before and after the
completion date of the acquisition. Under the terms of the Agreement the Company
had an obligation to register the common stock with the United States Securities
and Exchange Commission (the "SEC"). The Agreement gave Augusta the right to
redeem the common stock if the registration of the stock had not cleared the SEC
by January 31, 2002. The Company filed a registration statement to register the
common stock held by Augusta which was declared effective by the SEC on March 7,
2002. In March 2002, Augusta exercised the repurchase obligation requesting to
repurchase the 180,726 shares of common stock to the Company in exchange for a
promissory note of $1,445,808, repayable in nine monthly payments which would
have commenced April 1, 2002 and bearing interest at a rate of 8% per annum
which would result in an interest cost of approximately $50,000 for the whole
period of the promissory note.

     As the redemption option was exercised by Augusta prior to March 31, 2002,
the Group has adjusted the carrying amount of the redeemable common stock to the
full redemption amount. The adjustment of $542,178 to accrete to the value of
the promissory note of $1,445,808 was treated as an adjustment to the original
purchase price and resulted in the recognition of goodwill.

     On October 22, 2002, Augusta filed a request for arbitration in the state
of New York and on January 13, 2003, the Group filed its answer to Augusta's
request for arbitration asserting that Augusta breached the agreement and the
implied duty of good faith and fair dealing by withholding consent from Korona's
auditors for the release of Korona's financial statements. In September 2003, a
three-member panel of the arbitration tribunal heard testimony from the Group
and Augusta during a two-day hearing.

     On January 13, 2004, the arbitration tribunal issued a partial award in
favor of Augusta, finding that while Augusta did cause the accountants to delay
beginning work on the reconciliation of Korona's financial to U.S. GAAP, that
delay was not the cause of the Group's failure to get the stock registered by
the deadline. The arbitration tribunal awarded Augusta reasonable costs
associated with the arbitration. On February 5, 2004, the Group filed a notice
of intent to pursue further defenses not resolved in the partial award. In April
2004, a further hearing was held before the arbitration tribunal during which
the Group argued its additional defenses.

                                       52
<PAGE>

     On July 28, 2004, the arbitration tribunal issued a final award in favor of
Augusta. The Group was obligated to exchange the stock for the promissory note
of $1,445,808, with accrued interest of $416,404, and to reimburse Augusta its
attorney fees and expenses of $515,272 as incurred in the arbitration.

Item 8. Financial Information

Financial Statements

     Our Consolidated Financial Statements are set forth under Item 18.
Financial Statements. For the year ended March 31, 2005 to the date of filing
this Annual Report with the SEC, there has been no significant changes on our
Consolidated Financial Statements.

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 National Market System ("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, 2000 to March 31, 2001              $17.5625          $6.00
     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

     The following table sets forth the high and low sale prices during each of
the quarters in the two-year period ended March 31, 2005.

                  Period                            High             Low
                  ------                            ----             ---
     April 1, 2003 to June 30, 2003                $6.40            $1.77
     July 1, 2003 to September 30, 2003            $4.99            $2.19
     October 1, 2003 to December 31, 2003          $9.71            $4.05
     January 1, 2004 to March 31, 2004             $9.65            $5.68
     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


                                       53
<PAGE>

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

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

     March 2005                       $4.93             $3.90
     April 2005                       $4.49             $3.40
     May 2005                         $4.61             $3.80
     June 2005                        $5.48             $4.00
     July 2005                        $7.00             $5.84
     August 2005                      $6.24             $4.89


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 years ended March 31, 2003, 2004 and 2005 included herein in Item
18.

     At May 31, 2005, there were 5,577,639 shares of our common stock
outstanding, all of which were fully paid. In addition, at May 31, 2005, we had
outstanding 1,074,500 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

     At May 31, 2005 there were no shares of our preferred stock outstanding.

                                       54
<PAGE>

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
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.

                                       55
<PAGE>

     Paragraph 10 of the Memorandum of Association provides that if at any time
the authorized share capital is divided into different classes or series of
shares, the rights attached to any class or series may be varied with the
consent in writing of the holders of not less than three-fourths of the issued
shares of any other class or series of shares which may be affected by such
variation.

     Paragraph 105 of the Articles of Association provides that our Memorandum
and Articles of Association may be amended by a resolution of members or a
resolution of directors. Thus, our board of directors without shareholder
approval may amend our Memorandum and Articles of Association. This includes
amendments to increase or reduce our authorized capital stock. Our ability to
amend our Memorandum and Articles of Association without shareholder approval
could have the effect of delaying, deterring or preventing a change in control
of the Company, including a tender offer to purchase our common shares at a
premium over the then current market price.

     Provisions in respect of the holding of general meetings and extraordinary
general meetings are set out in Paragraphs 68 through 77 of the Articles and
under the International Business Companies Act. The directors may convene
meetings of the members at such times and in such manner and places as the
directors consider necessary or desirable, and they shall convene such a meeting
upon the written request of members holding more than 30% of the votes of our
outstanding voting shares.

     British Virgin Islands law and our Memorandum and Articles of Association
impose no limitations on the right of nonresident or foreign owners to hold or
vote our securities. There are no provisions in the Memorandum and Articles of
Association governing the ownership threshold above which shareholder ownership
must be disclosed.

     A copy of our Memorandum and Articles of Association, as amended, 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 entered into an employment agreement with Anthony So our former
President, and our current Chief Executive Officer, Secretary, Treasurer, Chief
Financial Officer effective April 1, 2003.

     We entered into an employment agreement with Cathy Kit Teng Pang our
Director of Finance effective April 1, 2003.

     We entered into an employment agreement with Kim Wah Chung our Director of
Research and Development effective April 1, 2003.

     We signed a Banking Facility Letter, dated August 30, 2004 between Korona,
Bonso and Commerzbank Aktiengesellschaft Bank for a EURO 2,000,000 line of
credit.

                                       56
<PAGE>

     We signed a Banking Facility Letter dated July 20, 2004 between Bonso and
KBC Bank Hong Kong Branch for a HK $25,500,000 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 May 31, 2004 between Bonso and
DBS Kwong on Bank Limited for a HK $11,000,000 letter of credit, letter of
credit cargo receipt, trust receipt advance against outward bills and
negotiation under documentary credit.

     We signed a Banking Facility Letter, dated May 6, 2004 between Bonso and
Standard Chartered Bank for a working capital facilities 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 5, 2004 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 April 8, 2004 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.

     We signed a Banking Facility Letter, dated January 15, 2004 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%, 38% and 26.375%,
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

                                       57
<PAGE>

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
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.

                                       58
<PAGE>

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, 2005 our total long-term debt was
$256,750, and we had utilized $9,066,337 of our total banking facilities of
$29,909,886. Based on the maturity profile and composition of our long-term debt
and general banking facilities, including the fact that our banking facilities
are at variable interest rates, we estimate that changes in interest rates will
not have a material impact on our operating results or cash flows. We intend to
manage our interest rate risk through appropriate borrowing strategies. We have
not entered into interest rate swap or risk management agreements; however, it
is possible that we may do so in the future.

     A summary of our debts as at March 31, 2005 which were subjected to
variable interest rates is as below:

                                   March 31, 2005         Interest rate
                                   --------------         -------------

      Notes payable                  $3,744,726             Prime rate minus
                                                                    2.75% or
                                                          HIBOR + 2% to 2.5%

      Short-term loans               $4,742,685     Prime rate minus 0.5% or
                                                   EONIA +1 or HIBOR + 2.25%

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.

                                       59
<PAGE>

                                     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

     Our Chief Executive Officer and our Chief Financial Officer, after
evaluating the effectiveness of the Company's disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14(c)) as of the end of the period covered
by this Annual Report, have concluded that, as of such date, the Company's
disclosure controls and procedures were effective to ensure that material
information relating to the Company was made known to them by others within the
Company particularly during the period in which this Form 20-F was being
prepared.

     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. Beginning
with the fiscal year ending March 31, 2007, Section 404 of the Sarbanes-Oxley
Act of 2002, or Section 404, will require us to include an internal control
report of management with our annual report on Form 20-F.

     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.

                                       60
<PAGE>

     Under the supervision and with the participation of our senior management,
including our principal executive officer and principal financial officer, we
are in the process of conducting further evaluation and strengthening of our
internal control over financial reporting. We plan to design enhanced processes
and controls to address these and any other issues that might be identified
through our review. As we are still in the evaluation process, we may identify
other conditions that may result in significant deficiencies or material
weaknesses in the future. Should we discover such conditions, we will take
action to correct them. We are committed to taking appropriate steps for
remediation, as needed.

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. A copy of the revised Code
of Ethics is attached as Exhibit 11.1 to this Annual Report on Form 20-F.
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

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.

                                       61
<PAGE>

     The Audit Committee may delegate pre-approval authority to one or more of
its members. The member or members to whom such authority is delegated shall
report any pre-approval decisions to the Audit Committee at its next scheduled
meeting. The Audit Committee may not delegate to management the Audit
Committee's responsibilities to pre-approve services performed by the
independent auditor.

     The Audit Committee must specifically pre-approve the terms of the annual
audit services engagement. The Audit Committee shall approve, if necessary, any
changes in terms resulting from changes in audit scope, Company structure or
other matters. In addition to the annual audit services engagement approved by
the Audit Committee, the Audit Committee may grant pre-approval for other audit
services, which are those services that only the independent auditor reasonably
can provide.

     The Audit Committee may grant pre-approval to those permissible non-audit
services classified as other services that it believes would not impair the
independence of the auditor, including those that are routine and recurring
services.

     The Audit Committee may consider the amount or range of estimated fees as a
factor in determining whether a proposed service would impair the auditor's
independence. Where the Audit Committee has approved an estimated fee for a
service, the pre-approval applies to all services described in the approval.
However, in the event the invoice in respect of any such service is materially
in excess of the estimated amount or range, the Audit Committee must approve
such excess amount prior to payment of the invoice. The Audit Committee expects
that any requests to pay invoices in excess of the estimated amounts will
include an explanation as to the reason for the overage. The Company's
independent auditor will be informed of this policy.

     The Company's management shall inform the Audit Committee of each service
performed by the independent auditor pursuant to this Pre-Approval Policy.
Requests or applications to provide services that require separate approval by
the Audit Committee shall be submitted to the Audit Committee by both the
independent auditor and the Chief Financial Officer, and must include a joint
statement as to whether, in their view, the request or application is consistent
with the SEC's and the PCAOB'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, 2005 were $220,000 and
for the fiscal year ended March 31, 2004 were $280,000.

     Tax Fees

     The aggregate fees billed by PricewaterhouseCoopers for professional
services rendered for tax compliance for the fiscal year ended March 31, 2005
were $6,000 and for the fiscal year ended March 31, 2004 were $5,900.

                                       62
<PAGE>

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
or acquire shares over any specified period of time. The Company did not
repurchase any share during the fiscal year ended March 31, 2005 and 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

Consolidated Balance Sheets as of March 31, 2004 and 2005                    F-2

Consolidated Statements of Income (Loss) and Comprehensive
Income (Loss) for the years ended March 31, 2003, 2004 and 2005              F-3

Consolidated Statements of Changes in Shareholders' Equity for the
years ended March 31, 2003, 2004 and 2005                                    F-4

Consolidated Statements of Cash Flows for the years ended
March 31, 2003, 2004 and 2005                                        F-5 and F-6

Notes to Consolidated Financial Statements                      F-7 through F-35



                                       63
<PAGE>

Item 19. Exhibits.


     4.1       Banking Facility Letter, dated August 30, 2004 between Bonso,
               Korona and Commerzbank Aktiengesellschaft Bank

     4.2       Banking Facility Letter, dated July 20, 2004 between Bonso and
               KBC Bank Hong Kong Branch

     4.3       Banking Facility Letter, dated May 6, 2004 between Bonso and
               Standard Chartered Bank (1)

     4.4       Banking Facility Letter, dated January 15, 2004 between Bonso and
               Natexis Banques Populaires Hong Kong Branch (1)

     4.5       Banking Facility Letter, dated May 31, 2004 between Bonso and DBS
               Kwong on Bank Limited (1)

     4.6       Banking Facility Letter, dated May 5, 2004 between Bonso and the
               Hong Kong and Shanghai Banking Corporation Limited (1)

     4.7       Banking Facility Letter, dated April 8, 2004 between Bonso and
               Hang Seng Bank Limited (1)

     11.1      Code of Ethics For Chief Executive Officer and Chief Financial
               Officer

     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.




                                       64
<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 23, 2005                 /s/ Anthony So
                                            ------------------------------------
                                            Anthony So, Chairman


                                            /s/ George O'Leary
                                            ------------------------------------
                                            George O'Leary, President and
                                            Chief Executive Officer
















                                       65
<PAGE>












                        Consolidated Financial Statements

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


                                 March 31, 2005



<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, 2004 and 2005....................F-2



Consolidated Statements of Income (Loss) and Comprehensive Income
(Loss) for the years ended March 31, 2003, 2004 and 2005.....................F-3



Consolidated Statements of Changes in Shareholders' Equity for
the years ended March 31, 2003, 2004 and 2005................................F-4



Consolidated Statements of Cash Flows for the years ended
March 31, 2003, 2004 and 2005........................................F-5 and F-6



Notes to Consolidated Financial Statements...........................F-7 to F-35




<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 (loss) and comprehensive income (loss), 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, 2005 and 2004, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 2005 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 22, 2005


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

                              Bonso Electronics International Inc
                                  Consolidated Balance Sheets
                             (Expressed in United States Dollars)
                                                                                March 31
                                                                       --------------------------
<S>                                                           <C>       <C>             <C>
                                                              Notes           2004           2005
                                                                                 $              $
Assets

Current assets
  Cash and cash equivalents                                             10,815,279      9,707,588
  Restricted cash deposits                                                   4,337          4,848
  Trade receivables, net                                          2     10,389,769     10,585,968
  Inventories                                                     3     10,881,932     11,402,239
  Tax recoverable                                                           58,464        486,618
  Deferred income tax assets - current                            5         52,057         52,057
  Other receivables, deposits and prepayments                              888,658      1,450,322
                                                                       -----------    -----------
  Total current assets                                                  33,090,496     33,689,640
                                                                       -----------    -----------
Deposits                                                                   617,056         72,789
Long term investment                                                          --          500,000
Deferred income tax assets - non current                          5         15,178         46,849

Goodwill                                                         11      1,100,962      1,100,962

Brand name and other intangible assets, net                      11      2,397,392      2,740,530
Property, plant and equipment

  Leasehold land and buildings                                          12,446,534     12,478,098
  Plant and machinery                                                   15,401,460     15,657,016
  Furniture, fixtures and equipment                                      5,798,190      6,097,481
  Motor vehicles                                                           344,035        357,343
                                                                       -----------    -----------
                                                                        33,990,219     34,589,938
Less: accumulated depreciation and impairment                          (17,612,858)   (20,277,952)
                                                                       -----------    -----------
  Property, plant and equipment, net                                    16,377,361     14,311,986
                                                                       -----------    -----------
  Total assets                                                          53,598,445     52,462,756
                                                                       ===========    ===========

