UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM 10-K









x
              ANNUAL
      REPORT PURSUANT TO SECTION1 3 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the fiscal year ended March 31,
2009





-OR-





 ̈
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
      OF 1934For
      the transition period
      from                                                   
               to




Commission
File Number 033-377099-S









T-BAY
HOLDINGS, INC.


(Exact
Name of registrant as specified in its charter)




NEVADA
              
              91-1465664(State
      or other jurisdiction of
              
              (I.R.S.
      Employer Identification No.)incorporation
      or organization)




Room
      917, YongSheng Building
                ZhongShan
      Xi Road
                Xuhui
      District, Shanghai, China
                (Address
      of principal executive offices)
              
              (Zip
      code)





Issuer’s
telephone number, including area code: 86-021 51539900





(Former
name, former address or former fiscal year, if changed since last
report)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.   Yes  ̈     No
þ





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes  ̈   No
þ





Indicate
by check mark whether the registrant: (1) 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.


Yesþ      No  ̈




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes  ̈ No  ̈




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will no
be contained, to the best of registrant’s knowledge, indefinitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.  Yes  ̈     No þ





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer or smaller reporting
company.  . See definition of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.





Large accelerated filer  ̈
              
              Accelerated
      filer  ̈Non-accelerated filer ̈
              
              Smaller
      reporting company þ





Indicate
by check mark whether the registrant is a shell company (as defined in Rue
12b-2of the Exchange Act).   Yes   ̈   No þ





As of
March 31, 2009, the aggregate market value of the registrant’s common stock held
by non-affiliates of the registrant was $4,318,669.60 based on the closing sale
price as reported on the Over-the-Counter Bulletin Board. As of June 30, 2009,
there were 30,088,174 shares of common stock outstanding.





DOCUMENTS
INCORPORATED BY REFERENCE





None







T-Bay
Holdings, Inc.




FORM
10-K





For the
Year Ended March 31, 2009




TABLE
OF CONTENTS





PART
      IITEM
      1.
                      
                      Business
                      4ITEM
      1A.
                      
                      Risk
      Factors
                      11ITEM
      1B.
                      
                      Unresolved
      Staff Comments
                      18ITEM
      2.
                      
                      Properties
                      18ITEM
      3.
                      
                      Legal
      Proceedings
                      18ITEM
      4.
                      
                      Submission
      of Matters to a Vote of Security Holders
                      19PART
      IIITEM
      5.
                      
                      Market
      for Registrant’s Common Equity, Related Stockholder Matters andIssuer
      Purchases of Equity Securities
                      19ITEM
      6.
                      
                      Selected
      Financial Data
                      19ITEM
      7.
                      
                      Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                      21ITEM
      7A.
                      
                      Quantitative
      and Qualitative Disclosures About Market Risk
                      29ITEM
      8.
                      
                      Financial
      Statements and Supplementary Data
                      F-1
                        to
                        F-22ITEM
      9.
                      
                      Changes
      In and Disagreements with Accountants on Accounting and Financial
      Disclosure
                      30ITEM
      9A.
                      
                      Controls
      and Procedures
                      30ITEM
      9B.
                      
                      Other
      Information
                      32PART
      IIIITEM
      10.
                      
                      Directors
      and Executive Officers of the Registrant
                      31ITEM
      11.
                      
                      Executive
      Compensation
                      35ITEM
      12.
                      
                      Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                      37ITEM
      13.
                      
                      Certain
      Relationships and Related Transactions
                      39ITEM
      14.
                      
                      Principal
      Accountant Fees and Services
                      39PART IVITEM
      15
                      
                      Exhibits,
      Financial Statement Schedules
                      40SIGNATURES
                      40




Page 2 of
41




INFORMATION
REGARDING FORWARD-LOOKING STATEMENTS




This
Annual Report on Form 10-K contains forward-looking statements. These statements
relate to future events or our future financial performance. These statements
involve known and unknown risks, uncertainties and other factors that may cause
our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance,
or achievements expressed or implied by forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "potential" or "continue," the negative of such terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially.




Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of the forward-looking
statements. We undertake no duty to update any of the forward-looking statements
after the date of this report to conform such statements to actual results or to
changes in our expectations.




Readers
are also urged to carefully review and consider the various disclosures made by
us which attempt to advise interested parties of the factors which affect our
business, including without limitation the disclosures made in PART I. ITEM 1A: Risk Factors
and PART II. ITEM 6
"Management's Discussion and Analysis or Plan of Operation" included
herein.




Page 3 of
41




PART
I.





Item
      1.
            Business.





Overview




The
Company was incorporated under the laws of the State of Utah on August 8, 1984
with the name of "Sharus Corporation" with authorized common stock of 50,000,000
shares with par value of $0.001 per share. On June 13, 1989 the domicile of the
Company was changed to the state of Nevada in connection with a name change to
"Golden Quest, Inc." On January 7, 2002, the name was changed to "T-Bay
Holdings, Inc." as part of a reverse stock split of 400 shares of outstanding
stock for one share. On January 17, 2005 the Company carried out a reverse stock
split of 20 shares of outstanding stock for one share.   After the
reverse split, the Company has authorized common stock of 100,000,000 shares
common stock and 10,000,000 shares of preferred stock both with par value of
$0.001.





On August
1, 2005, the Company entered into an Agreement and Plan of Reorganization (the
“Agreement”) between Wise Target International Limited, (“Wise Target”), Amber
Link International Limited (“Amber Link”), Ms. Meilian Li and Mr. Xiaofeng Li.
 Pursuant to the terms of the Agreement, following due diligence, the
Company acquired all of the outstanding stock of Wise Target and Amber Link,
making them wholly owned subsidiaries of the Company.  Wise Target and
Amber Link together owned and controlled 95% of Shanghai Sunplus Communication
Technology Co., Ltd., (“Sunplus”), a Sino-foreign joint venture. The Agreement
required the Company to issue 18,550,000 shares of restricted common stock in
exchange for all of the issued and outstanding shares of Wise Target and Amber
Link.  This transaction was subsequently completed on August 16,
2005.





We
conduct our business through our 95% owned subsidiary, Shanghai Sunplus
Communication Technology Co., Ltd., a Sino-foreign joint venture established in
China in 2002, which provides a wide span of mobile handset design and other
services to leading mobile handset brand owners in China.  Sunplus also
provides total solution services to its customers, starting from new product
concept identification, handset exterior design, hardware and software design,
material procurement, production, and after-sale maintenance services.
Historically, our customers included multinational brand names such as Motorola,
NEC, Siemens, China Telecom, Panasonic and Alcatel. We also conduct our business
through Amber Link. Our major customers in China in fiscal year ended March 31,
2009 were Shenzhen Henkai Co. Ltd., Shenzhen Xuanhua Electronic Technology Co.
Ltd., Shenzhen Naide Technology Co., Ltd., Beijing Hocom Co., Ltd. and Huizhou
QiaoXing Development Co., Ltd.





We focus
on the vast wireless telecommunication market in China. By working closely with
top technology partners, we provide tailored mobile handset design solution
services according to our customers’ specifications. We believe we have strong
capabilities to design mobile handsets to support a broad range of wireless
communications standards, baseband platforms and components. We also provide
production support to facilitate our customers’ manufacturing and supply chain
management processes. In addition, our special project teams work closely with
our customers to monitor and coordinate the progress of each new design project.
To further strengthen our presence in the market, we have also begun to work
with our customers in providing customized handset solutions to mobile service
operators. We believe the design solutions and services provided by us can help
our customers in enhancing competitive strength and gaining market
share.





Corporate
Structure





Sunplus
was jointly owned by Wise Target, Amber Link and Shanghai Fanna Industrial
Product Design Co., Ltd. (“Shanghai Fanna”).  Wise Target and Amber link
are investment holding companies incorporated in the British Virgin Islands
whereas Shanghai Fanna is a privately-owned company established in China in
2001. On August 16, 2005, T-Bay Holdings completed a reverse merger with Wise
Target and Amber Link, which jointly held a 95% interest of
Sunplus.




Page 4 of
41




In
January 2007, Sunplus established Zhangzhou JiaXun Communication Facility
Co.,Ltd. (“JiaXun”), a 100% owned subsidiary in Zhangzhou in Fujian province. In
March 2007, JiaXun and Sunplus respectively acquired 20% and 80% interest in
Fujian QiaoXing Industry Co.,Ltd. (“Fujian QiaoXing”) for the construction
of a technology park for long term development in the mobile
telecommunication industry.  Fujian QiaoXing was established on
February 13, 2004, with a registered capital of RMB20,000,000
($2,590,000).





In
December 2008, Sunplus entered into an agreement with Huizhou Liyin Electronics
Co., Ltd. (“Huizhou Liyin”) to dispose of its 100% interest in JiaXun for
$724,000 (RMB5, 000,000) and its 80% interest inFujian QiaoXing for $12,230,000
(RMB84,000,000).





In March
2009, Sunplus terminated the agreement with Huizhou Liyin and entered into an
agreement with Qiaoxing Telecommunication Industry Company Limited to dispose of
its 100% interest in JiaXun for $724,000 (RMB5,000,000) and its 80% interest in
Fujian QiaoXing for $12,230,000 (RMB84,000,000). The disposal of Jia Xun and
Fujian QiaoXing was completed on April 9 and March 20, 2009,
respectively.





In March
2009, Wise Target transferred all its holdings (75%) in Sunplus to Amber Link
for US$2,885,000 (HK$22,500,000).





The
current corporate structure of T-Bay Holdings is as follows:











Company
History of Sunplus





October
2002 - Sunplus was established in Shanghai, with only 40 employees.





December
2002 - Sunplus established its strategic cooperation with Skyworks, followed by
the first mobile phone modules based on Skyworks’ chips platform. The first
module developed by Sunplus was used by Panda Electronics Inc. (“Panda”) for
making 150,000 mobile handsets and also was used by one of our major customers,
CECT.




Page 5 of
41





May 2003
- Sunplus launched its first phone model design.





April
2003 - Sunplus started collaboration with French Wavecom in module R&D.
 The module was completed six months later, which was ordered by Huizhou
Jialili Telecommunication Co., Ltd. (“Huizhou Jialili”), in its phone model T2,
which became one of its most popular products.





December
2003 - Sunplus completed the development of an electronics platform, which was
sold to Huaguan Electronics Inc. (“Huaguan”) for RMB 20 million ($2,480,000),
which was followed by a 150,000 sets order from Panda and 200,000 units order
from CECT.





As of
January 2004 - more than 500,000 mobile phone handsets designed by Sunplus were
sold in the China market. Major models included A606 Yinghu for Huaguan, Q747
Zhizhun for Philips, T520 Beetles for Hong Kong Zhongjian Telecom. Subsequently,
Sunplus continuously received large orders from Panda, CECT, Huizhou Jialili,
most of which exceed 200,000 units.





January
2004 - Sunplus established a partnership with Shenzhen Ankai Microelectronics
Technology Co., Ltd. in order to establish a multimedia chips platform, which
combines Ankai’s applications of multimedia chips and Skyworks’s radio
functions.





Our
product, T520 Beetles, was awarded by Sina.com as the Most Popular Mobile Phone
for Female.





May 2005
- our design SP-8 for the product CECT S569 was awarded top 100 iF Asia design.
SP-8 was also awarded the Fashion Color Nominate Prize.





On August
16, 2005 - we completed a reverse merger with Amber Link and Wise Target and
currently we own 95% of Sunplus.





May 2006
- Sunplus received the ISO9001:2000 certification of quality management
system.





August
2006 - Sunplus and VIA Technologies Inc., Ltd. (TSEC: 2388), a leading chipset
solution provider, established a partnership for Global Systems for Mobile
Communications (GSM) handsets development.





December
2006 - Sunplus and MediaTek Inc., Ltd. (“MTK”) (TSEC: 2454), a leading chipset
solution provider based in Taiwan, entered into a partnership agreement to
jointly develop multi-media Global Systems for Mobile Communications (GSM)
handsets for the mobile telecommunications market in China.





January
2007 - Sunplus re-launched a partnership with Anyka Inc., a Silicon Valley based
company, which enabled us to access the new technology of Infineon, a leading
chipset solutions provider headquartered in Germany.





January
2007 - Sunplus established JiaXun





February
2007 - Sunplus acquired RF design team from Simiens&BenQ, and extended our
design service in RF design industry.





March
2007 - JiaXun, a 100% subsidiary of Sunplus, and Sunplus respectively acquired
20% and 80% interests in Fujian QiaoXing, which would focus on the manufacture
of telephone and mobile components.





May 2007
- Sunplus received six copyrights for its designed software. All of them are
games and applications for mobile phone.





May 2007
- Sunplus was awarded “Software Company” by Ministry of Information Industry of
China.





October
2007 - Sunplus kicked off the world’s first phone solution which combined with
ECG (Electrocardiogram) monitor function.




Page 6 of
41




February
2008 - Sunplus reached agreement with Infineon Technologies Asia Pacific Pte
Ltd. to develop Tire Pressure Monitor System (TPMS) sensors. It’s the first step
by Sunplus to enter the Auto-Mobile Electronic Design market.





In 2008 -
Sunplus has developed GSM-R device and system for railway network in
China.





March
2009 -Sunplus disposed of its 80% interest in Fujian QiaoXing.





April
2009 - Sunplus disposed of its 100% interest in JiaXun.





Services
and Products





We seek
to maintain and strengthen our position as a provider of high quality mobile
handset design services.  We tailor-make our services and products based on
the requirements of our customers.  Our services mainly
include:





Design
Service





Mobile
handset design:  We have special project teams to work closely with our
customers to monitor and coordinate the progress of each new design
project.





Industrial
and mechanical design:  We design the exterior outlook and mechanical
structure of a mobile handset.  We adopt the user-orientation design
concept and focus our product design on the personality of target
end-users.





Hardware
design:  In addition to the design of the core printed circuit board
layout, we have also set up special engineering teams on the design of baseband
and radio frequency parts of mobile handsets based on chip
platforms.





Software
design:  We design the software system for the mobile handset and its
functional modules.  We are capable of developing our own software in
man-machine-interface and the driver software for LCD display, camera, harmonic
ring tones and MP3 functions.





Auto
Mobile wireless device design:  As of June 2008, we developed a GPS
device and Tire Pressure Monitor System (TPMS) sensors. We are capable of
designing other devices and systems related to the automobile wireless
technology.





Railway
wireless system design:  We developed GSM-R device and system for
railway network. We are capable of developing devices and systems related to
railway wireless technology.





Other
Design Services: We can also provide design services in relation to the design
of other electronic devices based on wireless technology, such as design in GPS
device and  Radio Frequency design.





Production
Services





Based on
the request of our customers, we also manufacture the components of mobile
handsets.  We subcontract the production work to third party manufacturers
mostly in the Shanghai area.  We have a quality assurance team to monitor
the production process to ensure the products can meet our quality
requirements.





Components:
 These mainly include printed circuit boards (PCB) and printed circuit
board assembly (PCBA).  They are the backbones of mobile
handsets.




Page 7 of
41




Business
Model





We are
one of the larger wireless telecommunication design houses in China. We generate
our revenue mainly by charging design services fees and royalty fees and by
selling mobile phone components.





Revenue
from Design Services





We charge
design fees directly or indirectly for design solutions or services provided by
us. The design fee consists of NRE (non-recurring engineering) fees and royalty
fees.





NRE fees
are one-off fees for a certain design project. Typically, NRE fee is required
before we formally launch the project. We will start the development of a
certain solution only if we have received the pre-paid NRE fee. To minimize the
operation risk, the NRE fee should be no less than the projected R&D fee for
a certain design solution.





We also
charge royalty fees based upon the product sales volume of our customers. When
the whole handset is sold in the market, we charge royalty fees monthly on every
handset manufactured by our customers using our designs. We usually ask for a
minimum volume term in our contracts to encourage larger volume order in a
certain period of time.





Revenue
from Sales of Handsets and Components





We also
provide production support to facilitate our customers’ manufacture of mobile
handsets and components. By closely working with our OEMs, we manufacture and
sell PCBs, PCBAs and handsets to our customers. We are fully responsible for
material purchases, cost control and quality control.





Competitive
Strengths





Strategic
Relationships with Business Partners





As the
mobile handset industry is characterized by rapid technological changes, it is
essential for us to keep abreast of and have access to the latest technologies
by working closely with the world’s leading technology and platform providers.
We continue to work closely with VIA Technologies Inc. (VIA), MediaTek Inc.,
Ltd.(MTK), Anyka Inc.(Anyka), Infineon Inc.(Infineon) as our strategic partners
which enables us to expand our product coverage. We believe we are one of the
first independent mobile handset design houses in China to work with Skyworks,
Inc (Skyworks), which has established a dedicated support team in Shanghai to
support us in our design process.





We have
also established good relationships with subcontractors which provide production
services for mobile phone components.





Quick
Market Response





We pursue
a market-oriented product development strategy, grasping end-users’ preferences
and tastes. Our experience and expertise enables us to complete a design
solution in only two to three months, to ensure our designs are one step ahead
of our competitors and leading market trends.





Strong
R&D capability





We have a
professional and competent team to handle the wide spectrum of mobile phone
design jobs, including industrial design, structural design, electronics design,
software design and machine-man interface design. Some of our engineers used to
be employed by mobile communication leaders such as Motorola, Siemens or BenQ.
Our professional industrial design team won the IF Asia Design Award Winner in
2005.




Page 8 of
41




We are
one of few design houses in China that are able to develop new mobile phones
based on chip-level modules, which can enhance the flexibility of the product
design in terms of handset size and functionalities.





Customized
Products and Market Knowledge





We design
many of our products based on our customers’ specifications. We work closely
with mobile device manufacturers and brand name owners to understand their needs
and product roadmaps. We also interface with our customers regularly to
understand the mobile handset market, consumer preferences and trends in the
industry. This allows us to predict future trends and to assist our customers in
the development of new products and functions and the setting of a price
range.





Current
Business Development





During
the fiscal year ended March 31, 2009, we launched 32 mobile handset solutions
covering the high-end, mid-end and low-end markets. We kept working closely with
strategic partners VIA, MTK, Anyka, Infineon , Skyworks and other technology
partners. During the fiscal year ended March 31, 2009, we developed mobile phone
solutions with new functions including but not limited to smart touch screen,
voice operation system, GPS and CMMB(China Mobile Multimedia Broadcasting). We
can tailor-make solutions featuring functions such as handwriting recognition,
digital cameras, Dual speakers, GPRS, FM radio, dictionaries, webcams, blue
tooth, E-mail, MP3, MPEG4 3GP, WAP, USB, T-Flash, MMS, CMOS, TV-out, fingerprint
authentication, firewall and sound recorder. In the fiscal year ended March 31,
2009, we also extended design of TDS-CDMA solutions and WCDMA
solutions.





The
company has postponed development of some new solutions because of less
favorable market condition. As a result of the worldwide financial crisis, the
demand in the Mainland market, especially the Mid-end and High-end market, as
well as the overseas market has been shrinking since the second half of fiscal
year ended March 31, 2009.





The
company also postponed the development of certain other technologies including
TPMS.





Following
the resignation of Mr. Jie Shi on March 31 2009 and Mr. Albert Wai Chiu Leung on
April 1, 2009, the Board appointed Mr. Xiaofeng Li and Mr. Xiangning Qin to
serve as the Chief Executive Officer and Chief Financial Officer respectively on
April 1, 2009.




We moved
part of our design team to Huizhou city in Guangdong. As most of our customers
are located in Guangdong province, we set up an office in Huizhou and sent part
of our design team there.





Products
Geographic Coverage





In terms
of revenue, over 90% of our mobile handsets designed by us were within the China
and Hong Kong markets. The company did not sell products to consumers directly,
but sell through the networks of our customers. According to sales information
provided by our customers, products designed or manufactured by us were sold in
major cities, secondary cities and small towns throughout China, covering all
provinces of China.





Starting
from 2006, we began to sell whole mobile handsets products through our sales
agents. Our products are sold to nine different countries mainly in Southeast
Asia, Eastern Europe and Latin America.





Quality
Assurance





We
believe that a high standard quality management system is crucial for
maintaining our reputation. Our quality assurance team monitors hardware,
software and mechanical design teams’ performance to ensure strict adherence to
the quality standards required by our customers. The team conducts product
reliability tests, including accelerated life tests, climatic stress tests and
mechanical endurance tests. The team is also responsible for components
qualification, prototype quality assurance, and submission of prototypes for FTA
(Full Type Approval) and CTA (China Testing Alliance) certifications. In
addition, the team collects and organizes all relevant written documents
produced and used throughout the design process.




Page 9 of
41




FTA
certifies that a mobile handset submitted for testing has passed tests for its
reliability and conformance with global standards.





CTA
certifies that the use of telecommunication terminal equipment in the national
telecommunications network has been approved and complies with the requirements
for network access and the national standards established by the Ministry of
Information Industry.





Through
our quality assurance team, we adopt stringent quality procedures at the design
stage, incoming quality assurance of components and parts, assembly testing and
final quality testing. Our selection criteria for suppliers include reputation,
time to supply, availability of components and parts, etc.





Sales
and marketing





Our sales
force consists of approximately 15 salespeople and support personnel. Most of
them have many years of experience in the telecommunication industry. They are
responsible for maintaining and establishing client relationships, trying to
fulfill customers’ special needs, and introducing new technologies and
applications in telecommunication field.





Intellectual
Property





We
believe protection of our intellectual property rights is extremely important
for our continuous success. As of the March 31, 2009, we have registered 17
patents, of which 15 have been approved. All of them are patents for product
appearance. Besides, we have registered six copyrights for software. All of them
are games and applications for mobile phone.





Our
Competitors





There are
more than a hundred mobile phone design houses in China, including market
leaders such as China TechFaith Wireless Communication Technology Limited,
Shanghai Longcheer Telecommunication Co.,Ltd and SIMCom Information Technology
Ltd. Other major design houses include Beijing Tianyu Communication Equipment
Co.Ltd, Shanghai WenTai Communication Technology Co., Ltd., Shanghai Huaqi
Telecom Technology Co., Ltd., Shenzhen Jinwave Technology Co., Ltd. and Shenzhen
Yulong Communication Technology Co., Ltd. We believe Shanghai Longcheer and
Shanghai Simcom are our most direct competitors.





Certain
of our competitors are substantially larger and have significantly greater
financial, marketing, research and development, technological and operating
resources and broader product lines than we do.





We think
that competition in our markets is based primarily on technology innovation,
product performance, reputation, delivery times, customer support and price. We
believe we are among the few design houses which are capable of software design
and hardware design as well as performing the whole spectrum of design
activities and developing functions or applications at chipset-level
modules.





Employees





As of
March 31, 2009, we had approximately 85 full-time employees employed in Greater
China. From time to time we employ independent contractors to support our
production, engineering, marketing, and sales departments. The company cut about
40 employees in fiscal year ended March 31, 2009, because of the decline in
business.




Page 10
of 41





Web Site Access to Our Periodic SEC
Reports





You may
read and copy any public reports we filed with the SEC at the SEC’s Public
Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC also maintains an Internet site http://www.sec.gov
that contains reports and information statements, and other information that we
filed electronically.





Item
      1A.
            Risk
      Factors.





Set forth
below is a description of factors that may affect our business, results of
operations and share price from time to time.





Our
sales and profitability depend on the continued growth of the mobile
communications industry as well as the growth of the new market segments within
that industry in which we have recently invested. If the mobile communications
industry does not grow as we expect, or if the new market segments on which we
have chosen to focus and in which we have recently invested grow less than
expected, or if new faster-growing market segments emerge in which we have not
invested, our sales and profitability may be adversely affected.





Our
business depends on continued growth in mobile communications in terms of the
number of existing mobile subscribers who upgrade or simply replace their
existing mobile devices, the number of new subscribers and increased usage. As
well, our sales and profitability are affected by the extent to which there is
increasing demand for, and development of, value-added services, leading to
opportunities for us to successfully market mobile devices that feature these
services. These developments in our industry are to a certain extent outside of
our control. For example, we are dependent on operators in highly penetrated
markets to successfully introduce services that cause a substantial increase in
usage of voice and data. Further, in order to support a continued increase in
mobile subscribers in certain low-penetration markets, we are dependent on
operators to increase their sales volumes of lower-cost mobile devices and to
offer affordable rate. If operators are not successful in their attempts to
increase subscriber numbers, stimulate increased usage or drive replacement
sales, our business and results of operations could be materially adversely
affected.





Our
industry continues to undergo significant changes. First, the mobile
communications, information technology, media and consumer electronics
industries are converging in some areas into one broader industry leading to the
creation of new type of mobile devices, services and ways to use mobile devices.
Second, while participants in the mobile communications industry once provided
complete products and solutions, industry players are increasingly providing
specific hardware and software layers for products and solutions. As a result of
these changes, new market segments within our industry have begun to emerge and
we have made significant investments in new business opportunities in certain of
these market segments, such as smartphones, imaging, games, music and enterprise
mobility infrastructure. However, a number of the new market segments in the
mobile communications industry are still in the early states of their
development, and it may be difficult for us to accurately predict which new
market segments are the most advantageous for us to focus on. As a result, if
the segments on which we have chosen to focus grow less than expected, we may
not receive a return on our investment as soon as we expect, or at all. We may
also forego growth opportunities in new market segments of the mobile
communications industry on which we do not focus.





Our
results of operations, particularly our profitability, may be adversely affected
if we do not successfully manage price erosion related to our
products.





In the
future, if, for competitive reasons, if we need to lower the selling prices of
certain of our products and if we cannot lower our costs at the same rate or
faster, this may have a material adverse effect on our business and results of
operations, particularly our profitability. To mitigate the impact of product
and service mix shifts on our profitability, we implement product segmentation
with the aim of designing appropriate features with an appropriate cost basis
for each customer segment. Likewise, we endeavor to mitigate the impact on our
profitability of price erosion of certain features and functionalities by
seeking to correctly time the introduction of new products, in order to align
such introductions with declines in the prices of relevant components. We cannot
predict with any certainty whether or to what extent we may need to lower prices
for competitive reasons again and how successful we will be in aligning our cost
basis to the pricing at any given point in time. Price erosion is a normal
characteristic of the mobile devices industry, and the products and solutions
offered by us are also subject to natural price erosion over time. If we cannot
reduce our costs at the same rate, our business may be materially adversely
affected.




Page 11
of 41




We
must develop or otherwise acquire complex, evolving technologies to use in our
business. If we fail to develop these technologies or to successfully
commercialize them as new advanced products and solutions that meet customer
demand, or fail to do so on a timely basis, it may have a material adverse
effect on our business, our ability to meet our targets and our results of
operations.





In order
to succeed in our markets, we believe that we must develop or otherwise acquire
complex, evolving technologies to use in our business. However, the development
and use of new technologies, applications and technology platforms for our
mobile devices involves time, substantial costs and risks both within and
outside of our control. This is true whether we develop these technologies
internally, by acquiring or investing in other companies or through
collaboration with third parties.





The
technologies, functionalities and features on which we choose to focus may not
achieve as broad or timely customer acceptance as we expect. This may result
from numerous factors including the availability of more attractive alternatives
or a lack of sufficient compatibility with other existing technologies, products
and solutions. Additionally, even if we do select the technologies,
functionalities and features that customers ultimately want, we or the companies
that work with us may not be able to bring them to the market at the right
time.





Furthermore,
as a result of ongoing technological developments, our products and solutions
are increasingly used together with components or layers that have been
developed by third parties, whether or not we have authorized their use with our
products and solutions. However, such components, such as batteries, or layers,
such as software applications, may not be compatible with our products and
solutions and may not meet our and our customers' quality, safety or other
standards. As well, certain components or layers that may be used with our
products may enable our products and solutions to be used for objectionable
purposes, such as to transfer content that might be hateful or derogatory. The
use of our products and solutions with incompatible or otherwise substandard
components or layers, or for purposes that are inappropriate, is largely outside
of our control and could harm our reputation in the industry.





We
need to understand the different markets in which we operate and meet the needs
of our customers, which include mobile network operators, distributors,
independent retailers and enterprise customers. We need to have a competitive
product portfolio, and to work together with our operator customers to address
their needs. Our failure to identify key market trends and to respond timely and
successfully to the needs of our customers may have a material adverse impact on
our market share, business and results of operations.





We serve
a diverse range of customers, ranging from mobile network operators,
distributors, independent retailers to enterprise customers, across a variety of
markets. In many of these markets, the mobile communications industry is at
different stages of development, and many of these markets have different
characteristics and dynamics, for example, in terms of mobile penetration rates
and technology, feature and pricing preferences. Establishing and maintaining
good relationships with our customers and understanding trends and needs in
their markets require us to constantly obtain and evaluate a complex array of
feedback and other data. We must do this efficiently in order to be able to
identify key market trends and address our customers' needs proactively and in a
timely manner. If we fail to analyze correctly and respond timely and
appropriately to customer feedback and other data, our business may be
materially adversely affected.





Certain
mobile network operators require mobile devices to be customized to their
specifications, by requesting certain preferred features, functionalities or
design, together with co-branding with the network operator's brand. We believe
that customization is an important element in gaining increased operator
customer satisfaction and we are working together with operators on product
planning as well as accelerating product hardware and software customization
programs. These developments may result in new challenges as we provide
customized products, such as the need for us to produce mobile devices in
smaller lot sizes, which can impede our economies of scale, or the potential for
the erosion of the Sunplus brand, which we consider to be one of our key
competitive advantages.




Page 12
of 41




In order
to meet our customers' needs, we need to introduce new devices on a timely basis
and maintain a competitive product portfolio. For us, a competitive product
portfolio means a broad and balanced offering of commercially appealing mobile
devices with attractive features, functionality and design for all major user
segments and price points. If we do not achieve a competitive portfolio, we
believe that we will be at a competitive disadvantage, which may lead to lower
revenue and lower profits.




The
competitiveness of our portfolio is also influenced by the value of the Sunplus
brand. A number of factors, including actual or even alleged defects in our
products and solutions, may have a negative effect on our reputation and erode
the value of the Sunplus brand.





Competition
in our industry is intense. Our failure to respond successfully to changes in
the competitive landscape may have a material adverse impact on our business and
results of operations.





The
markets for our products and solutions are intensely competitive. Industry
participants compete with each other mainly on the basis of the breadth and
depth of their product portfolios, price, operational and manufacturing
efficiency, technical performance, product features, quality, customer support
and brand recognition. We are facing increased competition from both our
traditional competitors in the mobile communications industry as well as a
number of new competitors, particularly from countries where production costs
tend to be lower. Some of these competitors have used, and we expect will
continue to use, more aggressive pricing strategies, different design approaches
and alternative technologies than ours. In addition, some competitors have
chosen a strategy of focusing on productization based on commercially available
technologies and components, which may enable them to introduce products faster
and with lower levels of research and development spending than our
company.




As a
result of developments in our industry, we also expect to face new competition
from companies in related industries, such as consumer electronics manufacturers
and business device and solution providers, including but not limited to Dell,
HP, Microsoft, Nintendo, Palm, Research in Motion and Sony. Additionally,
because mobile network operators are increasingly offering mobile devices under
their own brand, we face increasing competition from non-branded mobile device
manufacturers. If we cannot respond successfully to these competitive
developments, our business and results of operations may be materially adversely
affected.





Reaching
our sales, profitability, volume and market share targets depends on numerous
factors. These include our ability to offer products and solutions that meet the
demands of the market and to manage the prices and costs of our products and
solutions, our operational efficiency, the pace of development and acceptance of
new technologies, our success in the business areas that we have recently
entered, and general economic conditions. Depending on those factors, some of
which we may influence and others of which are beyond our control, we may fail
to reach our targets and we may fail to provide accurate forecasts of our sales
and results of operations.





A variety
of factors discussed throughout these Risk Factors could affect our ability to
reach our targets and give accurate forecasts. Although, we can influence some
of these factors, some of them depend on external factors that are beyond our
control.  In our mobile device businesses, we seek to maintain healthy
levels of sales and profitability through offering a competitive portfolio of
mobile devices, growing faster than the market, working to improve our
operational efficiency, controlling our costs, and targeting timely and
successful product introductions and shipments. The quarterly and annual sales
and operating results in our mobile device businesses also depend on a number of
other factors that are not within our control. Such factors include the global
growth in mobile device volumes, which is influenced by, among other factors,
regional economic factors, competitive pressures, regulatory environment, the
timing and success of product and service introductions by various market
participants, including network operators, the commercial acceptance of new
mobile devices, technologies and services, and operators' and distributors'
financial situations. Our sales and operating results are also impacted by
fluctuations in exchange rates and at the quarterly level by seasonality. In
developing markets, the availability and cost, through affordable tariffs, of
mobile phone service compared with the availability and cost of fixed line
networks may also impact volume growth.




Page 13
of 41




In our
mobile networks business, we also seek to maintain healthy levels of sales and
profitability and try to grow faster than the market. Our networks business's
quarterly and annual net sales and operating results can be affected by a number
of factors, some of which we can influence, such as our operational efficiency,
the level of our research and development investments and the deployment
progress and technical success we achieve under network contracts. Other
relevant factors include operator investment behavior, which can vary
significantly from quarter to quarter, competitive pressures and general
economic conditions although these are not within our control.





The new
business areas that we have entered may be less profitable than we currently
foresee, or they may generate more variable operating results than we currently
foresee. We expect to incur short-term operating losses in certain of these new
business areas given our early stage investments in research and development and
marketing in particular. Also our efforts in managing prices and costs in the
long-term, especially balancing prices and sales volumes with research and
development costs, may prove to be inadequate.





Although
we may announce forecasts of our results of operations, uncertainties affecting
any of these factors, particularly during difficult economic conditions, render
our forecasts difficult to make, and may cause us not to reach the targets that
we have forecasted, or to revise our estimates.





Our
sales and results of operations could be adversely affected if we fail to
efficiently manage our manufacturing and logistics without interruption, or fail
to ensure that our products and solutions meet our and our customers' quality,
safety and other requirements and are delivered in time.





Our
manufacturing and logistics are complex, require advanced and costly equipment
and include outsourcing to third parties. These operations are continuously
modified in an effort to improve manufacturing efficiency and flexibility. We
may experience difficulties in adapting our supply to the demand for our
products, ramping up or down production at our facilities, adopting new
manufacturing processes, finding the timeliest way to develop the best technical
solutions for new products, or achieving manufacturing efficiency and
flexibility, whether we manufacture our products and solutions ourselves or
outsource to third parties. Such difficulties may have a material adverse effect
on our sales and results of operations and may result from, among other things:
delays in adjusting or upgrading production at our facilities, delays in
expanding production capacity, failure in our manufacturing and logistics
processes, failures in the activities we have outsourced, and interruptions in
the data communication systems that run our operations. Also, a failure or an
interruption could occur at any stage of our product creation, manufacturing and
delivery processes, resulting in our products and solutions not meeting our and
our customers' quality, safety and other requirements, or being delivered late,
which could have a material adverse effect on our sales, our results of
operations and reputation and the value of the Sunplus brand.





We
depend on our suppliers for the timely delivery of components and for their
compliance with our supplier requirements, such as, most notably, our and our
customers' product quality, safety and other standards. Their failure to do so
could adversely affect our ability to deliver our products and solutions
successfully and on time.





Our
manufacturing operations depend to a certain extent on obtaining adequate
supplies of fully functional components on a timely basis. Our principal supply
requirements are for electronic components, mechanical components and software,
which all have a wide range of applications in our products. Electronic
components include integrated circuits, microprocessors, standard components,
memory devices, cameras, displays, batteries and chargers while mechanical
components include covers, connectors, key mats and antennas. In addition, a
particular component may be available only from a limited number of suppliers.
Suppliers may from time to time extend lead times, limit supplies or increase
prices due to capacity constraints or other factors, which could adversely
affect our ability to deliver our products and solutions on a timely basis.
Moreover, even if we attempt to select our suppliers and manage our supplier
relationships with scrutiny, a component supplier may fail to meet our supplier
requirements, such as, most notably, our and our customers' product quality,
safety and other standards, and consequently some of our products are
unacceptable to us and our customers, or we may fail in our own quality
controls. Moreover, a component supplier may experience delays or disruption to
its manufacturing, or financial difficulties. Any of these events could delay
our successful delivery of products and solutions, which meet our and our
customers' quality, safety and other requirements, or otherwise adversely affect
our sales and our results of operations. Also, our reputation and brand value
may be affected due to real or merely alleged failures in our products and
solutions.




Page 14
of 41




We
are developing a number of our new products and solutions together with other
companies. If any of these companies were to fail to perform, we may not be able
to bring our products and solutions to market successfully or in a timely way
and this could have a material adverse impact on our sales and
profitability.





We
continue to invite the providers of technology, components or software to work
with us to develop technologies or new products and solutions. These
arrangements involve the commitment by each company of various resources,
including technology, research and development efforts, and personnel. Although
the target of these arrangements is a mutually beneficial outcome for each
party, our ability to introduce new products and solutions that meet our and our
customers' quality, safety and other standards successfully and on schedule
could be hampered if, for example, any of the following risks were to
materialize: the arrangements with the companies that work with us do not
develop as expected, the technologies provided by the companies that work with
us are not sufficiently protected or infringe third parties' intellectual
property rights in a way that we cannot foresee or prevent, the technologies,
products or solutions supplied by the companies that work with us do not meet
the required quality, safety and other standards or customer needs, our own
quality controls fail, or the financial standing of the companies that work with
us deteriorates.





Our
operations rely on complex and highly centralized information technology systems
and networks. If any system or network disruption occurs, this reliance could
have a material adverse impact on our operations, sales and operating
results.





Our
operations rely to a significant degree on the efficient and uninterrupted
operation of complex and highly centralized information technology systems and
networks, which are integrated with those of third parties. Any failure or
disruption of our current or future systems or networks could have a material
adverse effect on our operations, sales and operating results. Furthermore, any
data leakages resulting from information technology security breaches could also
adversely affect us.





All
information technology systems are potentially vulnerable to damage or
interruption from a variety of sources. We pursue various measures in order to
manage our risks related to system and network disruptions, including the use of
multiple suppliers and available information technology security. However,
despite precautions taken by us, an outage in a telecommunications network
utilized by any of our information technology systems, virus or other event that
leads to an unanticipated interruption of our information technology systems or
networks could have a material adverse effect on our operations, sales and
operating results.




Page 15
of 41




Our
products and solutions include increasingly complex technology involving
numerous new proprietary technologies, as well as some developed or licensed to
us by certain third parties. As a consequence, evaluating the protection of the
technologies we intend to use is more and more challenging, and we expect
increasingly to face claims that we have infringed third parties' intellectual
property rights. The use of increasingly complex technology may also result in
increased licensing costs for us, restrictions on our ability to use certain
technologies in our products and solution offerings, and/or costly and
time-consuming litigation. Third parties may also commence actions seeking to
establish the invalidity of intellectual property rights on which we
depend.





Our
products and solutions include increasingly complex technology involving
numerous new proprietary technologies, as well as some developed or licensed to
us by certain third parties. As the amount of such proprietary technologies
needed for our products and solutions continues to increase, the number of
parties claiming rights continues to increase and become more fragmented within
individual products, and as the complexity of the technology and the overlap of
product functionalities increases, the possibility of more infringement and
related intellectual property claims against us also continues to increase. The
holders of patents potentially relevant to our product and solution offerings
may be unknown to us, or may otherwise make it difficult for us to acquire a
license on commercially acceptable terms. There may also be technologies
licensed to and relied on by us that are subject to claims of infringement or
other corresponding allegations by others which could damage our ability to rely
on such technologies.





In
addition, although we endeavor to ensure that companies that work with us
possess appropriate intellectual property rights or licenses, we cannot fully
avoid risks of intellectual property rights infringement created by suppliers of
components and various layers in our products and solutions or by companies with
which we work in cooperative research and development activities. Similarly, we
and our customers may face claims of infringement in connection with our
customers' use of our products and solutions. Finally, as all technology
standards, including those used and relied on by us, include some intellectual
property rights, we cannot fully avoid risks of a claim for infringement of such
rights due to our reliance on such standards. We believe that the number of
third parties declaring their intellectual property to be relevant to these
standards is increasing, which may increase the likelihood that we will be
subject to such claims in the future.





Any
restrictions on our ability to sell our products and solutions due to expected
or alleged infringements of third party intellectual property rights and any
intellectual property rights claims, regardless of merit, could result in
material losses of profits, costly litigation, the payment of damages and other
compensation, the diversion of the attention of our personnel, product shipment
delays or the need for us to develop non-infringing technology or to enter into
royalty or licensing agreements. If we were unable to develop non-infringing
technology, or if royalty or licensing agreements were not available on
commercially acceptable terms, we could be precluded from making and selling the
affected products and solutions. As new features are added to our products and
solutions, we may need to acquire further licenses, including from new and
sometimes unidentified owners of intellectual property. The cumulative costs of
obtaining any necessary licenses are difficult to predict and may over time have
a negative effect on our operating results.





In
addition, other companies may commence actions seeking to establish the
invalidity of our intellectual property, for example, patent rights. In the
event that one or more of our patents are challenged, a court may invalidate the
patent or determine that the patent is not enforceable, which could harm our
competitive position. If any of our key patents are invalidated, or if the scope
of the claims in any of these patents is limited by a court decision, we could
be prevented from licensing the invalidated or limited portion of our
intellectual property rights. Even if such a patent challenge is not successful,
it could be expensive and time consuming, divert management attention from our
business and harm our reputation. Any diminution of the protection that our own
intellectual property rights enjoy could cause us to lose some of the benefits
of our investments in R&D, which may have a negative effect on our results
of operations.




Page 16
of 41




If
we are unable to recruit, retain and develop appropriately skilled employees, we
may not be able to implement our strategies and, consequently, our results of
operations may suffer.





We must
continue to recruit, retain and through constant competence training develop
appropriately skilled employees with a comprehensive understanding of our
businesses and technologies. As competition for skilled personnel remains keen,
we seek to create a corporate culture that encourages creativity and continuous
learning. We are also continuously developing our compensation and benefit
policies and taking other measures to attract and motivate skilled personnel.
Nevertheless, we have encountered in the past, and may encounter in the future,
shortages of appropriately skilled personnel, which may hamper our ability to
implement our strategies and harm our results of operations.





The
global networks business relies on a limited number of customers and large
multi-year contracts. Unfavorable developments under such a contract or in
relation to a major customer may affect our sales, our results of operations and
cash flow adversely.





Large
multi-year contracts, which are typical in the networks industry, include a risk
that the timing of sales and results of operations associated with these
contracts will be different than expected. Moreover, they usually require the
dedication of substantial amounts of working capital and other resources, which
impacts our cash flow negatively. Any non-performance by us under these
contracts may have significant adverse consequences for us because network
operators have demanded and may continue to demand stringent contract
undertakings such as penalties for contract violations.





Our
sales derived from, and assets located in, emerging market countries may be
adversely affected by economic, regulatory and political developments in those
countries. As sales from these countries represent an increasing portion of our
total sales, economic or political turmoil in these countries could adversely
affect our sales and results of operations. Our investments in emerging market
countries may also be subject to other risks and uncertainties.





We
generate sales from and have invested in various emerging market countries. As
sales from these countries represent an increasing portion of our total sales,
economic or political turmoil in these countries could adversely affect our
sales and results of operations. Our investments in emerging market countries
may also be subject to risks and uncertainties, including unfavorable taxation
treatment, exchange controls, challenges in protecting our intellectual property
rights, nationalization, inflation, incidents of terrorist activity, currency
fluctuations, or the absence of, or unexpected changes in, regulation as well as
other unforeseeable operational risks.





Allegations
of health risks from the electromagnetic fields generated by base stations and
mobile devices, and the lawsuits and publicity relating to them, regardless of
merit, could affect our operations negatively by leading consumers to reduce
their use of mobile devices or by causing us to allocate monetary and personnel
resources to these issues.





There has
been public speculation about possible health risks to individuals from exposure
to electromagnetic fields from base stations and from the use of mobile devices.
While a substantial amount of scientific research conducted to date by various
independent research bodies has indicated that these radio signals, at levels
within the limits prescribed by public health authority safety standards and
recommendations, present no discernable adverse effect on human health, we
cannot be certain that future studies, irrespective of their scientific basis,
will not suggest a link between electromagnetic fields and adverse health
effects that would adversely affect our sales and share price. Research into
these issues is ongoing by government agencies, international health
organizations and other scientific bodies in order to develop a better
scientific and public understanding of these issues.




Although
Sunplus products and solutions are designed to meet all relevant safety
standards and recommendations globally, no more than a perceived risk of adverse
health effects of mobile communications devices could adversely affect us
through a reduction in sales of mobile devices or increased difficulty in
obtaining sites for base stations, and could have a negative effect on our
reputation and brand value as well as harm our share price.




Page 17
of 41




Changes
in various types of regulation in countries around the world could affect our
business adversely.





Our
business is subject to direct and indirect regulation in each of the countries
in which we, and the companies with which we work or our customers do business.
As a result, changes in various types of regulations applicable to current or
new technologies, products or services could affect our business adversely. For
example, it is in our interest that the Federal Communications Commission
maintains a regulatory environment that ensures the continued growth of the
wireless sector in the United States. In addition, changes in regulation
affecting the construction of base stations and other network infrastructure
could adversely affect the timing and costs of new network construction or
expansion and the commercial launch and ultimate commercial success of these
networks.




Moreover,
the implementation of new technological or legal requirements, such as the
requirement in the United States that all handsets must be able to indicate
their physical location, could impact our products and solutions, manufacturing
or distribution processes, and could affect the timing of product and solution
introductions, the cost of our production, products or solutions as well as
their commercial success. Finally, export control, tariff, environmental, safety
and other regulation that adversely affects the pricing or costs of our products
and solutions as well as new services related to our products could affect our
net sales and results of operations. The impact of these changes in regulation
could affect our business adversely even though the specific regulations do not
always directly apply to us or our products and solutions.





Our
stock price has been historically volatile and may continue to be volatile,
which may make it more difficult for you to resell shares when you want at
prices you find attractive.





The
trading price of our ordinary shares has been and may continue to be subject to
considerable daily fluctuations. During the twelve months ended March 31, 2009,
the closing sale prices of our ordinary shares on the Over-the-Counter Bulletin
Board ranged from $0.20 to $2.70 per share and the closing sale price on June
24, 2009 was $0.60 per share. Our stock price may fluctuate in response to a
number of events and factors, such as quarterly variations in operating results,
announcements of technological innovations or new products and media properties
by us or our competitors, changes in financial estimates and recommendations by
securities analysts, the operating and stock price performance of other
companies that investors may deem comparable, new governmental restrictions or
regulations and news reports relating to trends in our markets. In addition, the
stock market in general, and the market prices for China-related and
Internet-related companies in particular, have experienced extreme volatility
that often has been





Item
1B.   Unresolved Staff Comments.





None.





Item
      2.
            Properties.





As of
March 31, 2009, we have our headquarters in Shanghai, China and an office in
Huizhou, Guangdong, China.





Our
principal executive offices occupy an area of 140 square meters on the 9th floor
of YongSheng Building, Zhongshan Xi Road, Xuhui District, Shanghai, China. The
rental is $2,000 per month. We also rent 950 square meters of office space in
the QiaoXing Industry and Technology Zone, Tangquan, Huizhou, Guangdong, China.
The rental is $1,400 per month. These leased premises house the R&D and
design department, product testing facilities, maintenance and administrative
departments.





Item
      3.
            Legal
      Proceedings.





We are
not involved in any material pending legal proceedings at this time, and
management is not aware of any contemplated proceeding by any governmental
authority.




Page 18
of 41




Item
      4.
            Submission
      of Matters to a Vote of Security
Holders.





None.


PART
II.





Item
      5.
            Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities.





Our
common stock is listed on the Over-the-Counter Bulletin Board under the symbol
“TBYH.OB”.  As of June 24, 2009, there were: (i) 319 shareholders of
record, without giving effect to determining the number of shareholders who hold
shares in "street name" or other nominee status; (ii) no outstanding options to
purchase shares of our common stock; (iii) 30,088,174 outstanding shares of our
common stock, of which 12,139,937 shares are either freely tradable or eligible
for sale under Rule 144 or Rule 144K, and (v) no shares subject to registration
rights.




The
following table sets forth, for the fiscal quarters indicated, the high and low
closing prices as reported by the Over-the-Counter Bulletin Board. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions.




Sales
Price





High
                  
                  
                  LowFiscal
      2009First
      Quarter
                  
                  $
                  2.70
                  
                  
                  $
                  1.80Second
      Quarter
                  
                  $
                  2.36
                  
                  
                  $
                  1.55Third
      Quarter
                  
                  $
                  2.01
                  
                  
                  $
                  0.65Fourth
      Quarter
                  
                  $
                  0.63
                  
                  
                  $
                  0.20Fiscal
      2008First
      Quarter
                  
                  $
                  4.30
                  
                  
                  $
                  2.25Second
      Quarter
                  
                  $
                  4.20
                  
                  
                  $
                  2.15Third
      Quarter
                  
                  $
                  3.80
                  
                  
                  $
                  2.00Fourth
      Quarter
                  
                  $
                  3.20
                  
                  
                  $
                  1.91




Dividend
Policy





We have
never paid cash dividends and have no plans to do so in the foreseeable future.
Our future dividend policy will be determined by our Board of Directors and will
depend upon a number of factors, including our financial condition and
performance, our cash needs and expansion plans, income tax consequences, and
the restrictions that applicable laws and our credit arrangements then
impose.





Recent
Sales of Unregistered Securities




During
the year ended March 31, 2009, we did not issue any securities that were not
registered under the Securities Act of 1933, as amended (the “Securities
Act”).





Item
      6.
            Selected
      Financial Data.





The
following tables summarize the consolidated financial data of T-Bay Holdings,
Inc. for the periods presented. You should read the following financial
information together with the information under “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and our consolidated
financial statements and the related notes to these consolidated financial
statements appearing elsewhere in this Form 10-K.




Page 19
of 41





Year
      Ended
                  March
      31In
      thousands, except per share amounts2007
                
                
                2008
                
                
                2009(Restated)(1)
                
                
                (Restated)
      (1)Revenue
                
                $
                35,236
                
                
                $
                45,681
                
                
                $
                34,838Cost
      of sales
                
                $
                17,606
                
                
                $
                23,539
                
                
                $
                24,440Gross
      profit
                
                $
                17,630
                
                
                $
                22,142
                
                
                $
                10,398Depreciation
      and amortization
                
                $
                656
                
                
                $
                965
                
                
                $
                1,012Selling
      and distribution expenses
                
                $
                292
                
                
                $
                280
                
                
                $
                245General
      and administrative expenses
                
                $
                3,002
                
                
                $
                3,264
                
                
                $
                10,043Other
      operating expenses
                
                $
                -
                
                
                $
                -
                
                
                $
                5,075Other
      income
                
                $
                7
                
                
                $
                185
                
                
                $
                545Interest
      expense
                
                $
                3
                
                
                $
                3
                
                
                $
                -Income/(loss)
      before income taxes and minority interests
                
                $
                14,340
                
                
                $
                18,780
                
                
                $
                (4,420
                )Income
      tax
                
                $
                1,701
                
                
                $
                3,188
                
                
                $
                1,900Minority
      interests’ share of income/(loss)
                
                $
                429
                
                
                $
                659
                
                
                $
                (429
                )Loss
      from discontinued operations
                
                $
                7
                
                
                $
                379
                
                
                $
                2,822Net
      income/(loss) attributable to the Stockholders of the
    Company
                
                $
                12,210
                
                
                $
                14,554
                
                
                $
                (8,713
                )Earning/(loss)
      per Share — basic
                
                $
                0.41
                
                
                $
                0.48
                
                
                $
                (0.29
                )Earning/(loss)
      per Share — diluted
                
                $
                0.41
                
                
                $
                0.48
                
                
                $
                (0.29
                )





Year
      Ended
                        March
      31In
      thousands2007
                      
                      
                      2008
                      
                      
                      2009(Restated)
      (1)
                      
                      
                      (Restated)
      (1)Balance
      Sheet Data:Cash
      and cash equivalents
                      
                      $
                      23
                      
                      
                      $
                      23,330
                      
                      
                      $
                      20,493Total
      current assets
                      
                      $
                      25,783
                      
                      
                      $
                      43,227
                      
                      
                      $
                      48,585Assets
      of discontinued operations
                      
                      $
                      18,552
                      
                      
                      $
                      18,954
                      
                      
                      $
                      724Total
      assets
                      
                      $
                      52,473
                      
                      
                      $
                      65,664
                      
                      
                      $
                      51,867Accounts
      payable
                      
                      $
                      2,570
                      
                      
                      $
                      688
                      
                      
                      $
                      466Total
      current liabilities
                      
                      $
                      11,560
                      
                      
                      $
                      9,141
                      
                      
                      $
                      3,415Liabilities
      of discontinued operation
                      
                      $
                      3,942
                      
                      
                      $
                      3,313
                      
                      
                      $
                      -Long-term
      liabilities
                      
                      $
                      3,967
                      
                      
                      $
                      4,177
                      
                      
                      $
                      4,255Total
      stockholders’ equity
                      
                      $
                      31,720
                      
                      
                      $
                      49,689
                      
                      
                      $
                      41,929





(1)
            The
      comparative figures have been restated to conform with current year’s
      presentation of discontinued
operations.




Page 20
of 41





Item
      7.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation.





The
information in this discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements involve risks and uncertainties, including statements regarding our
capital needs, business strategy and expectations. Any statements contained
herein that are not statements of historical facts may be deemed to be
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may", "will", "should", "expect", "plan",
"intend", "anticipate", "believe", "estimate", "predict", "potential" or
"continue", the negative of such terms or other comparable terminology. Actual
events or results may differ materially. We disclaim any obligation to publicly
update these statements, or disclose any difference between its actual results
and those reflected in these statements. The information constitutes
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995.





Overview





For the
fiscal year ended March 31, 2009, our net revenue decreased by $10,843,000 from
$45,681,000 for the fiscal year ended March 31, 2008 to $34,838,000, which
represented a 23.7% decrease. Our net results changed from a profit of
$14,554,000, to a loss of $8,713,000. We reported loss per share of $0.29 in the
fiscal year ended March 31, 2009, compared to earnings per share of $0.48 in the
fiscal year ended March 31, 2008.





Net
Revenue





(in thousands of US
      dollars)
                        
                        
                        
                        
                        
                        
                        
                        Fiscal
      Year Ended March 31,2009
                        
                        
                        %
                        
                        
                        2008
                        
                        
                        %
                        
                        
                        Variance
                        
                        
                        %Sales
      of mobile phone components
                        
                        $
                        23,614
                        
                        
                        
                        67.8
                        
                        
                        
                        22,746
                        
                        
                        
                        49.8
                        
                        
                        $
                        868
                        
                        
                        
                        3.8
                        %Revenue
      from design services
                        
                        $
                        11,224
                        
                        
                        
                        32.2
                        
                        
                        
                        22,935
                        
                        
                        
                        50.2
                        
                        
                        $
                        -11,711
                        
                        
                        
                        -51.1
                        %NET
      REVENUE
                        
                        $
                        34,838
                        
                        
                        
                        100.0
                        
                        
                        
                        45,681
                        
                        
                        
                        100.0
                        
                        
                        $
                        -10,843
                        
                        
                        
                        -23.7
                        %





Our net
revenue was $34,838,000 for the fiscal year ended March 31, 2009, a decrease of
$10,843,000, or 23.7%, from $45,681,000 in the previous fiscal year.
 Revenue from sales of mobile phone components was $23,614,000 compared to
$22,746,000 in the last fiscal year, representing a 3.8% increase. Revenue from
design services decreased to $11,224,000 from $22,935,000 in the last fiscal
year, representing a 51.1% decrease.





Our net
revenue decrease mainly resulted from the decrease relating to design services.
In the fiscal year ended March 31, 2009, customers did not place as many orders
for design services. As a result, the percentage of our revenue from sales of
mobile phone components increased as compared with the prior year.





For the
fiscal year ended March 31, 2009, revenue from design services represented 32.2%
of total revenue, while revenue from sales of mobile phone components was 67.8%,
compared to 50.2% from design services and 49.8% from sales of mobile phone
components in the fiscal year ended March 31, 2008.





Detailed
information on sale of mobile phone components





Sale of
mobile phone components increased from $22,746,000 in fiscal 2008 to $23,614,000
in fiscal 2009, representing a 3.8% increase. The increase was mainly
attributable to the increase in the sales of PCB and PCBA boards, the key
components in the manufacture of mobile handsets.





We design
and manufacture PCB and PCBA boards according to our customers’ specifications.
Besides the amount of revenue from selling PCB and PCBA boards to our customers,
we charge royalty fees by the number of PCB and PCBA boards we provide. We
manufactured more PCB and PCBA boards for our customers for the fiscal year
ended March 31, 2009 when compared to the fiscal year ended March 31, 2008. The
increase in sales volume of PCB and PCBA boards led to the increase in sales of
components, despite the decrease in average selling price of our product in the
current year as a result of the worldwide financial crisis, the demand in the
Mainland market, especially the Mid-end and High-end market, as well as the
overseas market has been shrinking since the second half of fiscal year ended
March 31, 2009.




Page 21
of 41




We have
been selling our products in overseas markets through our sales agents in
Mainland China and Hong Kong since March 2006. Our products were sold to
end-users in nine different countries, mainly in Southeast Asia, Eastern Europe
and Latin America.





Detailed
information on revenue from design services





Revenue
from design services decreased from $22,935,000 for the fiscal year ended March
31, 2008 to $11,224,000, or 51.1%. The significant decrease mainly resulted from
the reduction of royalty fees per unit in the weak domestic market in China. As
a result of the global financial crisis, demand in the Mainland China market, as
well as the overseas market, has been shrinking since the second half of the
fiscal year ended March 31, 2009.





During
the fiscal year ended March 31, 2009, we launched 32 mobile handset solutions
covering the high-end, mid-end and low-end markets. We kept working closely with
strategic partners VIA, MTK, Anyka, Infineon, Skyworks and other technology
partners. During the fiscal year ended March 31, 2009, we developed mobile phone
solutions with new functions including but not limited to smart touch screen,
voice operation system, GPS and CMMB(China Mobile Multimedia Broadcasting). We
can tailor-make solutions featuring functions such as handwriting recognition,
digital cameras, dual speakers, GPRS, FM radio, dictionaries, webcams, blue
tooth, E-mail, MP3, MPEG4 3GP, WAP, USB, T-Flash, MMS, CMOS, TV-out, fingerprint
authentication, firewall, sound recorder and. In the fiscal year 2009, we also
extended the design of TDS-CDMA solutions and WCDMA solutions.




Cost
of Revenue





For the
fiscal year ended March 31, 2009, cost of revenue increased to $24,440,000 from
$23,539,000 in the fiscal year ended March 31, 2008, representing a 3.8%
increase.  Cost of revenue primarily consisted of the purchase cost of raw
and processed materials and indirect costs of salaries of engineers and
designers, research and development (“R&D”) and quality control
expenses.





Detailed
information on Cost of Revenue





(in
      thousands of US dollars)
                  
                  
                  
                  
                  Fiscal
      Year Ended
                    March
      31,2009
                  
                  
                  2008
                  
                  
                  Variance
                  
                  
                  %Cost
      of revenue
                  
                  $
                  24,440
                  
                  
                  $
                  23,539
                  
                  
                  $
                  901
                  
                  
                  
                  3.8
                  %Raw
      materials
                  
                  $
                  22,952
                  
                  
                  $
                  20,464
                  
                  
                  $
                  2,488
                  
                  
                  
                  12.2
                  %R&D
                  
                  $
                  17
                  
                  
                  $
                  420
                  
                  
                  $
                  -403
                  
                  
                  
                  -
      96.0
                  %Model
      making
                  
                  $
                  -
                  
                  
                  $
                  177
                  
                  
                  $
                  -177
                  
                  
                  
                  -
      100.0
                  %Salaries
                  
                  $
                  938
                  
                  
                  $
                  1,133
                  
                  
                  $
                  -195
                  
                  
                  
                  -
      17.2
                  %Business
      tax
                  
                  $
                  533
                  
                  
                  $
                  1,149
                  
                  
                  $
                  -616
                  
                  
                  
                  -
      53.6
                  %Other
      indirect costs
                  
                  $
                  -
                  
                  
                  $
                  196
                  
                  
                  $
                  -196
                  
                  
                  
                  -
      100.0
                  %





The
increase in cost of revenue was mainly attributable to an increase in the
purchase of raw materials. As we manufactured more PCB and PCBA boards for our
customers, we purchased more raw materials in the current fiscal year than in
the fiscal year ended March 31, 2008. Key materials for manufacture such as
chipsets and PCB blank boards accounted for a large proportion of cost of raw
materials. The cost of raw material was up by $901,000, or 3.8%, from
$20,464,000 for the fiscal year ended March 31, 2008 to $22,952,000 for the
fiscal year ended March 31, 2009.




Page 22
of 41




During
the two years ended March 31, 2009 and 2008, research and development costs
amounting to $17,000 and $420,000, respectively, were charged to cost of
revenue. The decrease was mainly the result of stringent cost
control.





Business
tax decreased $616,000 from $1,149,000 for the fiscal year ended March 31, 2008
to $533,000 for the fiscal year ended March 31, 2009. The decrease was mainly
due to the decrease in revenue from design services which is subject to business
tax.





Gross
profit





Our gross
profit was $10,398,000 for the fiscal year ended March 31, 2009 as compared to
$22,142,000 for the fiscal year ended March 31, 2008, representing a 53.0%
decrease. The decrease in gross profit was mainly attributable to the
significant decrease in revenue from design services with high profit
margin.





Operating
Expenses





Operating
expenses consist of selling expenses, general and administrative (G&A)
expenses and other operating expenses. For the fiscal year ended March 31, 2009,
operating expenses were $15,363,000, as compared to $3,544,000 for the fiscal
year ended March 31, 2008, representing a 333.5 % increase.





Detailed
information of operating expenses for the year ended March 31, 2009 and 2008 is
as follows:





(in thousands of US
      dollars)
                  
                  2009
                  
                  
                  Fiscal
      Year Ended
                    March
      31
                  
                  
                  2008
                    (restated)Amount
                  
                  
                  %
      of net revenue
                  
                  
                  Amount
                  
                  
                  %
      of net revenueOperating
      Expenses
                  
                  $
                  15,363
                  
                  
                  
                  44.1
                  %
                  
                  $
                  3,544
                  
                  
                  
                  7.8
                  %Selling
      Expenses
                  
                  $
                  245
                  
                  
                  
                  0.7
                  %
                  
                  $
                  280
                  
                  
                  
                  0.6
                  %G&A
      Expenses
                  
                  $
                  10,043
                  
                  
                  
                  28.8
                  %
                  
                  $
                  3,264
                  
                  
                  
                  7.1
                  %Other
      Operating Expenses
                  
                  $
                  5,075
                  
                  
                  
                  14.6
                  %
                  
                  
                  -
                  
                  
                  
                  -





Operating
expenses during the fiscal year ended March 31, 2009 were $15,363,000, or 44.1%
of revenue, compared to $3,544,000, or 7.8% of revenue for the fiscal year ended
March 31, 2008. The significant increase was mainly attributed to the increase
in G&A and other operating expenses.





Selling
expenses decreased from $280,000 to $245,000. The decrease was mainly
attributable to less marketing-related expenses in keeping with a shrinking
business.





G&A
expenses were $10,043,000, or 28.8% of revenue, compared to $3,264,000, or 7.1%
of revenue in the last fiscal year. The increase in G&A expenses was mainly
due to the increase in the charges relating to the allowance for doubtful
receivables.





We
increased allowance for doubtful receivables by $6,915,000 for the fiscal year
ended 31 March 2009. The allowance for doubtful receivables was $8,040,000 as of
March 31, 2009 compared to $1,125,000 as of March 31, 2008.  As a
comparison, we increased allowance for doubtful receivables by $700,000 for the
fiscal year ended 31 March 2008. The allowance for doubtful receivables was
$1,125,000 as of March 31, 2008 compared to $425,000 as of March 31, 2007.
 Allowance for doubtful receivables is maintained for all customers based
on a variety of factors, including the overall economy and industrial condition,
length of time the receivables are past due, significant one-time events and
historical experience. For the fiscal year ended March 31, 2009, particular
consideration was given to the increased credit risk due to the current economic
downturn.




Page 23
of 41




Other
operating expenses represented compensation of $5,075,000 to two customers to
compensate them for subcontracting fees and raw materials consumed for two
defectively designed mobile phone PCBAs.





Loss/
Income from Operations





Loss from
operation was $4,965,000 in fiscal year ended March 31, 2009, compared to income
of $18,598,000 in year 2008. The decrease was mainly attributable to the
decrease of revenue in design service and increase of allowance for doubtful
receivables.





Loss
from Discontinued Operations





The
Company reported losses of $2,822,000 and $379,000 from discontinued operations
for the years ended March 31, 2009 and 2008, respectively. Loss from
discontinued operations for the years ended March 31, 2009 and 2008 consisted of
other revenue of $2,000 and $nil, operating loss of US$90,000 and $379,000, loss
on disposal of a subsidiary of US$2,730,000 and $nil, and impairment loss on
assets of discontinued operations of US$4,000 and $nil, respectively. We
recorded losses on discontinued operations as Sunplus disposed of its 80%
interest in its subsidiary Fujian QiaoXing for $12,230,000 (RMB84,000,000),
which was $2,730,000 less than the carrying values of Fujian QiaoXing’s net
assets.





Interest
Expense





During
the fiscal year ended March 31, 2009, we did not borrow any funds and did not
incur any interest expense.We incurred interest
expense of $3,000 during the fiscal year ended March 31, 2008 for discounted
bills.





Income
Tax





Sunplus
is subject to PRC Income Tax.  Pursuant to the PRC Income Tax Laws, the
prevailing statutory rate of enterprise income tax in Shanghai is 25% as of
January 1, 2008.  It was 27% prior to January 1, 2008.





Pursuant
to the relevant laws and regulations in the PRC, Sunplus was entitled to an
exemption from PRC income tax for two years starting from its first profitable
year.  As Sunplus’ statutory year-end is December 31, the exemption applied
from January 1, 2003 to December 31, 2004.  Sunplus was also entitled to
three years of 50% exemption after the expiration of the two years of full
exemption.  The 50% exemption applied from January 1, 2005 to December 31,
2007.  Therefore, Sunplus was subject to a 13.5% income tax through
December 31, 2007 and 25% thereafter.





For the
fiscal year ended March 31, 2009, Sunplus made an income tax provision of
$1,900,000 in total, compared to $3,188,000 in the last fiscal year ended March
31, 2008. The decrease was mainly due to the decrease in taxable
profits.





Fujian
QiaoXing and JiaXun were inactive and were not subject to any income tax in the
fiscal years ended March 31, 2009 and 2008.





Minority
Interests





Minority
interests represent the portion of net results of Sunplus, Fujian QiaoXing and
JiaXun that we do not own.  In the fiscal year ended March 31, 2009,
minority interests were attributable to the minority interests owned by Shanghai
Fanna, which owns directly 5% of Sunplus, and indirectly 5% of Fujian QiaoXing
and Jia Xun.





Net
loss/income





As a
result of the above items, net loss was $8,713,000 for the fiscal year ended
March 31, 2009, as compared to net income of $14,554,000 for the fiscal year
ended March 31, 2008. This adverse change was mainly the result of the
significant decrease of income from design services, increase in operating
expenses and loss from discontinued operations.




Page 24
of 41






Earnings/loss
per share





We
reported loss per share of $0.29, based on 30,088,174 outstanding weighted
shares for the fiscal year ended March 31, 2009. Our outstanding common stock
was 30,088,174 shares as of March 31, 2009. We do not have any preferred stock
issued or outstanding.





Assets





Cash
and cash equivalents





As of March 31,(in thousands of US dollars)2009
                  
                  
                  2008(restated)Cash
      and cash equivalents
                  
                  
                  20,493
                  
                  
                  
                  23,330





Cash and
cash equivalents were $20,493,000 as of March 31, 2009. The decrease in cash and
cash equivalents was mainly attributed to the decrease in operating cash flows
arising from the reduction in revenue and gross profit.





Accounts
receivable, net





As of
March 31, 2009, accounts receivable amounted to $14,361,000, a decrease of
$3,357,000 compared to $17,718,000 as of March 31, 2008. The decrease was mainly
the net result of an increase in the gross amount of accounts receivable and an
increase in the allowance for doubtful accounts receivable. The gross amount of
the accounts receivable increased by $3,415,000 mainly, because trade debtors
took longer to pay in an economic environment which was deteriorating. The
allowance for doubtful accounts receivable increased by an amount of $6,772,000
for the year ended March 31, 2009. The Company revaluated credit risk on trade
debtors and adjusted its allowance policy to make a 100% provision for accounts
receivable overdue more than one year. The Company believes this reflects the
increased credit risk due to the current economic downturn. If circumstances
related to customers change, estimates of the recoverability of receivables
would be further adjusted.





Detailed
information on accounts receivables, net





As of March 31,
                    (in thousands of US dollars)2009
                  
                  
                  2008Accounts
      receivable
                  
                  
                  22,258
                  
                  
                  
                  18,843Allowance
      for doubtful debts
                  
                  
                  (7,897
                  )
                  
                  
                  (1,125
                  )Accounts
      receivable, net
                  
                  
                  14,361
                  
                  
                  
                  17,718





Notes
receivable





As of
March 31, 2009, there were notes receivable of $37,000 ($nil as of March 31,
2008).  Notes receivable were mainly settlement of accounts receivable
from customers who issued commercial notes for settlement.


Page 25
of 41


Inventories





Inventories
comprise raw materials, work in progress and finished goods and are stated at
the lower of cost or market value.





As of March 31,(in thousands of US dollars)2009
                  
                  
                  2008Inventories
                  
                  
                  -
                  
                  
                  
                  242





As of
March 31, 2009, the Company had no inventories. All raw materials and
work-in-progress had been sold during the year.





Inventories
consisted of the following as at March 31:





As of March 31,(in thousands of US dollars)2009
                  
                  
                  2008Raw
      materials
                  
                  
                  -
                  
                  
                  
                  583Work
      in progress
                  
                  
                  -
                  
                  
                  
                  29Total
                  
                  
                  -
                  
                  
                  
                  612Less:
      allowance for losses
                  
                  
                  -
                  
                  
                  
                  (370
                  )Inventories,
      net
                  
                  
                  -
                  
                  
                  
                  242





Property,
Plant and Equipment





As of March 31,(in thousands of US dollars)2009
                  
                  
                  2008(restated)Property,
      Plant and Equipment
                  
                  
                  2,493
                  
                  
                  
                  3,383





As of
March 31, 2009, our property, plant and equipment amounted to
$2,493,000.





The
detailed information on property, plant and equipment is as
follows:





As of March 31,(in thousands of US dollars)2009
                  
                  
                  2008(restated)CostMachinery
                  
                  
                  4,859
                  
                  
                  
                  4,804Office
      equipment
                  
                  
                  138
                  
                  
                  
                  454Motor
      vehicles
                  
                  
                  56
                  
                  
                  
                  55Total
                  
                  
                  5,053
                  
                  
                  
                  5,313Accumulated
      depreciationMachinery
                  
                  
                  2,426
                  
                  
                  
                  1,571Office
      equipment
                  
                  
                  95
                  
                  
                  
                  331Motor
      vehicles
                  
                  
                  39
                  
                  
                  
                  28Total
                  
                  
                  2,560
                  
                  
                  
                  1,930Carrying
      valueMachinery
                  
                  
                  2,433
                  
                  
                  
                  3,233Office
      equipment
                  
                  
                  43
                  
                  
                  
                  123Motor
      vehicles
                  
                  
                  17
                  
                  
                  
                  27Total
                  
                  
                  2,493
                  
                  
                  
                  3,383




Page 26
of 41


Liabilities





As of March 31
                    (in thousands of
                    US dollars),2009
                  
                  
                  2008(restated)Liabilities
                  
                  
                  7,670
                  
                  
                  
                  13,318Current
      liabilities
                  
                  
                  3,415
                  
                  
                  
                  9,141Long-term
      liabilities
                  
                  
                  4,255
                  
                  
                  
                  4,177








Our total
liabilities as of March 31, 2009 were $7,670,000, which consisted of $3,415,000
in current liabilities and $4,255,000 in long-term liabilities.





Long-term
liabilities amounted to $4,255,000 as of March 31, 2009, all of which were
liabilities due to shareholders.





Liquidity
and Capital Resources





For the
fiscal year ended March 31, 2009, we principally engaged in provision of design
solutions of wireless communication devices and sales of mobile phone
components. We did not declare or pay dividends in the fiscal year ended March
31, 2009.





Cash and
cash equivalents decreased from $23,330,000 to $20,493,000 as of March 31,
2009.





We used
$3,987,000 in operating activities for fiscal year ended March 31, 2009, as
compared to $17,988,000 provided by operating activities for the fiscal year
ended March 31, 2008. The net cash outflow was mainly caused by the net loss for
the fiscal year ended March 31, 2009 adjusted for non-cash items, as well as the
increase in accounts receivable and the decrease in receipts in advance. Our
average trade debt collection period is approximately eight months.





Net cash
provided by investing activities amounted to $363,000 for the fiscal year ended
March 31, 2009 as compared with net cash provided by investing activities of
$4,105,000 for the fiscal year ended March 31, 2008. Net cash provided by
investing activities in the fiscal year ended March 31, 2009 related mainly to
the initial deposits received for the disposal of Fujian Qiaoxing of $364,000.
Net cash provided by investing activities in the fiscal year ended March 31,
2008 related mainly to proceeds from the disposal of property, plant and
equipment of $4,864,000. No property, plant and equipment was disposed of by us
in the fiscal year ended March 31, 2009.





Net cash
provided by financing activities decreased from $896,000 to $78,000. It mainly
represented advance from shareholders.




Page 27
of 41


As of
March 31, 2009, we had capital commitments of $27,000 in relation to acquisition
of intangible assets.





We expect
to be able to meet our liquidity needs for the fiscal year ending March 31,
2010.  We expect net revenue to be at about the same level as for the
fiscal year ended March 31, 2009.  However, it may take trade debtors
longer to settle the accounts receivable owing to a possible worsening of the
economic situation.  We currently do not have any plans to incur
significant capital expenditures.  We believe our cash holdings as of
March 31, 2009 of $20,493,000 together with the remaining balance of
consideration for the disposal of our subsidiaries to be received of $11,866,000
is sufficient to support our operations and to meet our working capital
needs.





Critical
Accounting Policies





The
financial statements are prepared in accordance with accounting principles
generally accepted in the U.S., which require us to make estimates and
assumptions in certain circumstances that affect amounts reported in the
accompanying financial statements and related footnotes. In preparing these
financial statements, management has made its best estimates and judgments of
certain amounts included in the financial statements, giving consideration to
materiality. We do not believe there is a great likelihood that materially
different amounts would be reported related to the accounting policies described
below. However, application of these accounting policies involves the exercise
of judgment and use of assumptions as to future uncertainties and, as a result,
actual results could differ from these estimates.





Revenue
Recognition





Our
revenues are mainly derived from design fees of mobile handset design services
and sales of mobile phone components. We earn our revenue mainly through NRE
fees, royalties, and sales of products.





NRE fee.NRE fees stands for
Non Refundable Engineering fees, a fixed one-off fee after an agreement has been
signed by both customers and the Company. The NRE fees are no less than the
total expenses of project design which normally includes the cost of market
study, product concept identification, hardware designs, software designs,
engineer expenses, mechanical engineering designs, testing and quality
assurance, pilot production and production support. The NRE fees are recognized
when payments are received.





Royalty.In addition to NRE
fees, we also charge royalties to our customers. Royalty is calculated at an
agreed rate for each unit manufactured or sold by our customers. The rate is
variable based on volume of mobile handsets manufactured or sold. Royalty income
is recognized when confirmation of manufacturing or selling volume is obtained
from customers.





Component and product sales.Revenue from sales of components including but not limited to PCBAs,
PCBs, whole handsets designed by us and manufactured by OEMs, and wireless
modules are recognized when products are delivered to our
customers.





Allowance
for doubtful receivables


Our
determination of the allowance for doubtful receivables is based on a general
reserve established for all customers based on a range of percentages applied to
aging categories.  These percentages are based on historical
collection and write-off experience.


Page 28
of 41


Item
7A.         Quantitative and
Qualitative Disclosures About Market Risk.





The
majority of our revenues derived and expenses and liabilities incurred are in
Chinese Renminbi (“RMB”) with a relatively small amount in Hong Kong dollars
(“HK$”) and the United States dollars (“$”). Thus, our revenues and operating
results may be impacted by exchange rate fluctuations in the currencies of China
and Hong Kong. We have not tried to reduce our exposure to exchange rate
fluctuations by using hedging transactions. However, we may choose to do so in
the future. The availability and effectiveness of any hedging transactions may
be limited and we may not be able to successfully hedge our exchange rate risks.
Accordingly, we may experience economic losses and negative impacts on earnings
and equity as a result of foreign exchange rate fluctuations.


Page 29
of 41


Item
8.            Financial
Statements and Supplementary Data.





T-BAY
HOLDINGS, INC. AND SUBSIDIARIES


INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS





Report
      of Independent Registered Public Accounting Firm
              F-2Consolidated
      Balance Sheets
              F-3Consolidated
      Statements of Operations
              F-4Consolidated
      Statements of Changes in Stockholders’ Equity
              F-5Consolidated
      Statements of Cash Flows
              F-6 – F-7Notes
      to Consolidated Financial Statements
              F-8 – F-22




F-1





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





The Board
of Directors and Stockholders of


T-Bay
Holdings, Inc.





We have
audited the accompanying consolidated balance sheet of T-Bay Holdings, Inc. and
subsidiaries (the “Company”) as of March 31, 2009 and 2008, and the related
consolidated statements of operations, changes in stockholders’ equity, and cash
flows for each of the two years in the period ended March 31,
2009.  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 audits.





We
conducted our audits 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 audits provide a reasonable basis for our
opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company as
of March 31, 2009 and 2008 and the results of its operations and cash flows for
each of the two years in the period then ended in conformity with accounting
principles generally accepted in the United States of America.





/s/ Moore
Stephens





Certified
Public Accountants


Hong
Kong





July 9,
2009


F-2


T-BAY
HOLDINGS, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


March
31, 2009 and 2008


(In
thousands of United States dollars)


MARCH
      31,Note(s)
                                                              
                                                              
                                                              2009
                                                              
                                                              
                                                              2008ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                                                              
                                                              
                                                              
                                                              
                                                              $
                                                              20,493
                                                              
                                                              
                                                              $
                                                              23,330Notes
      receivable
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              37
                                                              
                                                              
                                                              
                                                              -Accounts
      receivable, net
                                                              
                                                              3
                                                              
                                                              
                                                              
                                                              14,361
                                                              
                                                              
                                                              
                                                              17,718Prepayments,
      deposits and other receivables, net
                                                              
                                                              3
                                                              
                                                              
                                                              
                                                              13,694
                                                              
                                                              
                                                              
                                                              1,937Inventories
                                                              
                                                              4
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              242Total
      current assets
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              48,585
                                                              
                                                              
                                                              
                                                              43,227PROPERTY,
      PLANT AND EQUIPMENT, NET
                                                              
                                                              5
                                                              
                                                              
                                                              
                                                              2,493
                                                              
                                                              
                                                              
                                                              3,383INTANGIBLE
      ASSETS, NET
                                                              
                                                              6
                                                              
                                                              
                                                              
                                                              65
                                                              
                                                              
                                                              
                                                              100ASSETS
      OF DISCONTINUED OPERATIONS
                                                              
                                                              13
                                                              
                                                              
                                                              
                                                              724
                                                              
                                                              
                                                              
                                                              18,954TOTAL
      ASSETS
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              $
                                                              51,867
                                                              
                                                              
                                                              $
                                                              65,664LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIESAccounts
      payable
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              $
                                                              466
                                                              
                                                              
                                                              $
                                                              688Accruals
      and other payablesRelated
      parties
                                                              
                                                              10
                                                              
                                                              
                                                              
                                                              285
                                                              
                                                              
                                                              
                                                              247Third
      parties
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              1,412
                                                              
                                                              
                                                              
                                                              1,279Receipts
      in advance
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              990
                                                              
                                                              
                                                              
                                                              2,098Income
      tax payable
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              262
                                                              
                                                              
                                                              
                                                              1,516Liabilities
      of discontinued operations
                                                              
                                                              13
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              3,313Total
      current liabilities
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              3,415
                                                              
                                                              
                                                              
                                                              9,141LONG-TERM
      LIABILITIESDue
      to shareholders
                                                              
                                                              10
                                                              
                                                              
                                                              
                                                              4,255
                                                              
                                                              
                                                              
                                                              4,177Total
      liabilities
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              7,670
                                                              
                                                              
                                                              
                                                              13,318MINORITY
      INTERESTS
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              2,268
                                                              
                                                              
                                                              
                                                              2,657COMMITMENTS
      AND CONTINGENCIES
                                                              
                                                              12STOCKHOLDERS’
      EQUITYPreferred
      stock, authorized 10,000,000 shares, parvalue
      $0.001, issued and outstanding Nil
                                                              
                                                              2(t)
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              -Common
      stock, authorized 100,000,000 shares, par value $0.001, issued and
      outstanding 30,088,174
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              30
                                                              
                                                              
                                                              
                                                              30Additional
      paid-in capital
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              1,462
                                                              
                                                              
                                                              
                                                              1,462Public
      welfare fund
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              2,109
                                                              
                                                              
                                                              
                                                              2,109Statutory
      surplus fund
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              4,219
                                                              
                                                              
                                                              
                                                              4,219Retained
      earnings
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              28,303
                                                              
                                                              
                                                              
                                                              37,016Accumulated
      other comprehensive income
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              5,806
                                                              
                                                              
                                                              
                                                              4,853Total
      stockholders’ equity
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              41,929
                                                              
                                                              
                                                              
                                                              49,689TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              $
                                                              51,867
                                                              
                                                              
                                                              $
                                                              65,664


The
accompanying notes are an integral part of these consolidated financial
statements.


F-3


T-BAY
HOLDINGS, INC. AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF OPERATIONS


For
the years ended March 31, 2009 and 2008


(In
thousands of United States dollars, except per share data)





Note(s)
                                    
                                    
                                    YEAR
      ENDED MARCH 31,2009
                                    
                                    
                                    2008NET
      REVENUE
                                    
                                    
                                    
                                    
                                    $
                                    34,838
                                    
                                    
                                    $
                                    45,681COST
      OF REVENUE
                                    
                                    
                                    
                                    
                                    
                                    24,440
                                    
                                    
                                    
                                    23,539GROSS
      PROFIT
                                    
                                    
                                    
                                    
                                    
                                    10,398
                                    
                                    
                                    
                                    22,142OPERATING
      EXPENSESSelling
      expenses
                                    
                                    
                                    
                                    
                                    
                                    245
                                    
                                    
                                    
                                    280General
      and administrative expenses
                                    
                                    
                                    
                                    
                                    
                                    10,043
                                    
                                    
                                    
                                    3,264Other
      operating expenses
                                    
                                    11
                                    
                                    
                                    
                                    5,075
                                    
                                    
                                    
                                    -TOTAL
      OPERATING EXPENSES
                                    
                                    
                                    
                                    
                                    
                                    
                                    15,363
                                    
                                    
                                    
                                    3,544(LOSS)/INCOME
      FROM OPERATIONS
                                    
                                    
                                    
                                    
                                    
                                    
                                    (4,965
                                    )
                                    
                                    
                                    18,598OTHER
      INCOME
                                    
                                    
                                    
                                    
                                    
                                    
                                    545
                                    
                                    
                                    
                                    185INTEREST
      EXPENSE
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (3
                                    )(LOSS)/INCOME
      BEFORE INCOME TAXAND
      MINORITY INTERESTS
                                    
                                    
                                    
                                    
                                    
                                    
                                    (4,420
                                    )
                                    
                                    
                                    18,780INCOME
      TAX: CURRENT
                                    
                                    7
                                    
                                    
                                    
                                    (1,900
                                    )
                                    
                                    
                                    (3,188
                                    )(LOSS)/INCOME
      BEFORE MINORITY INTERESTS
                                    
                                    
                                    
                                    
                                    
                                    
                                    (6,320
                                    )
                                    
                                    
                                    15,592MINORITY
      INTERESTS
                                    
                                    
                                    
                                    
                                    
                                    
                                    429
                                    
                                    
                                    
                                    (659
                                    )(LOSS)/INCOME
      FROM CONTINUING OPERATIONS
                                    
                                    
                                    
                                    
                                    
                                    
                                    (5,891
                                    )
                                    
                                    
                                    14,933LOSS
      FROM DISCONTINUED OPERATIONS
                                    
                                    13
                                    
                                    
                                    
                                    (2,822
                                    )
                                    
                                    
                                    (379
                                    )NET
      (LOSS)/INCOME
                                    
                                    
                                    
                                    
                                    
                                    
                                    (8,713
                                    )
                                    
                                    
                                    14,554OTHER
      COMPREHENSIVE INCOMEForeign
      currency translation adjustment
                                    
                                    
                                    
                                    
                                    
                                    
                                    953
                                    
                                    
                                    
                                    2,889COMPREHENSIVE
      (LOSS) INCOME
                                    
                                    
                                    
                                    
                                    
                                    $
                                    (7,760
                                    )
                                    
                                    $
                                    17,443WEIGHTED
      AVERAGE NUMBEROF
      SHARES (in thousands)
                                    
                                    
                                    
                                    
                                    
                                    
                                    30,088
                                    
                                    
                                    
                                    30,088EARNINGS
      (LOSS) PER SHARE (in dollars)-
      Continuing operations
                                    
                                    
                                    
                                    
                                    
                                    $
                                    (
      0.20
                                    )
                                    
                                    $
                                    0.50-
      Discontinued operations
                                    
                                    2(a)
                                    
                                    
                                    
                                    (
      0.09
                                    )
                                    
                                    
                                    (
      0.02
                                    )2(r)
                                    
                                    
                                    $
                                    (
      0.29
                                    )
                                    
                                    $
                                    0.48





The
accompanying notes are an integral part of these consolidated financial
statements.




F-4


T-BAY
HOLDINGS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


For
the years ended March 31, 2009 and 2008


(In
thousands of United States dollars)





COMMON STOCK
                    
                    
                    ADDITIONAL
                      PAID-IN
                      CAPITAL
                    
                    
                    PUBLIC
                      WELFARE
                      FUND
                    
                    
                    STATUTORY
                      SURPLUS
                      FUND
                    
                    
                    RETAINED
                      EARNINGS
                    
                    
                    ACCUMULATED
                      OTHER
                      COMPREHENSIVE
                      INCOME
                    
                    
                    TOTAL
                      STOCKHOLDERS’
                      EQUITYNo. of sharesBalance,
      April 1, 2007
                    
                    
                    30,088,174
                    
                    
                    
                    30
                    
                    
                    
                    1,462
                    
                    
                    
                    1,430
                    
                    
                    
                    2,859
                    
                    
                    
                    23,975
                    
                    
                    
                    1,964
                    
                    
                    
                    31,720Net
      income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    14,554
                    
                    
                    
                    -
                    
                    
                    
                    14,554Transfer
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    504
                    
                    
                    
                    1,009
                    
                    
                    
                    (1,513
                    )
                    
                    
                    -
                    
                    
                    
                    -Foreign
      currency translation adjustment
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    175
                    
                    
                    
                    351
                    
                    
                    
                    -
                    
                    
                    
                    2,889
                    
                    
                    
                    3,415Balance,
      March 31, 2008
                    
                    
                    30,088,174
                    
                    
                    
                    30
                    
                    
                    
                    1,462
                    
                    
                    
                    2,109
                    
                    
                    
                    4,219
                    
                    
                    
                    37,016
                    
                    
                    
                    4,853
                    
                    
                    
                    49,689Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (8,713
                    )
                    
                    
                    -
                    
                    
                    
                    (8,713
                    )Foreign
      currency translation adjustment
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    953
                    
                    
                    
                    953Balance,
      March 31, 2009
                    
                    
                    30,088,174
                    
                    
                    
                    30
                    
                    
                    
                    1,462
                    
                    
                    
                    2,109
                    
                    
                    
                    4,219
                    
                    
                    
                    28,303
                    
                    
                    
                    5,806
                    
                    
                    
                    41,929





The
accompanying notes are an integral part of these consolidated financial
statements.


F-5


T-BAY
HOLDINGS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


For
the years ended March 31, 2009 and 2008


(In
thousands of United States dollars)





FOR
      THE YEAR ENDED
                    MARCH
      31,2009
                  
                  
                  2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      (loss) income
                  
                  $
                  (8,713
                  )
                  
                  $
                  14,554Adjustments
      to reconcile net income to net cashgenerated
      from operating activities:Depreciation
                  
                  
                  933
                  
                  
                  
                  884Amortization
                  
                  
                  37
                  
                  
                  
                  36Allowances
      for doubtful receivables
                  
                  
                  6,915
                  
                  
                  
                  700Reversal
      of allowance for obsolete inventories
                  
                  
                  (370
                  )
                  
                  
                  (306
                  )Loss/(gain)
      on disposal of property, plant and equipment
                  
                  
                  44
                  
                  
                  
                  (5
                  )Minority
      interests
                  
                  
                  (429
                  )
                  
                  
                  659Changes
      in operating assets and liabilities:(Increase)/decrease
      in notes receivable
                  
                  
                  (37
                  )
                  
                  
                  4,156(Increase)/decrease
      in accounts receivable
                  
                  
                  (2,201
                  )
                  
                  
                  2,316Decrease
      in prepayments, deposits and other receivables
                  
                  
                  (1,225
                  )
                  
                  
                  580Decrease
      in VAT recoverable
                  
                  
                  -
                  
                  
                  
                  21Decrease
      in inventories
                  
                  
                  612
                  
                  
                  
                  988Decrease
      in accounts payable
                  
                  
                  (222
                  )
                  
                  
                  (1,995
                  )Increase/(decrease)
      in accruals and other payables
                  
                  
                  255
                  
                  
                  
                  (2,835
                  )Decrease
      in receipts in advance
                  
                  
                  (1,108
                  )
                  
                  
                  (690
                  )Decrease
      in income tax payable
                  
                  
                  (1,254
                  )
                  
                  
                  (833
                  )Operating
      cash flow (used in)/provided by continuing operations
                  
                  
                  (6,763
                  )
                  
                  
                  17,070Operating
      cash flow provided by discontinued operations
                  
                  
                  2,776
                  
                  
                  
                  918Net
      cash (used in)/provided by operating activities
                  
                  
                  (3,987
                  )
                  
                  
                  17,988CASH
      FLOWS FROM INVESTING ACTIVITESAcquisition
      of property, plant and equipment
                  
                  
                  (1
                  )
                  
                  
                  -Proceeds
      received from disposal of property, plant and equipment
                  
                  
                  -
                  
                  
                  
                  13Deposit
      refunded for property, plant and equipment
                  
                  
                  -
                  
                  
                  
                  4,864Acquisition
      of intangible assets
                  
                  
                  -
                  
                  
                  
                  (97
                  )Investing
      activities of continuing operations
                  
                  
                  (1
                  )
                  
                  
                  4,780Investing
      activities of discontinued operations, (including proceeds from sale of a
      subsidiary (net of cash at date of sale)
                  
                  
                  364
                  
                  
                  
                  (675
                  )Net
      cash provided by investing activities
                  
                  
                  363
                  
                  
                  
                  4,105


F-6


T-BAY
HOLDINGS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)


For
the years ended March 31, 2009 and 2008


(In
thousands of United States dollars)





FOR
      THE YEAR ENDED
                  MARCH
      31,2009
                
                
                2008CASH
      FLOWS FROM FINANCING ACTIVITIESIncrease
      in minority interests
                
                
                -
                
                
                
                638Increase
      in amounts due to shareholders
                
                
                78
                
                
                
                258Financing
      activities of continuing operations
                
                
                78
                
                
                
                896Financing
      activities of discontinued operations
                
                
                -
                
                
                
                -Net
      cash provided by financing activities
                
                
                78
                
                
                
                896Effect
      of exchange rate changes on cash
                
                
                685
                
                
                
                299Net
      (decrease)/increase in cash and cash equivalents
                
                
                (2,861
                )
                
                
                23,288Cash
      and cash equivalents at beginning of year
                
                
                23,355
                
                
                
                67Cash
      and cash equivalents at end of year (including cash of discontinued
      operations of $1,000 and $25,000, respectively)
                
                $
                20,494
                
                
                $
                23,355SUPPLEMENTAL
      INFORMATIONIncome
      taxes paid
                
                $
                3,188
                
                
                $
                3,854Interest
      paid
                
                $
                -
                
                
                $
                3





The
accompanying notes are an integral part of these consolidated financial
statements.


F-7


T-BAY
HOLDINGS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009 and 2008





1.
The Company and Subsidiaries





T-Bay
Holdings, Inc. (the “Company” or T-Bay) was incorporated under the laws of the
State of Utah on August 8, 1984 as “Sharus Corporation” with authorized common
stock of 50,000,000 shares with a par value of US$0.001.  On June 13,
1989, the domicile of the Company was changed to the state of Nevada in
connection with a name change to “Golden Quest, Inc.”.  On January 7, 2002,
the name was changed to “T-Bay Holdings, Inc.” as part of a reverse stock split
of 400 shares of outstanding stock for one share and on November 23, 2004, the
Company increased the authorized common stock to 100,000,000 shares with a par
value of US$0.001 as part of a reverse stock split of 20 outstanding shares for
one share.





On August 16, 2005,
pursuant to an Agreement and Plan of Reorganization, T-Bay issued 18,550,000
shares of its common stock for all of Amber Link International Limited’s (“Amber
Link”) and Wise Target International Limited’s (“Wise Target”) outstanding
shares of common stock (the “Merger”).  Amber Link and Wise Target
were two of the owners of Shanghai Sunplus Communication Co., Ltd.
(“Sunplus”).  Wise Target owned a 75% interest and Amber Link owned a
20% interest in Sunplus.  After the Merger, T-Bay indirectly owned a
95% interest in Sunplus. In March 2009, Wise Target transferred all its holdings
(75%) in Sunplus to Amber Link for US$2,885,000 (HK$22,500,000). As a result of
this transaction, Amber Link directly owned 95% of Sunplus and this transaction
had no impact on the Company’s effective holdings of
Sunplus.  Shanghai Fanna Industrial Design Co., Ltd. owned the
remaining 5% interest in Sunplus.





Wise
Target was incorporated on April 24, 2002 under the International Business
Companies Act in the British Virgin Islands.





Amber
Link was incorporated on May 10, 2002 under the International Business Companies
Act in the British Virgin Islands.  During the year ended March 31,
2007, Amber Link commenced the sales of mobile phones and
components.





Sunplus
was established on October 17, 2002 under the laws of the People’s Republic of
China (“PRC”) as a Sino-foreign joint venture specialized in the development,
production and sales of electronic telecommunication devices.  Sunplus
commenced operations on May 1, 2003.  At March 31, 2009, Sunplus has
approximately 85 staff, mostly engineers and software programmers.





On
February 12, 2007, Sunplus established a wholly-owned subsidiary, Zhangzhou
JiaXun Communication Facility Co., Ltd. (“Zhangzhou JiaXun”) under the laws of
the PRC.  Zhangzhou JiaXun is an investment holding
company.





On March
19, 2007, Sunplus and Zhangzhou JiaXun acquired 80% and 20%, respectively, of
Fujian Qiaoxing Industry Co., Ltd. (“Fujian Qiaoxing”).


F-8


Pursuant
to an agreement signed on December 31, 2008, Sunplus agreed to dispose of its
entire interest in Zhangzhou JiaXun (100%) to Huizhou Liyin Electronics Co.,
Ltd. (“Huizhou Liyin”), a third party, for US$724,000 (RMB5,000,000). However,
on March 10, 2009, pursuant to a supplemental agreement between Sunplus and
Huizhou Liyin, Huizhou Liyin and Sunplus rescinded the original
agreement.  On the same date, Sunplus entered into another agreement
with Qiaoxing Telecommunication Industry Company Limited (“Qiaoxing Telecom”), a
third party, to dispose of all its interest in Zhangzhou JiaXun at a
consideration of US$724,000 (RMB5,000,000).The ownership and legal
title were transferred on April 9, 2009.  The disposal criteria were
met before March 31, 2009.  As a result, assets of Zhangzhou JiaXun
were classified and grouped in assets of discontinued operations. (See Note
13)





On
December 31, 2008, Sunplus entered into an agreement with Huizhou Liyin to
dispose of its 80% interest in Fujian Qiaoxing for a consideration of
US$12,230,000 (RMB84,000,000). However, on March 10, 2009, pursuant to a
supplemental agreement between Sunplus and Huizhou Liyin, Huizhou Liyin and
Sunplus rescinded the original agreement.  On the same date, Sunplus
entered into another agreement with Qiaoxing Telecom to dispose of all its
interest in Fujian Qiaoxing at a consideration of US$12,230,000 (RMB84,000,000)
and the transaction was completed on March 20, 2009. (See Note 13)




As of
March 31, 2009, the Group structure is as follows:-








F-9


2.
Summary of Significant Accounting Policies





(a)
Basis of Preparation and Consolidation





The
consolidated financial statements for the year ended March 31, 2009 and 2008
included the financial statements of T-Bay and its subsidiaries (hereinafter,
referred to collectively as the “Group”) and are prepared in conformity with
accounting principles generally accepted in the United States of America (US
GAAP). All significant inter-company balances and transactions have been
eliminated in consolidation.





As
mentioned in Note 1, on March 20, 2009, the Group disposed of its 80% interest
in Fujian Qiaoxing, for net proceeds of US$12,230,000 and disposed of its entire
interest in Zhangzhou Jiaxun, on April 9, 2009 for net proceeds of US$724,000.
Criteria for disposal of Zhangzhou JiaXun were met before March 31, 2009, but
legal ownership and legal title had not been transferred. As a result, the
financial position of Zhangzhou Jiaxun and results of operations of Fujian
Qiaoxing and Zhangzhou Jiaxun have been presented as discontinued operation
for all periods shown in the accompanying consolidated financial statements
(see Note 13).





(b)
Reclassifications





Certain
reclassifications were made to conform prior year’s financial statements to the
current presentation.





(c)
Goodwill





Goodwill
arising on consolidation represents the excess of the cost of acquisition over
the Group’s interest in the fair value of the identifiable assets and
liabilities of subsidiary at the date of acquisition. Goodwill is recognized as
an asset and carried at cost less impairment.  In accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 142, goodwill is tested
for impairment on an annual basis.  Recognized impairment losses of
goodwill cannot be reversed.





Goodwill
arising on the acquisition of subsidiaries is presented separately in the
balance sheet.





(d)
Use of Estimates





In
preparing financial statements in conformity with US GAAP, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and revenues and expenses during the
reported periods. Significant estimates include useful lives of depreciable and
amortizable assets and allowance for doubtful receivables.  Actual
results could differ from those estimates.





(e)
Cash and Cash Equivalents





The Group
considers all highly liquid investments with original maturities of three months
or less at the time of purchase to be cash equivalents. As of March 31, 2009 and
2008, the Group did not have any cash equivalents.


F-10


(f)
Allowance for Doubtful Receivables





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 a customer’s
or other debtor’s 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 would be
further adjusted (See Note 3).





(g)
Inventories





Inventories
comprise raw materials, work in progress and finished goods and are stated at
the lower of cost or market.  Market value represents replacement cost
for raw materials and net realizable value for finished goods and work in
progress.  Substantially all inventory costs are determined using the
weighted average basis. Costs of finished goods include direct materials,
subcontracting charges and other overhead before the goods are ready for
sale.  Inventory costs do not exceed net realizable
value.





(h)
Property, Plant and Equipment





Property,
plant and equipment is stated at cost. Depreciation is provided principally by
use of the straight-line method over the estimated useful lives of the related
assets.  Expenditure for maintenance and repairs, which does not
improve or extend the expected useful life of the assets, is expensed to
operations while major repairs are capitalized.





Management
estimates that property, plant and equipment have a 10% residual
value.  The estimated useful lives are as follows:





Buildings
            20
      yearsMachinery
            5
      yearsOffice
      equipment
            5
      yearsMotor
      vehicles
            5
      years





The gain
or loss on disposal of property, plant and equipment is the difference between
the net sales proceeds and the carrying amount of the relevant assets, and, if
any, is recognized in the statement of operations and comprehensive
income.





(i)
Construction in Progress





Construction
in progress represents factory buildings under construction and machinery under
installation and is stated at cost and not depreciated.  Construction
in progress is reclassified to the appropriate category of property, plant and
equipment when completed and ready for use.





(j)
Land-use Rights





Land-use
rights are stated at cost, less amortization. Amortization of land-use rights is
calculated on the straight-line method, based on the period over which the right
is granted by the relevant authorities in Fujian Province, PRC.


F-11


(k)
Intangible Assets





Intangible
assets consist of software and patents and are amortized using the straight-line
method over their estimated useful life of 5 years.





(l)
Impairment of Long-Lived Assets





In
accordance with SFAS No. 144, "Accounting for Impairment or Disposal of
Long-Lived Assets", the Group evaluates its long-lived assets to determine
whether later events and circumstances warrant revised estimates of useful lives
or a reduction in carrying value due to impairment. If indicators of impairment
exist and if the value of the assets is impaired, an impairment loss would be
recognized.  For the years ended March 31, 2009, an impairment loss of
US$4,000 has been recognized (2008: nil) (See Note 13).





(m)
Income Taxes





The Group
accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes".  Under SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases.  Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.  Under SFAS No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.





The Group
reviews the differences between the tax bases under PRC tax laws and financial
reporting under US GAAP.  As of March 31, 2009 and 2008, no material
differences were found; therefore, there were no material deferred tax assets or
liabilities arising from the operations of the subsidiaries in the
PRC.





Under
current PRC tax laws, no tax is imposed in respect to distributions paid to
owners except individual income tax.





(n)
Revenue Recognition





Revenue
from goods sold is recognized when title has passed to the purchaser, which
generally is at the time of delivery.  Revenue from design services is
recognized when earned on the basis of the terms specified in the underlying
contractual agreements.





(o)
Research and Development Costs





Research
and development costs consist of expenditure incurred during the course of
planned research and investigation aimed at discovery of new knowledge which
will be useful for developing new products or significantly enhancing existing
products, and the implementation of such through design and testing of product
alternatives.  All expenses incurred in connection with the Group’s
research and development activities are charged to current
income.  During the two years ended March 31, 2009 and 2008, research
and development costs amounting to US$17,000 and US$420,000, respectively, were
charged to operations and are included in cost of revenue.




F-12


(p)
Foreign Currency Transactions





The
functional currencies of the Group are U.S. dollars, Hong Kong dollars and
Renminbi, and its reporting currency is U.S. dollars.The
Group’s balance sheet accounts are translated into U.S. dollars at the year-end
exchange rates and all revenue and expenses are translated into U.S. dollars at
the average exchange rates prevailing during the periods in which these items
arise.  Translation gains and losses are deferred and accumulated as a
component of other comprehensive income in stockholders’
equity.  Transaction gains and losses that arise from exchange rate
fluctuations from transactions denominated in a currency other than the
functional currency are included in the consolidated statement of operations as
incurred.





The PRC
government imposes significant exchange restrictions on fund transfers out of
the PRC that are not related to business operations. These restrictions have not
had a material impact on the Group because it has not engaged in any significant
transactions that are subject to the restrictions.





(q)
Fair Value of Financial Instruments





SFAS No.
107, “Disclosures about Fair Values of Financial Instruments”, requires
disclosing fair value to the extent practicable for financial instruments that
are recognized or unrecognized in the balance sheet.  The fair value
of the financial instruments disclosed herein is not necessarily representative
of the amount that could be realized or settled, nor does the fair value amount
consider the tax consequences of realization or settlement.





For
certain financial instruments, including cash, accounts, notes and other
receivables, accounts payable, accruals and other payables, it was assumed that
the carrying amounts approximate fair value because of the near term maturities
of such obligations.





(r)
Earnings (Loss) Per Share





Basic
earnings (loss) per share is computed by dividing the earnings for the year by
the weighted average number of common shares outstanding for the
year.  Diluted earnings per share reflects the potential dilution of
securities by including other potential common stock, including stock options
and warrants, in the weighted average number of common shares outstanding for
the year, if dilutive.  There are no common stock equivalents in 2009
and 2008.





(s)
Profit Appropriation





In
accordance with PRC regulations, the PRC subsidiaries are required to make
appropriations to the statutory surplus reserve, based on after-tax net income
determined in accordance with PRC GAAP. Appropriation to the statutory surplus
reserve should be at least 10% of the after-tax net income determined in
accordance with PRC GAAP until the reserve is equal to 50% of the entity’s
registered capital. Appropriations to the statutory public welfare fund and
discretionary surplus reserve fund are made on the same basis as statutory
surplus fund, normally at 5%-10% or higher rates and are generally optional at
the discretion of the Board of Directors.  Statutory surplus reserve
is non-distributable other than in liquidation.




F-13


(t)
Preferred Stock





No shares
of preferred stock have been issued or are outstanding. Dividends, voting rights
and other terms, rights and preferences of the preferred shares have not been
designated but may be designated by our board of directors from time to
time.





3.
Allowance for Doubtful Receivables





MARCH
      31,2009
                  
                  
                  2008US$’000
                  
                  
                  US$’000Balance,
      beginning of year
                  
                  $
                  1,125
                  
                  
                  $
                  425Additions
                  
                  
                  6,915
                  
                  
                  
                  700Balance,
      end of year
                  
                  $
                  8,040
                  
                  
                  $
                  1,125





4.
Inventories





As of
March 31, 2009 and 2008, inventories consisted of the following:





MARCH
      31,2009
                    
                    
                    2008US$’000
                    
                    
                    US$’000Raw
      materials
                    
                    $
                    -
                    
                    
                    $
                    583Work
      in progress
                    
                    
                    -
                    
                    
                    
                    29Finished
      goods
                    
                    
                    -
                    
                    
                    
                    --
                    
                    
                    
                    612Less:
      allowance for losses
                    
                    
                    -
                    
                    
                    
                    (370
                    )Total
                    
                    $
                    -
                    
                    
                    $
                    242





The
changes in the inventory allowances are summarized as follows:





MARCH
      31,2009
                  
                  
                  2008US$’000
                  
                  
                  US$’000Balance,
      beginning of year
                  
                  $
                  370
                  
                  
                  $
                  676Reversal
                  
                  
                  (370
                  )
                  
                  
                  (306
                  )Balance,
      end of year
                  
                  $
                  -
                  
                  
                  $
                  370




F-14


5.
Property, Plant and Equipment, Net





MARCH
      31,2009
                        
                        
                        2008US$’000
                        
                        
                        US$’000CostMachinery
                        
                        $
                        4,859
                        
                        
                        $
                        4,804Office
      equipment
                        
                        
                        138
                        
                        
                        
                        454Motor
      vehicles
                        
                        
                        56
                        
                        
                        
                        555,053
                        
                        
                        
                        5,313Accumulated
      depreciationMachinery
                        
                        
                        2,426
                        
                        
                        
                        1,571Office
      equipment
                        
                        
                        95
                        
                        
                        
                        331Motor
      vehicles
                        
                        
                        39
                        
                        
                        
                        282,560
                        
                        
                        
                        1,930Carrying
      valueMachinery
                        
                        
                        2,433
                        
                        
                        
                        3,233Office
      equipment
                        
                        
                        43
                        
                        
                        
                        123Motor
      vehicles
                        
                        
                        17
                        
                        
                        
                        27$
                        2,493
                        
                        
                        $
                        3,383





Depreciation
expense for each of the years ended March 31, 2009 and 2008 was approximately
US$975,000 and US$929,000, respectively.





6.
Intangible Assets, Net





Changes
in the carrying amount of intangible assets for the year ended March 31, 2009
were as follows:





Software
                
                
                Patent
                
                
                TotalUS$’000
                
                
                US$’000
                
                
                US$’000Cost:Balance,
      March 31, 2008
                
                
                178
                
                
                
                4
                
                
                
                182Foreign
      currency translation
                
                
                5
                
                
                
                -
                
                
                
                5Balance,
      March 31, 2009
                
                
                183
                
                
                
                4
                
                
                
                187Less:
      Accumulated amortisationBalance,
      March 31, 2008
                
                
                (80
                )
                
                
                (2
                )
                
                
                (82
                )Amortisation
      expenses
                
                
                (36
                )
                
                
                (1
                )
                
                
                (37
                )Foreign
      currency translation
                
                
                (3
                )
                
                
                -
                
                
                
                (3
                )Balance,
      March 31, 2009
                
                
                (119
                )
                
                
                (3
                )
                
                
                (122
                )Net
      balance, March 31, 2009
                
                
                64
                
                
                
                1
                
                
                
                65





The
estimated amortization expense for the five years ending March 31, 2010, 2011,
2012, 2013 and 2014 amounts to approximatelyUS$23,000,US$22,000,US$18,000,
US$2,000 and US$ Nil, respectively.


F-15


7.
Income Taxes





Amber
Link and Wise Target are not subject to income taxes in any tax
jurisdiction.





No
provision for current income tax for T-Bay has been made as it incurred a loss
for each of the two years ended March 31, 2009 and 2008,
respectively.





Sunplus
is subject to PRC Income Tax.  Pursuant to the old laws and
regulations in the PRC, Sunplus was entitled to an exemption from PRC income tax
for two years starting from its first profitable year.  As Sunplus’
statutory year-end is December 31, the tax exemption applied to the period from
January 1, 2003 to December 31, 2004.  Sunplus was also entitled to
three years of 50% exemption after the expiration of the two years of full
exemption.  The 50% tax exemption applied to the period from January
1, 2005 to December 31, 2007.  For the period from April 1, 2006 to 31
December 31, 2007, Sunplus is subject to PRC Income Tax at a reduced rate of
13.5%.  Pursuant to the New PRC Income Tax Laws, the prevailing
statutory rate of enterprise income tax is 25% as of January 1, 2008; prior to
that date, it was 27%.





Zhangzhou
JiaXun and Fujian Qiaoxing were inactive during each of the years ended March
31, 2009 and 2008.





A
reconciliation between taxes computed at the United States statutory rate of 34%
and the Group’s effective tax rate is as follows:-





YEAR
      ENDED MARCH 31,2009
                    
                    
                    2008US$’000
                    
                    
                    US$’000(Loss)/income
      before income tax
                    
                    $
                    (4,420
                    )
                    
                    $
                    18,780Income
      tax/(benefit) on pretax incomeat
      statutory rate
                    
                    $
                    (1,503
                    )
                    
                    $
                    6,385Effect
      of different tax rates of subsidiaryoperating
      in other jurisdictions
                    
                    
                    540
                    
                    
                    
                    (2,222
                    )Tax
      effect of non-deductible expenses
                    
                    
                    334
                    
                    
                    
                    504Tax
      effect of non-taxable income
                    
                    
                    (2
                    )
                    
                    
                    (1
                    )Change
      in valuation allowance
                    
                    
                    2,531
                    
                    
                    
                    23Tax
      effect of exemption
                    
                    
                    -
                    
                    
                    
                    (1,501
                    )Income
      tax
                    
                    $
                    1,900
                    
                    
                    $
                    3,188





As
of March 31, 2009 and 2008, T-Bay had accumulated net operating loss
carryforwards for United States federal tax purposes of approximately
US$5,630,000 and US$5,501,000, respectively, that are available to offset future
taxable income.  Realization of the net operating loss carryforwards is
dependent upon future profitable operations.  In addition, the
carryforwards may be limited upon a change of control in accordance with
Internal Revenue Code Section 382, as amended.  Accordingly, management has
recorded a valuation allowance to reduce deferred tax assets associated with the
net operating loss carryforwards to zero at March 31, 2009 and 2008.The net
operating loss carryforwards expire in years 2012 through 2029.


F-16


As of
March 31, 2009 and 2008, deferred tax assets consist of:-





MARCH
      31,2009
                  
                  
                  2008US$’000
                  
                  
                  US$’000Net
      operating loss carryforwards
                  
                  $
                  4,427
                  
                  
                  $
                  1,896Less:
      valuation allowance
                  
                  
                  (4,427
                  )
                  
                  
                  (1,896
                  )$
                  -
                  
                  
                  $
                  -





8.
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, 2009 and 2008, the Group had credit risk exposure of uninsured cash in banks
of approximately US$20,494,000 and US$23,355,000, respectively (including cash
of discontinued operations of US$1,000 and US$25,000 respectively).





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





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





YEAR
      ENDED MARCH 31,2009
                  
                  
                  2008US$’000
                  
                  
                  %
                  
                  
                  US$’000
                  
                  
                  %Customer
      A
                  
                  $
                  6,251
                  
                  
                  
                  18
                  
                  
                  $
                  4,410
                  
                  
                  
                  10Customer
      B
                  
                  
                  6,951
                  
                  
                  
                  20
                  
                  
                  
                  6,977
                  
                  
                  
                  15Customer
      C
                  
                  
                  6,945
                  
                  
                  
                  20
                  
                  
                  
                  4,902
                  
                  
                  
                  11Customer
      group A*
                  
                  
                  3,451
                  
                  
                  
                  10
                  
                  
                  
                  3,755
                  
                  
                  
                  8





*At March
31, 2009 and 2008, this group of customers accounted for 15% and 10%,
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.




F-17


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





MARCH 31,2009
                  
                  
                  2008US$’000
                  
                  
                  %
                  
                  
                  US$’000
                  
                  
                  %Customer
      B
                  
                  $
                  2,241
                  
                  
                  
                  10
                  
                  
                  $
                  3,603
                  
                  
                  
                  19Customer
      C
                  
                  
                  2,808
                  
                  
                  
                  13
                  
                  
                  
                  645
                  
                  
                  
                  3Customer
      D
                  
                  
                  3,505
                  
                  
                  
                  16
                  
                  
                  
                  2,529
                  
                  
                  
                  13Customer
      E
                  
                  
                  2,762
                  
                  
                  
                  12
                  
                  
                  
                  2,517
                  
                  
                  
                  13Customer
      F
                  
                  
                  1,742
                  
                  
                  
                  8
                  
                  
                  
                  2,030
                  
                  
                  
                  11Customer
      G*
                  
                  
                  2,551
                  
                  
                  
                  11
                  
                  
                  
                  1,734
                  
                  
                  
                  9Customer
      H
                  
                  
                  3,219
                  
                  
                  
                  14
                  
                  
                  
                  3,220
                  
                  
                  
                  17Customer
      group A*
                  
                  
                  3,261
                  
                  
                  
                  15
                  
                  
                  
                  1,941
                  
                  
                  
                  10





*
Customer Group A includes customers G and other customers in the same group that
individually do not meet the greater than 10% threshold





9.
Retirement and Welfare Benefits





The
full-time employees of the PRC subsidiaries are entitled to staff welfare
benefits including medical care, casualty, housing benefits, education benefits,
unemployment insurance and pension benefits through a PRC government-mandated
multi-employer defined contribution plan.  The PRC subsidiaries are
required to accrue the employer-portion for these benefits based on certain
percentages of the employees’ salaries. The total provision for such employee
benefits was US$189,000 and US$212,000 for the two years ended March 31, 2009
and 2008, respectively.  The PRC subsidiaries are required to make
contributions to the plans out of the amounts accrued for all staff welfare
benefits except for education benefits.  The PRC government is
responsible for the staff welfare benefits including medical care, casualty,
housing benefits, unemployment insurance and pension benefits to be paid to
these employees.





10.
Related Party Transactions





The Group
engages in business transactions with the following related
parties:


a. Li
Xiaofeng, a stockholder of T-Bay.


b. Li
Meilian, a stockholder of T-Bay.





The Group
has the following transactions and balances with related parties:-





MARCH 31,2009
                
                
                2008US$’000
                
                
                US$’000Other
      payable – Li Meilian
                
                $
                285
                
                
                $
                247Long-term
      liabilitiesOther
      payable – Li Meilian
                
                $
                3,482
                
                
                $
                3,404Other
      payable – Li Xiaofeng
                
                
                773
                
                
                
                773$
                4,255
                
                
                $
                4,177


F-18





The
balances have no stated terms for repayment and are not interest
bearing.  The payables to Li Meilian and Li Xiaofeng are not repayable
within the next twelve months.





11.
Other Operating Expenses





On March
20, 2009, Sunplus signed a compensation agreement with one of its major customer
to compensate the customer for subcontracting fees and raw materials consumed
for a defectively designed cell phone printed circuit board assembly (“PCBA”) of
US$2,593,000.





On March
23, 2009, Sunplus signed another compensation agreement with another major
customer to compensate it for subcontracting fees and raw materials consumed for
another defectively designed cell phone PCBA of US$2,482,000.





Total
compensation of US$5,075,000 was recorded as other operating expenses for the
year ended March 31, 2009.





12.
Commitments and Contingencies





a.
            As
      of March 31, 2009, Sunplus leased office premises and staff quarters under
      several agreements expiring from 2010 to
2012.





Rental
expenses for the two years ended March 31, 2009 and 2008 amounted to US$246,000
and US$439,000, respectively, and are included in general and administrative
expenses in the consolidated statements of operations and comprehensive
income.





The
      future minimum lease payments under the above-mentioned leases as of March
      31, 2009 are as follows:-


US$’000Year Ending March 31,2010
                      
                      $
                      582011
                      
                      
                      382012
                      
                      
                      38Total
                      
                      $
                      134





b.
            As
      of March 31, 2009, the Group had capital commitments in relation to
      acquisition of intangible assets of
US$27,000.





13.
Discontinued Operations





On
December 31, 2008, Sunplus entered into an agreement with Huizhou Liyin to sell
its entire interest in Zhangzhou JiaXun.  The sales price of Zhangzhou
JiaXun is RMB5,000,000 (US$724,000).  However, on March 10, 2009,
pursuant to a supplemental agreement between Sunplus and Huizhou Liyin, Huizhou
Liyin and Sunplus rescinded the original agreement.  On the same date,
Sunplus entered into another agreement with Qiaoxing Telecom to dispose of all
its interest in Zhangzhou JiaXun at a consideration of US$724,000
(RMB5,000,000).  The disposal criteria were met before March 31,
2009.  On April 9, 2009 legal title and ownership of Zhangzhou Jiaxun
had been transferred (See Note 15).


F-19





On March
20, 2009, Sunplus disposed of its 80% interest in its subsidiary Fujian QiaoXing
to Qiaoxing Telecom, a third party, for a consideration of RMB84,000,000
(US$12,230,000).





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





Discontinued
Operations (Fujian Qiaoxing and Zhangzhou Jiaxun)





2009
                
                
                2008US$’000
                
                
                US$’000Other
      revenue
                
                $
                2
                
                
                $
                -Operating
      loss
                
                
                90
                
                
                
                379Loss
      on disposal of Fujian Qiaoxing
                
                
                2,730
                
                
                
                -Impairment
      loss on assets of discontinued operations
                
                
                4
                
                
                
                -Net
      loss
                
                $
                2,822
                
                
                $
                379





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,
                    2009
                  
                  
                  MARCH 31,
                    2008US$’000
                  
                  
                  US$’000Fixed
      assets
                  
                  $
                  -
                  
                  
                  $
                  748Construction
      in progress
                  
                  
                  -
                  
                  
                  
                  2,035Land-use
      rights
                  
                  
                  -
                  
                  
                  
                  10,647Investment
      at cost
                  
                  
                  585
                  
                  
                  
                  -Goodwill
                  
                  
                  -
                  
                  
                  
                  5,362Deposits
      and other receivables
                  
                  
                  83
                  
                  
                  
                  137Due
      from minority shareholder
                  
                  
                  59
                  
                  
                  
                  -Cash
      and bank balances
                  
                  
                  1
                  
                  
                  
                  25728
                  
                  
                  
                  18,954Impairment
                  
                  
                  (4
                  )
                  
                  
                  -Assets
      of discontinued operations
                  
                  
                  724
                  
                  
                  
                  18,954Liabilities
      of discontinued operations
                  
                  
                  -
                  
                  
                  
                  (3,313
                  )Assets
      held for sales, net
                  
                  $
                  724
                  
                  
                  $
                  15,641Total
      consideration
                  
                  $
                  724
                  
                  
                  $
                  -


F-20





14.
New Accounting Pronouncements





In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements - an amendment of ARB No. 51” (“SFAS No. 160”). SFAS
No. 160 requires that a noncontrolling interest in a subsidiary be reported
as equity and the amount of consolidated net income specifically attributable to
the noncontrolling interest be identified in the consolidated financial
statements. It also calls for consistency in the manner of reporting changes in
the parent’s ownership interest and requires fair value measurement of any
noncontrolling equity investment retained in a deconsolidation. SFAS
No. 160 is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008. The Company is
currently evaluating the impact adopting SFAS No. 160 will have on its
consolidated financial condition, results of operations, and cash
flows.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R) broadens the guidance of
SFAS No. 141, extending its applicability to all transactions and other
events in which one entity obtains control over one or more other businesses. It
broadens the fair value measurement and recognition of assets acquired,
liabilities assumed, and interests transferred as a result of business
combinations. SFAS No. 141(R) expands on required disclosures to improve
the statement users’ abilities to evaluate the nature and financial effects of
business combinations. SFAS No. 141(R) is effective for the first annual
reporting period beginning on or after December 15, 2008. The adoption of SFAS
No. 141(R) will have an impact on the Company’s consolidated financial
statements for any further acquisitions.





In
February 2008, the FASB issued FASB Staff Position (“FSP”) FAS
No. 157-1, “Application of FASB Statement No. 157 to FASB Statement
No. 13 and Other Accounting Pronouncements That Address Fair Value
Measurements for Purposes of Lease Classification or Measurement under Statement
13”, or FSP FAS No. 157-1. FSP FAS No. 157-1 provides a scope exception from
SFAS No. 157 for the evaluation criteria on lease classification and
capital lease measurement under SFAS No. 13, “Accounting for Leases” and
other related accounting pronouncements. The Company adopted FSP FAS No.
157-1 effective October 1, 2008. Accordingly, the provisions of SFAS
No. 157 will not be applied to lease transactions under SFAS No. 13
except when applying SFAS No. 157 to business combinations recorded by the
Company.





In
February 2008, the FASB issued FSP FAS No. 157-2, “Effective Date of
FASB Statement No. 157” (“FSP FAS 157-2”) which delays the effective date of
SFAS No. 157 to fiscal years beginning after November 15, 2008 for
certain nonfinancial assets and nonfinancial liabilities. The Company is in the
process of evaluating the impact of applying FSP FAS 157-2 to nonfinancial
assets and liabilities measured on a nonrecurring basis.





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 expands and amends the disclosure requirements for derivative
instruments and hedging activities. SFAS No. 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008. The Company does not expect that adoption of SFAS No. 161 will have a
material impact on its consolidated financial statements.


F-21





In
April 2008, the FASB issued FSP FAS No. 142-3, “Determination of the
Useful Life of Intangible Assets” (“FSP FAS No. 142-3”). FSP FAS 142-3 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 (“SFAS No. 142”).
FSP FAS No. 142-3 is intended to improve the consistency between the useful life
of an intangible asset determined under SFAS No. 142 and the period of expected
cash flows used to measure the fair value of the asset under SFAS No. 141(R) and
other U.S. GAAP. FSP FAS No. 142-3 is effective for fiscal years beginning after
December 15, 2008. Early adoption is prohibited. The Company is currently
evaluating the impact of the adoption of FSP FAS No. 142-3 on its consolidated
financial statements.





14.
New Accounting Pronouncements (continued)





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles”. The statement identifies the sources of accounting
principles and the framework to be used in preparation of financial statements
of nongovernmental entities. The adoption is not expected to have a material
impact on the Company’s consolidated financial statements.





In
April 2009, the FASB issued FSP FAS No. 115-2 and FAS No. 124-2,
“Recognition of Other-Than- Temporary Impairments (“FSP FAS No. 115-2
and FAS No. 124-2”). FSP FAS No. 115-2 and FAS No. 124-2 amends
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 Company is currently evaluating the impact
of the adoption of FSP FAS No. 115-2 and FAS No. 124-2 on its
financial statements.





15.
Subsequent Event





On April
9, 2009, legal title of Zhangzhou JiaXun was transferred from Sunplus to
Qiaoxing Telecom (see Note 13).


F-22


Item
      9.
            Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure.





Not
applicable.





Item
      9A(T).
            Controls
      and Procedures.





(a)
Evaluation of Disclosure Controls and Procedures





As of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with the participation of our management, including our
Chief Executive Officer ("CEO") and our Chief Financial Officer ("CFO"), of the
effectiveness of the design and operation of our disclosure controls and
procedures, or “disclosure controls,” pursuant to Exchange Act Rule
13a-15(b). Disclosure controls are controls and procedures designed to
reasonably ensure that information required to be disclosed in our reports filed
under the Exchange Act, such as this annual report, is recorded, processed,
summarized and reported within the time periods specified in the U.S. Securities
and Exchange Commission’s rules and forms. Disclosure controls include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed in our reports filed under the Exchange Act is accumulated and
communicated to our management, including our CEO and CFO, or persons performing
similar functions, as appropriate, to allow timely decisions regarding required
disclosure. Our disclosure controls include some, but not all, components of our
internal control over financial reporting. In making this evaluation, our
management considered the material weaknesses in our internal control over
financial reporting as discussed below. Based upon that evaluation, our CEO and
CFO concluded that our disclosure controls and procedures were not effective as
of March 31, 2009.  However, giving full consideration to the material
weaknesses described below, we performed adequate analyses and procedures,
including among other things, transaction reviews and account reconciliations,
in order to provide assurance that our consolidated financial statements
included in this annual report were prepared in accordance with generally
accepted accounting principles (“GAAP”) and present fairly, in all material
respects, our financial position, results of operations and cash flows for the
periods presented in conformity with GAAP.





(b)
Management’s Report on Internal Control Over Financial Reporting





Our
management is responsible for establishing and maintaining effective internal
control over financial reporting. This system is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of consolidated financial statements for external purposes in accordance with
GAAP.





Our
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 our transactions and dispositions of our assets;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of consolidated financial statements in accordance with
generally accepted accounting principles, and that our receipts and expenditures
are being made only in accordance with authorizations of our management and
directors; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of our assets that
could have a material effect on the consolidated financial
statements.





Our
management performed an assessment of the effectiveness of our internal control
over financial reporting as of March 31, 2009, utilizing the criteria described
in the “Internal Control — Integrated Framework” issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The objective of
this assessment was to determine whether our internal control over financial
reporting was effective as of March 31, 2009. Management’s assessment included
evaluation of such elements as the design and operating effectiveness of key
financial reporting controls, process documentation, accounting policies, and
our overall control environment.


Page 30
of 41





A
material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial


reporting
such that there is a reasonable possibility that a material misstatement of the
Company’s annual or interim financial statements will not be prevented or
detected on a timely basis. In our assessment of the effectiveness of internal
control over financial reporting as of March 31, 2009, we identified the
following material weaknesses, which have not been fully remedied and continued
to exist:





·
            There
      was a lack of 1) effective communication of the importance of internal
      controls over financial reporting throughout the structure of the Company
      and 2) an adequate tone set by management around control
      consciousness.





·
            We
      do not have sufficient in-house capacity to review and supervise the
      accounting operations. Our policies and procedures with respect to the
      review, supervision and monitoring of accounting operations were not
      operating in a fully effective manner.  Timely review of
      vouchers, general ledger and sub-ledger was not
  sufficient.





·
            Our
      accounting staffs were not familiar with U.S. GAAP and SEC reporting
      requirements.  In addition, we did not maintain effective
      controls over the preparation and review of the period-end closing
      procedures to ensure the completeness and accuracy of the consolidated
      financial statements and that balances and disclosures reported in the
      consolidated financial statements reconciled to the underlying supporting
      schedules and accounting records.





·
            There
      was a lack of effective anti-fraud program designed to detect and prevent
      fraud relating to an effective whistle-blower program, consistent
      background checks of personnel in positions of responsibility and an
      ongoing program to manage identified fraud
  risks.





·
            We
      did not maintain an effective risk assessment and management
      mechanism.  Specifically, we do not have sufficient internal
      mechanisms to prevent management override in a fully effective
      manner.





·
            Our
      internal audit function was not sufficient. Specifically, there were no
      personnel with an appropriate level of experience, training and there were
      no lines of reporting to allow an internal audit group to function
      effectively in determining the adequacy of our internal control over
      financial reporting and monitoring the ongoing effectiveness
      thereof.





In light
of these material weaknesses management concluded that our internal control over
financial reporting was not effective as of March 31, 2009.





However,
giving full consideration to the material weaknesses described above, we
performed adequate analyses and procedures, including among other things,
transaction reviews and account reconciliations, in order to provide assurance
that our consolidated financial statements included in this annual report were
prepared in accordance with generally accepted accounting principles (“GAAP”)
and present fairly, in all material respects, our financial position, results of
operations and cash flows for the periods presented in conformity with
GAAP.





We have
made certain changes in internal control over financial reporting during the
fiscal year ended March 31, 2009, that have a material effect or, are
reasonably likely to have a material effect, on our internal control over
financial reporting.  In regard to the safeguarding of documentation,
we have implemented procedures to safeguard all important documentation by
purchasing new sets of safeguarding equipment to secure important documentation.
We have also implemented the policy of reviewing all of our contracts and
agreements and storing them properly.


Page 31
of 41





This
annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our independent
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management's report in
this annual report.





Item
      9B.
            Other
      Information.





On
January 9, 2009, the Company filed with the Commission a Form 8-K stating that
on December 31, 2008, Sunplus, a 95% owned subsidiary of the Company had entered
into an agreement with Huizhou Liyin to sell 100% of Sunplus’ interest in its
wholly-owned subsidiary JiaXun. The purchase price was RMB5,000,000 with an
initial payment of RMB500,000 and the remaining balance of RMB4,500,000 to be
paid within 3 months following the completion of the transaction.





The
filing also stated that Sunplus has entered into another agreement with Huizhou
Liyin to sell 80% of Sunplus’ interest in its subsidiary Fujian QiaoXing. The
purchase price was RMB84,000,000 with an initial payment of RMB2,000,000 and the
remaining balance of RMB82,000,000 to be paid within 3 months following the
completion of the transaction.





In March
2009, Sunplus terminated the agreement with Huizhou Liyin on acquisition of
JiaXun and Fujian Qiao Xing and entered into another agreement with QiaoXing
Telecommunication Industrial Company Limited to sell One Hundred Percent (100%)
of JiaXun for RMB5,000,000 and Eighty Percent (80%) of Fujian QiaoXing for
RMB84,000,000. The disposal of JiaXun and Fujian QiaoXing were completed on
April 9 and March 20, 2009, respectively.





PART
III.





Item
      10.
            Directors,
      Executive Officers and Corporate
Governance.





DIRECTORS
AND EXECUTIVE OFFICERS




Our
directors and officers, as of March 31, 2009, are set forth below. The directors
hold office for their respective term and until their successors are duly
elected and qualified. Vacancies in the existing Board are filled by a majority
vote of the remaining directors. The officers serve at the will of the Board of
Directors.





Name
                
                Age
                
                Position
                
                SinceXiaofeng
      Li
                
                32
                
                Director
                
                August
      2005Wai
      Chiu Albert Leung *
                
                52
                
                Chief
      Financial Officer
                
                September
      2008Jiancheng
      Fang
                
                54
                
                Independent
      Director
                
                June
      2008Chao
      Jiang
                
                38
                
                Independent
      Director
                
                June
      2008Chengning
      Zhang
                
                46
                
                Independent
      Director
                
                June
      2008


*Mr. Wai
Chiu Albert Leung resigned on April 1, 2009 and was replaced by Mr. Xiangning
Qin.





The
following is a brief summary of the business experience of our
management.





Mr. Xiaofeng Li, Chief Executive
Officer andDirector. Mr. Li holds a Bachelor Degree from Shanghai University,
Industrial Design Department. From August 1998 to February 2001, Mr. Li was
employed by Inventec Appliances Corp. where he was an Industrial Designer.
 From 2001 to March 2002, Mr. Li was employed by Shanghai Fanna Industrial
Product Design Co., Ltd. as executive director and general manager.  Since
April 2002, Mr. Li has been Chairman of the Board of Shanghai Sunplus
Communication Technology Co., Ltd.


Page 32
of 41





Mr.
Xiaofeng Li was first appointed Chief Executive Officer of the Company in August
2005, resigned from the office of Chief Executive Officer in June 2008 and was
re-appointed Chief Executive Officer in April 2009.





Wai
Chiu Albert Leung, Former Chief Financial Officer


Mr. Leung
prior to joining the Company, served as CFO of Qiao Xing Universal Telephone,
Inc. (NASDAQ:XING) from December 2003 to August 2008. Mr. Leung served as
Consultant for AB Management Consulting Company, Hong Kong from March 2001 to
December 2003; his duties included: accounting services, tax compliance and
finance for small and medium enterprises, designing and implementing tailor-made
accounting computer software packages for clients and proved financial services
(mainly US-based external financial reporting) to Mainland Chinese businesses
quoted on the OTCBB.





Mr. Leung
served in various financial oversight responsibilities since February 1985,
including from February 1985 to September 1988 as Group Internal Auditor for
L’Air Liquide S.A., from September 1988 to February 1990 as Finance Director for
Liquid Air Far East Ltd. (subsidiary of L’Air Liquide S.A.), from May 1990 to
December 1994 as Tax & Accounts Manager for Dragages Et Travaux Public (HK)
Ltd. (part of Bouygues Group), from January 1995 to May 1997 as Financial
Controller for BYME Engineering (HK) Ltd. (also part of Bouygues Group), from
May 1997 to August 1998 as CFO - Asia for DMC Group and from November 1999 to
October 2000 as Regional Financial Controller for Euro RSCG Asia Pacific. Prior
to 1985, Mr. Leung served as a Junior then Assistant Auditor, from July 1980 to
October 1981, with Deloitte, Haskins & Sells, Hong Kong.





Mr. Leung
is a member of the Association of Chartered Certified Accountants of Great
Britain and Hong Kong Institute of Certified Public Accountants. Mr. Leung holds
a Diplome de l’Ecole des Hautes Etudes Commerciales (Master of Science in
Management) from l’Ecole des Hautes Etudes Commerciales of France and a Higher
Diploma in Accountancy from Hong Kong Polytechnic.





Mr.Leung
resigned on April 1, 2009.





Xiangning
Qin, Chief Financial Officer


Mr. Qin
currently serves as the Financial Director of Shanghai Sunplus Communication
Technology Co., Ltd..  From 2000 to 2006, Mr. Qin was employed by
Guangxi Liugong Machinery Co., Ltd. (SZSE: 000528), a Top 500 enterprise in
China, serving as the Accounting Manager, Accounting Director and Internal
Auditor during the six years with Guangxi.  Mr. Qin holds a Bachelors
Degree of Accounting from Zhongnana University of Economics and
Law.  Mr. Qin also holds a Certificate of Assistant Auditor and
Certificate of Medium Level Accountant. Mr. Qin was appointed as Chief Financial
Officer on April 1, 2009.





Jiancheng Fang(Independent
Director)


Dr.
Jiancheng Fang, Doctoral Supervisor, is the Chief of College of Optoelectronic
Engineering and Vice-Chief of R&D Center of Information and Control in
Beijing University of Aeronautics and Astronautics. Dr. Fang has been the First
and Second place winner of the National Tech & Invention Award and has
received the National Science Fund. He is now in charge of nine National Science
Projects, three of which are included in “National 863 Plan Program”. He is the
member of Electric Control & Testing Standards Department in State
Administration of Science Technology and Industry for National
Defense.





Chao Jiang(Independent
Director)


Mr. Chao
Jiang, current serves as the Executive Director, the chief Financial Officer,
and Vice President of China Wireless Technologies Limited (02369.HK) since June
2002. With more than 15 years experience in accounting and finance, he is an
associate member of the Association of Chartered Certified Accountants and a
Certified Public Accountant in the PRC. Previously, he worked for the State
Audit Bureau. Mr. Jiang has also worked for Qiaoxing Electronic Company Limited
and Shenzhen Zhong Xing Xin Telecom Equipment Company Limited (00763.HK). Mr.
Jiang obtained a Bachelor Degree in Economics from Sun Yat-Sen University in
1991.


Page 33
of 41





Chengning Zhang(Independent
Director)


Chengning
Zhang, Doctor Tutor for the Beijing Institute of Technology, is an expert in
“vehicle electric control” & “Electric Power System”. He has dedicated his
research to the study of Electric Power Control System, