SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549


FORM
20-F








o
              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


o
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





OR




o
            SHELL
      COMPANY 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
1915-1916, 19/F, Delta House


3
On Yiu Street, Shek Mun,


Shatin,
Hong Kong


(Address
of principal executive offices)





Securities registered or to be
registered pursuant to Section 12(b) of the Act:




COMMON
STOCK, PAR VALUE $.003





Securities registered pursuant to
Section 12(g) of the Act:  NONE





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, 2009





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


Yes o                        No
x





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





Yes o                      No
x





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




Yes x                      No
o










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





Large Accelerated
Filer   o                  Accelerated
Filer   o          
Non-accelerated filer   x





Indicate
by check mark which basis of accounting the Registrant has used to prepare the
financial statements included in this filing:





U.S.
GAAP   x                                International
Financial Reporting Standards as
issued                                
Other o


By the International Accounting Standards Board   o





If 
“Other”  has been checked in response to the previous question, indicate by
check mark which financial statement item the Registrant has elected to
follow:





Item
17 o                     Item
18  o





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





Yes o                     No  x





TABLE OF
CONTENTS








PART
      I
                Page5Item
      1. Identity of Directors, Senior Management and Advisors
                5Item
      2. Offer Statistics and Expected Timetable
                5Item
      3. Key Information
                21Item
      4. Information on the Company
                31Item
      4A.  Unresolved Staff Comments
                31Item
      5. Operating and Financial Review and Prospects
                52Item
      6. Directors, Senior Management and Employees
                60Item
      7. Major Shareholders and Related Party Transactions
                62Item
      8. Financial Information
                62Item
      9. The Offer and Listing
                63Item
      10. Additional Information
                68Item
      11. Quantitative and Qualitative Disclosures about Market
    Risk
                69Item
      12. Description of Securities Other Than Equity SecuritiesPART
      IIItem
      13. Defaults, Dividend Arrearages and Delinquencies
                69Item
      14. Material Modifications to the Rights of Security Holders and Use of
      Proceeds
                69Item
      15. Controls and Procedures
                70Item
      16. Reserved
                72Item
      16A. Audit Committee Financial Expert
                72Item
      16B. Code of Ethics
                72Item
      16C. Principal Accountant Fees and Services
                72Item
      16D. Exemptions from the Listing Standards for Audit
      Committees
                74Item
      16E. Purchases of Equity Securities by the Issuer and Affiliates
      Purchasers
                74Item
      16F. Changes in Registrants Certifying Accountants
                75PART
      IIIItem
      17. Financial Statements
                75Item
      18. Financial Statements
                F-1 to F-41Item
      19. Exhibits
                76SIGNATURES
                77













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 Annual Report, 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


















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, 2008 and 2009 and for each
of the three fiscal years ended March 31, 2009 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, 2005, 2006 and 2007, and for each
of the two fiscal years in the period ended March 31, 2006 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.


















SELECTED
CONSOLIDATED FINANCIAL DATA





Statement
of Operations Data


(in 000’s
US$ except per shares and per share data)




Year
      Ended March 31,2005
                $
              
              
              2006
                $
              
              
              2007(1)(2)
                $
              
              
              2008
      (1)(2)
                $
              
              
              2009
      (1)(2)
                $Net
      sales
              
              
              69,602
              
              
              
              64,543
              
              
              
              48,272
              
              
              
              45,496
              
              
              
              40,378Cost
      of sales
              
              
              (53,138
              )
              
              
              (51,114
              )
              
              
              (40,304
              )
              
              
              (43,629
              )
              
              
              (34,707
              )Gross
      margin
              
              
              16,464
              
              
              
              13,429
              
              
              
              7,968
              
              
              
              1,867
              
              
              
              5,671Selling
      expenses
              
              
              (2,595
              )
              
              
              (2,111
              )
              
              
              (874
              )
              
              
              (720
              )
              
              
              (649
              )Salaries
      and related costs
              
              
              (5,216
              )
              
              
              (5,681
              )
              
              
              (3,017
              )
              
              
              (3,541
              )
              
              
              (3,777
              )Research
      and development expenses
              
              
              (710
              )
              
              
              (847
              )
              
              
              (983
              )
              
              
              (883
              )
              
              
              (792
              )Administration
      and general expenses
              
              
              (4,079
              )
              
              
              (3,421
              )
              
              
              (1,655
              )
              
              
              (3,351
              )
              
              
              (4,602
              )Amortization
      of brand name
              
              
              (200
              )
              
              
              (200
              )
              
              
              (200
              )
              
              
              (200
              )
              
              
              -Impairment
      of goodwill
              
              
              -
              
              
              
              (258
              )
              
              
              -
              
              
              
              (843
              )
              
              
              -Impairment
      of brand name
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,597
              )
              
              
              -Impairment
      on share investment
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (200
              )
              
              
              -Income
      (Loss) from operations
              
              
              3,664
              
              
              
              911
              
              
              
              1,239
              
              
              
              (9,468
              )
              
              
              (4,149
              )Gain
      from disposal of subsidiary
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              363Interest
      income
              
              
              81
              
              
              
              202
              
              
              
              309
              
              
              
              198
              
              
              
              126Interest
      expenses
              
              
              (417
              )
              
              
              (504
              )
              
              
              (122
              )
              
              
              (448
              )
              
              
              (209
              )Foreign
      exchange gain (loss)
              
              
              (98
              )
              
              
              (184
              )
              
              
              (193
              )
              
              
              (431
              )
              
              
              (279
              )Gain
      on disposal of property
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              3,124
              
              
              
              163Other
      income (expenses)
              
              
              372
              
              
              
              190
              
              
              
              (236
              )
              
              
              592
              
              
              
              706Waiver
      of loan from discontinued operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (5,871
              )Income
      (Loss) before income taxes and minority interest
              
              
              3,602
              
              
              
              615
              
              
              
              997
              
              
              
              (6,433
              )
              
              
              (9,150
              )Income
      tax (expense) benefit
              
              
              (266
              )
              
              
              (131
              )
              
              
              (911
              )
              
              
              341
              
              
              
              (208
              )Net
      (loss) income before minority interest
              
              
              3,336
              
              
              
              484
              
              
              
              87
              
              
              
              (6,092
              )
              
              
              (9,358
              )Minority
      interest
              
              
              14
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -(Loss)
      income from continuing operations
              
              
              
              
              
              
              
              
              
              
              87
              
              
              
              (6,092
              )
              
              
              (9,358
              )(Loss)
      income from discontinued operations
              
              
              
              
              
              
              
              
              
              
              (1,458
              )
              
              
              (2,458
              )
              
              
              1,774Net
      (loss) income
              
              
              3,350
              
              
              
              484
              
              
              
              (1,371
              )
              
              
              (8,550
              )
              
              
              (7,584
              )(Loss)
      earnings per share-Basic
              
              $
              0.59
              
              
              $
              0.09-
      Diluted
              
              $
              0.55
              
              
              $
              0.08Loss per share-Continuing
      operations
              
              
              
              
              
              
              
              
              
              $
              0.01
              
              
              $
              (1.09
              )
              
              $
              (1.68
              )- Discontinued
      operations
              
              
              
              
              
              
              
              
              
              $
              (0.26
              )
              
              $
              (0.44
              )
              
              $
              0.32- Total
              
              
              
              
              
              
              
              
              
              $
              (0.25
              )
              
              $
              (1.53
              )
              
              $
              (1.36
              )Weighted
      average shares
              
              
              5,646,676
              
              
              
              5,577,639
              
              
              
              5,577,639
              
              
              
              5,577,639
              
              
              
              5,577,639Diluted
      weighted average shares
              
              
              6,054,303
              
              
              
              5,937,644
              
              
              
              5,937,644
              
              
              
              5,577,639
              
              
              
              5,577,639


(1) The
diluted net loss per share was the same as the basic net loss per share for the
fiscal years ended March 31, 2008 and 2009 as all potential ordinary shares
including the stock options are anti-dilutive and therefore excluded from
the computation of diluted net loss per share.





(2) The
statement of operations for fiscal years ended March 31, 2007, 2008 and 2009
present continuing and discontinued operations in conjunction with the
Consolidated Financial Statements.















Balance
Sheet Data


(in 000’s
US$ except per shares and per share data)


March
      31,2005
              
              
              2006
              
              
              2007
              
              
              2008(1)
              
              
              2009
      (1)$
              
              
              
              $
              
              
              
              $
              
              
              
              $
              
              
              
              $Cash
      and cash equivalents
              
              
              9,708
              
              
              
              8,582
              
              
              
              8,118
              
              
              
              9,654
              
              
              
              8,044Working
      capital
              
              
              15,345
              
              
              
              16,945
              
              
              
              16,842
              
              
              
              11,815
              
              
              
              11,244Total
      assets of continuing operations
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              34,044
              
              
              
              25,620Total
      assets of discontinued operations
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              7,742
              
              
              
              3,819Total
      assets
              
              
              52,463
              
              
              
              49,479
              
              
              
              47,519
              
              
              
              41,786
              
              
              
              29,439Current
      liabilities
              
              
              18,319
              
              
              
              15,657
              
              
              
              16,394
              
              
              
              11,990
              
              
              
              6,993Long-term
      debts and capital leases
              
              
              168
              
              
              
              0
              
              
              
              59
              
              
              
              184
              
              
              
              52Deferred
      income tax assets
              
              
              99
              
              
              
              83
              
              
              
              87
              
              
              
              22
              
              
              
              0Total
      liabilities of continuing operations
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              14,774
              
              
              
              9,654Total
      liabilities of discontinued operations
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              6,107
              
              
              
              5,787Common
      stock
              
              
              17
              
              
              
              17
              
              
              
              17
              
              
              
              17
              
              
              
              17Shareholders’
      equity
              
              
              33,932
              
              
              
              33,802
              
              
              
              31,051
              
              
              
              20,905
              
              
              
              13,998Dividends
      declared per share
              
              
              0.10
              
              
              
              0.05
              
              
              
              0
              
              
              
              0
              
              
              
              0


(1)  The
selected financial data for balance sheets for fiscal years ended March 31, 2008
and 2009 present continuing and discontinued operations in conjunction with the
Consolidated Financial Statements.





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.  From 1994 until July 2005, the Chinese Renminbi had
remained stable against the U.S. Dollar at approximately 8.28 to 1.00 U.S.
Dollar.  On July 21, 2005, the Chinese currency regime was altered to
link the RMB to a “basket of currencies,” which includes the US dollar, Euro,
Japanese Yen and Korean Won.  Under the rules, the RMB is allowed to
move 0.3% on a daily basis against the U.S. Dollar.  The People's Bank
of China, on May 21 2007, widened the RMB trading band from 0.3% daily movement
against the U.S. Dollar to 0.5%.  As of September 30, 2009, the RMB
was valued at 6.83 per US Dollar.  Any significant revaluation of the
RMB may materially and adversely affect our cash flows, revenues, earnings and
financial position, and the value of, and any dividends payable to, our common
shareholders in U.S. Dollars.  In addition, China’s government
continues to receive significant international pressure to further liberalize
its currency policy and as a result may further change its currency
policy.  The Chinese government in the past has expressed its
intention in the Basic Law to maintain the stability of the Hong Kong currency
after the sovereignty of Hong Kong was transferred to China in July
1997.  However, there can be no assurance that theHong Kong Dollar will
remain pegged against the U.S. Dollar or the Chinese Renminbi will not be
allowed to fluctuate more than 0.5% on a daily basis.  If the current
exchange rate mechanism is changed, we face increased currency risks, which
could have a material adverse effect upon the Company.












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





Our Results Have Been Affected By
The Recent Global Economic Downturn and We Expect Results will Continue to be
Affected













The
economy of China has been experiencing significant growth, leading to some
inflation. If the government tries to control inflation by traditional means of
monetary policy or returns to planned economic techniques, our business will
suffer a reduction in sales growth and expansion opportunities.





The rapid
growth of the PRC economy has historically resulted in high levels of inflation.
If the government tries to control inflation, it may have an adverse effect on
the business climate and growth of private enterprise in the PRC. An economic
slowdown may reduce our revenues. If inflation is allowed to proceed unchecked,
our costs would likely increase, and there can be no assurance that we would be
able to increase our prices to an extent that would offset the increase in our
expenses.





Changes
to PRC tax laws and heightened efforts by the China’s tax authorities to
increase revenues are expected to subject us to greater taxes.





Under
prior PRC law, we have been afforded a number of tax concessions by, and tax
refunds from, China’s tax authorities on a substantial portion of our operations
in China by reinvesting all or part of the profits attributable to our PRC
manufacturing operations.  On March 16, 2008, the National People’s
Congress approved the Corporate Income Tax Law of the People’s Republic of China
(the “new CIT Law”).  The new CIT Law increases the corporate income
tax rate for foreign invested enterprises to 25% with effect from January 1,
2009, which would likely increase our tax burden in the future.  The
new CIT Law provides that further detailed measures and regulations on the
determination of taxable profit, tax incentives and grandfathering provisions
will be issued by the State Council in due course.  As and when the
State Council announces the additional regulations, we will assess their impact,
if any.  Under the new income tax law, apart from those qualified as
high-tech enterprises, most domestic enterprises and foreign invested
enterprises would be subject to a single PRC enterprise income tax rate and
gradually transition to the new tax rate of 25% within five years.  We
base our tax position upon the anticipated nature and conduct of our business
and upon our understanding of the tax laws of the various countries in which we
have assets or conduct activities. However, our tax position is subject to
review and possible challenge by taxing authorities and to possible changes in
law, which may have retroactive effect. We cannot determine in advance the
extent to which some jurisdictions may require us to pay taxes or make payments
in lieu of taxes.












We Face Risks By Operating In China, Because The Chinese Legal System Relating
To Foreign Investment And Foreign Operations Such As Bonso’s Is Evolving And The
Application Of Chinese Laws Is Uncertain.




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 Guangdong 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 The Shenzhen Special
Economy Zone 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 on us and our operations near Shenzhen.





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












If Our Sole Factory Were Destroyed
Or Significantly Damaged As A Result of Fire, Flood Or Some Other Natural
Disaster, We Would Be Adversely Affected.  All of our products
are 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 $27.63 million 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 China’s national and local governments and foreign governments
and agencies and has been subject to increasing regulation.  Our
business and operating results could be materially and adversely affected if we
were to increase expenditures to comply with any new environmental regulations
affecting our operations.





Future Changes In The Labor Laws In
China May Result In The Continued Increase In Labor
Costs.During the fiscal years ended March 31, 2007, 2008 and
2009, 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 our 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.





If We Were To Lose Our Existing
Banking Facilities Or Those Facilities Were Substantially Decreased Or Less
Favorable Terms Were Imposed Upon Us, The Company Could Be Materially And
Adversely Affected.We maintain banking facilities with a
number of different banks, which are typically subject to renewal on an annual
basis. Certain of our short-term bank loans (i.e., aggregating approximately
US$16.6 million) were renewed subsequent to our fiscal year end. We have other
banking facilities aggregating approximately US$6.1 million that we expect to
renew in the coming months.





We use
our banking facilities to fund our working capital requirements. In recent
months, the credit markets in Hong Kong and throughout the world have tightened
and experienced extraordinary volatility and uncertainty. We have had discussion
with several of our banks and believe that the availability of our banking
facilities will continue on terms that are acceptable to us. However, as a
result of changes in the capital or other legal requirements applicable to the
banks that provide our banking facilities or if our financial position and
operations were to deteriorate further, our costs of borrowing could increase or
the terms of our banking facilities could be changed so as to impact our
liquidity. If we are unable to obtain needed capital on terms acceptable to us,
our business, financial condition, results of operations and cash flows could be
materially adversely affected.












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.
  The global economic weakness has
adversely affected our earnings, liquidity and financial condition and, until
global economic conditions improve, is expected to continue to do
so.








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 effects upon our business with these customers.  If we were
involved in any product liability litigation, even if it were unsuccessful, it
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, Susceptibility To A Downturn In The Retail Economy
And Sales Variances Resulting From Retail Promotional
Programs.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 is 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.  We cannot assure you that promotional purchases by our
retail industry customers will be repeated regularly, or at
all.  Further, our promotional sales could cause our quarterly results
to vary significantly.  The reduction in promotional purchases would
likely have a material adverse effect upon our results of
operations.





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












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





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












Certain Subsidiaries Of The Company
Received On-going Enquiries From The Local Tax Authorities During The
Year.  If The Subsidiaries Were Finally Held Liable For Such
Additional Taxation, Our Consolidated Net Income And The Value Of Your
Investment Could Be Substantially Reduced.  During the fiscal
years ended March 31, 2007, 2008 and 2009, certain of our subsidiaries were, and
continue to be, subject to enquiries from the local tax
authorities.  Upon the adoption of FIN 48, “Accounting for Uncertainty
in Income Taxes — An Interpretation of FASB Statement No. 109,” or FIN 48,
the Company recorded a provision of approximately $2,164,000 in relation to
uncertain tax positions as of April 1, 2007. The assessment is subject to final
determination by the local tax authorities and may be different from what we
have recorded as a provision. As such, there can be no assurance that the
enquiry will not result in imposing additional income tax expense on the Group,
which could have a material adverse effect upon the Group and its results of
operations.





Contractual Arrangements We Have
Entered Into Among Us And Our Subsidiaries May Be Subject To Scrutiny By The
Respective Tax Authorities And A Finding That Bonso And Its Subsidiaries Owe
Additional Taxes Could Substantially Reduce Our Consolidated Net Income And The
Value Of Your Investment. We
could face material and adverse tax consequences if the respective tax
authorities determine that the contractual arrangements among our subsidiaries
and Bonso do not represent an arm’s length price and adjust Bonso or any of its
subsidiaries’ income in the form of a transfer pricing adjustment. Bonso did not
consider the need to make tax provision in this respect.  However,
there can be no assurance that the assessment performed by the local tax
authorities will result in the same position.  A transfer pricing
adjustment could, among other things, result in a reduction, for tax purposes,
of expense deductions recorded by Bonso or any of its subsidiaries, which could
in turn increase its tax liabilities.  In addition, the tax
authorities may impose late payment fees and other penalties on our affiliated
entities for underpaid taxes.  Our consolidated net income may be
materially and adversely affected if our affiliated entities’ tax liabilities
increase or if they are found to be subject to late payment fees or other
penalties.





Increased Prices For Raw Materials
May Have A Negative Impact Upon Us.  During the fiscal years
ended March 31, 2007 and 2008, 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 increase
in the future, 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.  During the fiscal year ended March 31, 2009, we did not
experience increased prices for raw materials we used in manufacturing our
products.





We May Face An Increased Shortage Of
Factory Workers.










Recent changes in
the PRC’s labor law could penalize Bonso if it needs to make additional
workforce reductions.In June 2007, the
National People’s Congress of the PRC enacted new labor law legislation called
the Labor Contract Law, which became effective on January 1, 2008. It
formalizes workers’ rights concerning overtime hours, pensions, layoffs,
employment contracts and the role of trade unions. Considered one of the
strictest labor laws in the world, among other things, this new law requires an
employer to conclude an “open-ended employment contract” with any employee who
either has worked for the employer for 10 years or more or has had two
consecutive fixed-term contracts. An “open-ended employment contract” is in
effect a lifetime, permanent contract, which is terminable only in specified
circumstances, such as a material breach of the employer’s rules and
regulations, or for a serious dereliction of duty. Under the new law, downsizing
by 20% or more of each individual entity may occur only under specified
circumstances, such as a restructuring undertaken pursuant China’s Enterprise
Bankruptcy Law, or where a company suffers serious difficulties in production
and/or business operations. Also, if we lay off more than 20 employee at one
time, we have to communicate with the labor union of our Company and report to
the District Labor Bureau. Although we have successfully reduced our headcount
in response to the current economic downturn and recorded a loss of $785,438, we
may incur much higher costs under China’s labor laws if we are forced to
downsize further and accordingly, this new labor law may exacerbate the adverse
effect of the economic environment on our financial results and financial
condition.




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 original equipment manufacturer (“OEM”) and original design
manufacturer (“ODM”) manufacturers, and all companies engaged in the branded,
ODM and OEM business.  Both the scale and the telecommunications
markets are highly competitive, and we face pressures on pricing and lower
margins as evidenced by the decline in margins that we have experienced with our
scale and 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.
  Due to inherent limitations, there
can be no assurance that our system of disclosure and internal controls and
procedures will be successful in preventing all errors or fraud, or in informing
management of all material information in a timely manner.










Compliance Costs With Recently
Enacted Changes In The Securities Laws And Regulations Pursuant To The
Sarbanes-Oxley Act of 2002 Will Increase Our Costs. The Sarbanes-Oxley Act of 2002 that became law in
July 2002 has required changes in some of our corporate governance, securities
disclosure, accounting and compliance practices.  In response to the
requirements of that act, the Securities and Exchange Commission and NASDAQ have
promulgated new rules on a variety of subjects.  Compliance with these
rules, as well as with the Sarbanes-Oxley Act of 2002, including but not
limited to compliance with Section 404 that requires management to assess the
effectiveness of its internal control over financial reporting, has increased
our legal, financial and accounting costs, and we expect the cost of compliance
with these new rules 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 Hong Kong dollar or Chinese Renminbi could increase our
expenses.  During the fiscal years ended March 31, 2007, 2008 and
2009, our financial results were affected by currency fluctuations, resulting in
a total foreign exchange loss of approximately $193,000, $431,000 and $279,000,
respectively.  Generally, our revenues are collected in United States
Dollars.  Our costs and expenses are paid in United States Dollars,
Hong Kong Dollars, and Chinese Renminbi.  We face a variety of risks
associated with changes among the relative value of these
currencies.  Appreciation of the Chinese Renminbi against the Hong
Kong Dollar and the United States Dollar would increase our expenses when
translated into United States Dollars and could materially and adversely
affect our margins and results of operations.  If the trend of Chinese
Renminbi appreciation continues against the Hong Kong Dollar and the United
States Dollar, our operating costs will further increase and our financial
results will be adversely affected.  In addition, a significant
devaluation in the Chinese Renminbi or Hong Kong Dollar could have a material
adverse effect upon our results of operations. If we determined to pass
onto our customers through price increases the effect of increases in the Chinese Renminbi relative to the
Hong Kong Dollar and the United
States Dollar, it would make our products more expensive in global
markets, such as the United States and the European Union. This could result in
the loss of customers, who may seek, and be able to obtain, products and
services comparable to those we offer in lower-cost regions of the world. If we
did not increase our prices to pass on the effect of increases in the Chinese Renminbi relative to the
Hong Kong Dollar and the United
States Dollar, our margins and profitability would
suffer.








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





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





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





We Generally Have No Written
Agreements With Suppliers To Obtain Components, And Our Margins And Operating
Results Could Suffer From Increases In Component Prices.  We
are typically responsible for purchasing components used in manufacturing
products for our customers.  We generally do not have written
agreements with our suppliers of components.  This typically results
in our bearing the risk of component price increases because we may be unable to
procure the required materials at a price level necessary to generate
anticipated margins from the orders of our customers.  Further, prices
of components have increased recently based upon the increase in oil prices and
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.
  Because We Are Incorporated In The
British Virgin Islands, You May Not Have The Same Protections As Shareholders Of
U.S. Corporations.
  Future Issuances Of Preference
Shares Could Materially And Adversely Affect The Holders Of Our Common Shares Or
Delay Or Prevent A Change Of Control.










Our Shareholders 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.
  Our Board’s Ability To Amend Our
Charter Without Shareholder Approval Could Have Anti-Takeover Effects That Could
Prevent A Change In Control.
  We Have Not Paid Dividends Since
2007 And May Not Pay Dividends In The Future.


We Have Received Notice From NASDAQ
For Not Maintaining A Minimum Market Value Of Publicly Held Shares And May Not
Fulfill Such Requirement In The Future.  On September 15, 2009,
the Company received notice from NASDAQ that its common stock has not maintained
a minimum market value of publicly held shares of $5,000,000 for the last 30
consecutive trading days, as required for continued inclusion on the NASDAQ
Global Market set forth in Marketplace Rule 5450(b)(1)(C).  Therefore,
in accordance with Marketplace Rule 5810(c)(3)(D), the Company has been provided
90 calendar days, or until December 14, 2009, to regain compliance with the
rule.  If the Company does not meet the minimum $5,000,000 market
value test for a minimum of 10 consecutive trading days before December 14,
2009, it will receive notice of delisting from NASDAQ, which notice may be
appealed at that time.  Further, the Company may transfer its
securities listing to the NASDAQ Capital Market, provided it meets the continued
inclusion requirements for that market












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 BVI Business Companies Act.







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
1915-1916, 19/F, Delta House, 3 On Yiu Street, Shek Mun, Shatin, 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 on property, plant and equipment over the last
three years are set forth below:




2007
              2008
              2009Property plant & equipment and land use rights
              $293,295
              $2,558,720
              $71,538


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.












In
November, 2006, Bonso entered into a land purchase agreement with Xincheng
Hi-Tech Industrial Estate to acquire a piece of land of approximately 146,673
square meters for future expansion of the Company’s operations in
XinXing.  Pursuant to the land purchase agreement, the total
consideration was approximately $1,472,000 (RMB 11,145,500).  In July
2007, the Company paid a deposit of approximately $610,000 (RMB 4,617,900), and
the remaining balance was paid in October 2007. During the year ended March 31,
2008, the Group prepaid $150,325 (RMB 1,050,000) for the acquisition of the
right to use another piece of land in XinXing, the total consideration for which
was $501,083 (RMB 3,500,000).









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, “OEM's”), Original Brand
Manufacturers (individually “OBM” or, collectively, “OBM's”) and Original Design
Manufacturers (individually “ODM” or, collectively, “ODM's”).





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




.
  .








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, 2007, 2008, and 2009:


Year
      ended March 31,Product
      Line
              2007
              
              2008
              
              2009Scales
              66%
              
              58%
              
              75%Telecommunication
      Products
              33%
              
              41%
              
              24%Others
              1%
              
              1%
              
              1%Total
              100%
              
              100%
              
              100%


Business
Strategy





We believe that our continued growth
depends upon our ability to strengthen our customer base by enhancing and
diversifying our products, increasing the number of customers and expanding into
additional markets, while maintaining or increasing sales of our products to
existing customers.  Our continued growth and our ability to become
profitable are 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.
  Maintaining And Expanding Business Relations With Existing
Customers.


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












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





Increasing Production Capacity


Customers
and Marketing





We sell
our products primarily in the United States and Europe.  Customers for
our products are primarily OEM's, OBM's and ODM's, 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.





Net
export sales to customers by geographic area consisted of the following for each
of the three years ended March 31, 2007, 2008 and 2009.





Year
ended March 31:


2007
              
              2008
              
              2009$
              %
              $
              %
              $
              %United
      States of America
              33,048,645
              68
              29,585,942
              65
              26,923,189
              67Germany
              4,742,834
              10
              5,361,899
              12
              4,782,280
              12Other
      European
                Countries
              6,501,354
              14
              6,652,236
              14
              2,858,239
              7Asia
      and Others
              3,979,549
              8
              3,895,544
              9
              5,814,490
              14Total
              48,272,382
              100
              45,495,621
              100
              40,378,198
              100





Percent
of Sales – Year ended March 31:


Electronics
      Sensor Customers
              2007
              2008
              2009Sunbeam
      Products, Inc.
              32%
              29%
              45%




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
              2007
              2008
              2009TTI
      Tech Co., Ltd.
              16%
              20%
              11%Global
      Link Corporation Ltd.
              17%
              19%
              6%





Component
Parts and Suppliers





We
purchase over 1,000 different component parts from more than 100 major suppliers
and are not dependent upon any single supplier for key components.  We
purchase components for our products primarily from suppliers in Japan, Taiwan,
South Korea, Hong Kong and China.





During
the fiscal years ended March 31, 2007 and 2008, 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
increased during this time period due to an increase in worldwide demand for
electronic components such as those used in the production of our
products.  During the fiscal year ended March 31, 2009, there was not
a significant change to the price of oil, steel or other raw
materials.  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.  Further, we have received TL 9000 certification for our
telecommunications products.  We have also received certification
according to the Environmental Management Standards of ISO 14001:2004 and the
Occupational Health and Safety Management Standard of OHSAS 18001.




ISO 9001
is one of the ISO 9000 series of quality system standards developed by the
International Organization for Standardization, a worldwide federation of
national standards bodies.  ISO 9001 provides a model for quality
assurance (and continuous improvement) in product development, manufacturing,
installation and servicing that focuses on meeting customer
requirements.  The TL 9000 standard was developed by the Quality
Excellence for Suppliers of Telecommunications (QuEST) Leadership
Forum.  The TL 9000 certification process was developed exclusively to
address the quality of products and services provided by suppliers to the
telecommunications industry.





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





The
European Union has enacted the Restriction of the Use of Certain Hazardous
Substances in Electrical and Electronic Equipment Directive (“RoHS”). RoHS
prohibits the use of certain substances, including lead, in certain
products.  We believe that we are in compliance with RoHS and have a
supply of compliant components from suppliers.





The
Company provides to certain customers an additional 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 to three years 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.












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.





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















Seasonality





Generally,
the first calendar quarter of each year is typically the slowest sales period
because our manufacturing facilities in China are closed for two weeks for the
Chinese New Year holidays to permit employees to travel to their homes in
China.  In addition, sales during the first calendar quarter of both
scales and telecommunications products usually dip following the increase in
sales during the Christmas season.  A greater number of our sales of
scales and telecommunications products occur between the months of April and
September for shipment in the summer in preparation of the Christmas
holiday.  Throughout the remainder of the year, our products do not
appear to be subject to significant seasonal variation.  Sales of
telecommunication products are generally higher in the summer
months.  However, past sales patterns may not be indicative of future
performance.





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





Transportation





Typically,
we sell products either F.O.B. Hong Kong or Yantian (Shenzhen), which means that
our customers are responsible for the transportation of finished products from
Hong Kong or Yantian (Shenzhen) to their final
destination.  Transportation of components and finished products to
and from the point of shipment is by truck.  To date, we have not been
materially affected by any transportation problems.  However,
transportation difficulties affecting air cargo or shipping, such as an extended
closure of ports that materially disrupts the flow of our customers’ products
into the United States, could materially and adversely affect our sales and
margins if, as a result, our customers delay or cancel orders or seek
concessions to offset expediting charges they incurred pending resolution of the
problems causing the port closures.





Government
Regulation





We are
subject to comprehensive and changing foreign, federal, state and local
environmental requirements, including those governing discharges to the air and
water, the handling and disposal of solid and hazardous waste and the
remediation of contamination associated with releases of hazardous
substances.  We believe that we are in compliance with current
environmental requirements.  Nevertheless, we use hazardous substances
in our operations and, as is the case with manufacturers in general, if a
release of hazardous substances occurs on or from our properties we may be held
liable and may be required to pay the cost of remediation.  The amount
of any resulting liability could be material.












Foreign
Operations





A
significant amount of our products are manufactured at our factory located in
China.  While China has been granted permanent most favored nation
trade status in the United States through its entry into the World Trade
Organization, controversies between the United States and China may arise that
threaten the status quo involving trade between the United States and
China.  These controversies could materially and adversely affect our
business by, among other things, causing our products in the United States to
become more expensive, resulting in a reduction in the demand for our products
by customers in the United States.





Sovereignty
over Hong Kong reverted to China on July 1, 1997.  The 1984
Sino-British Joint Declaration, the 1990 Basic Law of Hong Kong, the 1992 United
States-Hong Kong Policy Act and other agreements provide some indication of the
business climate we believe will continue to exist in Hong Kong.  Hong
Kong 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 a 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
















Property,
Plant and Equipment




British Virgin Islands











Hong Kong








China





Our existing factory in China is
located at Shenzhen in the DaYang Synthetical Development District, close to the
border between Hong Kong and China.  This factory consists of five
factory buildings, which contain approximately 333,000 square feet, four
workers’ dormitories, containing approximately 181,000 square feet, a canteen
and recreation center of approximately 25,500 square feet, an office building,
consisting of approximately 25,500 square feet, and two staff quarters for our
supervisory employees, consisting of approximately 35,000 square feet, for a
total of approximately 600,000 square feet.  All of the facilities
noted above are wholly-owned, except three factory buildings and two workers’
dormitories with approximately 200,000 square feet.












We also own one residential property in
Shenzhen, which is located at Lakeview Mansion, B-20C, Hujinju Building No. 63,
Xinan Road, Boacheng Baoan Shenzhen, China.  It consists of
approximately 1,591 square feet and is utilized by directors when they require
accommodations in China.





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.  One Unit is
rented to unaffiliated third parties for an aggregate monthly rental of RMB
14,150, or approximately $2,072.




In November, 2006, Bonso entered into a
land use right purchase agreement with Xincheng Hi-Tech Industrial Estate to
acquire a piece of land of approximately 146,673 square meters for future
expansion of the Company’s operations in XinXing.  Pursuant to the
land purchase agreement, the total consideration was approximately $1,472,000
(RMB 11,145,500).  In July 2007, the Company paid a deposit of
approximately $610,000 (RMB 4,617,900). During the year ended March 31, 2008,
the Group prepaid $150,325 (RMB 1,050,000) for the acquisition of the right to
use another piece of land in XinXing, the total consideration for which is
$501,083 (RMB 3,500,000).




Adequacy
of Facilities





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





Item
4A.  Unresolved Staff Comments





Not
Applicable.





Item
5.  Operating and Financial Review and Prospects








Overview





During the fiscal year ended March 31,
2009, the Company experienced decreased revenues.  Our sales dropped
due to the Company’s decision to reduce orders for telecommunication products
with low profit margin, and loss making business units in Germany and
Canada.



















Operating
Results




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








Fiscal
      Year Ended March 31Statement of Operations Data
              2007
              2008
              2009%
              %
              %Net
      sales
              100.0
              100.0
              100.0Cost
      of sales
              (83.5)
              (95.9)
              (86.0)Gross
      margin
              16.5
              4.1
              14.0Selling
      expenses
              (1.8)
              (1.6)
              (1.6)Salaries
      and related costs
              (6.2)
              (7.8)
              (9.4)Research
      and development expenses
              (2.0)
              (1.9)
              (2.0)Administration
      and general expenses
              (3.4)
              (7.4)
              (11.4)Amortization
      of brand name
              (0.4)
              (0.4)
              -Impairment
      of goodwill
              -
              (1.9)
              -Impairment
      of brand name
              -
              (3.5)
              -Impairment
      of share investment
              -
              (0.4)
              -Income
      (loss) from operations
              2.7
              (20.8)
              (10.4)Gain
      from disposal of subsidiary
              -
              -
              0.9Interest
      income
              0.6
              0.4
              0.3Interest
      expenses
              (0.3)
              (1.0)
              (0.5)Foreign
      exchange loss
              (0.4)
              (0.9)
              (0.7)Gain
      on disposal of property
              -
              6.9
              0.4Other
      income (expenses)
              (0.5)
              1.3
              1.7Waived
      of loan from discontinued operations
              -
              -
              (14.4)Income
      before income taxes
              2.1
              (14.1)
              (22.7)Income
      tax expenses
              (1.9)
              0.7
              (0.5)Loss
      from continuing operations
              0.2
              (13.4)
              (23.2)(Loss)
      income from discontinued operations
              (3.0)
              (5.4)
              -4.4Net
      loss
              (2.8)
              (18.8)
              (18.8)


Fiscal
year ended March 31, 2009 compared to fiscal year ended March 31,
2008





Net Sales.  Our
sales decreased approximately $5,118,000 or 11.2% from approximately $45,496,000
for the year ended March 31, 2008, to approximately $40,378,000 for the year
ended March 31, 2009.  The decrease in sales was primarily the result
of decrease sales orders for telecommunication products.  Sales of our
scales and others business increased 14.9% from approximately $26,898,000 for
the year ended March 31, 2008 to approximately $30,903,000 for the year ended
March 31, 2009, and sales for telecommunications products decreased 49.1% from
approximately $18,598,000 for the year ended March 31, 2008 to approximately
$9,475,000 for the year ended March 31, 2009.  The increase in sales
for scale and others business was the result of increase customer demands for
scale products.  The decrease in sales for telecommunications products
was caused by the Company’s decision to give up orders of telecommunications
products with low profit margins.


Gross Margin.  Gross margin as a
percentage of revenue increased to approximately 14.0% during the year ended
March 31, 2009, as compared to approximately 4.1% during the year ended March
31, 2008.  The higher gross margin was the result of the Company’s
decision to reduce products with low profit margins from its telecommunication
products, and reduced costs of raw materials both as a result of the
Company’s efforts to purchase materials more cost effectively and the decline in
costs resulting from lower petroleum prices.  Furthermore, prices of raw
materials decreased due to the decrease in oil prices and the financial crisis
in 2008, which benefited the Company in the fiscal year ended March 31,
2009.  As a result of these factors, our gross profit margin increased
by 9.9% when compared to the prior fiscal year.











Selling Expenses.  Selling expenses decreased by approximately
$71,000 from approximately $720,000 for the year ended March 31, 2008 to
approximately $649,000 for the year ended March 31, 2009.  Local
freight costs decreased during the year due to decreased sales.  As a
result, selling expenses decreased by 9.8% when compared to the prior fiscal
year.
 
 Salaries And Related
Costs.  Salaries and related costs increased by approximately
$236,000, or 6.7%, from approximately $3,541,000 for the year ended March 31,
2008 to approximately $3,777,000 for the year ended March 31,
2009.  According to the New Labor Law in the PRC that was effective
January 1, 2009, the Company was required  to provide one month of
salary for each year of service as a severance payment to each worker that was
furloughed.  As such, the company recognized a provision of $785,438
in the fiscal year ended March 31, 2009 for severance payments for staff in
PRC.
 
 Research And
Development.  Research and development expenses decreased
approximately $91,000, or 10.3%, from approximately $883,000 for the year ended
March 31, 2008 to approximately $792,000 for the year ended March 31,
2009.  The decrease in research and development was primarily the
result of a reduction in the number of engineers employed.  Research
and Development as a percentage of revenue increased to 2.0% during the year
ended March 31, 2009, as compared to 1.9% during the year ended March 31, 2008,
because of lower sales in the year ended March 31, 2009.
 
 Administration And General Expenses.Administration and general
expenses increased by approximately $1,251,000, or 37.3%, from approximately
$3,351,000 for the year ended March 31, 2008 to approximately $4,602,000 for the
year ended March 31, 2009.This increase was primarily the
result of recognizing an immediate write down of approximately $1,700,000
relating to the disposition of the Company’s Canadian subsidiary.
  When the
Company disposed of its Canadian subsidiary, Gram Precision, on November 1,
2008, Gram Precision issued a promissory note to the Company to repay $1,700,000
to the Company in installments. Monthly payments of $10,000 were to be paid to
the Company in the six months from December 2008 to May 2009, and monthly
payments of $20,000 were to be paid from June 2009 until the full amount of
$1,700,000 was repaid.  Since Gram Precision had operating losses
during the years ended March 31, 2009 and 2008, the recoverability of the full
amount of $1,700,000 was doubtful.  As a result, the Company
recognized a bad debt provision of $1,700,000 for the year 2009.
 
 Amortization Of Brand
Names.  During the year ended March 31, 2008, we amortized
$200,000 relating to the brand names acquired upon the acquisition of
Korona.  Brand names are amortized using the straight-line method over
the related estimated useful life of 15 years.  During the year ended
March 31, 2009, no amortization was recognized, since the brand name was fully
amortized during the year ended March 31, 2008.
 
 Impairment Of Goodwill.Based
on the assessment for the year ended March 31, 2008, the Group made a provision
for impairment of approximately $843,000 for Gram Precision due to the continued
losses from operations.  The reporting unit’s operating results for
fiscal 2008 were used as a basis of management’s discounted cash flow analysis
in determining the reporting unit’s fair value.  There was no
impairment loss recognized during the fiscal year ended March 31, 2009 although
the Company did record a bad debt provision of $1,700,000 in connection with the
disposition of Gram Precision as noted above.
















Impairment Of Brand Name.Management performed an impairment assessment of the brand name of Korona
due to continuing losses incurred by Korona and the diminishing price premium
that Korona was able to realize on its branded products since the last quarter
of fiscal 2008.  Based on the assessment for the year ended March 31,
2008, the Company recorded an impairment charge on the brand name of
approximately $1,597,000.  There was no impairment loss recognized
during the fiscal year ended March 31, 2009.





Impairment Of Share Investment.Based on the assessment for the year ended March 31, 2008, the Company
made a provision for an impairment of $200,000 for its investment in a private
company, since the value of the investment had become uncertain during the
fiscal year.  There was no impairment loss recognized during the
fiscal year ended March 31, 2009.





Loss From
Operations.  As a result of the factors described above, loss
from operations decreased by 56.2% from a loss of approximately $9,468,000 for
the year ended March 31, 2008 to a loss of approximately $4,149,000 for the year
ended March 31, 2009.





Gain on Disposal of Subsidiary.Effective November 1, 2008, the Company disposed of its Canadian
subsidiary, Gram Precision, since this reporting unit experienced operating
losses in the fiscal years ended March 31, 2007 and 2008, and for the seven
month period ended October 31, 2008.  The Company recognized a gain of
approximately $363,000 from the dispositionbecause the company was relieved of
Gram’s liabilities.





Interest
Income.  Interest income decreased by $71,000, or 35.9%, from
approximately $198,000 for the year ended March 31, 2008 to approximately
$127,000 for the year ended March 31, 2009.  The decreases were
primarily the result of fewer deposits in higher yield accounts and a decrease
in interest rates for interest bearing accounts during the fiscal
year.





Interest Expenses. Interest expenses
decreased approximately $239,000, or 53.3%, from approximately $448,000 for the
year ended March 31, 2008 to approximately $209,000 for the year ended March 31,
2009.  This decrease was primarily the result of a decrease in
interest rates during the year ended March 31, 2009 and decreased use of the
Company’s banking facilities.





Foreign Exchange Losses.Foreign exchange loss decreased approximately $152,000, or 35.3%, from
approximately $431,000 for the year ended March 31, 2008 to approximately
$279,000 for the year ended March 31, 2009.  This decrease was
primarily the result of the reduced rate of appreciation of Chinese Renminbi
against the United States Dollar during the fiscal year ended March 31, 2009, as
compared to that during the fiscal year ended March 31, 2008.













Other Income.Other income decreased approximately $2,847,000,
or 76.6%, from approximately $3,717,000 for the year ended March 31, 2008, to
approximately $869,000 for the year ended March 31, 2009.  The
difference was mainly due to the fact that in the year ended March 31, 2008,
there was a gain on the sale of an office suite in Hong Kong of approximately
$3,124,000.  In the year ended March 31, 2009, the sale of a warehouse
in Hong Kong resulted in a gain of $136,016.





Income Tax
Expense.  Income tax expense increased approximately $549,000
from an income tax benefit of $341,000 during the year ended March 31, 2008 to
an income tax expense of $208,000 during the year ended March 31, 2009,
representing approximately 0.7% and approximately negative 0.5% of net sales,
respectively.  For the year ended March 31, 2009, the Company wrote
off deferred income tax assets of $191,618 because of operation loss for the
year.  During the fiscal year ended March 31, 2008, the Company
performed an assessment and made a reversal of provision of approximately
$306,000 in relation to uncertain tax positions of prior years.





Net Loss.  As
a result of the factors described above, net loss decreased from a loss of
approximately $8,550,000 for the year ended March 31, 2008 to a loss of
approximately $7,584,000 for the year ended March 31, 2009, a decrease of
approximately $966,000, or 11.3%.


Foreign Currency Translation
Adjustments.  Foreign currency translation adjustments, net of
tax increased from a gain of $567,000 for the year ended March 31, 2008 to a
gain of approximately $811,000 for the year ended March 31, 2009, an increase of
approximately $244,000, or 43.0%.  The increased foreign currency
translation adjustment, net of tax, was primarily the result of appreciation of
the Chinese Renminbi against the United States Dollar.
 
 Comprehensive
Loss.  As a result of the factors described above,
comprehensive loss decreased from a loss of approximately $7,982,000 for the
year ended March 31, 2008, to a loss of approximately $6,773,000 for the year
ended March 31, 2009, a decrease of approximately $1,209,000, or
15.2%.


Fiscal
year ended March 31, 2008 compared to fiscal year ended March 31,
2007




Net Sales















Gross Margin.  Gross margin as a percentage of revenue declined
to approximately 4.1% during the year ended March 31, 2008, as compared to
approximately 16.5% during the year ended March 31, 2007.  The Company
was confronted with a very difficult operating environment in this fiscal
year.  Rising prices for some key raw materials such as plastic resins
and stainless steel drove up production costs for the Company.  Rising
labor costs also increased our production costs.  Furthermore, the
Company paid more for  raw materials because of the appreciation of
Chinese Renminbi against the United States Dollar during the year. Also, we
wrote off $2,457,510 of obsolete inventories during the fiscal year ended March
31, 2008.   In addition, the Company was not able to reflect
fully the increase in material and labor costs in its selling
prices.  As a result of these factors, our gross profit margin
decreased by 10.9% when compared to the prior fiscal year.
 
 Selling
Expenses.  Selling expenses decreased by approximately $154,000
from approximately $874,000 for the year ended March 31, 2007 to approximately
$720,000 for the year ended March 31, 2008.  Local freight costs
decreased during the year due to decreased sales.  As a result,
selling expenses decreased by 17.6% when compared to the prior fiscal
year.
 
 Salaries And Related
Costs.  Salaries and related costs increased by approximately
$524,000, or 17.4%, from approximately $3,017,000 for the year ended March 31,
2007 to approximately $3,541,000 for the year ended March 31,
2008.  This increase was primarily the result of increased salaries to
employees and appreciation of Chinese Renminbi against the United States
Dollar.
 
 Research And
Development.  Research and development expenses decreased
approximately $100,000, or 10.2%, from approximately $983,000 for the year ended
March 31, 2007 to approximately $883,000 for the year ended March 31,
2008.  The decrease in research and development was primarily the
result of a reduction in the number of engineers employed.  Research
and Development as a percentage of revenue decreased to 1.9% during the year
ended March 31, 2008, as compared to 2.0% during the year ended March 31,
2007.
 
 Administration And General
Expenses.  Administration and general expenses increased by
approximately $1,696,000, or 102.4%, from approximately $1,655,000 for the year
ended March 31, 2007 to approximately $3,351,000 for the year ended March 31,
2008.  This increase was primarily the result of increased expenses in
professional fees for tax advisory services, audit fees, and operating expenses
for Bonso USA.  An increase in bank charges of approximately $120,000
was due to facilitating insurance coverage through factoring for open accounts
to customers.  Furthermore, the Company recognized a provision of
$869,995 for bad debts during the fiscal year ended March 31, 2008.








Amortization Of Brand
Names.  During the years ended March 31, 2007 and 2008, we
amortized $200,000 relating to the brand names acquired upon the acquisition of
Korona.  Brand names are amortized using the straight-line method over
the related estimated useful life of 15 years.





Impairment Of Goodwill.





Impairment Of Brand Name.Management performed an impairment assessment of the brand name of one of
 its subsidiaries, Korona, due to continuing losses incurred by Korona and
the diminishing price premium that Korona was able to realize on its branded
products since the last quarter of fiscal 2008.  Based on the
assessment for the year ended March 31, 2008, the Group recorded an impairment
charge on the brand name of approximately $1,597,000.  There was no
impairment loss recognized during the fiscal year ended March 31,
2007.





Impairment Of Share Investment.Based on the assessment for the year ended March 31, 2008, the Group made
a provision for impairment of $200,000 for its investment in a private company,
since the value of the investment had become uncertain during the fiscal
year.  There was no impairment loss recognized during the fiscal year
ended March 31, 2007.





Loss From
Operations.  As a result of the factors described above, loss
from operations increased by 864.2% from a gain of approximately $1,239,000 for
the year ended March 31, 2007 to a loss of approximately $9,468,000 for the year
ended March 31, 2008.





Interest
Income.  Interest income decreased by $111,000, or 35.9%, from
approximately $309,000 for the year ended March 31, 2007 to approximately
$198,000 for the year ended March 31, 2008.  The decrease was
primarily the result of fewer deposits in higher yield accounts and a decrease
in interest rates.





Interest Expenses. Interest expenses
increased approximately $325,000, or 265.2%, from approximately $123,000 for the
year ended March 31, 2007 to approximately $448,000 for the year ended March 31,
2008.  This increase was primarily the result of an increase in bank
borrowings during the year ended March 31, 2008.





Foreign Exchange Losses.












Other Income
(Expenses).Other income increased approximately $3,952,000,
or 1478.0%, from loss of approximately $236,000 for the year ended March 31,
2007, to approximately $3,716,000 for the year ended March 31,
2008.  The increase was primarily the result of the gain on the sale
of an office suite in Hong Kong of approximately $3,124,000 and disposal of
fixed assets in Germany.





Income Tax
Expense.  Income tax expense decreased approximately $1,251,000
from approximately $911,000 during the year ended March 31, 2007 to an income
tax benefit of $340,000 during the year ended March 31, 2008, representing
approximately 1.9% and approximately negative 0.7% of net sales,
respectively.  For the year ended March 31, 2008, the Company
performed an assessment and made a reversal of provision of approximately
$306,000 in relation to uncertain tax positions of prior years.





Net
loss.  As a result of the factors described above, net loss
increased from a loss of approximately $1,371,000 for the year ended March 31,
2007 to a loss of approximately $8,550,000 for the year ended March 31, 2008, an
increase of approximately $7,179,000, or 523.6%.





Foreign currency translation
adjustments.  Foreign currency translation adjustments, net of
tax increased from a gain of $227,000 for the year ended March 31, 2007 to a
gain of approximately $567,000 for the year ended March 31, 2008, an increase of
approximately $340,000, or 149.8%.  The increased foreign currency
translation adjustment, net of tax, was primarily the result of appreciation of
Chinese Renminbi, the Canadian Dollars, and the Euro against the United States
Dollar.





Comprehensive
loss.  As a result of the factors described above,
comprehensive loss increased from a loss of approximately $1,144,000 for the
year ended March 31, 2007 to a loss of approximately $7,983,000 for the year
ended March 31, 2008, a increase of approximately $6,839,000, or
597.8%.





Impact
of Inflation













Taxation





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 and
Canada.  The current rate of taxation of the subsidiary operating in
Hong Kong is 16.5%.  Korona 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 and Canada are 15% and 36%,
respectively.


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 its 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,” and a further 50% tax reduction was
granted for another three years.  The last year it was entitled to
this benefit was December 31, 2005. Under the Implementation Rules of the
Foreign Enterprise Income Tax Law, Bonso Electronics (Shenzhen) Co. Ltd. was
entitled to a further tax rate reduction to 10% for the calendar year ended
December 31, 2006, as its export sales exceeded 70% of its revenue.
 
 Most of
our subsidiaries’ profits accrue in Hong Kong and the PRC, where the applicable
tax rates are 16.5% and 20%, respectively, in 2009.  The tax rates for
our subsidiary in PRC will be 22% in 2010, 24% in 2011 and 25% in 2012 and
beyond.  There is no tax payable in Hong Kong on offshore profit or on
dividends paid to Bonso Electronics Limited by its subsidiaries or to us by
Bonso Electronics Limited.  Therefore, our overall effective tax rate
may be lower than that of most United States corporations; however, this
advantage could be materially and adversely affected by changes in the tax laws
of the British Virgin Islands, Hong Kong or China.
 
 On March 16, 2008, the National
People’s Congress approved the Corporate Income Tax Law of the People’s Republic
of China (the “new CIT Law”).  The new CIT Law increases the corporate
income tax rate for foreign invested enterprises to 25%, with effect from
January 1, 2009.  Under the new income tax law, apart from those
qualified as high-tech enterprises, most domestic enterprises and foreign
invested enterprises would be subject to a single PRC enterprise income tax rate
and gradually transfer to the new tax rate of 25% within five
years.


Efforts by the Chinese government to
increase tax revenues could result in decisions or interpretations of the tax
laws by the Chinese tax authorities that are unfavorable to us and which
increase our future tax liabilities, or deny our expected
refunds.  Changes in Chinese tax laws or their interpretation or
application may subject us to additional Chinese taxation in the
future.












No
reciprocal tax treaty regarding withholding taxes exists between the United
States and the British Virgin Islands.  Under current British Virgin
Islands law, dividends, interest or royalties paid by us to individuals are not
subject to tax as long as the recipient is not a resident of the British Virgin
Islands.  If we were to pay a dividend, we would not be liable to
withhold any tax, but shareholders would receive gross dividends, irrespective
of their residential or national status.


During
the fiscal years ended March 31, 2007, 2008 and 2009, certain of our
subsidiaries were and continue to be subject to enquiries from the local tax
authorities.  Upon the adoption of FIN 48, the Company recorded a
provision of $2,164,000 in relation to uncertain tax positions as of April 1,
2007. There can be no assurance that the enquiries will not result in the
imposition of additional income tax expense on the Group, which could have a
material adverse effect upon the Group and its results of
operations.
 
 Contractual
arrangements we have entered into among us and our subsidiaries in different
locations may be subject to scrutiny by respective tax authorities, and a
finding against the Company and its subsidiaries may result in additional tax
liabilities that could substantially reduce our consolidated net
income.  We could face material and adverse tax consequences if
respective tax authorities determine that the contractual arrangements among our
subsidiaries and Bonso do not represent an arm’s length price and adjust Bonso’s
or its subsidiaries’ income.  Our consolidated net income may be
materially and adversely affected if our affiliated entities’ tax liabilities
increase.
 
 Dividends,
if any, paid to any United States resident or citizen shareholder are treated as
dividend income for United States federal income tax purposes.  Such
dividends are not eligible for the 70% dividends-received deduction allowed to
United States corporations on dividends from a domestic corporation under
Section 243 of the United States Internal Revenue Code of 1986, as amended (the
“Internal Revenue Code”).  Various Internal Revenue Code provisions
impose special taxes in certain circumstances on non-United States corporations
and their shareholders.  You are urged to consult your tax advisor
with regard to such possibilities and your own tax situation.


In
addition to United States federal income taxation, shareholders may be subject
to state and local taxes upon their receipt of dividends.





Foreign
Currency Exchange Rates





We sell most of our products to
international customers.  Our principal export markets are North
America (mainly the United States), Europe (mainly Germany) and
Asia.  Other markets are other European countries (such as the United
Kingdom), Australia and Africa.  Sales to international customers are
made directly by us to our customers.  We sell all of our products in
United States Dollars and pay for our material components principally in United
States Dollars and Hong Kong Dollars.  A very small portion of the
components used are paid for in Japanese Yen.  Most factory expenses
incurred are paid in Chinese Renminbi.  Because the Hong Kong Dollar
is pegged to the United States Dollar, in the past our only material foreign
exchange risk previously arose from potential fluctuations in the Chinese
Renminbi and the devaluation in United States Dollars; management believes that
it may be possible that there will be some fluctuation in the coming
year.












Gram Precision principally pays for its
products in United States Dollars and Canadian dollars and sells its products in
Canadian dollars and United States Dollars.  Korona primarily
pays for its products in United States Dollars and Euros and sells its products
in Euros.  During the fiscal year ended March 31, 2009, we experienced
a foreign currency loss of $278,944.  We do not currently engage in
hedging transactions; however, we may undertake hedging activities in the
future.





A summary of our debts from our banking
facilities utilized as at March 31, 2009 which was subjected to foreign currency
risk is as follows:




March 31, 2009$Hong
      Kong dollars
            
            
            1,747,3011,747,301




All  of the balances above are due
within one year.













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.  We do
not currently engage in hedging transactions; however we may undertake
hedging activities in the future.  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.













As of March 31, 2009 we had in place
general banking facilities with three financial institutions with amounts
available aggregating $18,617,948.  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, 2009, we had
utilized $1,747,301 from these general banking facilities.  Interest
on this indebtedness fluctuates with the prime rate and the Hong Kong Interbank
Offer Rate as set by the Hong Kong Bankers Association.  The bank
credit facilities are collateralized by certain of our bank guarantees. Our bank
credit facilities are due for renewal annually.  We anticipate that
the banking facilities will be renewed on substantially the same terms and our
utilization in the next year will remain at a similar level as that in the
current year.  During the fiscal years ended March 31, 2009 and 2008,
we paid a total of $199,493 and $328,756, respectively, in interest on
indebtedness for continuing operations.





Our
current ratio increased from 1.71 as of March 31, 2008 to 1.73 as of March 31,
2009. Our quick ratio decreased from 1.25 as of March 31, 2008 to 1.23 as of
March 31, 2009.





We
believe that our cash flows from operations, our current cash balance and funds
available under our working capital and credit facilities will be sufficient to
meet our working capital needs and planned capital expenditures for at least the
next 12 to 24 months.   However, a decrease in the demand for our
products may affect our internally generated funds, and we would further look to
our banking facilities to meet our working capital demands.





Commitments





The following table sets forth
information with respect to our commitments as of March 31, 2009:


Payments
      due by Period(1)Total
              Within
      1 year
              Within
      1 to 3 years
              Within
      3 to 5 years
              More
      than 5 yearsNotes
      payable
              $1,361,787(2)
              $1,361,787
              $0
              $0
              $0Operating
      leases
              $518,483
              $375,683
              $142,800
              $0
              $0Capital
      leases
              $182,172
              $130,201
              $51,971
              $0
              $0Acquisition
      of land
              $350,758(3)
              $350,758
              $0
              $0
              $0Interest
      on capital leases
              $2,430
              $2,430
              $0
              $0
              $0Income
      tax liabilities
              $2,602,023
              $6,888
              $2,595,135(4)
              $0
              $0Total
              $5,017,653
              $2,227,747
              $2,789,906
              $0
              $0
  (1)
                Does not include amounts that
      Company expects to expend in connection with the construction of its new
      manufacturing facility XinXing, China, which construction is expected to
      be completed in 2012.
 
 (2)
                  Represents amounts due within one
      year under our banking facilities
  agreements.
 
 (3)
                During the year ended March 31,
      2008, the Company prepaid $150,325 for the acquisition of the right to use
      another piece of land in XinXing, China at a total consideration of
      $501,083.  The balance is due within one
      year.
 
 (4)
                Effective
      April 1, 2007, the Company adopted FIN 48.  As a result of the
      adoption of FIN 48, the Company recognized a $1,169,777 increase in the
      liability for unrecognized tax benefits and penalties of $994,310, which
      were accounted for as a reduction to the April 1, 2007 balance of retained
      earnings.  The Company assessed the tax position during fiscal
      year ended March 31, 2009, and concluded that the same tax liability were
      carried forward.
  For
a discussion of interest rates on our notes payable and short term loans, see
“Item 11.  Qualitative and Quantitative Disclosures About Market Risk”
below.












Critical
Accounting Policies





The methods, estimates and judgments we
use in applying our most critical accounting policies have a significant impact
on the results we report in our financial statements.  The SEC has
defined the most critical accounting policies as the ones that are most
important to the portrayal of our financial condition and results and require us
to make our most difficult and subjective judgments, often as a result of the
need to make estimates of matters that are inherently
uncertain.  Based on this definition, our most critical policies
include inventories, impairment, brand name, trade receivables and deferred
income taxes.





Below, we
discuss these policies further, as well as the estimates and judgments
involved.  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.  For a discussion
of all our significant accounting policies, see footnote 1 to the Consolidated
Financial Statements included elsewhere in this Annual Report.





Inventories





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





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 to three years 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.











Due to
similar contractual terms, the Company’s revenue recognition policies do not
differ among its significant product lines (i.e. sensor based versus wireless
products) and among various marketing venues used 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 discounted
future cash flows analysis.  For the year ended March 31, 2007, the
Group made a provision of $5,414 for impairment of investment properties due to
the decline in market value.  No provision was made in fiscal 2008 or
2009.  On the other hand, for the year ended March 31, 2008, the Group
made a provision for impairment of $200,000 (2009: $0) on its investment in a
private company due to continuous losses and net liability
positions.





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 a discounted future cash flow analysis.  No provision was made by
the Group on impairment of goodwill for the year ended March 31,
2009.  During the fiscal year ended March 31, 2008  the
Company made a full provision of the goodwill because of Gram Precision’s
failure to meet business objectives and achieve profitability during the fiscal
year ended March 31, 2008 (2008: $842,821; 2007: $0).





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.












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.





Income
Taxes, Deferred Income Taxes





On April 1, 2007, the Company adopted FIN 48. FIN 48 clarifies the accounting
for uncertainty in income taxes recognized in financial statements in accordance
with FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48
prescribes a recognition threshold and measurement attributes for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. Only tax positions that meet the more-likely-than-not
recognition threshold at the effective date may be recognized or continue to be
recognized upon adoption of FIN 48. The Company’s accounting policy is to treat
interest and penalties as a component of income taxes.





Amounts in the consolidated financial statements related to income taxes are
calculated using the principles of 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 the 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 as deferred tax
assets.  Recognized deferred tax assets are reduced by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some portion or all of the deferred tax asset will not be
realized.












Research
and Development, Patents and Licenses, etc.




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





Trend
Information




Although
we are optimistic about our future in the manufacture and sale of
telecommunications and scale products, we are dependent upon a limited number of
customers for a significant portion of our revenues, and the loss of any of
these customers could have a material adverse effect upon us and our results of
operations.  As of March 31, 2009, our backlog of manufacturing orders
was $7,152,691, as compared to $7,922,410 as of March 31,
2008.  We expect that in the fiscal year ending March 31, 2010, the
trend of sales from telecommunications products and scales will be more or less
the same as the year ended March 31, 2009.





Off-Balance
Sheet Arrangements





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
















Recent
Accounting Pronouncements





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





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities - an amendment of FASB Statement
No. 133” (“SFAS No. 161”). SFAS No. 161 requires disclosures of
how and why an entity uses derivative instruments, how derivative instruments
and related hedged items are accounted for and how derivative instruments and
related hedged items affect an entity’s financial position, financial
performance and cash flows. SFAS No. 161 is effective for fiscal years
beginning after November 15, 2008, with early adoption permitted. We do not
expect the adoption of SFAS No. 161 to have a material impact on our
consolidated financial statements.





In April
2008, the FASB finalized Staff Position No. 142-3, “Determination of the
Useful Life of Intangible Assets” (“FSP 142-3”). The position amends the factors
that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under SFAS
No. 142, “Goodwill and Other Intangible Assets”. The position applies to
intangible assets that are acquired individually or with a group of other assets
and both intangible assets acquired in business combinations and asset
acquisitions. FSP 142-3 is effective for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. The
Company is in the process of assessing the impact of the recent accounting
pronouncement.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally
Accepted Accounting Principles” (“SFAS No. 162”). SFAS No. 162 defines
the order in which accounting principles that are generally accepted should be
followed. SFAS No. 162 is effective 60 days following the SEC’s
approval of the Public Company Accounting Oversight Board (United States)
 amendments to AU Section 411, The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles. We do not expect the
adoption of SFAS No. 162 to have a material impact on our consolidated
financial statements.





In May
2008, the FASB finalized Staff Position No. APB 14-1, “Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)” (“FSP APB 14-1”).  The position
clarifies that convertible debt instruments that may be settled in cash upon
conversion (including partial cash settlement) are not addressed by APB Opinion
No. 14 “Accounting for Convertible Debt and Debt Issued with Stock Purchase
Warrants.”  FSP APB 14-1 further specifies that issuers of such
instruments should separately account for the liability and equity components in
a manner that will reflect the entity’s nonconvertible debt borrowing rate when
interest cost is recognized in subsequent periods.  FSP APB 14-1 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years.  As
of the date of this annual report, we do not have any convertible debt
instruments that may be settled in cash upon conversion, and FSP APB 14-1 does
not have any impact on us.










In April
2009, the FASB issued FSP FAS No. 107-1 and APB No. 28-1 “Interim Disclosures
about Fair Value of Financial Instruments,” or FSP FAS No. 107-1 and APB No.
28-1. FSP FAS No. 107-1 and APB No. 28-1 amends SFAS No. 107, “Disclosures
about Fair Value of Financial Instruments,” to require disclosures about
fair value of financial instruments for interim reporting periods of publicly
traded companies as well as in annual financial statements. In addition,
the FSP amend APB Opinion No. 28, “Interim Financial Reporting,” to require
those disclosures in summarized financial information at interim reporting
periods. The FSP is effective for interim periods ending after June 15,
2009, with earlier adoption permitted for periods ending after March 15,
2009. The adoption of FSP FAS No. 107-1 and APB No. 28-1 has no material effect
on the Company’s financial statements.













In
May 2009, the FASB issued SFAS No. 165 “Subsequent Events,” or SFAS
No. 165, which sets forth general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. SFAS No.165 is effective after June
15, 2009. The adoption of SFAS No. 165 has no material effect on the
Company’s financial statements.





In June
2009, the FASB issued SFAS No. 166 “Accounting for Transfers of Financial
Assets – an amendment of FASB Statement No. 140,” or SFAS No.
166. SFAS No. 166 improves the relevance, representational faithfulness,
and comparability of the information that a reporting entity provides in its
financial statements about a transfer of financial assets; the effects of a
transfer on its financial position, financial performance and cash flows; and a
transferor’s continuing involvement, if any, in transferred financial
assets. SFAS No. 166 is effective as of the beginning of each reporting entity’s
first annual reporting period that begins after November 15, 2009, for
interim periods within that first annual reporting period and for interim and
annual reporting periods thereafter. The Company is currently evaluating
the impact of the adoption of SFAS No. 166 on its financial
statements.





In
June 2009, the FASB issued SFAS No. 167 “Amendments to FASB
Interpretation No. 46(R),” or SFAS No. 167, which amends FASB
Interpretation No. 46 (revised December 2003) to address the
elimination of the concept of a qualifying special purpose entity. SFAS No. 167
also replaces the quantitative-based risks and rewards calculation for
determining which enterprise has a controlling financial interest in a variable
interest entity with an approach focused on identifying which enterprise has the
power to direct the activities of a variable interest entity and the obligation
to absorb losses of the entity or the right to receive benefits from the entity.
Additionally, SFAS No. 167 provides more timely and useful information about an
enterprise’s involvement with a variable interest entity. SFAS No. 167 shall be
effective as of the beginning of each reporting entity’s first annual reporting
period that begins after November 15, 2009, for interim periods within that
first annual reporting period and for interim and annual reporting periods
thereafter. Earlier application is prohibited. The Company is currently
evaluating the impact of the adoption of SFAS No. 167 on its financial
statements.
















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 BonsoAnthony
      So
            66
            Chairman
      of the Board, Chief Executive Officer and Director, President and
      TreasurerKim Wah
      Chung
            51
            Director
      of Engineering and Research and Development
      and DirectorWoo-Ping
      Fok
            60
            DirectorJ. Stewart Jackson,
      IV
            73
            DirectorHenry F.
      Schlueter
            58
            Director and
      Assistant SecretaryAlbert So
            31
            Chief Financial
      Officer and Secretary





ANTHONY
SO is the founder of Bonso.  He has been our Chairman of the Board of
Directors since July 1988.  He was appointed as the Chief Executive
Officer and the President on November 16, 2006.  Mr. So received his
BSE degree in civil engineering from National Taiwan University in 1967 and a
master’s degree in business administration (“MBA”) from the Hong Kong campus of
the University of Hull, Hull, England in 1994.  Mr. So has been
Chairman of the Hong Kong GO Association since 1986 and also served as Chairman
of the Alumni Association of National Taiwan University for the 1993-1994
academic years.  Mr. So has served as a trustee of the Chinese
University of Hong Kong, New Asia College since 1994.





KIM WAH
CHUNG has been a director since September 21, 1994.  Mr. Chung has
been employed by us since 1981 and currently holds the position of Director of
Engineering and Research and Development.  Mr. Chung is responsible
for all research projects and product development.  Mr. Chung’s entire
engineering career has been spent with Bonso, and he has been involved in all of
our major product developments.  Mr. Chung graduated with honors in
1981 from the Chinese University of Hong Kong with a Bachelor of Science degree
in electronics.





WOO-PING
FOK was elected to our Board of Directors on September 21, 1994.  Mr.
Fok has practiced law in Hong Kong since 1991 and is a Consultant with Messrs.
C.K. Mok & Co.  Mr. Fok’s major areas of practice include
conveyancing 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 installedthe
first self-contained ionization smoke detectors and which was later sold to a
conglomerate manufacturer.  After the merger of Denver Burglar Alarm
Co., Inc., Mr. Jackson founded Jackson Burglar Alarm Co., Inc.  Mr.
Jackson served as Chief Executive Officer of Jackson Burglar Alarm Co. from
February 1998 to October 2005.  Mr. Jackson has served as the Chief
Executive Officer of J S J Corporation.  Mr. Jackson served on the
advisory board of directors for Underwriter’s Laboratories for burglar and fire
alarm systems for 25 years and has been an officer in the Central Station
Protection Association, which, along with the National Burglar Alarm
Association, was formed by his family in the late 1940’s.  Mr. Jackson
graduated from the University of Colorado in 1962 with a degree in Business
Management and Engineering.





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.





ALBERT SO
was appointed as the Chief Financial Offer of the Company in March
2009.  Mr. So was first employed as the Financial Controller of the
Company in January 2008 and as a management trainee of the Company in November
2004.  Prior to his employment as a management trainee of the Company,
Albert So was a student.  Mr. Albert So is a Certified Management
Accountant, Financial Risk Manager, and has received a Bachelor degree in
Mathematics from Simon Fraser University in Burnaby, British Columbia,
Canada.












Anthony
So, the Company’s President, Chief Executive Officer and Chairman of the Board
of Directors is the father of Albert So, the Company’s Chief Financial
Officer.





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, 2009 to all directors, former directors, and officers as a group
for services in all capacities was $1,528,148.  Total compensation for
the benefit of Anthony So was $930,256, for the benefit of Kim Wah Chung was
$162,502, for the benefit of George O’Leary was $240,000, for the benefit of
Albert So was $86,026 and for the benefit of Henry F. Schlueter was an aggregate
of $109,364.  The $109,364 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.




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, 2009,
other than contributions to our Provident Fund Plan, which aggregated$14,103 for officers and
directors.




Employment
Agreements




We have employment agreements with
Anthony So and Kim Wah Chung.  Mr. So’s employment agreement provides
for a yearly salary of approximately $800,000 per year plus bonus, and Mr.
Chung’s employment agreement provides for a yearly salary of approximately
$200,000 per year plus bonus, as stated in their respective employment
agreements, which expire on March 31, 2013.  Mr. So’s employment
agreement contains a provision under which we will be obligated to pay Mr. So
all compensation for the remainder of his employment agreement and five times
his annual salary and bonus compensation if a change of control as defined in
his employment agreements occurs.





Options
of Directors and Senior Management




The
following table provides information concerning options owned by the directors
and senior management at March 31, 2009.









54 
  Name
              
              Number
      of Common Shares
                Subject
      toStock Options
              Exercise
      Price
                Per Share
              Expiration DateAnthony
      So
              
              158,000
              $8.00
              January
      6, 2010128,000
              $3.65
              April
      9, 2011128,000
              $2.50
              March
      6, 2012222,500
              $1.61
              March
      31, 2013Kim
      Wah Chung
              
              20,000
              $8.00
              January  6,
      201020,000
              $3.65
              April
      9, 201120,000
              $2.50
              March
      6, 201255,000
              $1.61
              March
      31, 2013Woo-Ping
      Fok
              
              10,000
              $8.125
              January
      12, 201010,000
              $7.875
              January
      9, 201110,000
              $6.12
              March
      25, 201410,000
              $6.20
              September
      12, 201410,000
              $4.50
              December
      4, 2015J.
      Stewart Jackson IV
              
              10,000
              $7.875
              January
      9, 201110,000
              $2.55
              October
      15, 201110,000
              $1.61
              March
      31, 201310,000
              $6.12
              March
      25, 201410,000
              $6.20
              September
      12, 201410,000
              $4.50
              December
      4, 2015Henry
      F. Schlueter
              
              10,000
              $8.00
              January
      6, 201010,000
              $6.12
              March
      25, 201410,000
              $6.20
              September
      12, 201410,000
              $4.50
              December
      4, 2015


Directors





Except as mentioned above, our
directors do not receive any additional monetary compensation for serving in
their capacities.  All directors are reimbursed for all reasonable
expenses incurred in connection with their services as a director.





Employee
retirement benefits





(a)
            With
      effect from January 1, 1988, BEL, a wholly-owned foreign subsidiary of the
      Company in Hong Kong, implemented a defined contribution plan (the “Plan”)
      with a major international assurance company to provide life insurance and
      retirement benefits for its employees. All permanent full time employees
      who joined BEL before December 2000, excluding factory workers, are
      eligible to join the provident fund plan.  Eligible employees of
      the Plan are required to contribute 5% of their monthly salary, while
      BEL is required to contribute from 5% to 10% based on the eligible
      employee’s salary, depending on the number of years of the eligible
      employee’s service.





The
Mandatory Provident Fund (the “MPF”) was introduced by the Hong Kong Government,
and commenced in December 2000.  BEL joined the MPF by implementing a
plan with a major international assurance company.  All permanent Hong
Kong full time employees who joined BEL on or after December 2000, excluding
factory workers, are eligible to join the MPF.   Eligible employees'
and the employer’s contributions to the MPF are both at 5% of the eligible
employee’s monthly salary and are subject to a maximum contribution of HK$1,000
(US$128) monthly.












Pursuant
to the relevant PRC regulations, the Group is required to make contributions for
each employee, at rates based upon the employee’s standard salary base as
determined by the local Social Security Bureau, to a defined contribution
retirement scheme organized by the local Social Security Bureau in respect of
the retirement benefits for the Group’s employees in the PRC.





(b)
            The
      contributions to each of the above schemes are recognized as employee
      benefit expense when they are due and are charged to the consolidated
      statement of income (loss).  The Group’s total contributions to
      the above schemes for the years ended March 31, 2007, 2008 and 2009
      amounted to $164,348, $251,538 and $324,882, respectively.  The
      Group has no other obligation to make payments in respect of retirement
      benefits of the employees.





Board
Practices




All directors hold office until our
next annual meeting of shareholders or until their respective successors are
duly elected and qualified or their positions are earlier vacated by resignation
or otherwise.  All executive officers are appointed by the Board and
serve at the pleasure of the Board.  There are no director service
contracts providing for benefits upon termination of employment or
directorship.





NASDAQ
Exemptions and Home Country Practices





NASDAQ
Marketplace Rule 4350 provides that foreign private issuers may elect to follow
certain home country corporate governance practices so long as they provide
NASDAQ with a letter from outside counsel in its home country certifying that
the issuer 's corporate governance practices are not prohibited by home country
law.





On July
19, 2005, we submitted a letter to the NASDAQ certifying that certain of Bonso’s
corporate governance practices are not prohibited by the relevant laws of the
British Virgin Islands.  We will follow British Virgin Island law in
respect to the following requirements:





§
            A
      majority of Bonso’s board of directors will not be
      independent;


§
            Bonso
      will not have a nominating
committee;


§
            Bonso
      will not have a compensation
committee;


§
            Bonso’s
      independent directors will not meet in executive session;
    and


§
            Bonso’s
      audit committee will have only one
member.





Audit
Committee















The Audit Committee was established to
(i) review and approve the scope of audit procedures employed by our independent
auditors; (ii) review and approve the audit reports rendered by our independent
auditors; (iii) approve the audit fee charged by the independent auditors; (iv)
report to the Board of Directors with respect to such matters; (v) recommend the
selection of independent auditors; and (vi) discharge such other
responsibilities as may be delegated to it from time to time by the Board of
Directors.  Effective as of 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, 2009, we employed a total of 1,557 persons, as compared to 2,755
persons at March 31, 2008 and 3,334 persons at March 31, 2007; 24 employees in
Hong Kong (31 in 2008 and 45 in 2007) 1,533 employees in China (2,724 in 2008
and 3,289 in 2007).  Employees are not covered by collective
bargaining agreements.  We consider our global labor practices and
employee relations to be good.





Share
Ownership





The
following table shows the number of shares of common stock beneficially owned by
our directors and executive officers as of August 31, 2009:





Name
            Shares of Common Stock Owned
of
              Record
            Options Held
            Total Number of
              Shares of Common Stock Beneficially
      Owned
            Percent
      of
              Beneficial
              OwnershipAnthony
      So
            1,626,195(1)
            636,500(2)
            2,262,695
            36.41%Kim
      Wah Chung
            93,700
            115,000(3)
            208,700
            3.67%Henry
      F. Schlueter
            34,000
            40,000(4)(9)
            74,000
            1.32%Woo-Ping
      Fok
            64,407
            50,000(6)(8)(9)
            114,407
            2.03%J.
      Stewart Jackson IV
            462,575(7)
            60,000(5)(8)(9)
            522,575
            9.27%All
      Directors and Officers  as a group (5 persons)
            2,280,877
            901,500
            3,182,377
            49.12%





(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 on 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 on January 6, 2010, options to purchase
      20,000 shares of common stock at an exercise price of $3.65 per share
      expiring on April 9, 2011, options to purchase 20,000 shares of common
      stock at an exercise price of $2.50 per share expiring on March 6, 2012,
      and options to purchase 55,000 shares of common stock at an exercise price
      of $1.61 per share expiring on March 31,
2013.


(4)
            Includes
      options to purchase 10,000 shares of common stock at an exercise price of
      $8.00 per share expiring on January 6,
2010.


(5)
            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.


(6)
            Includes
      options to purchase 10,000 shares of common stock at an exercise price of
      $8.125 per share expiring on January 12,
2010.


(7)
            Includes
      461,975 shares held by Mr. Jackson and 600 shares held by Mr. Jackson’s
      wife.


(8)
            Includes
      options to purchase 10,000 shares of common stock at an exercise price of
      $7.875 per share expiring on January 9,
2011.


(9)
            Includes
      options to purchase 10,000 shares of common stock at an exercise price of
      $6.12 expiring on March 25, 2014, options to purchase 10,000 shares of
      common stock at an exercise price of $6.20 per share expiring on September
      12, 2014 and options to purchase 10,000 shares of common stock at an
      exercise price of $4.50 per share expiring on December 4,
      2015.






Stock
Option and Bonus Plans





The
1996 Stock Option Plan





In October 1996, our stockholders
adopted the 1996 Stock Option Plan (the “Employees’ Plan”) which provides for
the grant of options to purchase an aggregate of not more than 400,000 shares of
our common stock.  In January 2000, our shareholders approved the
proposal of the Board of Directors to increase from 400,000 to 900,000 in the
aggregate the number of options to purchase common stock under the Employees’
Plan.  The purpose of the Employees’ Plan is to make options available
to management and employees in order to encourage them to secure or increase on
reasonable terms their stock ownership and to encourage them to remain with the
Company.





The Employees’ Plan is administered by
a committee appointed by the Board of Directors which determines the persons to
be granted options under the Employees’ Plan, the number of shares subject to
each option, the exercise price of each option and the option period, subject to
the requirement that no option may be exercisable more than ten years after the
date of grant.  The exercise price of an option may be less than the
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 distributionm and each option will be
exercisable during the lifetime of the optionee, only by such
optionee.





The exercise price of an option granted
pursuant to the Employees’ Plan may be paid in cash, by the surrender of
options, in common stock, in other property, including the optionee’s promissory
note, or by a combination of the above, at our discretion.












During the fiscal year ended March 31,
2009, no options were granted under the Employees Plan.





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.





On November 16, 2006, the Board of
Directors of the Company voted to rescind the Company’s 1996 Non-Employee
Directors’ Stock Option Plan (the “Non-Employee Directors’
Plan”).  All options previously granted under the Non-Employee
Directors’ Plan continue in full force and effect pursuant to their terms of
grant.





The
2004 Stock Option Plan





On March 23, 2004, our stockholders
adopted the 2004 Stock Option Plan (the “2004 Plan”) which provides for the
grant of up to six hundred thousand (600,000) shares of the Company’s common
stock in the form of stock options, subject to certain adjustments as described
in the 2004 Plan.





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















2004
Stock Bonus Plan





On September 7, 2004, our stockholders
adopted the 2004 Stock Bonus Plan (the “Stock Bonus Plan”) which authorizes the
issuance of up to five hundred thousand (500,000) shares of the Corporation’s
Common Stock in the form of stock a stock bonus.





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





The Stock Bonus Plan shall be
administered by a committee appointed by the Board of Directors which consists
of at least two but not more than three members of the Board, one of whom shall
be a non-employee of the Corporation.  The Committee members currently
are Anthony So and Woo-Ping Fok.  The Committee has the authority, in
its sole discretion:  (i) to determine the parties to receive bonus
stock, the times when they shall receive such awards, the number of shares to be
issued, and the time, terms and conditions of the issuance of any such shares;
(ii) to construe and interpret the terms of the Stock Bonus Plan; (iii) to
establish, amend and rescind rules and regulations for the administration of the
Stock Bonus Plan; and (iv) to make all other determinations necessary or
advisable for administering the Stock Bonus Plan.





As of
March 31, 2009, no shares had 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 August 31, 2009,
beneficial ownership of our common stock by each person, to the best of our
knowledge, known to own beneficially 5% or more of our common stock outstanding
as of such date.  Except as otherwise indicated, all shares are owned
directly and hold equal voting rights.

















Amount
      OwnedName
            
            Shares of
      Common Stock
            
            Options to
      Purchase
              Common
      Stock
            
            Percent Class
              Beneficially Owned
      (1)Anthony So
            
            1,626,195(2)
            
            636,500(3)
            
            36.41%John Stewart Jackson
      IV
            
            462,575
            
            60,000(3)
            
            9.27%W. Douglas
      Moreland
            
            501,400
            
            0
            
            8.99%Royce &
      Associates LLC
            
            297,000
            
            0
            
            5.32%CAS
      Corporation
            
            290,654
            
            0
            
            5.21%




(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
which may at a subsequent date result in a change in control of the
Company.





Related
Party Transactions





During the fiscal year ended March 31,
2009, we paid Schlueter & Associates, P.C. an aggregate of $109,364 for
legal fees.  Mr. Henry F. Schlueter, a director, is the Managing
Director of Schlueter & Associates, P.C.





As of March 31, 2008, BEL had paid
deposits of approximately US$1,528,000 with regard to potential investments in a
commercial residential building and a land use right in the PRC. Subsequent to
this fiscal year end, Mr. Anthony So, Chairman of Bonso decided to take up BEL’s
potential investments and paid BEL the full amount of approximately US$1,528,000
in September 2008.  The carrying amount of the deposits approximates
their fair value due to their short maturities.





During the year ended March 31, 2007,
BEL had paid certain deposits of US$799,000 for a potential investment in a
hotel.  Such potential investment was subsequently taken up by Mr.
Anthony So and the full amount was paid to BEL in July 2007.








Interests
of Experts and Counsel




Not
Applicable.





Legal
Proceedings





Not Applicable.













Item
8.  Financial Information





Financial
Statements




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





Item
9.  The Offer and Listing





Listing
Details




Our
common stock is traded only in the United States over-the-counter
market.  It is quoted on the NASDAQ Global Market 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
            LowApril 1, 2004
      to March 31, 2005
            $9.09
            $3.90April 1, 2005
      to March 31, 2006
            $7.00
            $3.40April 1, 2006
      to March 31, 2007
            $5.47
            $3.01April 1, 2007
      to March 31, 2008
            $4.68
            $1.86April 1, 2008
      to March 31, 2009
            $2.45
            $0.03




The
following table sets forth the high and low sale prices during each of the
quarters in the two-year period ended September 30, 2009.


Period
              High
              LowOctober 1,
      2007 to December 31, 2007
              $4.68
              $2.40January 1,
      2008 to March 31, 2008
              $3.00
              $2.00April 1, 2008
      to June 30, 2008
              $2.27
              $1.86July 1, 2008
      to September 30, 2008
              $2.49
              $0.03October 1, 2008 to
      December 31, 2008
              $1.39
              $0.08January 1,
      2009 to March 31, 2009
              $1.36
              $0.63April 1, 2009
      to June 30, 2009
              $1.35
              $0.83July 1, 2009
      to September 30, 2009
              $1.42
              $0.82





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




Period
              High
              LowApril
      2009
              $1.35
              $0.83May
    2009
              $1.22
              $0.98June
      2009
              $1.18
              $0.87July
      2009
              $1.18
              $0.82August
      2009
              $1.42
              $1.05September
      2009
              $1.39
              $1.11












On September 30, 2009, the closing
price of our common stock was $1.23.  Of the 5,577,639 shares of
common stock outstanding as of August 31, 2009, 3,817,452 shares were held in
the United States by 203 holders of record.  We have 210 shareholders
of record and estimate that we have 753 shareholders holding their stock in
street name (who have not objected to their names being disclosed to
us).





Transfer
and Warrant Agent





The transfer agent and registrar for
the common stock is Computershare, 1745 Gardena Avenue #200, Glendale,
California 91204.





Item
10.  Additional Information





Share
Capital





Our
authorized capital is $170,000 consisting of 23,333,334 shares of common stock,
$0.003 par value per share, and 10,000,000 authorized shares of preferred stock,
$0.01 par value, divided into 2,500,000 shares each of class A preferred stock,
class B preferred stock, class C preferred stock and class D preferred
stock.  Information with respect to the number of shares of common
stock outstanding at the beginning and at the end of the last three fiscal years
is presented in the Consolidated Statements of Changes in Shareholders’ Equity
for the fiscal years ended March 31, 2007, 2008 and 2009 included herein in Item
18.





At
September 30, 2009, there were 5,577,639 shares of our common stock outstanding,
all of which were fully paid.  In addition, we had outstanding
1,104,500 options to purchase common stock as follows:








Number
      of Options
            
            Exercise
      Price per Share
            Expiration
      Date228,000
            
            $8.00
            January 6,
      201020,000
            
            $8.125
            January 12,
      201030,000
            
            $7.875
            January 9,
      2011196,000
            
            $3.65
            April 9,
      201110,000
            
            $2.55
            October 15,
      2011168,000
            
            $2.50
            March 6,
      2012342,500
            
            $1.61
            March 31,
      201340,000
            
            $6.12
            March 25,
      201440,000
            
            $6.20
            September 12,
      201430,000
            
            $4.50
            December 4,
      2015







At August
31, 2009 there were no shares of our preferred stock outstanding.












Memorandum
and Articles of Association





We are
registered in the British Virgin Islands and have been assigned company number
9032 in the register of companies.  Our registered agent is HWR
Services Limited at Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, British
Virgin Islands.  The object or purpose of the Company is to engage in
any act or activity that is not prohibited under British Virgin Islands law as
set forth in Paragraph 4 of our Memorandum of Association.  As an
International Business Company, we are prohibited from doing business with
persons resident in the British Virgin Islands, owning real estate in the
British Virgin Islands or acting as a bank or insurance company.  We
do not believe that these restrictions materially affect our
operations.





Paragraph
57(c) of our Amended Articles of Association (the “Articles”) provides that a
director may be counted as one of a quorum in respect of any contract or
arrangement in which the director is materially interested; however, if the
agreement or transaction cannot be approved by a resolution of directors without
counting the vote or consent of any interested director, the agreement or
transaction may only be validated by approval or ratification by a resolution of
the members.  Paragraph 53 of the Articles allows the directors to
vote compensation to themselves in respect of services rendered to the
Company.  Paragraph 66 of the Articles provides that the directors may
by resolution exercise all the powers of the Company to borrow money and to
mortgage or charge its undertakings and property or any part thereof, to issue
debentures, debenture stock and other securities whenever money is borrowed or
as security for any debt, liability or obligation of ours or of any third
party.  Such borrowing powers can be altered by an amendment to the
Articles.  There is no provision in the Articles for the mandatory
retirement of directors.  Directors are not required to own shares of
the Company in order to serve as directors.





Our
authorized share capital is $170,000 divided into 23,333,334 shares of common
stock, $0.003 par value, and 10,000,000 authorized shares of preferred stock,
$0.01 par value.  Holders of our common stock are entitled to one vote
for each whole share on all matters to be voted upon by shareholders, including
the election of directors.  Holders of our common stock do not have
cumulative voting rights in the election of directors.  All of our
common shares are equal to each other with respect to liquidation and dividend
rights.  Holders of our common shares are entitled to receive
dividends if and when declared by our board of directors out of funds legally
available therefor under British Virgin Islands law.  In the
event of our liquidation, all assets available for distribution to the holders
of our common shares are distributable among them according to their respective
holdings.  Holders of our common stock have no preemptive rights to
purchase any additional unissued common shares.  No shares of our
preferred stock have been issued however the board of directors has the ability
to determine the rights, preferences and restrictions of the preferred stock at
their discretion.





Paragraph
7 of the Memorandum of Association provides that without prejudice to any
special rights previously conferred on the holders of any existing shares, any
share may be issued with such preferred, deferred or other special rights or
such restrictions, whether in regard to dividend, voting, return of capital or
otherwise, as the directors may from time to time determine.












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





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





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





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





A copy of
our Memorandum and Articles of Association, as amended, was filed as an
exhibit to our Registration Statement on Form F-2 (SEC File No.
333-32524).





Material
Contracts




The
following summarizes each material contract, other than contracts entered into
in the ordinary course of business, to which Bonso or any subsidiary of Bonso is
a party, for the two years immediately preceding the filing of this
report:


















We signed a Banking Facility Letter, dated April 17, 2009, amending our Banking
Facilities Letters dated April 6, 2009, October 14, 2008, June 4, 2008 and June
6, 2007 between Bonso and Standard Chartered Bank for an HK$63,000,000 letter of
credit, trust receipt facility, export D/P bills, export trade loan, factoring
and overdraft facility. A copy of this Banking Facilities Letter is attached to
this Annual Report on Form 20-F as Exhibit 4.1 and is incorporated herein by
this reference.





We signed a Banking Facility Letter dated March 6, 2009, between
Bonso and Hang Seng Bank for a HK$63,000,000 letter of credit, trust receipt
facility, export D/P bills, export trade loan, factoring and overdraft facility.
A copy of this Banking Facilities Letter is attached to this Annual Report on
Form 20-F as Exhibit 4.2 and is incorporated herein by this
reference.





We signed
an employment agreement with Anthony So to serve as Chairman of the Board of
Directors, Chief Executive Officer and President of the Company effective April
1, 2008 (the “So Employment Agreement”).  Pursuant to the So
Employment Agreement, Mr. So’s base salary is $800,000 per annum.  Mr.
So is also entitled to such bonus as the board of directors shall
determine.  Mr. So is also entitled to the use of a property located
at Savanna Garden, House No. 27, Tai Po, New Territories, Hong Kong without any
charge or cost.  Mr. So is entitled to be reimbursed for all
reasonable out of pocket expenses incurred in connection with the performance of
his duties.  The So Employment Agreement expires on March 31,
2013.  The So Employment Agreement contains provisions under which we
will be obligated to pay Mr. So all compensation for the remainder of his
employment agreement and five times his annual salary and bonus compensation if
a change of control as defined in the agreements occurs. A copy of the So
Employment Agreement was attached as Exhibit 4.5 to the Company’s Annual Report
on Form 20-F filed with the Commission on November 17, 2008, and is incorporated
herein by this reference.





We
signed an employment agreement with Kim Wah Chung to serve as the Director of
Engineering and Research and Development of the Company effective April 1, 2008
(the “Chung Employment Agreement”).  Pursuant to the Chung Employment
Agreement, Mr. Chung’s base salary is $200,000 per annum.  Mr. Chung
is also entitled to such bonus as the board of directors shall determine and to
be reimbursed for all reasonable out of pocket expenses incurred in connection
with the performance of his duties.  The Chung Employment Agreement
expires on March 31, 2013. A copy of the Chung Employment Agreement was attached
as Exhibit 4.6 to the Company’s Annual Report on Form 20-F filed with the
Commission on November 17, 2008 and is incorporated herein by this
reference.












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.  With respect to our PRC subsidiaries, with the exception
of a requirement that about 11% of profits be reserved for future developments
and staff welfare, there are no restrictions on the payment of dividends and the
removal of dividends from China once all taxes are paid and assessed and losses,
if any, from previous years have been made good.  To date, these
controls have not had, and are not expected to have, a material impact on our
financial results.  There are no material British Virgin Islands laws
that impose foreign exchange controls on us or that affect the payment of
dividends, interest or other payments to holders of our securities who are not
residents of the British Virgin Islands.  British Virgin Islands law
and our Memorandum and Articles of Association impose no limitations on the
right of nonresident or foreign owners to hold or vote our
securities.





Taxation




No
reciprocal tax treaty regarding withholding exists between the United States and
the British Virgin Islands.  Under current British Virgin Islands law,
dividends, interest or royalties paid by us to individuals are not subject to
tax as long as the recipient is not a resident of the British Virgin
Islands.  If we were to pay a dividend, we would not be liable to
withhold any tax, but shareholders would receive gross dividends, if any,
irrespective of their residential or national status.








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
SEC at the SEC's Public Reference Room, 450 Fifth Street, N.W., Washington,
D.C.  You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330.  You can also
obtain copies of our SEC filings by going to the SEC's website at
http://www.sec.gov.





The SEC allows us to “incorporate by
reference” the information we file with the SEC.  This means that we
can disclose important information to you by referring you to another document
filed separately with the SEC.  The information incorporated by
reference is considered to be part of this Annual Report on Form
20-F.





Item
11.  Quantitative and Qualitative Disclosures About Market
Risk





We are exposed to a certain level of
interest rate risk and foreign currency exchange risk.





Interest
Rate Risk





Our interest rate risk primarily arises
from our long-term debt and our general banking facilities.  As at
March 31, 2009, there was no long-term debt.  We had utilized
$1,747,301 of our total banking facilities of $18,617,948.  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,
2009 which were subjected to variable interest rates is as below:





March
      31,
            Interest2009
            rateNotes
      payable
            
            $1,361,787
            HIBOR
      + 2.5% to 2.59%Bank
      overdrafts
            
            $385,514
            Prime
      rate + 0.5% to 1%
              Or
              HIBOR
      + 2.25%





HIBOR:  Hong
Kong Inter-bank Offer Rate







Foreign
Currency Exchange Rates





For a discussion of our Foreign
Currency Exchange Risk, SeeItem
5.  Operating and Financial Review and Prospects “Foreign Currency
Exchange Rates.”








Item
12.  Description of Securities Other Than Equity
Securities





Not applicable.





PART
II





Item
13.  Defaults, Dividend Arrearages and Delinquencies





None.





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





None.












Item
15.  Controls and Procedures








Management’s
Report on Internal Control over Financial Reporting





Management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in
Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with applicable
generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of
the Company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the company’s
assets that could have a material effect on the financial
statements.





Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of compliance
with the policies or procedures may deteriorate.












The Company’s management has evaluated the effectiveness of the Company’s
internal control over financial reporting as of March 31, 2009 based upon
criteria established in Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on the
assessment, the Company’s management, including its Chief Executive Officer and
Chief Financial Officer, concluded that, as of March 31, 2009, the
Company’s internal control over financial reporting was effective based on these
criteria.





This Annual Report does not include an audit report of the Company’s
independent registered public accounting firm regarding internal controls over
financial reporting.  Management’s report was not subject to audit by
the Company’s independent registered public accounting firm pursuant to rules of
the SEC that permit the Company to provide only management’s report in this
Annual Report.





Remediation of Material Weaknesses in
Internal Control Over Financial Report Identified in Fiscal
2008





In our
annual report on Form 20-F for the year ended March 31, 2008, our
management identified a material weakness in our internal control over financial
reporting which related to a insufficient complement of people with an
appropriate level of knowledge, experience and training in the application of
GAAP and in internal control over financial reporting commensurate with our
financial reporting requirements.  As such, the Company hired a
qualified accountant with extensive experience in public company accounting
operations in March 2008.  Also, our internal training sessions for
our accounting personnel assured that our financial statements for the year
ended March 31, 2009, were prepared accordingly to GAAP.





In our
annual report on Form 20-F for the year ended March 31, 2008, our management
identified a material weakness in our internal control over financial reporting
which related to inventory accounting and valuation.  We had performed
reviews and ensured that the net realizable value (NRV) calculation to reflect
current market conditions were effective.





In our
annual report on Form 20-F for the year ended March 31, 2008, our management
identified a material weakness in our internal control over financial reporting
which related to income tax accounting and valuation.  Our qualified
account hired in March 2008, performed reviews and ensured that our tax
accounts and valuation were accurate and disclosures of the income tax
liabilities were fully addressed.





We
believe that the foregoing corrective action resolved the material weaknesses
that existed as of March 31, 2008, and that as of March 31, 2009, it
was no longer reasonably possible that our financial statements will be
materially misstated. Accordingly, as stated in management’s report on internal
control over financial reporting included above, we have concluded that our
internal control over financial reporting was effective as of March 31,
2009.










Changes
in internal controls over financial reporting





Other
than as disclosed above, there were no changes in the Company’s internal
controls over financial reporting during the year ended March 31, 2009 that has
materially affected or is reasonably likely to materially affect our internal
control over financial reporting.





Item
16.  Reserved





Item
16A.  Audit Committee Financial Expert




Item 16B.  Code of
Ethics


Bonso
Electronics International, Inc.


Unit
1915-1916, 19/F, Delta House


3 On Yiu
Street, Shek Mun


Shatin,
N. T.


Hong
Kong





Item
16C.  Principal Accountant Fees and Services





Audit
Committee’s pre-approval policies and procedure





The Audit Committee must pre-approve
the audit and non-audit services performed by the independent auditor in order
to assure that the provision of such services does not impair the auditor's
independence.  Before the Company or any of its subsidiaries engage
the independent auditor to render a service, the engagement must be
either:





(1)           specifically
approved by the Audit Committee; or




(2)           entered
into pursuant to this Pre-Approval Policy.




The term of any pre-approval is 12
months from the date of pre-approval, unless the Audit Committee specifically
provides for a different period.  The Audit Committee may periodically
revise the list of pre-approved services.





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










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





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





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





The Company’s management shall inform
the Audit Committee of each service performed by the independent auditor
pursuant to this Pre-Approval Policy.  Requests or applications to
provide services that require separate approval by the Audit Committee shall be
submitted to the Audit Committee by both the independent auditor and the Chief
Financial Officer and must include a joint statement as to whether, in their
view, the request or application is consistent with the SEC’s and the Public
Company Accounting Oversight Board (United States)'s rules on auditor
independence.





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 Moore
Stephens for professional services rendered for the audit of the Corporation’s
annual consolidated financial statements for the fiscal year ended March 31,
2009 was $205,000 and the aggregate fees billed by PricewaterhouseCoopers for
the audit of the Company’s annual consolidated financial statements for the
fiscal year ended March 31, 2008 was $371,538.





Audit
Related Fees





There were no fees billed by Moore
Stephens or PricewaterhouseCoopers for professional services rendered for
assurance and related services provided by PricewaterhouseCoopers that were
reasonably related to the performance of the audit and are not reported above
under “Audit Fees” for the fiscal year ended March 31, 2009 and for the fiscal
year ended March 31, 2008.










Tax
Fees





The
aggregate fees billed by PricewaterhouseCoopers for professional services
rendered for tax compliance for the fiscal year ended March 31, 2009 were
$59,190 and $91,317 for the fiscal year ended March 31,
2008.   There were no fees billed by Moore Stephens for
professional services rendered for tax compliance during the fiscal year ended
March 31, 2009 and 2008.




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
















Item
16F.  Changes in Registrant's Certifying Accountants.





On March 27, 2009, PricewaterhouseCoopers (“PwC”) resigned as the Company’s
independent registered public accountants. During the Company’s two most recent
fiscal years and during any subsequent interim periods preceding the date of
termination, none of the reports of PWC contained any adverse opinion, or
disclaimer of opinion, or was qualified or modified as to uncertainty, audit
scope or accounting principles.





PART
III





Item
17.  Financial Statements





Not applicable.





Item
18.  Financial Statements





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






PagesReports
      of Independent Registered Public Accounting Firms
            F-1
      through F-2Consolidated Balance
      Sheets as of March 31, 2008 and 2009
            F-3Consolidated
      Statements of Operations and Comprehensive Income (Loss) for the years
      ended March 31, 2007, 2008 and 2009
            F-4Consolidated
      Statements of Changes in Stockholders’ Equity for the years ended March
      31,  2007,  2008 and 2009
            F-5Consolidated
      Statements of Cash Flows for the years ended March 31, 2007, 2008 and
      2009
            F-6Notes to
      Consolidated Financial Statements
            F-7 through
      F-41
























Bonso
Electronics International Inc.


Index
to Consolidated Financial Statements
















Contents
              PagesReports
      of Independent Registered Public Accounting Firms
              F-1
      through F-2Consolidated Balance
      Sheets as of March 31, 2008 and 2009
              F-3Consolidated
      Statements of Operations and Comprehensive Income (Loss) for the years
      ended March 31, 2007, 2008 and 2009
              F-4Consolidated
      Statements of Changes in Stockholders’ Equity for the years ended March
      31,  2007,  2008 and 2009
              F-5Consolidated
      Statements of Cash Flows for the years ended March 31, 2007, 2008 and
      2009
              F-6Notes to
      Consolidated Financial Statements
              F-7 through
      F-41
























Report of Independent
Registered Public Accounting Firm














The Board
of Directors and Stockholders of


Bonso
Electronics International Inc.





We have
audited the accompanying consolidated balance sheet of Bonso Electronics
International Inc. and subsidiaries (the “Company”) as of March 31, 2009, and
the related consolidated statements of operations, changes in stockholders’
equity, and cash flows for the year then ended.  These consolidated
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit. We
also have audited the adjustments to the March 31, 2008 and 2007 financial
statements to retrospectively apply the accounting for discontinued operations
as described in Note 12.  In our opinion, such adjustments are
appropriate and have been properly applied.  We were not engaged to
audit, review, or apply any procedures to the March 31, 2008 and 2007 financial
statements of the Company other than with respect to the adjustments and,
accordingly, we do not express an opinion or any other form of assurance on the
March 31, 2008 and 2007 financial statements taken as a whole.




We
conducted our audit 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
consolidated financial statements are free of material
misstatement.  The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purposes of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements.  An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company as
of March 31, 2009  and the results of their operations and cash flows
for  the year then ended in conformity with accounting principles
generally accepted in the United States of America.








/s/ Moore Stephens


Moore
Stephens


Certified
Public Accountants


Hong
Kong,


October
20, 2009









































Report of Independent
Registered Public Accounting Firm














To Board
of Directors and Stockholders of Bonso Electronics International
Inc.:





In our
opinion, the consolidated balance sheet as of March 31, 2008 and the related
consolidated statements of loss and comprehensive loss, of cash flows and of
stockholders' equity for each of two years in the period ended March 31, 2008,
before the effects of the adjustments to retrospectively reflect the
discontinued operations described in Note 12, present fairly, in all material
respects, the financial position of Bonso Electronics International Inc. and its
subsidiaries at March 31, 2008, and the results of their operations and their
cash flows for each of the two years in the period ended March 31, 2008, in
conformity with accounting principles generally accepted in the United States of
America (the 2008 financial statements before the effects of the adjustments
discussed in Note 12 are not presented herein). 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, before the effects of the
adjustments described above, 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.





As
discussed in Notes 1(p) and 9(h) to the consolidated financial statements,
effective from April 1, 2007, the Company adopted FASB Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes - An Interpretation of FASB
Statement No. 109."





We were
not engaged to audit, review, or apply any procedures to the adjustments to
retrospectively reflect the discontinued operations described in Note 12, and
accordingly, we do not express an opinion or any other form of assurance about
whether such adjustments are appropriate and have been properly
applied.  Those adjustments were audited by other
auditors.











/s/ PricewaterhouseCoopers


PricewaterhouseCoopers


Hong
Kong


November
14, 2008






















Bonso
Electronics International Inc.


Consolidated
Balance Sheets


(Expressed
in United States Dollars)




March
      31Note
            
            
            2008
              $
            
            
            2009
              $AssetsCurrent
      assetsCash and cash equivalents
            
            
            
            
            
            9,653,991
            
            
            
            8,043,535Trade receivables, net
            
            
            2
            
            
            
            2,653,886
            
            
            
            1,084,756Inventories
            
            
            3
            
            
            
            8,446,903
            
            
            
            6,284,293Income tax recoverable
            
            
            
            
            
            
            406,861
            
            
            
            987,449Other receivables, deposits and prepayments
            
            
            
            
            
            
            2,643,936
            
            
            
            837,191Held-to-maturity investments
            
            
            4
            
            
            
            -
            
            
            
            1,000,000Current assets of discontinued operations
            
            
            12
            
            
            
            7,191,970
            
            
            
            3,813,697Total current assets
            
            
            
            
            
            
            30,997,547
            
            
            
            22,050,921Deferred
      income tax assets
            
            
            9
            
            
            
            21,776
            
            
            
            -Goodwill
            
            
            7
            
            
            
            -
            
            
            
            -Brand
      name and other intangible assets, net
            
            
            7
            
            
            
            4,118,575
            
            
            
            4,008,147Other
      non-current assets
            
            
            
            
            
            
            155,125
            
            
            
            -Property,
      plant and equipmentBuildings
            
            
            
            
            
            
            9,958,525
            
            
            
            9,567,353Plant and machinery
            
            
            
            
            
            
            19,690,136
            
            
            
            19,972,376Furniture, fixtures and equipment
            
            
            
            
            
            
            3,228,585
            
            
            
            3,276,312Motor vehicles
            
            
            
            
            
            
            491,490
            
            
            
            447,79233,368,736
            
            
            
            33,263,833Less: accumulated depreciation and impairment
            
            
            
            
            
            
            (27,425,537
            )
            
            
            (29,889,580
            )Property, plant and equipment, net
            
            
            5
            
            
            
            5,943,199
            
            
            
            3,374,253Non-current assets of discontinued operations
            
            
            12
            
            
            
            549,626
            
            
            
            5,704Total
      assets
            
            
            
            
            
            
            41,785,848
            
            
            
            29,439,025Liabilities
      and stockholders’ equityCurrent
      liabilitiesBank overdrafts – secured
            
            
            8
            
            
            
            300,192
            
            
            
            385,514Notes payable
            
            
            8
            
            
            
            3,863,465
            
            
            
            1,361,787Accounts payable
            
            
            
            
            
            
            5,366,138
            
            
            
            3,103,502Accrued charges and deposits
            
            
            
            
            
            
            2,276,871
            
            
            
            2,004,841Income tax liabilities
            
            
            9
            
            
            
            6,888
            
            
            
            6,888Current portion of capital lease obligations
            
            
            10
            
            
            
            176,930
            
            
            
            130,201Current liabilities of discontinued operations
            
            
            12
            
            
            
            6,107,272
            
            
            
            5,787,099Total current liabilities
            
            
            
            
            
            
            18,097,756
            
            
            
            12,779,832Capital
      lease obligations, net of current portion
            
            
            10
            
            
            
            183,761
            
            
            
            51,971Income
      tax liabilities
            
            
            9
            
            
            
            2,595,135
            
            
            
            2,595,135Deferred
      income tax liabilities
            
            
            9
            
            
            
            4,460
            
            
            
            14,162Commitments
            
            
            11Stockholders’
      equityCommon
      stock par value $0.003 per share- authorized shares - 23,333,334- issued shares: 5,577,639
            
            
            
            
            
            
            16,729
            
            
            
            16,729Additional
      paid-in capital
            
            
            
            
            
            
            21,764,788
            
            
            
            21,764,788Treasury
      stock at cost: 2008 – 260,717 shares; 2009 - 330,736
shares
            
            
            13
            
            
            
            (1,328,560
            )
            
            
            (1,462,325
            )Accumulated
      deficit
            
            
            
            
            
            
            (1,129,819
            )
            
            
            (8,714,233
            )Accumulated
      other comprehensive income
            
            
            
            
            
            
            1,581,598
            
            
            
            2,392,96620,904,736
            
            
            
            13,997,925Total liabilities and stockholders’ equity
            
            
            
            
            
            
            41,785,848
            
            
            
            29,439,025















Bonso
Electronics International Inc.


Consolidated
Statements of Operations and Comprehensive Income


(Expressed
in United States Dollars)





Year
      ended March 31,Note
            
            
            2007
              $
            
            
            2008
              $
            
            
            2009
              $Net
      sales
            
            
            19
            
            
            
            48,272,382
            
            
            
            45,495,621
            
            
            
            40,378,198Cost
      of sales
            
            
            
            
            
            
            (40,304,102
            )
            
            
            (43,628,620
            )
            
            
            (34,707,293
            )Gross
      profit
            
            
            
            
            
            
            7,968,280
            
            
            
            1,867,001
            
            
            
            5,670,905Selling
      expenses
            
            
            
            
            
            
            (874,340
            )
            
            
            (720,204
            )
            
            
            (649,377
            )Salaries
      and related costs
            
            
            
            
            
            
            (3,016,590
            )
            
            
            (3,540,780
            )
            
            
            (3,776,841
            )Research
      and development expenses
            
            
            
            
            
            
            (983,172
            )
            
            
            (883,304
            )
            
            
            (792,071
            )Administration
      and general expenses
            
            
            
            
            
            
            (1,655,285
            )
            
            
            (3,350,888
            )
            
            
            (4,601,879
            )Amortization
      of brand name
            
            
            7
            
            
            
            (200,000
            )
            
            
            (200,000
            )
            
            
            -Impairment
      of goodwill
            
            
            7
            
            
            
            
            
            
            
            (842,821
            )
            
            
            -Impairment
      of brand name
            
            
            7
            
            
            
            
            
            
            
            (1,597,392
            )
            
            
            -Impairment
      of share investment
            
            
            7
            
            
            
            
            
            
            
            (200,000
            )
            
            
            -Profit
      (loss) from operations
            
            
            19
            
            
            
            1,238,893
            
            
            
            (9,468,388
            )
            
            
            (4,149,263
            )Gain
      from disposal of a subsidiary
            
            
            
            
            
            
            
            
            
            
            -
            
            
            
            363,411Interest
      income
            
            
            
            
            
            
            309,447
            
            
            
            198,255
            
            
            
            126,544Interest
      expenses
            
            
            
            
            
            
            (122,784
            )
            
            
            (448,372
            )
            
            
            (209,268
            )Foreign
      exchange loss
            
            
            
            
            
            
            (192,776
            )
            
            
            (431,052
            )
            
            
            (278,944
            )Gain
      on disposal of property
            
            
            
            
            
            
            
            
            
            
            3,123,983
            
            
            
            162,681Other
      income (expenses)
            
            
            
            
            
            
            (235,509
            )
            
            
            592,524
            
            
            
            706,541Waiver
      of loan to subsidiaries
            
            
            
            
            
            
            -
            
            
            
            -
            
            
            
            (3,690,590
            )Waiver
      of loan to subsidiaries held for sale
            
            
            
            
            
            
            -
            
            
            
            -
            
            
            
            (2,180,779
            )Profit
      (loss) before income taxes
            
            
            
            
            
            
            997,271
            
            
            
            (6,433,050
            )
            
            
            (9,149,667
            )Income
      tax (expense) benefit
            
            
            9
            
            
            
            (910,609
            )
            
            
            340,680
            
            
            
            (208,003
            )Gain
      (loss) from continuing operations
            
            
            
            
            
            
            86,662
            
            
            
            (6,092,370
            )
            
            
            (9,357,670
            )(Loss)
      gain from discontinued operations, net of tax
            
            
            12
            
            
            
            (1,457,604
            )
            
            
            (2,457,543
            )
            
            
            1,773,256Net
      loss
            
            
            
            
            
            
            (1,370,943
            )
            
            
            (8,549,913
            )
            
            
            (7,584,414
            )Other
      comprehensive income, net of tax:Foreign
      currency translation adjustments, net of tax
            
            
            
            
            
            
            227,389
            
            
            
            567,439
            
            
            
            811,368Comprehensive
      loss
            
            
            
            
            
            
            (1,143,554
            )
            
            
            (7,982,474
            )
            
            
            (6,773,046
            )Earnings
      (loss) per shareWeighted
      average number of shares
            
            
            18
            
            
            
            5,577,639
            
            
            
            5,577,639
            
            
            
            5,577,639,Basic
      and diluted-Continuing
      operations
            
            
            
            
            
            
            0.01
            
            
            
            (1.09
            )
            
            
            (1.68
            )-Discontinued
      operations
            
            
            
            
            
            
            (0.26
            )
            
            
            (0.44
            )
            
            
            0.32(0.25
            )
            
            
            (1.53
            )
            
            
            (1.36
            )













Bonso
Electronics International Inc.


Consolidated
Statements of Changes in Stockholders’ Equity


(Expressed
in United States Dollars)





Common stock
            
            
            
            
            
            Treasury stock
            
            
            
            
            
            AccumulatedotherRetained
            
            
            comprehensiveAdditional
            
            
            
            
            
            
            
            
            earnings/
            
            
            income-foreign
            
            
            TotalShares
            
            
            Amount
            
            
            paid-in
            
            
            Shares
            
            
            Amount
            
            
            (Accumulated
            
            
            currency
            
            
            shareholders’Issued
            
            
            outstanding
            
            
            capital
            
            
            held
            
            
            outstanding
            
            
            deficit)
            
            
            adjustments
            
            
            equity$
            
            
            $
            
            
            
            
            
            
            
            
            $
            
            
            $
            
            
            $Balance,
      March 31, 2006
            
            
            5,577,639
            
            
            
            16,729
            
            
            
            21,764,788
            
            
            
            -
            
            
            
            -
            
            
            
            11,234,006
            
            
            
            786,770
            
            
            
            33,802,293Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,370,943
            )
            
            
            -
            
            
            
            (1,370,943
            )Shares
      repurchase
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            260,717
            
            
            
            (1,328,560
            )
            
            
            -
            
            
            
            -
            
            
            
            (1,328,560
            )Dividends
      paid
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -
            
            
            
            (278,882
            )
            
            
            -
            
            
            
            (278,882
            )Foreign
      exchange translation adjustment
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            227,389
            
            
            
            227,389────Balance,
      March 31, 2007
            
            
            5,577,639
            
            
            
            16,729
            
            
            
            21,764,788
            
            
            
            260,717
            
            
            
            (1,328,560
            )
            
            
            9,584,181
            
            
            
            1,014,159
            
            
            
            31,051,297Cumulative
      effect of adoption of FIN 48
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (2,164,087
            )
            
            
            -
            
            
            
            (2,164,087
            )Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (8,549,913
            )
            
            
            -
            
            
            
            (8,549,913
            )Foreign
      exchange translation adjustment
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            567,439
            
            
            
            567,439Balance,
      March 31, 2008
            
            
            5,577,639
            
            
            
            16,729
            
            
            
            21,764,788
            
            
            
            260,717
            
            
            
            (1,328,560
            )
            
            
            (1,129,819
            )
            
            
            1,581,598
            
            
            
            20,904,736Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (7,584,414
            )
            
            
            -
            
            
            
            (7,584,414
            )Shares
      repurchase
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            70,019
            
            
            
            (133,765
            )
            
            
            -
            
            
            
            -
            
            
            
            (133,765
            )Foreign
      exchange translation adjustment
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            811,368
            
            
            
            811,368Balance,
      March 31, 2009
            
            
            5,577,639
            
            
            
            16,729
            
            
            
            21,764,788
            
            
            
            330,736
            
            
            
            (1,462,325
            )
            
            
            (8,714,233
            )
            
            
            2,392,966
            
            
            
            13,997,925





See notes
to these consolidated financial statements


















Bonso
Electronics International Inc.


Consolidated
Statements of Cash Flows


(Expressed
in United States Dollars)


Year
      Ended March 31,2007
            
            
            2008
            
            
            2009$
            
            
            
            $
            
            
            
            $Cash
      flows from operating activitiesNet loss
            
            
            (1,370,943
            )
            
            
            (8,549,913
            )
            
            
            (7,584,414
            )Loss/(income) from discontinued operations
            
            
            1,457,604
            
            
            
            2,457,543
            
            
            
            (1,773,256
            )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation
            
            
            2,232,326
            
            
            
            2,188,700
            
            
            
            2,281,689Amortization
            
            
            289,420
            
            
            
            293,536
            
            
            
            171,677Waiver
      of loan to subsidiaries
            
            
            -
            
            
            
            
            
            
            
            3,690,590Waiver
      of loan to subsidiaries held for sale
            
            
            -
            
            
            
            -
            
            
            
            2,180,779Gain
      on disposal of a subsidiary
            
            
            -
            
            
            
            -
            
            
            
            (363,441
            )Gain
      on disposal of property, plant and equipment (Note 5)
            
            
            (54,409
            )
            
            
            (3,123,983
            )
            
            
            (162,681
            )Inventory
      allowance
            
            
            261,242
            
            
            
            2,184,840
            
            
            
            559,240Bad
      debt allowance
            
            
            -
            
            
            
            633,545
            
            
            
            1,959,413Impairment
      of investment properties
            
            
            5,414
            
            
            
            -
            
            
            
            -Impairment
      of goodwill
            
            
            -
            
            
            
            842,821
            
            
            
            -Impairment
      of brand name
            
            
            -
            
            
            
            1,597,392
            
            
            
            -Impairment
      of investment in a private company
            
            
            -
            
            
            
            200,000
            
            
            
            -Others
            
            
            11,639
            
            
            
            141,682
            
            
            
            (13,098
            )Changes
      in assets and liabilities:Trade
      receivables
            
            
            (525,694
            )
            
            
            1,476,305
            
            
            
            (390,281
            )Other
      receivables, deposits and prepayments
            
            
            (1,049,837
            )
            
            
            (956,131
            )
            
            
            1,806,745Inventories
            
            
            (1,919,855
            )
            
            
            913,935
            
            
            
            1,603,370Deposits
            
            
            188,525
            
            
            
            (155,125
            )
            
            
            155,125Income
      tax recoverable
            
            
            181,276
            
            
            
            (404,744
            )
            
            
            (580,588
            )Accounts
      payable
            
            
            (556,250
            )
            
            
            330,463
            
            
            
            (2,262,636
            )Accrued
      charges and deposits
            
            
            (229,953
            )
            
            
            629,749
            
            
            
            (272,030
            )Notes
      payable
            
            
            425,853
            
            
            
            126,939
            
            
            
            (2,501,678
            )Income
      tax payable
            
            
            814,374
            
            
            
            (376,438
            )
            
            
            -Deferred
      tax
            
            
            3,768
            
            
            
            (89,779
            )
            
            
            31,478Operating
      activities of continuing operations
            
            
            164,500
            
            
            
            361,337
            
            
            
            (1,463,997
            )Operating
      activities of discontinued operations
            
            
            1,251,741
            
            
            
            (1,172,370
            )
            
            
            (352,960
            )Net
      cash generated from (used in) operating activities
            
            
            1,416,241
            
            
            
            (811,033
            )
            
            
            (1,816,957
            )Cash
      flows from investing activitiesProceeds
      from disposal of a subsidiary
            
            
            -
            
            
            
            -
            
            
            
            1Proceeds
      from disposal of property, plant and equipment and land use
      rights
            
            
            173,583
            
            
            
            4,875,513
            
            
            
            563,718Acquisition of property, plant and equipment
            
            
            (293,295
            )
            
            
            (2,558,720
            )
            
            
            (71,538
            )Acquisition of held-to-maturity investments
            
            
            (200,000
            )
            
            
            -
            
            
            
            (1,000,000
            )Proceeds from investment
            
            
            
            
            
            
            559,495
            
            
            
            -Investing
      activities of continuing operations
            
            
            (319,712
            )
            
            
            2,876,288
            
            
            
            (507,819
            )Investing
      activities of discontinued operations
            
            
            (48,815
            )
            
            
            (124,720
            )Net
      cash generated from (used in) investing activities
            
            
            (368,527
            )
            
            
            2,751,568
            
            
            
            (507,819
            )Cash
      flows from financing activitiesRepurchase
      of common stocks
            
            
            (1,328,560
            )
            
            
            -
            
            
            
            (133,765
            )(Repayment
      of) loan from long-term borrowings
            
            
            (41,132
            )
            
            
            301,433
            
            
            
            -Capital
      lease payments
            
            
            (71,077
            )
            
            
            (95,725
            )
            
            
            (178,519
            )Payment
      of dividends to stockholders
            
            
            (278,882
            )Net
      (repayment of) advance from banking facilities
            
            
            59,258
            
            
            
            -
            
            
            
            85,322Financing
      activities of continuing operations
            
            
            (1,660,393
            )
            
            
            205,708
            
            
            
            (226,962
            )Financing
      activities of discontinued operations
            
            
            95,054
            
            
            
            (376,086
            )
            
            
            299,481Net
      cash (used in) generated from financing activities
            
            
            (1,565,339
            )
            
            
            (170,378
            )
            
            
            72,519Net
      (decrease) increase in cash and cash equivalents
            
            
            (517,625
            )
            
            
            1,770,157
            
            
            
            (2,252,257
            )Effect
      of exchange rate changes on cash and cash equivalents held in foreign
      currencies
            
            
            53,386
            
            
            
            307,187
            
            
            
            767,321Cash
      and cash equivalents, beginning of year
            
            
            8,582,257
            
            
            
            8,118,018
            
            
            
            10,195,362Cash
      and cash equivalents, end of year
            
            
            8,118,018
            
            
            
            10,195,362
            
            
            
            8,710,426Less:
      cash and cash equivalents at the end of the year – discontinued
      operations
            
            
            (526,611
            )
            
            
            (541,371
            )
            
            
            (666,891
            )Cash
      and cash equivalents at the end of the year – continuing
      operations
            
            
            7,591,407
            
            
            
            9,653,991
            
            
            
            8,043,535Supplemental
      disclosure of cash flow informationCash
      paid during the year for:Interest
      paid
            
            
            614,269
            
            
            
            692,232
            
            
            
            475,126Income
      tax paid, net of refund
            
            
            37,321
            
            
            
            155,974
            
            
            
            4,903Non-cash
      investing and financing activitiesProperty,
      plant and machinery acquired under
              Capital
      leases
            
            
            188,718
            
            
            
            374,195
            
            
            
            -Interest
      Income
            
            
            312,768
            
            
            
            139,239
            
            
            
            179,582Provision
      for FIN 48 uncertain tax positions upon adoption at April 1,
      2007
            
            
            
            
            
            
            2,164,087
            
            
            
            -


See
notes to these consolidated financial statements















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





1.
            Description of business and
      significant accounting
policies





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, telecommunication products and other
  products.





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




The
      Group sustained operating losses in fiscal years ended March 31, 2008 and
      2009, including a net loss of $7,584,414 for the fiscal year ended March
      31, 2009.
  Notwithstanding
      the operating losses sustained in the last two fiscal years, the
      accompanying consolidated financial statements have been prepared on a
      going concern basis. Management believes the Group will have sufficient
      working capital to meet its financing requirements based upon their
      experience and their assessment of the Group’s projected performance,
      credit facilities and banking
relationships.




On
      November 1 2008, the Company disposed of all the shares of a wholly owned
      indirect subsidiary, Gram Precision Scales Inc. (“Gram”), at a
      consideration of US$1.  As a result, the figures of Gram are
      included as discontinued operations (see note 12) in the financial
      statements.





Pursuant
      to an agreement signed March 30, 2009, Korona Haushaltswaren GmbH &
      Co. KG (“Korona”), an indirect subsidiary of the Company, agreed to sell
      all of its major assets, comprising account receivables, inventories,
      intellectual property rights and toolings, to a third party purchaser at a
      consideration of  EUR 1,989,681.  The Group decided to
      liquidate Korona after the completion of the sale.  As a result,
      the figures of Korona are included as discontinued operations (see note
      12).




The significant accounting
      policies are as
follows:





(a)
            Principles
      of consolidation





The
      consolidated financial statements include the accounts of the Company and
      its subsidiaries after elimination of inter-company accounts and
      transactions.





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















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





1.
            Description
      of business and significant accounting policies
  (Continued)


(c)
              Inventories


Inventories
      are stated at the lower of cost, as determined on a first-in, first-out
      basis, or market.  Costs of inventories include purchase and
      related costs incurred in bringing the products to their present location
      and condition. Market value is determined by reference to the selling
      price after the balance sheet date or to management estimates based on
      prevailing market conditions.  The Company routinely reviews its
      inventories for their saleability and for indications of obsolescence to
      determine if inventory carrying values are higher than market
      value.  Some of the significant factors the Company considers in
      estimating the market value of its inventories include the likelihood of
      changes in market and customer demand and expected changes in market
      prices for its inventories. As of March 31, 2008 and 2009 inventories were
      stated at market value which is lower than their costs by $2,184,840 and
      $559,240, respectively.


(d)
              Trade
      receivables


Trade
      accounts receivable are recorded at the invoiced amount, net of allowances
      for doubtful accounts and sales returns. The allowance for doubtful
      accounts is the Group’s best estimate of the amount of probable credit
      losses in the Group’s existing trade accounts receivable.  Bad
      debt expense is included in the general and administrative
      expenses.


The
      Group recognizes an allowance for doubtful receivables to ensure accounts
      and other receivable are not overstated due to
      uncollectibility.  Allowance for doubtful receivables is
      maintained for all customers based on a variety of factors, including the
      length of time the receivables are past due, significant one-time events
      and historical experience.  An additional allowance for
      individual accounts is recorded when the Group becomes aware of customers’
      or other debtors’ inability to meet its financial obligation, such as in
      the case of bankruptcy filings or deterioration in the customer’s or other
      debtor’s operating results or financial position. If circumstances related
      to customers or debtors change, estimates of the recoverability of
      receivables will be further
adjusted. (e)
                Investments


Investment
      in a capital guaranteed fund is classified as held-to-maturity and
      recorded at amortized cost, while investment in a private company is
      recorded at cost less any impairment in the consolidated balance
      sheets.  These investments are subject to impairment tests (Note
      4).


(f)
            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 as deferred tax assets.  Recognized
      deferred tax assets are reduced by a valuation allowance if, based on the
      weight of available evidence, it is more likely than not that some portion
      or all of the deferred tax assets will not be
    realized.

















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)


1.
              Description
      of business and significant accounting policies
  (Continued)


(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. Brand name is assessed for impairment according to the policy
      described in note 1(k).


(h)
                    Lease
      prepayments


Lease
      prepayments represent the cost of land use rights in the People’s Republic
      of China (“PRC”). Land use rights are carried at cost and amortized on a
      straight-line basis over the period of rights of 50
  years.
 (i)
                        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, the shorter of the remaining term of the license period or the
      expected useful life to the Group.  Taxi licenses entitle the
      Group to operate 5 taxis for 50 years in Shenzhen, PRC. The purpose of
      holding these licenses is to generate additional
  income.





Taxi
      licenses are assessed for impairment according to the policy described in
      note 1(k).





Land
      use rights held by the Company are reclassified from property, plant and
      equipment to intangible asset.  They are stated at cost and
      amortized on a straight-line basis over the granted useful life of 50
      years.


(j)
                        Property, plant and
      equipment


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





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




Plant
      and machinery
            -
  10%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
      Operations and Comprehensive Loss.


















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





1.
            Description
      of business and significant accounting policies
  (Continued)




(k)
              Long-lived
      assets including goodwill and other acquired intangible
    assets




Long-lived
      assets held and used by the Group and intangible assets, excluding
      goodwill, are reviewed for impairment whenever events or changes in
      circumstances indicate that the carrying amount of such assets may not be
      recoverable. The Group evaluates recoverability of assets to be held and
      used by comparing the carrying amount of an asset to future net
      undiscounted cash flows to be generated by the asset. If such assets are
      considered to be impaired, the impairment loss is measured by the amount
      by which the carrying amount of the assets exceeds the fair value of the
      assets calculated using a discounted future cash flows analysis.
      Provisions for impairment made on other long-lived assets are disclosed in
      the Consolidated Statements of Operations and Comprehensive
      Loss.


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 a discounted
      future cash flows analysis.  Based on the assessment for the
      year ended March 31, 2009, a provision of $nil was made by the Group as an
      impairment of goodwill (2008: $842,821; 2007:
  $nil).


(l)           Capital
and operating leases




Costs
      in respect of operating leases are charged against income on a
      straight-line basis over the lease term.  Leasing agreements,
      which transfer to the Group substantially all the benefits and risks of
      ownership of an asset, are treated as if the asset had been purchased
      outright.  The assets are included in property, plant and
      equipment (“capital leases”), and the capital element of the leasing
      commitments is shown as obligation under capital leases.  The
      lease rentals are treated as consisting of capital and interest
      elements.  The capital element is applied to reduce the
      outstanding obligation, and the interest element is charged against profit
      so as to give a consistent periodic rate of charge on the remaining
      balance outstanding at each accounting period end. Assets held under
      capital leases are depreciated over the useful lives of the equivalent
      owned assets.


(m)
            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 are transferred to
      customers, which is generally the point at which products are shipped to
      the customer from our facilities.  Shipping costs billed to our
      customers are included within revenue. Associated costs are classified as
      part of cost of goods sold.
 The
      Company provides to certain customers an additional two percent of the
      quantity 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 facilities.  In addition, certain products sold by the
      Company are subject to a limited product quality warranty.  The
      Company accrues for estimated incurred but unidentified quality issues
      based upon historical activity and known quality issues if a loss is
      probable and can be reasonably estimated.  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.










Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





1.
            Description of business and
      significant accounting policies (Continued)








(n)
              Research
      and development costs
  Research
      and development costs include salaries, utilities, and contractor fees
      that are directly attributable to the conduct of research and development
      progress primarily related to the development of new design of products.
      Research and development costs are expensed in the financial period in
      which they are
incurred.





(o)
            Advertising





Advertising
      costs are expensed as incurred and are included within selling expenses.
      The advertising costs were $142,642, $119,398 and $53,673 for the years
      ended March 31, 2007, 2008 and 2009,
  respectively.





(p)
            Income
      taxes




On
      April 1, 2007, the Company adopted Financial Accounting Standards Board
      (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income
      Taxes — An Interpretation of FASB Statement No. 109,” or FIN 48 (Note
      9). FIN 48 clarifies the accounting for uncertainty in income taxes
      recognized in financial statements in accordance with SFAS No. 109,
      “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold
      and measurement attributes for the financial statement recognition and
      measurement of a tax position taken or expected to be taken in a tax
      return. FIN 48 also provides guidance on derecognition, classification,
      interest and penalties, accounting in interim periods, disclosure and
      transition. Only tax positions that meet the more-likely-than-not
      recognition threshold at the effective date may be recognized or continue
      to be recognized upon adoption of FIN 48. The Company’s accounting policy
      is to treat interest and penalties as components of income
      taxes.


(q)
            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 loss.  Exchange
      differences are recorded in the Statements of Operations and Comprehensive
      Loss.





(ii)
            The
      financial statements of foreign subsidiaries, where non-United States
      dollar currencies are the functional currencies, are translated into
      United States dollars using exchange rates in effect at period end for
      assets and liabilities and average exchange rates during each reporting
      period for statement of operations. Adjustments resulting from translation
      of these financial statements are reflected as a separate component of
      shareholders’ equity in accumulated other comprehensive
      income.































Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





1.
            Description of business and
      significant accounting policies (Continued)





(r)
            Stock
      options and warrants




Stock
      options have been granted to employees, directors and non-employee
      directors. Upon exercise of the options, a holder can acquire share of
      common stock of the Company at an exercise price determined by the board
      of directors. The options are exercisable based on the vesting terms
      stipulated in the option agreements or
  plan.
 Effective
      April 1, 2006, the Company adopted the SFAS No. 123(R), “Share Based
      Payment”, in accounting for its employee stock options. Under the
      provisions of SFAS No. 123(R), the Company is required to measure the cost
      of employee services received in exchange for stock-based compensation at
      the fair value of the award as of the grant date.  According to
      the modified prospective application method, the Company applies SFAS No.
      123(R) for: (1) new awards granted after April 1, 2006, and (2) any
      portion of awards that were granted after April 1, 1995 and were not
      vested by April 1, 2006. As the Company did not have any unvested
      stock-based compensation as of April 1, 2006, the adoption of SFAS No.
      123(R) did not have any impact on the Company’s financial
      statements.


(s)
              Recent
      accounting pronouncements


In
      March 2008, the FASB issued SFAS No. 161, “Disclosures about
      Derivative Instruments and Hedging Activities - an amendment of FASB
      Statement No. 133” (“SFAS No. 161”). SFAS No. 161 requires
      disclosures of how and why an entity uses derivative instruments, how
      derivative instruments and related hedged items are accounted for and how
      derivative instruments and related hedged items affect an entity’s
      financial position, financial performance and cash flows.
      SFAS No. 161 is effective for fiscal years beginning after
      November 15, 2008, with early adoption permitted. We do not expect
      the adoption of SFAS No. 161 to have a material impact on our
      consolidated financial
statements.
 In
      April 2008, the FASB finalized Staff Position No. 142-3,
      “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”). The
      position amends the factors that should be considered in developing
      renewal or extension assumptions used to determine the useful life of a
      recognized intangible asset under SFAS No. 142, “Goodwill and Other
      Intangible Assets”. The position applies to intangible assets that are
      acquired individually or with a group of other assets and both intangible
      assets acquired in business combinations and asset acquisitions. FSP 142-3
      is effective for fiscal years beginning after December 15, 2008, and
      interim periods within those fiscal years. The Company is in the process
      of assessing the impact of the recent accounting
      pronouncement.
 In
      May 2008, the FASB issued SFAS No. 162, “The Hierarchy of
      Generally Accepted Accounting Principles” (“SFAS No. 162”).
      SFAS No. 162 defines the order in which accounting principles
      that are generally accepted should be followed. SFAS No. 162 is
      effective 60 days following the SEC’s approval of the Public Company
      Accounting Oversight Board (United States) amendments to AU
      Section 411, The Meaning of Present Fairly in Conformity with
      Generally Accepted Accounting Principles. We do not expect the adoption of
      SFAS No. 162 to have a material impact on our consolidated
      financial
statements.












Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





1.
            Description of business and
      significant accounting policies (Continued)




(s)
                      Recent accounting
      pronouncements
(Continued)


In
      May 2008, the FASB finalized Staff Position No. APB 14-1, “Accounting for
      Convertible Debt Instruments That May Be Settled in Cash upon Conversion
      (Including Partial Cash Settlement)” (“FSP APB 14-1”).  The
      position clarifies that convertible debt instruments that may be settled
      in cash upon conversion (including partial cash settlement) are not
      addressed by APB Opinion No. 14 “Accounting for Convertible Debt and Debt
      Issued with Stock Purchase Warrants.”  FSP APB 14-1 further
      specifies that issuers of such instruments should separately account for
      the liability and equity components in a manner that will reflect the
      entity’s nonconvertible debt borrowing rate when interest cost is
      recognized in subsequent periods.  FSP APB 14-1 is effective for
      financial statements issued for fiscal years beginning after December 15,
      2008, and interim periods within those fiscal years.  As of the
      date of this annual report, we do not have any convertible debt
      instruments that may be settled in cash upon conversion, and FSP APB 14-1
      does not have any impact on
us.


In
      April 2009, the FASB issued FSP FAS No. 107-1 and APB No. 28-1 “Interim
      Disclosures about Fair Value of Financial Instruments,” or FSP FAS No.
      107-1 and APB No. 28-1. FSP FAS No. 107-1 and APB No. 28-1 amend SFAS
      No. 107, “Disclosures about Fair Value of Financial Instruments,” to
      require disclosures about fair value of financial instruments for
      interim reporting periods of publicly traded companies as well as in
      annual financial statements. In addition, the FSP amends APB Opinion
      No. 28, “Interim Financial Reporting,” to require those disclosures
      in summarized financial information at interim reporting periods. The
      FSP is effective for interim periods ending after June 15, 2009, with
      earlier adoption permitted for periods ending after March 15, 2009. The
      adoption of FSP FAS No. 107-1 and APB No. 28-1 has no material effect on
      the Company’s financial
  statements.


In
      April 2009, the FASB issued FSP FAS No. 115-2 and FAS No. 124-2
      “Recognition of Other-Than-Temporary Impairments,” or FSP FAS No. 115-2
      and FAS No. 124-2. FSP FAS No. 115-2 and FAS No. 124-2 amend the
      other-than-temporary impairment guidance in SFAS No. 115, “Accounting for
      Certain Investments in Debt and Equity Securities,” for debt securities
      and the presentation and disclosure requirements of other-than-temporary
      impairments on debt and equity securities in the financial statements. FSP
      FAS No. 115-2 and FAS No. 124-2 are effective for interim and annual
      reporting periods ending after June 15, 2009, with early adoption
      permitted for periods ending after March 15, 2009. The adoption of
      FSP FAS No. 115-2 and FAS No. 124-2 has no material effect on
      the Company’s financial
statements.
 In
      April 2009, the FASB issued FSP No. 157-4 “Determining Whether a Market is
      Not Active and a Transaction Is Not Distressed,” or FSP No. 157-4. FSP No.
      157-4 clarifies when markets are illiquid or that market pricing may
      not actually reflect the “real” value of an asset. If a market is
      determined to be inactive and market price is reflective of a
      distressed price, then an alternative method of pricing can be used, such
      as a present value technique to estimate fair value. FSP No.
      157-4 identifies factors to be considered when determining whether or
      not a market is inactive. FSP No. 157-4 would be effective for interim and
      annual periods ending after June 15, 2009, with early adoption
      permitted for periods ending after March 15, 2009 and shall be applied
      prospectively. The adoption of FSP No. 157-4 has no material
      effect on the Company’s financial
  statements.























Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





1.
            Description of business and
      significant accounting policies (Continued)




(s)
                        Recent accounting
      pronouncements
(Continued)


In
      April 2009, the FASB issued FSP No. 141R-1 “Accounting for Assets Acquired
      and Liabilities Assumed in a Business Combination That Arise
      from Contingencies,” or FSP No. 141R-1. FSP No. 141R-1 amends the
      provisions in SFAS No. 141 (Revised) for the initial recognition and
      measurement, subsequent measurement and accounting and disclosures
      for assets and liabilities arising from contingencies in business
      combinations. FSP No. 141R-1 eliminates the distinction between
      contractual and non-contractual contingencies, including the initial
      recognition and measurement criteria in SFAS No. 141 (Revised), and
      instead carries forward most of the provisions in SFAS No. 141 for
      acquired contingencies. FSP No. 141R-1 is effective for contingent assets
      and contingent liabilities acquired in business combinations for
      which the acquisition date is on or after the first annual reporting
      period beginning on or after December 15, 2008. The Company is currently
      evaluating the impact of the adoption of FSP No. 141R-1 on its
      financial statements.


In
      May 2009, the FASB issued SFAS No. 165 “Subsequent Events,” or
      SFAS No. 165, which sets forth general standards of accounting for and
      disclosure of events that occur after the balance sheet date but before
      financial statements are issued or are available to be issued. SFAS No.165
      is effective for interim or annual financial periods ending after June 15,
      2009. The adoption of SFAS No. 165 has no material effect on the
      Company’s financial
statements.




In
      June 2009, the FASB issued SFAS No. 166 “Accounting for Transfers of
      Financial Assets – an amendment of FASB Statement No. 140,” or SFAS
      No. 166. SFAS No. 166 improves the relevance, representational
      faithfulness and comparability of the information that a reporting entity
      provides in its financial statements about a transfer of financial
      assets; the effects of a transfer on its financial position, financial
      performance, and cash flows; and a transferor’s
      continuing involvement, if any, in transferred financial assets. SFAS
      No. 166 is effective as of the beginning of each reporting entity’s first
      annual reporting period that begins after November 15, 2009, for
      interim periods within that first annual reporting period and for interim
      and annual reporting periods thereafter. The Company is currently
      evaluating the impact of the adoption of SFAS No. 166 on its
      financial statements.


In
      June 2009, the FASB issued SFAS No. 167 “Amendments to FASB
      Interpretation No. 46(R),” or SFAS No. 167, which amends FASB
      Interpretation No. 46 (revised December 2003) to address the
      elimination of the concept of a qualifying special purpose entity. SFAS
      No. 167 also replaces the quantitative-based risks and rewards calculation
      for determining which enterprise has a controlling financial interest in a
      variable interest entity with an approach focused on identifying which
      enterprise has the power to direct the activities of a variable interest
      entity and the obligation to absorb losses of the entity or the right to
      receive benefits from the entity. Additionally, SFAS No. 167 provides more
      timely and useful information about an enterprise’s involvement with a
      variable interest entity. SFAS No. 167 shall be effective as of the
      beginning of each reporting entity’s first annual reporting period that
      begins after November 15, 2009, for interim periods within that first
      annual reporting period and for interim and annual reporting periods
      thereafter. Earlier application is prohibited. The Company is
      currently evaluating the impact of the adoption of SFAS No. 167 on its
      financial statements.
 In
      June 2009, the FASB issued SFAS No. 168 “The FASB Accounting
      Standards Codification and the Hierarchy of Generally Accepted Accounting
      Principles, a replacement of FASB Statement No. 162,” or SFAS No.
      168, which establishes the FASB Accounting Standards Codification as the
      source of authoritative accounting principles recognized by the FASB to be
      applied in the preparation of financial statements in conformity with
      generally accepted accounting principles. SFAS No. 168 explicitly
      recognizes rules and interpretive releases of the Securities and Exchange
      Commission (“SEC”) under federal securities laws as authoritative GAAP for
      SEC registrants. SFAS No. 168 will become effective for financial
      statements issued for interim and annual periods ending after September
      15, 2009.












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:





2007
            
            
            2008
            
            
            2009$
            
            
            
            $
            
            
            
            $Balance,
      April 1
            
            
            74,909
            
            
            
            -
            
            
            
            633,545Write-off
            
            
            (74,909
            )
            
            
            -
            
            
            
            -Additions
      charged to expense
            
            
            -
            
            
            
            633,545
            
            
            
            1,959,413Balance,
      March 31
            
            
            -
            
            
            
            633,545
            
            
            
            2,592,958





3.
            Inventories





The
      components of inventories are as
follows:




2008
            
            
            2009$
            
            
            
            $Raw
      materials
            
            
            3,866,827
            
            
            
            2,592,550Work
      in progress
            
            
            3,898,639
            
            
            
            2,602,166Finished
      goods
            
            
            681,437
            
            
            
            1,089,5778,446,903
            
            
            
            6,284,293




During
      the years ended March 31, 2007, 2008 and 2009, based upon material
      composition and expected usage, management wrote off obsolete inventories
      of $261,242, $2,184,840 and $559,240, respectively, which were charged to
      the consolidated statement of
  operations.


4.
            Investments


Investments
      of $500,000 were related to a 7% zero coupon capital guaranteed fund with
      maturity on October 11, 2007 and an investment in a private company
      principally engaged in the biochemistry industry in the United States of
      America. The purpose of holding the investments is to generate additional
      income.
 The
      investment in the capital guaranteed fund matured and was fully repaid in
      October 2007 for
$559,495.




The
      private biochemistry company incurred continuous operating losses and had
      a net liabilities position in the past two years.  The Company’s
      investment would be worthless without further funding or merger;
      therefore, the Company provided for a full impairment of this investment
      during the fiscal year ended March 31,
  2008.
 During
      the fiscal year ended March 31, 2009, the Company invested in a one-year
      $1,000,000 bond through one of its banks.  The maximum return
      from this investment would be $80,000 (or 8%), and the investment matured
      in July 2009 for $1,058,707.  The aggregate fair value at March
      31, 2009 was $1,058,000 and the unrecognised holding gain was
      $58,000.


















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





5.
            Property,
      plant and equipment, net




During
      the years ended March 31, 2007, 2008 and 2009, depreciation expenses
      charged to the consolidated statements of operations amounted to
      $2,230,800, $2,188,700 and $2,281,689, respectively.  As at
      March 31, 2007, 2008 and 2009, fully depreciated assets that were still in
      use by the Group amounted to $3,457,543, $5,451,641 and $5,014,827,
      respectively.
 During
      the year ended March 31, 2008, the Group sold one of its properties
      located in Hong Kong with a net book value of $1,751,530 to a third party
      at a consideration of $4,875,513 and made a gain of
      $3,123,983.    During the year ended March 31, 2009,
      the Group sold one of its properties located in Hong Kong with a net book
      value of $401,037 to a third party at a consideration of $563,718 and made
      a gain of $162,681.



























Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





6.
            Interests
      in subsidiaries




Particulars
      of principal subsidiaries as of March 31, 2008 and 2009 are as
      follows:


Name of company
            
            Place
      of
              incorporation
      and kind of legal
    entity
            
            Particulars
      of
              issued
      capital/
              registered capital
            
            Percentage
      of capital held by the
      Company
            
            Principal activities2008
            2009Bonso
      Electronics Limited *
              (“BEL”)
            
            Hong
      Kong,
              limited
      liability company
            
            HK$5,000,000
      (US$641,026)
            
            100%
            100%
            
            Trading
      of scales and telecommunication productsBonso
      Investment Limited
              (“BIL”)
            
            Hong
      Kong,
              limited
      liability company
            
            HK$3,000,000
      (US$384,615)
            
            100%
            100%
            
            Investment
      holdingBonso
      Electronics (Shenzhen) Co. Limited
              (“BESCL”)
            
            PRC,
              limited
      liability company
            
            HK$97,519,772
      (US$12,502,535)
            
            100%
            100%
            
            Production
      of scales and telecommunication productsBonso
      Advanced Technology Limited *
              (“BATL”)
            
            Hong
      Kong,
              limited
      liability company
            
            HK$1,000,000
              (US$128,205)
            
            100%
            100%
            
            Investment
      holdingBonso
      Advanced Technology (Xin Xing) Limited
              (“BATXXL”)
            
            PRC,
              limited
      liability company
            
            HK$13,853,728
      (US$1,776,119)
            
            100%
            100%
            
            Investment
      holdingModus
      Enterprise
              International
      Inc.
              (“MEII”)
            
            British
      Virgin Island limited liability company
            
            HK$7,800
              (US$1,000)
            
            100%
            100%
            
            Investment
      holdingKorona
      Haushaltswaren GmbH & Co. KG (“Korona”)
            
            Germany,
              limited
      liability partnership
            
            EUR511,292
      (US$795,485)
            
            100%
            100%
            
            Trading
      of scalesBonso
      USA, Inc.  (“Bonso USA”)
            
            USA,
      limited liability company
            
            US$
      1,000
            
            100%
            100%
            
            Trading
      of scalesGram
      Precision Scales Inc.
              (“Gram”)#
            
            Canada,
              limited
      liability company
            
            US$3,276
            
            51%
            0%
            
            Trading
      of scales





*
      Shares directly held by the Company


#
      Effective November 1, 2008, the Company disposed of its entire interests
      in Gram for $1. As stipulated in the agreement, the Company agreed to
      forfeit an amount receivable from Gram of approximately $5,000,000, except
      for $1,700,000,   Monthly payments of $10,000 were to be
      paid to the Company in the six months from December 2008 to May 2009, and
      monthly payments of $20,000 were to be paid from June 2009 until the full
      amount of $1,700,000 was repaid.














Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





7.
            Goodwill,
      brand name and other intangible
asset





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





Goodwill
            
            
            Brand name
            
            
            Other intangible assetsMarch 31
            
            
            March 31
            
            
            March 312008
              $
            
            
            2009
              $
            
            
            2008
              $
            
            
            2009
              $
            
            
            2008
              $
            
            
            2009
              $Cost
            
            
            842,821
            
            
            
            842,821
            
            
            
            3,000,000
            
            
            
            3,000,000
            
            
            
            5,294,205
            
            
            
            5,374,767Less:
      accumulated amortization
            
            
            -
            
            
            
            -
            
            
            
            (1,402,608
            )
            
            
            (1,402,608
            )
            
            
            (1,175,630
            )
            
            
            (1,366,620
            )Less:
      impairment loss for the year
            
            
            (842,821
            )
            
            
            (842,821
            )
            
            
            (1,597,392
            )
            
            
            (1,597,392
            )
            
            
            -
            
            
            
            --
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            4,118,575
            
            
            
            4,008,147






As
      of March 31, 2008, an impairment test was carried out and there were
      indicators that the goodwill associated with Gram might not be
      recoverable.  These indicators, among others, included declines
      in the current and projected operating results and cash flows in Gram, and
      the slowdown of the worldwide economies in the second half of fiscal 2008
      since the emergence of the subprime related problems. Management evaluated
      the recoverability in accordance with SFAS No. 142, “Goodwill and Other
      Intangible Assets” (“SFAS No. 142).  Based on the analysis,
      management determined that goodwill of $842,821 associated with Gram was
      fully impaired as of March 31,
2008.
 As
      of March 31, 2008, management noted declines in the current and projected
      operating results and cash flows of Korona.  Together with
      certain other indicators, such as a drop in selling prices of Korona
      branded products, management was of the view that the carrying value of
      the Korona brand name might not be recoverable, and therefore performed an
      impairment review on the brand name.  Management evaluated the
      recoverability of the brand name in accordance with the requirements under
      SFAS No. 142 and SFAS No. 144, “Accounting for the impairment of
      long-lived assets.”  Based upon the analysis, management
      determined that the brand name value of $1,597,392 should be fully
      impaired as of March 31, 2008.
 Land
      use rights for factory lands held by the Company in PRC were reclassified
      from property, plant and equipment to other intangible assets during the
      fiscal years ended March 31, 2008 and
2009.
 Amortization
      expense in relation to brand name was $200,000, $200,000 and $nil for the
      years ended March 31, 2007, 2008 and 2009,
  respectively.
 Amortization
      expense in relation to other intangible assets was $89,421, $99,121 and
      $171,677 the years ended March 31, 2007, 2008 and 2009,
      respectively.
 As
      of March 31, 2009, future minimum amortization expenses in respect of
      other intangible assets are as
follows:





Year2010
            
            $
            136,0652011
            
            
            136,0652012
            
            
            136,0652013
            
            
            136,0652014
            
            
            136,065Thereafter
            
            
            3,327,822Total
            
            
            4,008,147


















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





8.
            Banking
      facilities





As
      of March 31, 2009, 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 $18,617,948 (2008: $25,981,074).  The
      general banking facilities utilized by the Group are denominated in United
      States dollars, Hong Kong dollars, Canadian dollars and
    Euros.





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


Amount available
            
            
            Amount utilized
            
            
            Amount unutilized
            
            Terms
      of banking
              facilities
      as ofMarch 31,
            
            
            March 31,
            
            
            March 31,
            
            March 31, 20092008
            
            2009
            
            
            2008
            
            2009
            
            
            2008
            
            2009
            
            Interest
            Repayment$
            
            
            $
            
            
            $
            
            
            $
            
            
            
            $
            
            $
            
            rate
            termsImport
      and export FacilitiesLetters
      of credit
            
            19,230,769
            
            
            12,564,102
            
            
            3,863,465
            
            
            1,361,787
            
            
            
            15,367,304
            
            
            11,202,315Including
      sub-limit ofNotes
      payable
            
            17,564,103
            
            
            10,897,436
            
            
            3,863,465
            
            
            1,361,787
            
            
            
            13,700,638
            
            
            9,535,649
            
            HIBOR
      # +2.5%

                to
      +2.59%
            Repayable
      in

                full
      within

                  four
      monthsOther
      facilitiesFactoring
            
            4,964,102
            
            
            4,964,102
            
            
            -
            
            
            -
            
            
            
            4,964,102
            
            
            4,964,102
            
            HIBOR
      +1.5% to +2.25%Bank
      overdrafts
            
            1,786,204
            
            
            1,089,744
            
            
            300,192
            
            
            385,514
            
            
            
            1,486,012
            
            
            704,230
            
            Prime
      rate +0.5% to 1%

                Or
      HIBOR+2.25%
            Repayable
      on
      demand─25,981,075
            
            
            18,617,948
            
            
            4,163,657
            
            
            1,747,301
            
            
            
            21,817,418
            
            
            16,870,647





# HIBOR
stands for Hong Kong Interbank Offering Rate
















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





8.
            Banking
      facilities (Continued)





The
      United States Dollar equivalent amounts of banking facilities utilized by
      the Group are denominated in the following
  currencies:





Amount utilizedMarch
      312008
              $
            
            
            2009
              $Hong
      Kong dollars
            
            
            3,863,465
            
            
            
            1,747,301United
      States dollars
            
            
            300,192
            
            
            
            -4,163,657
            
            
            
            1,747,301




The
      Prime Rate and HIBOR rate were 5.25% and 1.54% per annum, respectively, as
      of March 31, 2009.  The Prime Rate is determined by the Hong
      Kong Bankers Association and is subject to revision from time to
      time.  Interest rates are subject to change if the Company
      defaults on the amount due under the facility or draws in excess of the
      facility amounts, or at the discretion of the
  banks.


Average
      amount of bank borrowings were $5,051,158 and $4,597,818 for the years
      ended 2008 and 2009,
respectively.





The
      banking facilities are collateralized by guarantees of $4,322,196 (2008:
      $5,766,607) by a bank (2008: two banks), which in turn received a fee from
      the Company for the provision of such collateralized
      guarantees.


The
      weighted average interest rates of short-term borrowings of the Group are
      as follows:


Year ended March 312008
            
            
            2009Bank
      overdrafts
            
            
            5.76
            %
            
            
            5.75
            %Notes
      payable
            
            
            3.39
            %
            
            
            4.28
            %















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





9.
            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 (“USA”) and Canada.  The tax rate of the subsidiaries
      operating in Hong Kong was 16.5% for the year ended March 31, 2009 (2008
      and 2007: 17.5%).  The subsidiary of the Group in Germany was
      registered as a partnership in Germany, which was subject to a statutory
      tax rate of 14.17% during the three years ended March 31,
      2009.  The Group is not subject to income taxes in the British
      Virgin Islands.  The statutory tax rates in Canada and
      the USA were 36% and 34%, respectively, for the three years ended
      March 31, 2009.


Hong
      Kong Tax


BEL, BATL and BIL
      are subject to the Hong Kong profits tax rate of 16.5% (2008 and 2007:
      17.5%). Management of BEL has determined that all income and expenses are
      offshore and not subject to Hong Kong profits tax. As a result, BEL did
      not incur any Hong Kong profits tax during the years presented. BATL did
      not have any assessable profits for the year.  Therefore, no
      provision for taxation has been made.


PRC
      Tax
  BESCL
      is registered and operates in Shenzhen, the PRC, and is subject to a tax
      rate of 20% and 18% for the years ended December 31, 2009 and
      2008.  BATXXL is registered in Xinxing, Guangdong, PRC, and is
      entitled to an exemption from PRC income tax for two years starting from
      their first profitable year (“the tax holiday”).  As BATXXL has
      not yet commenced business, the tax holidays have not yet
      started.




(b)
            On
      March 16, 2007, the PRC Enterprise Income Tax Law, (the “EIT Law”), was
      enacted by the PRC government.  The EIT Law, effective January
      1, 2008, imposes a uniform tax rate of 25% for both domestic and
      foreign-invested enterprises and revokes the then current tax exemption,
      reduction and preferential treatments applicable to foreign-invested
      enterprises. However, there is a transition period for enterprises,
      whether foreign-invested or domestic, that were receiving preferential tax
      treatments granted by relevant tax authorities at the time the EIT Law
      became effective. Under the grandfathering rules of the EIT Law,
      enterprises that are subject to an enterprise income tax (“EIT”) rate
      lower than 25% will continue to enjoy lower rates with gradual
      transition to the new tax rate of 25% in five years from the effective
      date of the EIT Law. Enterprises that are currently entitled to exemptions
      or reductions from the standard income tax rate for a fixed term may
      continue to enjoy such treatment until the fixed term
    expires.




During
      the period from January 1, 2008 to March 31, 2009, the Company’s
      subsidiaries operating in the PRC were subject to the EIT Law and a
      standard tax rate of 25% was adopted, and the PRC subsidiaries are
      entitled to the grandfathering incentives.  For the years ended
      December 31, 2006, 2007 and 2008, BECSL, the Company’s PRC subsidiary, was
      subject to a tax rate of 10%, 15% and 18%, respectively.  BESCL
      will be subject to a tax rate of 20%, 22% and 24% for the years ended
      December 31, 2009, 2010 and 2011, respectively.  BESCL will be
      subject to a uniform tax rate of 25% for the year ended December 31, 2012
      and the years
after.



















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





9.
            Taxation
      (Continued)





(c)
            Income
      is subject to taxation in the various countries in which the Company and
      its subsidiaries operate.  The loss before income taxes by
      geographical location is analysed as
follows:





2007
              $
            
            
            2008
              $
            
            
            2009
              $Hong
      Kong
            
            
            854,807
            
            
            
            849,199
            
            
            
            (7,173,662
            )PRC
            
            
            1,303,303
            
            
            
            (3,137,058
            )
            
            
            443,816Others
            
            
            (1,160,839
            )
            
            
            (4,145,191
            )
            
            
            (2,419,821
            )Total
            
            
            997,271
            
            
            
            (6,433,050
            )
            
            
            (9,149,667
            )





Others
      mainly include the profit (loss) from BVI and the United
      States.




(d)




2007
            
            
            2008
            
            
            2009$
            
            
            
            $
            
            
            
            $Deferred
      income tax
            
            
            (802,628
            )
            
            
            31,478
            
            
            
            (204,777
            )Current
      income tax (expense)/ benefit
            
            
            (107,981
            )
            
            
            309,202
            
            
            
            (3,226
            )Total
      income tax (expense)/ benefit
            
            
            (910,609
            )
            
            
            340,680
            
            
            
            (208,003
            )




The
      components of the income tax (expense) benefit by geographical location
      are as follows:




2007
            
            
            2008
            
            
            2009$
            
            
            
            $
            
            
            
            $Hong
      Kong
            
            
            (836,942
            )
            
            
            419,782
            
            
            
            (204,777
            )PRC
            
            
            (126,617
            )
            
            
            (72,213
            )
            
            
            (3,226
            )Others
            
            
            52,950
            
            
            
            (6,889
            )
            
            
            -Total
            
            
            (910,609
            )
            
            
            340,680
            
            
            
            (208,003
            )



























Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





9.
            Taxation
      (Continued)





(e)





2007
            
            
            2008
            
            
            2009$
            
            
            $
            
            
            $Deferred
      income tax assets
            
            
            87,639
            
            
            
            21,776
            
            
            
            -Deferred
      income tax liabilities
            
            
            (13,901
            )
            
            
            (4,460
            )
            
            
            (14,162
            )73,738
            
            
            
            17,316
            
            
            
            (14,162
            )





Deferred
      tax assets comprised the following:





2007
            
            
            2008
            
            
            2009$
            
            
            $
            
            
            $Tax
      loss carry forwards
            
            
            1,167,987
            
            
            
            2,997,132
            
            
            $
            1,759,135Others
            
            
            87,639
            
            
            
            21,776
            
            
            
            -Less:
      Valuation allowance
            
            
            (1,167,987
            )
            
            
            (2,997,132
            )
            
            
            (1,759,135
            )87,639
            
            
            
            21,776
            
            
            
            -Less:
      current portion
            
            
            -
            
            
            
            -
            
            
            
            -Non-current
      portion
            
            
            87,639
            
            
            
            21,776
            
            
            
            -





As
      of March 31, 2007, 2008 and 2009, the Group had accumulated tax losses
      amounting to $5,845,998, $11,603,130 and $7,052,368 (the tax effect
      thereon is $1,167,987, $2,997,132 and $1,759,135), respectively, subject
      to the approval of the tax authorities, which may be carried forward and
      applied to reduce future taxable income which is earned in or derived from
      Hong Kong, and other countries.  Realization of deferred tax
      assets associated with tax loss carry forwards is dependent upon
      generating sufficient taxable income prior to their expiration. A
      valuation allowance is established against such tax losses when management
      believes it is more likely than not that a portion may not be utilized. As
      of March 31, 2009, the Group’s accumulated tax losses have no definite
      period of expiration, except for tax losses that expire in
      2013.





(f)
            Changes
      in the valuation allowance consist
of:





2007
              $
            
            
            2008
              $
            
            
            2009
              $Balance,
      April 1
            
            
            700,966
            
            
            
            1,167,987
            
            
            
            2,997,132Charged/(credited)
      to income tax expense
            
            
            467,021
            
            
            
            1,829,145
            
            
            
            (1,237,997
            )Balance,
      March 31
            
            
            1,167,987
            
            
            
            2,997,132
            
            
            
            1,759,135















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





9.
            Taxation
      (Continued)





(g)
            The
      actual income tax expense attributable to earnings for the years ended
      March 31, 2007, 2008 and 2009 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:





2007
              $
            
            
            2008
              $
            
            
            2009
              $(Loss)
      / income before taxation
            
            
            997,271
            
            
            
            (6,433,050
            )
            
            
            (9,149,667
            )Income
      tax (expense) credit on pretax income at statutory rate
            
            
            (339,072
            )
            
            
            2,187,237
            
            
            
            3,110,887Effect
      of different tax rates of subsidiary
              operating
      in other jurisdictions
            
            
            551,557
            
            
            
            (357,002
            )
            
            
            (2,170,831
            )Profit
      not subject to income tax
            
            
            154,349
            
            
            
            787,191
            
            
            
            -Expenses
      not deductible for income tax purposes
            
            
            (73,283
            )
            
            
            (753,692
            )
            
            
            (2,386,056
            )(Increase)
      decrease in valuation allowance
            
            
            (467,021
            )
            
            
            (1,829,145
            )
            
            
            1,237,997(Provision
      made)/ reversal of provision as a result of development of tax
      rules
            
            
            (737,139
            )
            
            
            306,091
            
            
            
            -Total
      income tax (expense) / credit
            
            
            (910,609
            )
            
            
            340,680
            
            
            
            (208,003
            )








(h)
            Effective
      April 1, 2007, the Company adopted FIN 48.  As a result of the
      adoption of FIN 48, the Company recognized a $1,169,777 increase in the
      liability for unrecognized tax benefits and penalties of $994,310, which
      were accounted for as a reduction to the April 1, 2007 balance of retained
      earnings.  The Company assessed the tax position during the
      fiscal year ended March 31, 2009 and concluded that the same tax liability
      was carried forward.




The
      Company’s accounting policy is to treat interest and penalties as
      components of income taxes.  As of March 31, 2009, the
      Company had accrued penalties related to uncertain tax positions of
      $994,310.


The
      Company files income tax returns in Hong Kong, the PRC and various foreign
      tax jurisdictions. There are two subsidiaries which operate within each of
      the Company’s major jurisdictions resulting in a range of open tax years.
      The open tax years for the Company and its significant subsidiaries range
      between fiscal 2000 and fiscal 2009.  The provisions made as a
      result of these open tax cases are subject to the final agreement with the
      tax authorities.






















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





10.
            Leases





(a)
            Capital
      leases





Plant
      and machinery include the following amounts for capitalized
      leases:





March 312008
            
            
            2009$
            
            
            
            $Cost
            
            
            661,374
            
            
            
            661,374Less:
      accumulated depreciation
            
            
            (364,029
            )
            
            
            (407,468
            )297,345
            
            
            
            253,906





During
      the years ended March 31, 2007, 2008 and 2009, the Group entered into
      additional capital lease obligations amounting to $154,983, $360,691 and
      $nil, respectively.





Future
      minimum payments under capital leases as of March 31, 2009 with an initial
      term of more than one year are as
follows:





$Total
      minimum lease payments
            
            
            184,602Less:
      amount representing interest
            
            
            (2,430
            )Present
      value of net minimum lease payments (including current portion of $130,201
      as of March 31, 2009)
            
            
            182,172Future
      minimum payments under capital leases2010
            
            
            130,2012011
            
            
            51,971182,172
















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





10.
            Leases
      (Continued)





(b)
            Operating
      leases





As
      of March 31, 2009, 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:





$2010
            
            
            375,6832011
            
            
            142,800518,483





Rental
      expense for all operating leases amounted to $331,758, $362,033 and
      $357,954 for the years ended March 31, 2007, 2008 and 2009,
      respectively.




11.
                Commitments





Capital
      expenditure contracted at the balance sheet but not yet provided for is as
      follows:





2008
            
            
            2009$
            
            
            
            $Land
      use rights
            
            
            350,758
            
            
            
            356,663





In
      November 2006, the Group entered into a land use right purchase agreement
      with Xincheng Hi-Tech Industrial Estate to acquire the right to use a
      piece of land of approximately 146,673 square meters for future expansion
      of production capacity in XinXing of GuangDong, PRC. The total
      consideration was $1,472,325.  A deposit of approximately
      $610,000 was paid in July 2007, and the balance was paid in October
      2007.  During the year ended March 31, 2008, the Group prepaid
      $150,325 for the acquisition of the right to use another piece of land in
      XinXing at a total consideration of $501,083.  This prepayment
      was classified as other current assets in the consolidated balance sheet
      as of March 31, 2009.












Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)








12.
              Discontinued
      Operations


On
      November 1, 2008, the Company disposed of its entire interests in Gram to
      a third party for $1. As stipulated in the agreement, the Company agreed
      to forfeit an amount receivable from Gram of approximately $5,000,000,
      except for $1,700,000, of which monthly payments of $10,000 was to be paid
      to the Company in the six months from December 2008 to May 2009, and
      monthly payments of $20,000 was to be paid from June 2009 until the full
      amount of $1,700,000 was repaid.


On
      March 31, 2009, the Company’s German subsidiary, Korona, sold its assets
      (accounts receivable, inventories, toolings and intellectual property
      rights) to a third party.  Korona had no operations since April
      1, 2009 and is now under liquidation
process.


The
      following table summarizes the result of these discontinued operations,
      net of income taxes.


Discontinued
      Operations (Korona and Gram)


2007
            
            
            2008
            
            
            2009$
            
            
            $
            
            
            $Sales
            
            
            18,218,998
            
            
            
            17,190,880
            
            
            
            10,722,372Cost
      of Sales
            
            
            (13,642,221
            )
            
            
            (14,053,878
            )
            
            
            (11,218,722
            )4,576,777
            
            
            
            3,137,002
            
            
            
            (496,350
            )Selling
      expenses
            
            
            (1,602,909
            )
            
            
            (1,760,291
            )
            
            
            (1,148,101
            )Salaries
      and related costs
            
            
            (2,421,063
            )
            
            
            (2,240,460
            )
            
            
            (1,480,815
            )Administrative
      expenses
            
            
            (1,349,073
            )
            
            
            (1,285,664
            )
            
            
            (1,488,942
            )Loss
      from water damage
            
            
            (700,950
            )Operating
      loss
            
            
            (1,497,218
            )
            
            
            (2,149,413
            )
            
            
            (4,614,208
            )Interest
      income
            
            
            3,321
            
            
            
            4,848
            
            
            
            53,039Other
      income
            
            
            537,775
            
            
            
            87,608
            
            
            
            2,849,087Gain
      on disposal of property
            
            
            -
            
            
            
            (364,244
            )
            
            
            -Interest
      expenses
            
            
            (503,404
            )
            
            
            (244,628
            )
            
            
            (241,111
            )Foreign
      exchange gain
            
            
            8,824
            
            
            
            214,812
            
            
            
            44,719Loan
      forgiveness from continuing operations
            
            
            -
            
            
            
            -
            
            
            
            3,690,590Income
      tax expenses
            
            
            (6,902
            )
            
            
            (6,526
            )
            
            
            (8,860
            )Net
      (loss) income
            
            
            (1,457,604
            )
            
            
            (2,457,543
            )
            
            
            1,773,256























Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)








12.
              Discontinued Operations
      (Continued)


The
      carrying values of the assets and liabilities of the disposal group
      classified as held for sale as at March 31, 2009 were as
      follows:


March
      31, 2008
            
            
            March
      31, 2009$
            
            
            $Assets:Cash
      and bank balances
            
            
            541,371
            
            
            
            666,891Trade
      receivables
            
            
            2,610,188
            
            
            
            1,195,973Inventories
            
            
            2,944,415
            
            
            
            -Other
      receivables, deposits and prepayments
            
            
            1,095,996
            
            
            
            1,950,833Current
      assets of discontinued operations
            
            
            7,191,970
            
            
            
            3,813,697Property,
      plant and equipment
            
            
            379,784
            
            
            
            5,704Deferred
      income tax assets
            
            
            169,842
            
            
            
            -Non-current
      assets of discontinued operations
            
            
            549,626
            
            
            
            5,704Total
      assets of discontinued operations
            
            
            7,741,596
            
            
            
            3,819,401Liabilities:Bank
      overdrafts
            
            
            511,162
            
            
            
            -Short
      term bank loans
            
            
            3,894,159
            
            
            
            3,935,196Trade
      payables
            
            
            619,264
            
            
            
            166,768Accrued
      charges and deposits
            
            
            1,082,687
            
            
            
            1,685,135Liabilities
      of discontinued operations
            
            
            6,107,272
            
            
            
            5,787,099























Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





13.
            Stockholders’
      equity





(a)
            Repurchase
      of common stock


In
      August of 2001, the Company's Board of Directors authorized a program for
      the Company to repurchase up to $500,000 of its common stock. This
      repurchase program does not obligate the Company to acquire any specific
      number of shares or acquire shares over any specified period of time. No
      stocks had been repurchased when, on November 16, 2006, the Company's
      Board of Directors authorized an additional $1,000,000 for the
      Company's repurchase of  its common stock under the same
      repurchase program. This authorization to repurchase shares increases the
      amount authorized for repurchase from $500,000 to
      $1,500,000.   The Board of Directors believed that the
      common stock was undervalued, and that the repurchase of common stock
      would be beneficial to the Company's shareholders. During the fiscal year
      ended March 31, 2007, 260,717 ($1,328,560) shares were purchased under
      this program. No shares were repurchased during the fiscal year ended
      March 31, 2008. During the fiscal year ended March 31, 2009, 70,019
      ($133,765) shares were purchased under this program.  The
      Company may from time to time repurchase shares of its common stock under
      this program.


(b)
            Preferred
      stock





The
      Company has 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 has not
      issued any shares of preferred stock as of March 31,
  2009.





(c)
            Dividends




No
      dividends were declared by the Company for each of the fiscal years ended
      March 31, 2007, 2008 and 2009, respectively.   Dividends of
      $278,882 were paid during the fiscal year ended March 31, 2007, for
      dividends declared for the fiscal year ended March 31,
      2006.
















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





14.
            Stock
      option and bonus plans





(a)
            On
      September 7, 2004, our stockholders adopted the 2004 Stock Bonus Plan (the
      “Stock Bonus Plan”) which authorizes the issuance of up to five hundred
      thousand (500,000) shares of the Company’s common stock in the form of
      stock bonus.


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


The
      Stock Bonus Plan shall be administered by a committee appointed by the
      Board of Directors which consists of at least two but not more than three
      members of the Board, one of whom shall be a non-employee of the
      Company.  The existing Committee members are Mr. Anthony So and
      Mr. Woo-Ping Fok.  The Committee has the authority, in its sole
      discretion:(i) to determine the parties to receive bonus stock, the times
      when they shall receive such awards, the number of shares to be issued,
      and the time, terms and conditions of the issuance of any such
      shares;  (ii) to construe and  interpret
      the  terms of the Stock Bonus Plan;  (iii)
      to  establish,  amend  and  rescind  rules  and
      regulations for the administration of the Stock Bonus Plan; and (iv) to
      make all other determinations necessary or advisable for administering the
      Stock Bonus Plan.


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
      employment of the Company and to encourage such employees to secure or
      increase on reasonable terms their common stock ownership in the
      Company.  The Company believes that the 2004 Plan promotes
      continuity of management and increased incentive and personal interest in
      the welfare of the
Company.


The
      2004 Plan is administered by a committee appointed by the Board of
      Directors which consists of at least two but not more than three members
      of the Board, one of whom shall be a non-employee of the
      Company.  The current committee members are Anthony So and
      Woo-Ping Fok.  The committee determines the specific terms of
      the options granted, including the employees to be granted options under
      the plan, the number of shares subject to each option grant, the exercise
      price of each option and the option period, subject to the requirement
      that no option may be exercisable more than 10 years after the date of
      grant.  The exercise price of an option may be less than
      the fair market value of the underlying shares of common
      stock.  No options granted under the plan will be transferable
      by the optionee other than by will or the laws of descent and distribution
      and each option will be exercisable, during the lifetime of the optionee,
      only by the optionee.


The
      exercise price of an option granted pursuant to the 2004 Plan may be paid
      in cash, by the surrender of options, in common stock, in other property,
      including a promissory note from the optionee, or by a combination of the
      above, at the discretion of the
Committee.












Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)








14.
              Stock option and bonus plans
      (Continued)


(a)
                  (Continued)


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 to
      purchase 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 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.  No such options have been exercised during the years
      ended March 31, 2008 and 2009.





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 years ended March 31, 2008 and
      2009.
















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





14.
            Stock
      option and bonus plans (Continued)




(a)
                (Continued)


In
      September 2004, the Company issued options to certain non-employee
      directors of the Company to purchase an aggregate of 40,000 shares of
      common stock of the Company at an exercise price of $6.20.  The
      options shall expire on September 12, 2014 and can be exercised at any
      time after granting.  The exercise prices of these options were
      equal to the fair market value at the time of grant.  No such
      option was exercised during the years ended March 31, 2008 and
      2009.


In
      December 2005, the Company issued options to certain non-employee
      directors of the Company to purchase an aggregate of 30,000 shares of
      common stock of the Company at an exercise price of $4.50. The options
      shall expire on December 4, 2015 and can be exercised at any time after
      granting. The exercise prices of these options were equal to the fair
      market value at the time of grant. No such options had been exercised
      during the years ended March 31, 2008 and
2009.


On
      November 16, 2006, the Board of Directors of the Company voted to rescind
      the Company’s 1996 Non-Employee Directors’ Stock Option Plan (the
      “Non-Employee Directors’ Plan”). All options previously granted under the
      Non-Employee Directors’ Plan continue in full force and effect pursuant to
      their terms of grant.


During
      the fiscal year ended March 31, 2009, no options were granted under the
      1996 stock option plan.
 (b)
                  The
      stock options summary as of March 31, 2009 is as
  follows:


Number

                of
      options
            
            
            Weighted
              average
              exercise
      priceBalance,
      March 31, 2006, 2007, 2008 and 2009
            
            
            1,104,500
            
            
            $
            4.13















Bonso
      Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





14.
            Stock
      option and bonus plans (Continued)





(c)
            The
      following table summarizes the information about all stock options of the
      Company outstanding as at March 31,
2009:





Weighted
      average exercise price
            
            
            Number
      outstanding at March 31, 2009
            
            Weighted
      average remaining life (years)
            
            Exercisable
      shares at
              March
      31, 2009$
            1.61
            
            
            
            342,500
            
            4.0
            
            342,500$
            2.50
            
            
            
            168,000
            
            3.0
            
            168,000$
            2.55
            
            
            
            10,000
            
            2.6
            
            10,000$
            3.65
            
            
            
            196,000
            
            2.1
            
            196,000$
            4.50
            
            
            
            30,000
            
            6.8
            
            30,000$
            6.12
            
            
            
            40,000
            
            5.0
            
            40,000$
            6.20
            
            
            
            40,000
            
            5.5
            
            40,000$
            7.875
            
            
            
            30,000
            
            1.8
            
            30,000$
            8.00
            
            
            
            228,000
            
            0.8
            
            228,000$
            8.125
            
            
            
            20,000
            
            0.8
            
            20,000$
            4.131
            
            
            
            1,104,500
            
            2.9
            
            1,104,500





The
      intrinsic value of options outstanding and exercisable was $1,218,160,
      $157,550 and $nil on March 31, 2007, 2008 and 2009,
      respectively.  The intrinsic value represents the pre-tax
      intrinsic value (the difference between the closing stock price of the
      Company’s common stock on the balance sheet date and the exercise
      price for both the outstanding and exercisable options) that would have
      been received by the option holders if all options had been exercised on
      March 31, 2007, 2008 and 2009.





New
      shares will be issued by the Company upon future exercise of stock
      options.





(d)
            Effective
      April 1, 2006, the Company adopted SFAS No. 123(R) in accounting for its
      employee stock option. Under the provisions of SFAS No. 123(R), the
      Company is required to measure the cost of employee services received in
      exchange for stock-based compensation measured at the fair value of the
      award as of the grant date.  According to the modified
      prospective application method, the Company applies SFAS No. 123(R) for:
      (1) new awards granted after April 1, 2006 and (2) any portion of awards
      that were granted after April 1, 1995 and have not vested by April 1,
      2006. As the Company did not have any unvested stock-based compensation as
      of April 1, 2006, the adoption of SFAS No. 123(R) did not have
      any impact on the Company’s financial statement. The weighted average
      fair value of options granted during the years ended March 31, 2008 and
      2009 amounted to $nil and $nil,
respectively.


















Bonso
      Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)








15.
                Related party
      transactions


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





Year
      endedMarch 31,
            
            Mr.
      So Hung Gun,Anthony
            
            
            Ms.
      Pang KitTeng, Cathy (iv)
            
            
            Mr.
      Chung KimWah2007
            
            $
            741,947
            (i)
            
            $
            68,222
            
            
            $
            151,0952008
            
            $
            705,901
            (i)
            
            Nil
            
            
            $
            150,4792009
            
            $
            930,000
            (i)(iii)
            
            Nil
            
            
            $
            162,502
            (iii)





Mr.
      Fok
      Woo           Ping
            
            Mr.
      GeorgeO’Leary (iv)
            
            Mr.
      J. Stewart Jackson
            
            Mr.
      HenrySchlueter2007
            Nil
            
            $
            180,000
            (v)
            Nil
            
            $
            14,571
      (ii)2008
            Nil
            
            Nil
            
            Nil
            
            $
            59,365
      (ii)2009
            Nil
            
            $
            240,000
            (vi)
            Nil
            
            $
            109,364
      (ii)





(i)
            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 as part of
      his compensation





(ii)
            The
      amount for the years ended March 31, 2007, 2008 and 2009 represented
      professional fees paid to Schlueter & Associates, P.C., and the
      Group’s SEC counsel in which Mr. Schlueter is one of the
      principals.





(iii)
            The
      amounts for the year ended March 31, 2009 included unpaid vacation
      payments for Messrs. So and Mr. Chung in the amounts of $114,872 and
      $13,656, respectively.  The vacation payment was paid in July
      2009.





(iv)
            Ms.
      Pang Kit Teng Cathy and Mr. George O’Leary resigned from its position as
      directors of the Company on November 16,
2006.





(v)
            This
      represented consultancy fees paid to Mr. O’Leary for provision of support
      and marketing services in the United States and his director fees since
      January 17, 2005.





(vi)
            This
      represented consultancy fees paid to Mr. O’Leary for provision of support
      and management services in Germany, completing an asset deal to sell
      Korona’s assets (accounts receivable, inventories, toolings and
      intellectual property rights) to a third party and for  the
      liquidation of Korona.





(b)
            As
      of March 31, 2008, BEL had paid deposits of approximately US$1,528,000
      with regard to potential investments in a commercial residential building
      and a land use right in the PRC.  Subsequent to this fiscal year
      end, Mr. So, Chairman of Bonso decided to take up BEL’s potential
      investments and paid BEL the full amount of approximately US$1,528,000 in
      September 2008.





During
      the year ended March 31, 2007, BEL paid certain deposits of US$799,000 for
      a potential investment in a hotel.  Such potential investment
      was subsequently taken up by Mr.  So and the full amount was paid to
      BEL in July 2007.


















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





16.
            Concentrations
      and Credit Risk


The
      Group operates principally in the PRC (including Hong Kong) and grants
      credit to its customers in this geographic region.  Although the
      PRC is economically stable, it is always possible that unanticipated
      events in foreign countries could disrupt the Group’s
      operations.


Financial
      instruments that potentially subject the Group to a concentration of
      credit risk consist of cash, accounts and notes
  receivable.


At
      March 31, 2007, 2008 and 2009, the Company had credit risk exposure of
      uninsured cash in banks of approximately $7,591,406, $9,653,991, and
      $8,043,535, respectively.


A
      substantial portion of revenue was generated from one customer for the
      years ended March 31, 2008 and
2009.


The
      net sales to customers representing at least 10% of net total sales are as
      follows:


Year
      Ended March 31,2008
            
            
            2009US$’000
            
            
            %
            
            
            US$’000
            
            
            %Sunbeam
      Products, Inc
            
            
            13,098
            
            
            
            29
            
            
            
            17,990
            
            
            
            45TTI
      Tech Co. Ltd
            
            
            9,148
            
            
            
            20
            
            
            
            4,512
            
            
            
            11Global
      Link Corporation Ltd
            
            
            8,574
            
            
            
            19
            
            
            
            2,242
            
            
            
            6








The
following customers had balances greater than 10% of the total accounts
receivable as of March 31, 2008 and 2009:





March
      31,2008
            
            
            2009US$’000
            
            
            %
            
            
            US$’000
            
            
            %Pitney
      Bowes Inc.
            
            
            325
            
            
            
            12
            
            
            
            599
            
            
            
            55TTI
      Tech Co. Ltd
            
            
            72
            
            
            
            3
            
            
            
            292
            
            
            
            2715
            
            
            
            
            
            
            
            82





At
      March 31, 2008 and 2009, these customers accounted for 15% and 82%,
      respectively, of net accounts receivable.  The accounts
      receivable have repayment terms of not more than twelve
      months.  The Group does not require collateral to support
      financial instruments that are subject to credit
    risk.



















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





17.
            Employee
      retirement benefits and severance payment
  allowance





(a)
            With
      effect from January 1, 1988, BEL, a wholly-owned foreign subsidiary of the
      Company in Hong Kong, implemented a defined contribution plan (the “Plan”)
      with a major international insurance company to provide life insurance and
      retirement benefits for its employees. All permanent full time employees
      who joined BEL before December 2000, excluding factory workers, are
      eligible to join the provident fund plan.  Each eligible
      employee that chooses to participate in the Plan is required to contribute
      5% of their monthly salary, while BEL is required to contribute from 5% to
      10% based on the eligible employee’s salary, depending on the number of
      years of the eligible employee’s
service.




The
      Mandatory Provident Fund (the “MPF”) was introduced by the Hong Kong
      Government, and commenced in December 2000.  BEL joined the MPF
      by implementing a plan with a major international insurance
      company.  All permanent Hong Kong full time employees who joined
      BEL in or after December 2000, excluding factory workers, must join the
      MPF, except for those who joined the Plan before December
      2000.  The eligible employee’s and employer’s contributions to
      the MPF are both at 5% of the eligible employee’s monthly salary and are
      subject to a maximum contribution of HK$1,000 (US$128)
      monthly.
 Pursuant
      to the relevant PRC regulations, the Group is required to make
      contributions for each employee at rates based upon the employee’s
      standard salary base as determined by the local Social Security Bureau, to
      a defined contribution retirement scheme organized by the local Social
      Security Bureau in respect of the retirement benefits for the Group’s
      employees in the PRC.
  The
      contributions to each of the above schemes are recognized as employee
      benefit expenses when they are due and are charged to the consolidated
      statement of operations.  The Group’s total contributions to the
      above schemes for the years ended March 31, 2008 and 2009 amounted to
      $251,538 and $324,882, respectively.  The Group has no other
      obligation to make payments in respect of retirement benefits of the
      employees.


According
      to the New Labor Law in the PRC which was effective from January 1, 2009,
      a company is required to provide one month of salary for each year of
      service as a severance payment.  As such, the company recognized
      a provision of $785,438 in fiscal year ended March 31, 2009 for the
      severance payment for staff in the PRC.  The accrued severance
      payment allowance will be reviewed every
  year.



























Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)




18.
              Earnings
      per share





Year ended March 312007
            
            
            2008
            
            
            2009$
            
            
            
            $
            
            
            
            $Net
      loss applicable to commonshareholders
            
            
            (1,370,943
            )
            
            
            (8,549,913
            )
            
            
            (7,584,414
            )Weighted
      average shares outstanding
            
            
            5,577,639
            
            
            
            5,577,639
            
            
            
            5,577,639Basic
      and diluted earnings per share
            
            
            (0.25
            )
            
            
            (1.53
            )
            
            
            (1.36
            )


Basic
      loss per share is computed by dividing net 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 stock
  options.


The
      diluted net loss per share is the same as the basic net loss per share for
      the year ended March 31,2008 and 2009 as all potential ordinary shares
      from the exercise of stock options are anti-dilutive and are therefore
      excluded from the computation of diluted net loss per
    share.













Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





19.
            Business
      segment information





(a)
            The
      Group is organized based on the products it offers. Under this
      organizational structure, the Group’s operations can be classified into
      three business segments, scales, telecommunication products and
      other.


Scales
      operations principally involve production and marketing of sensor-based
      scales products. These include bathroom, kitchen, office, jewelry,
      laboratory, postal and industrial scales that are used in consumer,
      commercial and industrial
applications.


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


The
      “other” segment is a residual, which principally includes the activities
      of (i) tooling and mould charges for scales and telecommunication products
      and (ii) sales of scrap materials.


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


Summarized
      financial information by business segment as of March 31, 2007, 2008 and
      2009 is as follows:


Net sales
            
            
            Operating
              profit/(loss)
            
            
            Identifiable
              assets
      as of
              March 31
            
            
            Depreciation
              and
              amortization
            
            
            Capital
              expenditure$
            
            
            
            $
            
            
            
            $
            
            
            
            $
            
            
            
            $2009Scales
            
            
            30,352,498
            
            
            
            150,866
            
            
            
            8,706,359
            
            
            
            823,564
            
            
            
            32,764Telecommunication
      products
            
            
            9,475,175
            
            
            
            (2,065,691
            )
            
            
            6,002,985
            
            
            
            916,115
            
            
            
            38,774Other
            
            
            550,525
            
            
            
            99,096
            
            
            
            42,105Total
      operating segments
            
            
            40,378,198
            
            
            
            (1,815,729
            )
            
            
            14,751,449
            
            
            
            1,739,679
            
            
            
            71,538Corporate
            
            
            -
            
            
            
            (2,333,534
            )
            
            
            10,868,175
            
            
            
            713,687Group
            
            
            40,378,198
            
            
            
            (4,149,263
            )
            
            
            25,619,624
            
            
            
            2,453,366
            
            
            
            71,538Discontinued
      operations
            
            
            
            
            
            
            
            
            
            
            3,819,401Total
      Assets
            
            
            
            
            
            
            
            
            
            
            29,439,0252008Scales
            
            
            26,649,049
            
            
            
            (3,513,366
            )
            
            
            7,809,114
            
            
            
            608,284
            
            
            
            315,588Telecommunication
      products
            
            
            18,597,938
            
            
            
            (2,561,417
            )
            
            
            10,426,828
            
            
            
            1,092,028
            
            
            
            489,789Other
            
            
            248,634
            
            
            
            44,754
            
            
            
            58,799
            
            
            
            -
            
            
            
            -Total
      operating segments
            
            
            45,495,621
            
            
            
            (6,030,029
            )
            
            
            18,294,741
            
            
            
            1,700,312
            
            
            
            805,377Corporate
            
            
            -
            
            
            
            (3,438,359
            )
            
            
            15,749,511
            
            
            
            781,924
            
            
            
            1,753,343Group
            
            
            45,495,621
            
            
            
            (9,468,388
            )
            
            
            34,044,252
            
            
            
            2,482,236
            
            
            
            2,558,720Discontinued
      operations
            
            
            
            
            
            
            
            
            
            
            7,741,596Total
      Assets
            
            
            
            
            
            
            
            
            
            
            41,785,848


















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





19.
            Business
      segment information (Continued)




(a)
                  (Continued)


Net sales
            
            
            Operating
              profit/(loss)
            
            
            Identifiable
              assets
      as of
              March 31
            
            
            Depreciation
              and
              amortization
            
            
            Capital
              expenditure2007Scales
            
            
            31,685,961
            
            
            
            5,468,768
            
            
            
            12,866,877
            
            
            
            632,697
            
            
            
            35,872Telecommunication
      products
            
            
            16,248,261
            
            
            
            (1,392,106
            )
            
            
            9,107,007
            
            
            
            1,037,083
            
            
            
            127,031Other
            
            
            338,160
            
            
            
            60,869
            
            
            
            -
            
            
            
            -
            
            
            
            -Total
      operating segments
            
            
            48,272,382
            
            
            
            4,137,531
            
            
            
            21,973,884
            
            
            
            1,669,780
            
            
            
            162,903Corporate
            
            
            -
            
            
            
            (2,898,638
            )
            
            
            17,868,263
            
            
            
            851,966
            
            
            
            130,392Group
            
            
            48,272,382
            
            
            
            1,238,893
            
            
            
            39,842,147
            
            
            
            2,521,746
            
            
            
            293,295Discontinued
      operations
            
            
            
            
            
            
            
            
            
            
            7,676,468Total
      Assets
            
            
            
            
            
            
            
            
            
            
            47,518,615




Operating
      profit by segment equals total operating revenues less expenses directly
      attributable to the generation of 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 $842,821, $nil
      and $nil arising from the purchase of Gram, is allocated to scales segment
      as of March 31, 2007, 2008 and 2009,
  respectively.


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


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





2007
            
            
            2008
            
            
            2009$
            
            
            
            $
            
            
            
            $Hong
      Kong
            
            
            3,585,124
            
            
            
            1,931,151
            
            
            
            1,672,417The
      PRC
            
            
            7,048,045
            
            
            
            3,960,526
            
            
            
            1,701,836United
      States
            
            
            50,281
            
            
            
            51,522
            
            
            
            -Total
      property, plant and equipment
            
            
            7,098,326
            
            
            
            5,943,199
            
            
            
            3,374,253


















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





19.
            Business
      segment information (Continued)





(c)
            The
      following is a summary of net export sales by geographical areas, which
      are defined by the final shipment destination, constituting 10% or more of
      total sales of the Company for the years ended March 31, 2007, 
      2008 and 2009:





Year ended March 312007
            
            
            %
            
            
            2008
            
            
            %
            
            
            2009
            
            
            %$
            
            
            
            
            
            $
            
            
            
            
            
            $United
      States of America
            
            
            33,048,645
            
            
            
            68
            
            
            
            29,585,942
            
            
            
            65
            
            
            
            26,923,189
            
            
            
            67Germany
            
            
            4,742,834
            
            
            
            10
            
            
            
            5,361,899
            
            
            
            12
            
            
            
            4,782,280
            
            
            
            12Other
      EC countries
            
            
            6,501,354
            
            
            
            14
            
            
            
            6,652,236
            
            
            
            14
            
            
            
            2,858,239
            
            
            
            7Asia
      and others
            
            
            3,979,549
            
            
            
            8
            
            
            
            3,895,544
            
            
            
            9
            
            
            
            5,814,490
            
            
            
            1448,272,382
            
            
            
            100
            
            
            
            45,495,621
            
            
            
            100
            
            
            
            40,378,198
            
            
            
            100





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





Year
      ended March 31Business
      segment
            
            2007
            
            
            %
            
            
            2008
            
            
            %
            
            
            2009
            
            
            %$
            
            
            
            
            
            
            $
            
            
            
            
            
            
            $Sunbeam
      Products, Inc. (USA)
            Scales
            
            
            15,387,967
            
            
            
            32
            
            
            
            13,097,835
            
            
            
            29
            
            
            
            17,990,414
            
            
            
            45TTI
      Tech Co., Ltd.
            Tele-communication
      products
            
            
            7,752,573
            
            
            
            16
            
            
            
            9,147,739
            
            
            
            20
            
            
            
            4,511,621
            
            
            
            11Global
      Link Corporation Ltd.
            Tele-communication
      products
            
            
            8,457,868
            
            
            
            17
            
            
            
            8,574,010
            
            
            
            19
            
            
            
            2,241,979
            
            
            
            631,598,408
            
            
            
            65
            
            
            
            30,819,584
            
            
            
            68
            
            
            
            24,744,014
            
            
            
            62















Bonso
Electronics International Inc.


Notes
to Consolidated Financial Statements


(Expressed
in United States Dollars)





20.
            Fair
      value of financial instruments


Effective
      April 1, 2008, we adopted SFAS No. 157, “Fair Value Measurements” (“SFAS
      No. 157”). SFAS No. 157 clarifies the definition of fair value, prescribes
      methods for measuring fair value and establishes a fair value hierarchy to
      classify the inputs used in measuring fair value as
      follows:


Level
      1-Inputs are unadjusted quoted prices in active markets for identical
      assets or liabilities available at the measurement
  date.


Level
      2-Inputs are unadjusted quoted prices for similar assets and liabilities
      in active markets, quoted prices for identical or similar assets and
      liabilities in markets that are not active, inputs other than quoted
      prices that are observable, and inputs derived from or corroborated by
      observable market data.


Level
      3-Inputs are unobservable inputs which reflect the reporting entity's own
      assumptions on what assumptions the market participants would use in
      pricing the asset or liability based on the best available
      information.


The
      adoption of SFAS No. 157 did not have a material impact on our fair value
      measurements as the Group does not have any balance sheet components
      deemed financial assets or
liabilities.


21.
            Post
      balance sheet event




On
      March 30, 2009, Korona, the Company’s indirect subsidiary, sold all of its
      major assets including accounts receivable, inventories, toolings and
      intellectual property rights, to a third party.  Subsequent to
      the year end, the directors decided to liquidate Korona.  The
      subsidiary is now in the process of being
  liquidated.
 22.
                    Reclassifications
 Certain
      reclassifications have been made to prior year balances in order to
      conform to the current year’s
  presentation.













Item
19.  Exhibits





4.1
            Banking
      Facility Letter dated April 17, 2009 between Bonso and Standard Chartered
      Bank





4.2
            Banking
      Facility Letter dated March 6, 2009 between Bonso and the Hang Seng Bank
      Limited





11.1
            Code
      of Ethics For Chief Executive Officer and Chief Financial Officer
      (1)





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





13.1
            Certification
      Pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002





13.2
            Certification
      Pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002





(1)
            Filed
      as an Exhibit to Form 20-F filed with the SEC on August 13,
      2004



















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.Date
      October 20, 2009
              By:
              /s/ Anthony
      SoAnthony
      So, Chairman of the Board, Chief Executive Officer, Treasurer
      and Director





Date
      October 20, 2009
                By:
                /s/ Albert
      SoAlbert
      So, Chief Financial Officer and Secretary