Liabilities and shareholders' equity

Current liabilities
  Bank overdraft                                                  7        156,429        281,085
  Notes payable                                                   7      3,244,194      3,744,726
  Accounts payable                                                       8,280,039      6,938,578
  Accrued charges and deposits                                           2,951,797      1,978,222
  Income taxes payable                                                     279,485           --
  Short-term loans                                                7      4,599,652      4,742,685
  Current portion of long-term debt                               4        244,528        249,271
  Current portion of capital lease obligations                    6        433,869        384,616
                                                                       -----------    -----------
  Total current liabilities                                             20,189,993     18,319,183
                                                                       -----------    -----------
Long-term debt, net of current maturities                         4        613,209          7,479

Capital lease obligations, net of current maturities              6        544,872        160,256

Commitments and contingencies (Notes 6(b) and 12)

Deferred income tax                                                         39,718         43,856
Minority interests                                                          14,203           --
Redeemable common stock

Redeemable common stock par value $0.003 per share
  - issued and outstanding shares: 2004 - 180,726;
    2005 - 0                                                             1,445,808           --


Shareholders' equity

Preferred stock par value $0.01 per share
  - authorized shares - 10,000,000
  - issued and outstanding shares: 2004-nil; 2005-nil                         --             --
Common stock par value $0.003 per share
  - authorized shares - 23,333,334
  - issued and outstanding shares : 2004-5,527,639,
     2005-5,577,639                                                         16,579         16,729
Additional paid-in capital                                              21,665,801     21,764,788
Retained earnings                                                        8,515,793     11,307,642
Accumulated other comprehensive income                                     552,469        842,823
                                                                       -----------    -----------
                                                                        30,750,642     33,931,982
                                                                       -----------    -----------
Total liabilities and shareholders' equity                              53,598,445     52,462,756
                                                                       ===========    ===========


                     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,
                                                                 2003           2004           2005
                                                          -----------    -----------    -----------
                                                                    $              $              $

Net sales                                                  46,400,141     74,964,085     69,602,192
Cost of sales                                              35,527,943     57,481,103     53,138,410
                                                          -----------    -----------    -----------
Gross margin                                               10,872,198     17,482,982     16,463,782

Selling expenses                                            2,466,653      3,121,900      2,595,222
Salaries and related costs                                  4,563,453      5,150,345      5,215,798
Research and development expenses                             392,926        739,730        710,355
Administration and general expenses                         3,956,858      5,438,995      4,079,201
Amortization of brand name                                    200,000        200,000        200,000
                                                          -----------    -----------    -----------
Income (loss) from operations                                (707,692)     2,832,012      3,663,206
Interest income                                                85,178         57,169         80,955
Interest expenses                                            (532,624)      (499,512)      (416,774)
Foreign exchange gain (losses)                                (96,592)        15,081        (98,051)
Other income                                                   99,369        224,292        372,133
Consultancy fee                                              (381,420)          --             --
                                                          -----------    -----------    -----------
Income (loss) before income taxes and minority interest    (1,533,781)     2,629,042      3,601,469
Income tax expense                                            (37,314)      (401,504)      (266,059)
                                                          -----------    -----------    -----------
Net income (loss) before minority interest                 (1,571,095)     2,227,538      3,335,410
Minority interest                                             (72,639)        41,072         14,202
                                                          -----------    -----------    -----------
Net income (loss)                                          (1,643,734)     2,268,610      3,349,612

Other comprehensive income, net of tax:
  Foreign currency translation adjustments net of tax         173,720        142,777        290,354
                                                          -----------    -----------    -----------
Comprehensive income (loss)                                (1,470,014)     2,411,387      3,639,966
                                                          ===========    ===========    ===========

Earnings (loss) per share
  Basic                                                   $     (0.29)   $      0.40    $      0.59
                                                          ===========    ===========    ===========

  Diluted                                                 $     (0.29)   $      0.37    $      0.55
                                                          ===========    ===========    ===========


                      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       Deferred                income-foreign         Total
                 issued and         Amount        paid-in     Stock held    consultancy       Retained       currency  shareholders'
                outstanding    outstanding        capital    at treasury            fee       earnings    adjustments        equity
                -----------    -----------     ----------    -----------    -----------    -----------    -----------   -----------
                                         $              $              $              $              $              $             $
Balance,
 March 31,
 2002             5,404,133         16,208     21,152,502           --         (381,420)     8,176,958        235,972    29,200,220

Net (loss)             --             --             --             --             --       (1,643,734)          --      (1,643,734)
Amortization
 of deferred
 consultancy
 fee (note
 16(b))                --             --             --             --          381,420           --             --         381,420
Common stock
 issued upon
 acquisition
 of a
 subsidiary         125,000            375        305,874           --             --             --             --         306,249
Purchase of
 common stock          --             --             --          (38,832)          --             --             --         (38,832)
Foreign
 exchange
 translation
 adjustment            --             --             --             --             --             --          173,720       173,720
                -----------    -----------    -----------    -----------    -----------    -----------    -----------   -----------
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
                ===========    ===========    ===========    ===========    ===========    ===========    ===========   ===========


                                          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,
                                                                  2003          2004          2005
                                                            ----------    ----------    ----------
                                                                     $             $             $

Cash flows from operating activities

  Net (loss)/ income                                        (1,643,734)    2,268,610     3,349,612
  Adjustments to reconcile net income to net cash
   provided by operating activities :
   Depreciation                                              3,297,608     2,675,549     2,206,099
   Amortization                                                550,300       553,491       566,987
   Impairment on property                                         --         161,499       148,198
   Reversal of software impairment                                --        (150,000)         --
   Loss on disposal of fixed assets                            236,944        39,867        35,392
   Consultancy fee                                             381,420          --            --
   Minority interest                                            72,639       (41,072)      (14,203)
   Other                                                       (84,015)     (296,957)      (28,029)


  Changes in assets and liabilities:
   Trade receivable                                          1,077,932    (4,198,142)     (196,199)
   Other receivables, deposits and prepayments                (111,441)      277,576      (561,664)
   Notes receivable                                            328,070       358,188          --
   Inventories                                              (2,314,599)    1,774,586      (520,307)
   Accounts payable                                          2,056,513     1,929,512    (1,341,461)
   Accrued charges and deposits                             (2,094,096)    1,274,511      (973,575)
   Tax recoverable                                               2,310       (58,464)     (428,154)
   Income tax payable                                         (135,701)      331,572      (279,485)
   Deferred tax                                                (85,826)      139,718       (27,534)
                                                            ----------    ----------    ----------
 Net cash provided by operating activities                   1,534,324     7,040,044     1,935,677
                                                            ----------    ----------    ----------


Cash flows from investing activities

  Restricted cash deposits                                    (131,626)    4,099,831          (511)
  Deposits for property, plant and equipment                  (551,399)     (617,056)         --
  Proceeds from disposal of property, plant and Equipment      250,103       115,721        22,256
  Acquisition of property, plant and equipment              (1,912,056)   (2,543,734)     (684,398)
  Acquisition of a subsidiary, net of cash acquired           (519,805)         --            --
  Acquisition of long term investment                             --            --        (500,000)
                                                            ----------    ----------    ----------
  Net cash used in investing activities                     (2,864,783)    1,054,762    (1,162,653)
                                                            ----------    ----------    ----------


                                               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                                   (38,832)       (25,849)          --
  Proceeds from long-term borrowings                           488,389         79,025           --
  Principal payments under long-term debt                      (65,245)          --         (600,987)
  Capital lease (payments)/ inception                         (623,592)       668,025       (433,869)
  Net advance /(repayment) under banking facilities          3,151,359     (1,763,094)       768,221
  Capital contribution by minority shareholder                      32           --             --
  Payment of dividends to stockholders                            --         (286,041)      (557,763)
                                                           -----------    -----------    -----------
  Net cash provided by /(used in) financing activities       2,912,111     (1,055,832)    (2,171,069)
                                                           -----------    -----------    -----------



  Net increase /(decrease) in cash and cash equivalents      1,581,652      7,038,974     (1,398,045)
  Net effect of cumulative translation adjustment              173,720        142,777        290,354
  Cash and cash equivalents, beginning of year               1,878,156      3,633,528     10,815,279
                                                           -----------    -----------    -----------
  Cash and cash equivalents, end of year                     3,633,528     10,815,279      9,707,588
                                                           ===========    ===========    ===========

                                                                  2003           2004           2005
                                                                     $              $              $
Supplemental disclosure of cash flow information

Cash paid during the year for:
    Interest paid                                              532,624        499,512        416,774
    Income tax paid, net of (refund)                           249,873        (21,123)       329,483

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           --

    Acquisition:
      Fair value of net assets acquired                        (18,107)          --             --
      Cash acquired                                           (150,728)          --             --




                                                 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, and the
     valuation of long-lived assets. 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 (Continued)

(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 till
     maturity.

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

     During the financial year ended March 31, 2003, the Group adopted Statement
     of Financial Accounting Standard ("SFAS") No. 142 "Goodwill and Other
     Intangible Assets", which requires discontinuance of goodwill amortization
     and an annual impairment review. Where an indication of impairment exists,
     the carrying amount of goodwill is assessed and written down to its
     recoverable amount.

     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, 2005, the Group made a provision for impairment of
     approximately $148,198, included in administration and general expenses, on
     leasehold land and buildings due to the decline in market value.

                                       F-8
<PAGE>

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

     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.

(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.













                                        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 (Continued)

(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. (2005 : $246,193, 2004 : $363,160 and 2003 : $386,545)

(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.

                                       F-10
<PAGE>

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

1    Description of business and significant accounting policies (Continued)

(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.

(0)  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,
     2003, 2004 and 2005.

     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-11
<PAGE>
<TABLE>
<CAPTION>

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

                                                                 2003          2004          2005
                                                                    $             $             $
<S>                                                        <C>            <C>           <C>
Net (loss ) income as reported                             (1,643,734)    2,268,610     3,349,612

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)
                                                           ----------    ----------    ----------
Pro forma net (loss) income                                (1,643,734)    1,424,085     3,157,900

Basic (losses) earnings per share

  As reported                                                $(0.29)        $0.40         $0.59
  Pro forma                                                  $(0.29)        $0.25         $0.56

Diluted (losses) earnings per share

As reported                                                  $(0.29)        $0.37         $0.55
  Pro forma                                                  $(0.29)        $0.23         $0.52

</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)  Stock bonus

     The Company accounts for Stock bonus issued in consideration for services
     rendered using the intrinsic value method prescribed in APB Opinion No. 25
     whereby the bonus are granted at market price, and a charge equivalent to
     market value of the number of bonus is included in the Consolidated
     Statements of Income (Loss) and Comprehensive Income (Loss). No stock bonus
     have been issued to employees during the years ended March 31, 2003, 2004
     and 2005.

(r)  Recent accounting pronouncements

     In November 2004, the Financial Accounting Standards Board ("FASB") issued
     SFAS No. 151 "Inventory Costs" ("SFAS No. 151"). This statement amends the
     guidance in Accounting Research Bulletin No. 43, Chapter 4, "Inventory
     Pricing," to clarify the accounting for abnormal amounts of idle facility
     expense, freight, handling costs, and wasted material (spoilage). SFAS No.
     151 requires that those items be recognized as current-period charges. In
     addition, this statement requires that allocation of fixed production
     overhead to costs of conversion be based upon the normal capacity of the
     production facilities. The provisions of SFAS No. 151 are effective for
     inventory costs incurred in fiscal years beginning after June 15, 2005. As
     such, we are required to adopt these provisions at the beginning of fiscal
     2007. The Company does not expect the adoption of SFAS No. 151 to have a
     material impact on its consolidated financial statements.

                                       F-12
<PAGE>

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

     In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment--An
     Amendment of FASB Statements No. 123 and 95 ("SFAS No. 123R"), which
     requires all companies to measure compensation cost for all share-based
     payments, including employee stock options, at fair value, effective for
     public companies for annual periods beginning after June 15, 2005.
     Generally, the approach in SFAS No. 123R is similar to the approach
     described in SFAS No. 123. However, SFAS No. 123R requires all share-based
     payments to employees, including grants of employee stock options, to be
     recognized in the income statement based on their fair values. Pro forma
     disclosure is no longer an alternative. The adoption of SFAS No. 123R may
     have a significant impact on the Company's results of operations. The
     Company is evaluating SFAS No. 123R and has not yet determined the amount
     of stock option expense which will be incurred in future periods.

     In December 2004, the FASB issued SFAS No. 153, "Exchange of Nonmonetary
     Assets, an amendment of APB Opinion No. 29, '"Accounting for Nonmonetary
     Transactions." SFAS No. 153 is based on the principle that exchange of
     nonmonetary assets should be measured based on the fair market value of the
     assets exchanged. SFAS No. 153 eliminates the exception of nonmonetary
     exchanges of similar productive assets and replaces it with a general
     exception for exchanges of nonmonetary assets that do not have commercial
     substance. SFAS No. 153 is effective for nonmonetary asset exchanges in
     fiscal periods beginning after June 15, 2005. Adoption of the provisions of
     SFAS No. 153 is not expected to have a material impact on the Company's
     financial condition, results of operations, or liquidity.

     In March 2005, the SEC issued Staff Accounting Bulletin No. 107 ("SAB
     107"). SAB 107 includes interpretive guidance for the initial
     implementation of FAS 123R. We will apply the principles of SAB 107 in
     conjunction with our adoption of FAS 123R.

     In March 2005, the FASB issued FASB Interpretation No. 47 ("FIN 47"),
     "Accounting for Conditional Asset Retirement Obligations--an interpretation
     of FASB Statement No. 143." FIN 47 clarifies that the term "conditional
     asset retirement obligation" as used in FASB Statement No. 143, "Accounting
     for Asset Retirement Obligations," refers to a legal obligation to perform
     an asset retirement activity in which the timing and (or) method of
     settlement are conditional on a future event that may or may not be within
     the control of the entity. Accordingly, an entity is required to recognize
     a liability for the fair value of a conditional asset retirement obligation
     if the fair value of the liability can be reasonably estimated. FIN 47 is
     effective for fiscal years ending after December 15, 2005. The Company has
     yet to determine the impact, if any, of FIN 47 on its consolidated
     financial statements.

     In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
     Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3."
     SFAS No. 154 requires retrospective application for voluntary changes in
     accounting principle unless it is impracticable to do so. In addition,
     indirect effects of a change in accounting principle should be recognized
     in the period of the accounting change. SFAS No. 154 is effective for
     accounting changes and corrections of errors made in fiscal years beginning
     after December 15, 2005.

                                       F-13
<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:

                                              2003        2004        2005
                                                 $           $           $
     Balance, April 1                      220,838     421,339     383,770

     Exchange adjustment                    28,549      24,076      18,744
     Acquisition of subsidiary              20,027        --          --
     Additions charged to expense          290,556     187,679     197,310
     Write-off                            (138,631)   (249,324)   (200,818)
                                          --------    --------    --------
     Balance, March 31                     421,339     383,770     399,006
                                          ========    ========    ========


3    Inventories

     The components of inventories are as follows:

                                                    2004               2005
                                                       $                  $
     Raw materials                             4,367,216          5,958,084
     Work in progress                          3,340,770          2,194,432
     Finished goods                            3,173,946          3,249,723
                                              ----------         ----------
                                              10,881,932         11,402,239
                                              ==========         ==========

     During the years ended March 31, 2003, 2004 and 2005, there were non-cash
     write-offs of specific inventories of $2,792, $24,407 and $233,246
     respectively.

4    Long-term debt
<TABLE>
<CAPTION>

     Long-term debt comprises:

                                                                        March 31
                                                                  -------------------
                                                                     2004        2005
                                                                        $           $
<S>                                                              <C>         <C>
     Bank loan for acquisition of fixed assets, denominated
      in United States dollars, due in February 2006              306,667        --
     Long term bank loan at bank's floating base rate + 4%,
      denominated in Canadian dollars, due in March 2006           83,327      48,611
     Mortgage loan at bank's prime interest rate + 1.15%,
      denominated in Canadian dollars                             256,761     171,093
     Business loans at bank's prime interest rate + 1.10%,
      denominated in Canadian dollars                              37,400      37,046
     Promissory note for the acquisition of subsidiaries due in
      March 2008 (see Note 10)                                    173,582        --
                                                                 --------    --------
     Long-term debt                                               857,737     256,750
     Less: current portion                                       (244,528)   (249,271)
                                                                 --------    --------
     Long-term debt, less current maturities                      613,209       7,479
                                                                 ========    ========


                                       F-14
</TABLE>
<PAGE>

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

4    Long-term debt (continued)

     Long term debt principal repayments are due as follows:

                                                                      $

     2006                                                       249,271
     2007                                                         7,479
                                                               --------
     Total                                                     $256,750
                                                               ========

     Subsequent to year end, on April 1, 2005, the Company had paid $208,139 of
     the long term debt, as reflected in the repayment schedule above.

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 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%, 19.64%, and 38% 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 will be entitled to this benefit will be
     December 31, 2005. With effect from January 1, 2006, Bonso Electronics
     (Shenzhen) Co., Ltd will subject to a 10% income tax. However, if over 70%
     of the sales are for export, it will be subject to a 15% tax.

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

                                                 2003        2004        2005
                                                    $           $           $

     Deferred income tax benefit (expense)     76,858    (149,468)     27,434
     Current income tax expense              (114,172)   (252,036)   (293,493)
                                             --------    --------    --------
     Total income tax expense                 (37,314)   (401,504)   (266,059)
                                             ========    ========    ========


                                       F-15
<PAGE>

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

5    Taxation (Continued)

(d)  Deferred tax assets comprise the following:

                                                      2004            2005
                                                         $               $
     Deferred tax liabilities

       Accelerated depreciation                    (43,632)         (4,014)

     Deferred tax assets

       Tax loss carry forwards                     311,682         479,341
       Others                                       50,614         (38,765)
       Less: Valuation allowance                  (251,429)       (337,656)
                                                  --------        --------
                                                   110,867         102,920
                                                  --------        --------
     Net deferred tax assets                        67,235          98,906
     Less: current portion                         (52,057)        (52,057)
                                                  --------        --------
     Non-current portion                            15,178          46,849
                                                  ========        ========


     As of March 31, 2005, the Group had accumulated tax losses amounting to
     $2,739,091 (the tax effect thereon is $479,341), 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
     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, 2005, the Group's accumulated tax losses have no definite
     period of expiration.

(e)  Changes in the valuation allowance consist of:

                                                   2003      2004      2005
                                                      $         $         $

     Balance, April 1                            10,149   163,645   251,429

     Addition debited to income tax expense     153,496    87,784    86,227
                                                -------   -------   -------
     Balance, March 31                          163,645   251,429   337,656
                                                =======   =======   =======


                                       F-16
<PAGE>

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

5    Taxation (Continued)

(f)  The actual income tax expense attributable to earnings for the years ended
     March 31, 2003, 2004 and 2005 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>

                                                        2003        2004        2005
                                                           $           $           $

<S>                                                 <C>         <C>         <C>
     Hong Kong statutory tax rate                       16.0%       17.5%       17.5%
     Income tax (expense) credit at the Hong Kong
      statutory tax rate                             245,405    (460,082)   (630,257)
     Offshore profit not subject to income tax        27,544     348,194     688,668
     Expenses not deductible for income tax
      purposes                                       (66,920)   (158,710)   (169,596)
     Changes in valuation allowance                 (153,496)    (87,784)    (86,227)
     Under provision for Hong Kong tax in prior
      years                                          (91,129)    (30,987)    (69,389)
     Income tax rate differentials                   (27,047)    (22,310)     (4,424)
     Tax losses utilized                              28,329      10,175       5,166
                                                    --------    --------    --------
     Total income tax expense                        (37,314)   (401,504)   (266,059)
                                                    ========    ========    ========


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
                                      ------------------------    ------------------------
                                            2004          2005          2004          2005
                                               $             $             $             $

     Cost                                110,065       110,065     2,316,002     2,316,002
     Less: accumulated amortization      (51,364)     (110,065)     (631,388)   (1,527,540)
                                      ----------    ----------    ----------    ----------
                                          58,701          --       1,684,614       788,462
                                      ==========    ==========    ==========    ==========


                                       F-17
</TABLE>
<PAGE>

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

6    Leases (Continued)

(a)  Capital leases (Continued)

     During the years ended March 31, 2003, 2004 and 2005, the Group entered
     into additional capital lease obligations amounting to $Nil, $1,551,119 and
     $Nil respectively.

     Future minimum payments under capital leases as of March 31, 2005 with an
     initial term of more than one year are as follows:

                                                                         $

     2006                                                          410,929
     2007                                                          171,308
                                                                  --------
     Total minimum lease payments                                  582,237

     Less: amount representing interest                            (37,365)
                                                                  --------
     Present value of net minimum lease payments (including
      current portion of $384,616 as of March 31, 2005)            544,872
                                                                  ========


(b)  Operating leases

     As of March 31, 2005, 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:

                                                                      $

     2006                                                       670,547
     2007                                                       569,335
     2008                                                       349,725
     2009                                                       365,346
     2010                                                       444,156
     Thereafter                                                   7,997
                                                              ---------
                                                              2,407,106
                                                              =========

     Rental expense for all operating leases amounted to $311,417, $478,986 and
     $521,819 for the years ended March 31, 2003, 2004 and 2005, respectively.


                                       F-18
<PAGE>
<TABLE>
<CAPTION>
                       Bonso Electronics International Inc
                   Notes to Consolidated Financial Statements
                      (Expressed in United States Dollars)

7    Banking facilities

     As of March 31, 2005, the Group had general banking facilities for bank
     overdrafts, letters of credit, notes payable, short-term loans and
     long-term loans. The facilities are interchangeable with total amounts
     available of $29,909,886 (2004: $28,884,030). The general banking
     facilities utilized by the Group are denominated in United States dollars,
     Hong Kong dollars, Renminbi, 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, 2005
                          -----------------------    -----------------------   ------------------------------
                                  March 31                  March 31
                          ------------------------   -----------------------
<S>                       <C>           <C>          <C>          <C>           <C>                <C>
                                2004          2005         2004         2005            Interest       Repayment
                                   $             $            $            $                rate           terms
     Import and export
     Facilities

     Letters of credit    15,948,718    21,987,179    3,340,044    3,785,817

     Including
     sub-limit of:
     Notes payable        15,948,718    20,846,154    3,244,194    3,744,726    Prime rate minus    Repayable in
                                                                                           2.75%     full within
                                                                                              or     four months
                                                                               HIBOR +2% to 2.5%

     Short-term loans     10,430,318     6,231,026    4,599,652    4,742,685    Prime rate minus    Repayable in
                                                                                            0.5%     full within
                                                                                 or EONIA + 1 or   twelve months
                                                                            HIBOR +2.5% to 2.25%

     Other facilities

     Bank overdrafts       1,647,257     1,434,931      156,429      281,085          Prime rate       Repayable
                                                                                           +0.5%       on demand
                                                                                        To 1.00%

     Long-term loans         857,737       256,750      857,737      256,750      Prime rate +1%       Repayable
      (Note 4)                                                                          or HIBOR  in full within
                                                                                          +2.25%      thirty-six
                                                                                                          months
                          ----------    ----------    ---------    ---------
                          28,884,030    29,909,886    8,953,862    9,066,337
                          ==========    ==========    =========    =========


                                       F-19
</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
                                                 --------------------------
                                                      2004             2005
                                                         $                $
     Euro                                        4,599,651        4,742,686

     Hong Kong dollars                           1,496,533        2,688,542

     Japanese Yen                                   38,578           44,822

     United States dollars                       2,285,183        1,052,452

     Canadian dollars                              533,917          537,835
                                                 ---------        ---------
                                                 8,953,862        9,066,337
                                                 =========        =========


     The Prime Rate and HIBOR rate were 5.25% and 2.7691% per annum,
     respectively, as of March 31, 2005. 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 $5,740,000 (2004:$5,124,430) and restricted cash
          deposits of $4,848 (2004: $4,337). 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 $449,428 (2004:$2,962,207); and

     (c)  a personal guarantee of $102,000 (2004: $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
                                                    -------------------------
                                                     2004                2005

     Bank overdrafts                                5.25%               5.00%
     Notes payable                                  4.33%               3.33%
     Short-term loans                               4.33%               3.33%


                                       F-20
<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. Chung Kim
     March 31                     Anthony     Teng, Cathy             Wah
     --------             ---------------    ------------   -------------

     2003                   $671,836 (iii)       $125,262     $149,606(ii)
     2004                   $630,821 (iii)       $128,015     $152,554(ii)
     2005                   $700,000 (iii)       $111,912    $134,350 (ii)


                    Mr. Fok Woo      Mr. George   Mr. J Stewart      Mr. Henry
                           Ping         O'Leary         Jackson      Schlueter
                    -----------     -----------   -------------    -----------
     2003                   Nil      $180,000(i)            Nil    $142,870(iv)
     2004                   Nil      $172,125(i)            Nil    $230,909(iv)
     2005                   Nil     $158,766 (v)            Nil    $119,201(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, 2005 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, 2003, 2004
          and 2005 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 (2004 : $15,900). Tantric is 100%
     (2004: 50%) owned by Mohan Thadani, the Chief Executive Officer and
     minority shareholder of one of the subsidiaries of the Company.


                                       F-21
<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, 2003, 2004 and 2005 aggregated $73,945, $77,402 and $83,277,
     respectively.




                                       F-22
<PAGE>

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

10   Business acquisition

     Acquisition of Korona

     Effective May 1, 2001, the Group acquired 100% of the equity of Korona from
     Augusta. Korona is a German company engaged in the distribution of
     electronic scales in Europe.

     The acquisition was accounted for using the purchase method of accounting.
     Under purchase accounting, the total purchase price has been allocated to
     the acquired assets and liabilities of Korona based on management's best
     estimate of the fair value of assets acquired and the liabilities assumed
     as of May 1, 2001. Due to legal restrictions on the timing of the transfer
     of the title of certain assets, the net assets purchased included a
     warehouse and an investment in a wholly owned subsidiary of Korona. As
     required under the terms of the sale and purchase agreement, in June and
     July 2001, respectively, Augusta repurchased the warehouse and the
     investment from Korona at their approximate net book values for cash.

     The purchase consideration included cash consideration of $2,730,000 and
     common stock consideration by issuance of 180,726 shares of restricted
     common stock based on an agreed-upon price of $8.00 per share pursuant to
     the Stock Purchase Agreement (the "Agreement") with Augusta. For accounting
     purposes, the issue of the shares was originally recorded at the value of
     $5.00 per share, based on the average price per share for a total of 5 days
     before and after the completion date of the acquisition. Under the terms of
     the Agreement the Company had an obligation to register the common stock
     with the United States Securities and Exchange Commission (the "SEC"). The
     Agreement gave Augusta the right to redeem the common stock if the
     registration of the stock had not cleared the SEC by January 31, 2002. The
     Company filed a registration statement to register the common stock held by
     Augusta which was declared effective by the SEC on March 7, 2002. In March
     2002, Augusta exercised the repurchase obligation requesting to repurchase
     the 180,726 shares of common stock to the Company in exchange for a
     promissory note of $1,445,808, repayable in nine monthly payments which
     would have commenced April 1, 2002 and bearing interest at a rate of 8% per
     annum which would result in an interest cost of approximately $50,000 for
     the whole period of the promissory note.

     As the redemption option was exercised by Augusta prior to March 31, 2002,
     the Group has adjusted the carrying amount of the redeemable common stock
     to the full redemption amount. The adjustment of $542,178 to accrete to the
     value of the promissory note of $1,445,808 was treated as an adjustment to
     the original purchase price and resulted in the recognition of goodwill

     On October 22, 2002, Augusta filed a request for arbitration in the state
     of New York and on January 13, 2003, the Group filed its answer to
     Augusta's request for arbitration asserting that Augusta breached the
     agreement and the implied duty of good faith and fair dealing by
     withholding consent from Korona's auditors for the release of Korona's
     financial statements. In September 2003, a three-member panel of the
     arbitration tribunal heard testimony from the Group and Augusta during a
     two-day hearing.

     On January 13, 2004, the arbitration tribunal issued a partial award in
     favor of Augusta, finding that while Augusta did cause the accountants to
     delay the work on the reconciliation of Korona's financial to U.S. GAAP,
     that delay was not the cause of the Group's failure to get the stock
     registered by the deadline. The arbitration tribunal awarded Augusta
     reasonable costs associated with the arbitration. On February 5, 2004, the
     Group filed a notice of intent to pursue further defenses not resolved in
     the partial award. In April 2004, a further hearing was held before the
     arbitration tribunal during which the Group argued its additional defenses.


                                       F-23
<PAGE>

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

10   Business acquisition (continued)

     On July 28, 2004, the arbitration tribunal issued a final award in favor of
     Augusta. The Group was obligated to exchange the stock for the promissory
     note of $1,445,808, with accrued interest of $416,404, and to reimburse
     Augusta its attorney fees and expenses of $515,272 as incurred in the
     arbitration.

     Acquisition of Gram

     As part of the Group's ongoing expansion of its sensor-based product
     business, effective August 1, 2002, the Group acquired 51% of the equity of
     Gram. Gram is a Canadian company engaged in the distribution of electronic
     scales in North America and Europe.

     The acquisition was accounted for using the purchase method of accounting.
     Under purchase accounting, the total purchase price has been allocated to
     the acquired assets and liabilities of Gram based on management's best
     estimate of the fair value of assets acquired and the liabilities assumed
     as of August 1, 2002.

     Total consideration consisted of cash, common stock and a promissory note
     issued to Gram. The value of the common stock issued (125,000 shares at
     $2.45 each) was determined based on the market price of the Group's stock
     on the date of the acquisition, which was also the date the terms of
     acquisition were agreed to and announced. The total promissory note of
     $231,000 is unsecured, non-interest bearing and repayable in five yearly
     installments through March 31, 2008 (see Note 4). The value at acquisition
     of $203,312 was calculated based on an imputed interest rate of 4%. This
     promissory note was fully paid in advance before March 31, 2005 based on a
     discount rate of 4.8%. The goodwill above arose on August 1, 2002 and is
     not amortized but subject to annual impairment review.










                                       F-24
<PAGE>
<TABLE>
<CAPTION>

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

11   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
                                 --------                  --------                   --------
<S>                       <C>          <C>          <C>           <C>          <C>          <C>
                               2004         2005         2004          2005          2004         2005
                                  $            $            $             $             $            $
     Cost                 1,100,962    1,100,962    3,000,000     3,000,000          --        544,267
     Less: accumulated
      amortization             --           --       (602,608)     (802,608)         --         (1,129)
                         ----------   ----------   ----------    ----------    ----------   ----------
                          1,100,962    1,100,962    2,397,392     2,197,392          --        543,138
                         ==========   ==========   ==========    ==========    ==========   ==========
</TABLE>

     The Group adopted SFAS No. 142 during the year ended March 31, 2003.
     Goodwill of the Group of $1,100,962 as at March 31, 2004 and 2005 was not
     subject to amortization. Amortization expense related to brand name was
     $200,000 for each of the years ended March 31, 2003, 2004 and 2005.
     Amortization expense related to other intangible assets was $1,129 for the
     year ended March 31, 2005.

     As of March 31, 2005, future minimum amortization expenses in respect of
     brand name and other intangible assets are as follows:

                                                              Other intangible
                                                 Brand name             assets
                                                          $                  $

     2006                                           200,000             13,548
     2007                                           200,000             13,548
     2008                                           200,000             13,548
     2009                                           200,000             13,548
     2010                                           200,000             13,548
     Thereafter                                   1,197,392            475,398
                                                  ---------           --------
     Total                                        2,197,392           $543,138
                                                  =========           ========








                                       F-25
<PAGE>

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

12   Commitments and contingencies

(a)  As of March 31, 2005, the Group had commitments to acquire plant and
     machineries from third parties for an aggregate consideration of $230,055
     (2004: $143,404), of which $86,567 (2004: $71,875) had been paid as
     deposits.

(b)  Litigation

     Jefferson County Colorado Litigation

     On August 20, 2004, the Company and three of the Company's directors were
     served with a copy of a Complaint filed on July 23, 2004 in District Court
     of Jefferson County, State of Colorado, Case No. 03CV2505. Plaintiffs Doug
     Moreland, William Pinard, Richard Pinard, Leigh Investment Company, LP,
     Patricia Johnson, Jason Pinard and Larry Rowe (collectively the
     "Plaintiffs") named Anthony So, George O'Leary, Henry F. Schlueter, Cathy
     Pang, and John Stewart Jackson (the "Individual Defendants") and the
     Company as defendants in this case.

     On September 26, 2004, the Company and the Individual Defendants filed a
     motion to dismiss the Complaint for lack of standing, failure to state a
     claim, and failure to comply with the appropriate procedural requirements
     for out of state defendants instituting and maintaining a legal action in
     the state of Colorado.

     On October 30, 2004, the Plaintiff's filed an amended complaint (the
     "Amended Complaint") with substantially the same factual allegations as
     asserted in the original Complaint. The Amended Complaint alleged
     derivative claims (the "Derivative Claims") against the Individual
     Defendants for breaches of fiduciary duties for: (i) insider selling and
     misappropriation of information, (ii) dissemination of misleading and
     inaccurate information and (iii) waste of corporate assets. The Derivative
     Claims allege that the Company has sustained damages as a result of the
     Individual Defendants actions. The Amended Complaint sought disgorgement of
     all profits realized by the Individual Defendants, the imposition of a
     constructive trust in favor of the Company for the amount of profits
     received by the Individual Defendants as a result of their sales of the
     Company's stock and damages in favor of the Company for breaches of the
     Individual Defendants fiduciary duties. In response, the Company engaged an
     independent counsel to review the validity and appropriateness of the
     Derivative Claims.

     The Amended Complaint also alleged individual claims (the "Individual
     Claims") against the Individual Defendants for breach of fiduciary duty
     for: (i) insider selling and misappropriation of information, (ii)
     dissemination of misleading and inaccurate information, (iii) negligent
     misrepresentations, and (iv) fraud.

     On November 20, 2004, the Company and the Individual Defendants filed a
     motion to dismiss the Amended Complaint for lack of standing and failure to
     comply with the appropriate procedural requirements for out of state
     defendants instituting and maintaining a legal action in the state of
     Colorado. On January 8, 2005, the Court entered an Order denying
     Defendants' motion to dismiss but requiring the non-resident Plaintiff to
     file a cost bond.

     Thereafter, Plaintiffs filed a Verified Second Amended Complaint (the
     "Second Amended Complaint") on January 21, 2004. While the Second Amended
     Complaint asserts essentially the same derivative and direct claims as the
     Amended Complaint, it includes new factual allegations concerning Bonso's
     December 17, 2003 announcement to extend the expiration date of its
     December 31, 2003 warrants (the "Warrants") and reduce the exercise price.

     On April 8, 2005, the District Court of Jefferson County, State of Colorado
     dismissed with prejudice this lawsuit with each party paying their own
     costs and fees. The Parties' Stipulation For Dismissal With Prejudice was
     based upon the Report of Independent Counsel Richard R. Greengard. In his

                                       F-26
<PAGE>

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

     57 page Independent Counsel's Report, Mr. Greengard found no credible
     evidence to support the plaintiffs' derivative claims after conducting an
     exhaustive review of the documents provided by both the plaintiffs and the
     defendants and conducting interviews of the individuals identified as
     having knowledge of the particular claims.


























                                       F-27
<PAGE>

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

13   Earnings per share

                                                    Year ended March 31
                                            ------------------------------------
                                                 2003          2004         2005
                                                    $             $            $

     (Loss) Income available to common
     Shareholders                          (1,643,734)    2,268,610    3,349,612

     Weighted average shares outstanding    5,599,238     5,702,015    5,646,676
     Incremental shares from assumed
      exercise of:
       Warrants                                  --           3,746         --
       Stock options                             --         354,503      407,627
                                           ----------    ----------   ----------
     Dilutive potential common shares            --         358,249      407,627
                                           ----------    ----------   ----------
     Diluted weighted average shares        5,599,238     6,060,264    6,054,303
                                           ==========    ==========   ==========

     Basic (loss) earnings per share       $    (0.29)   $     0.40   $     0.59
     Diluted (loss) earnings per share     $    (0.29)   $     0.37   $     0.55


     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, 30,000 shares , 228,000 and 20,000
     shares of common stock at $6.20, $7.875, $8.00 and $8.125, respectively,
     were outstanding as at March 31, 2005 but were not included in the
     calculation of diluted earnings per share during the year ended March 31,
     2005 due to their anti-dilutive effect.

14   Shareholders' equity

(a)  Repurchase of common stock

     Between December 2002 to March 2003, the Company repurchased 19,900 shares
     of the Company's common stock at an average cost of $1.95 per share, for a
     total cost of $38,832.

     Between April 2003 to June 2003, the Company repurchased 14,576 shares of
     the Company's common stock at an average cost of $1.77 per share, for a
     total cost of $25,849. Between September 2003 and October 2003, 34,476
     shares of the repurchased common stock were cancelled, and returned to the
     status of authorized but un-issued shares.

(b)  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, 2005.

                                       F-28
<PAGE>

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

15   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 that 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.

                                       F-29
<PAGE>

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

     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.

     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.

     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 options have been exercised during the year ended
     March 31, 2005.

     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 options had been exercised
     during the year ended March 31, 2005.

(b)  The stock options summary as of March 31, 2005 is as follows:

                                                            Average per share
                                                           -------------------
                                               Number      Exercise     Market
                                            of shares         price      price
                                           ----------      --------   --------

     Balance March 31, 2003                   672,000      $   5.11   $   5.11

     Granted                                  412,500      $   2.05   $   2.05
                                           ----------      --------   --------
      Balance, March 31, 2004               1,084,500      $   3.95   $   3.95

     Exercised                                (50,000)     ($  1.99)       --

     Granted                                   40,000      $   6.20   $   6.20
                                           ----------      --------   --------
      Balance, March 31, 2005               1,074,500      $   4.13   $   4.13
                                           ==========      ========   ========


                                       F-30
<PAGE>

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

15   Stock option and bonus plan (Continued)

(c)  The following table summarizes the information about all stock options of
     the Company outstanding as at March 31, 2005:

                                                       Weighted
                                        Number          average      Exercisable
     Weighted average           outstanding at   remaining life        shares at
     exercise price             March 31, 2005          (years)   March 31, 2005
     --------------             --------------          -------   --------------

     $1.61                             342,500              8.0          342,500
     $2.50                             168,000              6.9          168,000
     $2.55                              10,000              6.5           10,000
     $3.65                             196,000              6.0          196,000
     $6.12                              40,000              9.0           40,000
     $6.20                              40,000              9.5           40,000
     $7.875                             30,000              5.8           30,000
     $8.00                             228,000              4.8          228,000
     $8.125                             20,000              4.8           20,000
                                     ---------                         ---------
     $4.12                           1,074,500              6.7        1,074,500
                                     =========              ===        =========


(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, 2003, 2004
     and 2005 were $0, $844,525 and $191,712, 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, 2003, 2004 and 2005:

                                                     2003       2004        2005
                                                        $          $           $

     Weighted risk-free interest rate                 N/A      2.83%       4.46%
     Dividend yield                                     -      1.53%       1.80%
     Weighted volatility factor of the expected
      market price of the Company's common share      N/A     98.24%        110%
     Weighted average expected life of the option     N/A    5 years   7.2 years

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


                                       F-31
<PAGE>

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

16   Warrants

(a)  On January 5, 2000, the Company declared a one-for-one warrant dividend on
     all warrants which either were outstanding as of the close of trading on
     January 19, 2000 or which were exercised during the period commencing on
     November 22, 1999 and ending at the close of trading on January 19, 2000. A
     total of 2,174,403 new warrants were issued accordingly on June 1, 2000.
     Each two new warrants were exercisable to purchase 1 share of common stock
     of the Company at an exercise price of $17.50, which was equal to the
     market price on that date. The warrants originally expired on December 31,
     2001. In October 2001, our board of directors extended the expiration date
     until December 31, 2002, and in July 2002, extended the expiration date
     until December 31, 2003. On December 17, 2003 the Board of Directors
     extended the expiration date until February 13, 2004 and the exercise price
     was reduced from $17.50 to $8.25. During the fiscal year ended March 31,
     2004, 65,964 warrants were exercised and 32,982 shares of common stock of
     the Company were issued. The remaining 2,108,439 warrants expired on
     February 13, 2004.

(b)  On January 14, 2000, the Company entered into an agreement with Profit
     Concepts Limited ("Profit Concepts") which provided consulting services to
     the Company. The agreement provided for the issuance by the Company to
     Profit Concepts of 250,000 non-callable warrants to purchase 250,000 shares
     of the Company's common stock at $8.00 per share, which was equal to the
     market price on that date. Profit Concepts provided advisory services to
     the Company and the warrants were exercisable for a period of three years
     from January 14, 2000. Profit Concepts exercised 50,000 warrants and were
     issued 50,000 shares of the Company's common stock at $8.00 per share
     during the year ended March 31, 2001. The remaining warrants expired on
     January 13, 2003, and no additional warrants were exercised.

     The fair value of the warrants on the date of issue was $1,144,260 and was
     recognized as consultancy fee in the Consolidated Statements of Income
     (Loss) and Comprehensive Income (Loss) on a straight-line basis over the
     period of services by Profit Concepts which commenced on July 1, 2000 and
     concluded on January 13, 2004. The consultancy fees charged to the
     Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
     amounted to $381,420, $381,420 and $381,420 for the years ended March 31,
     2001, 2002 and 2003 respectively.

17   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 involves 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-32
<PAGE>
<TABLE>
<CAPTION>

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

17   Business segment information (Continued)

     Summarized financial information by business segment for 2003, 2004 and
     2005 is as follows:

                                                               Identifiable  Depreciation
                                                   Operating   assets as of           and       Capital
                                    Net sales   profit/(loss)      March 31  amortization   expenditure
                                    ---------   -------------      --------  ------------   -----------
                                            $              $              $             $             $
     2005
     ----
<S>                                <C>             <C>           <C>          <C>           <C>
     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
                                  ===========    ===========    ===========   ===========   ===========


     2003
     ----

     Scales                        27,443,774      3,855,701     24,672,560     2,019,590       837,113
     Telecommunication products    15,729,490         94,623      7,158,520     1,177,268        66,310
     Other                          3,226,877        290,626      1,403,184       183,356        84,354
                                  -----------    -----------    -----------   -----------   -----------
     Total operating segments      46,400,141      4,240,950     33,234,264     3,380,214       987,777
     Corporate                           --       (4,948,642)    15,676,472       467,694       940,317
                                  -----------    -----------    -----------   -----------   -----------
     Group                         46,400,141       (707,692)    48,910,736     3,847,908     1,928,094
                                  ===========    ===========    ===========   ===========   ===========


     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
     arising from the purchase of Korona and Gram is included in identifiable
     assets of the Scales segment as of March 31, 2003, 2004 and 2005
     respectively.

                                       F-33
</TABLE>
<PAGE>

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

17   Business segment information (Continued)

(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 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.

     Identifiable long lived assets by geographical areas are as follows:

                                                      2004             2005
                                                         $                $

     Hong Kong                                   3,886,768        3,771,080
     The PRC                                    11,297,299        9,522,560
     Germany                                       453,423          275,946
     Canada                                        693,964          687,135
     United States of America                       20,453           42,316
     United Kingdom                                 25,454           12,949
                                                ----------       ----------
     Total assets                               16,377,361       14,311,986
                                                ==========       ==========


(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, 2003, 2004 and 2005:

<TABLE>
<CAPTION>

                                                Year ended March 31
                          -----------------------------------------------------------
<S>                        <C>         <C>    <C>           <C>   <C>            <C>
                                2003     %           2004     %           2005     %
                                   $                    $                    $
     Canada                2,397,000     5%     3,768,000     5%    $2,686,951     4%
     United States of
      America             19,620,956    43%    41,302,191    55%    38,638,906    55%
     Germany              11,652,592    25%    17,429,011    23%    15,025,103    22%
     United Kingdom        4,167,505     9%     3,879,272     5%     2,769,900     4%
     Other EC countries    5,239,130    11%     6,483,109     9%     7,948,970    11%
     Asia and Others       3,322,958     7%     2,102,502     3%     2,532,362     4%
                          ----------   ---     ----------   ---     ----------   ---
                          46,400,141   100%    74,964,085   100%    69,602,192   100%
                          ==========   ===     ==========   ===     ==========   ===

(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       2003     %          2004    %         2005    %
                                     segment          $                   $                 $

     Sunbeam Products, Inc. (USA)     Scales           -    -    10,301,621   14   11,708,143   17

     TTI Tech Co., Ltd.                Tele-
                               communication
                                    products   3,550,470    8    18,664,970   25    7,309,546   11

     Global Link Corporation           Tele-
      Ltd.                     communication
                                    products   2,421,902    5     7,927,646   11   11,893,578   17

     Trisquare Communications          Tele-
      (HK) Company             communication
      Limited                       products   6,693,470   14        51,156    -            -    -

     Salter Housewares Ltd.           Scales   4,686,207   10     4,589,024    6    2,234,879    3
                                              ----------   --    ----------   --   ----------   --
                                              17,352,049   37    41,534,417   56   33,146,146   48
                                              ==========   ==    ==========   ==   ==========   ==


                                       F-34
</TABLE>
<PAGE>

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

18   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.





















                                       F-35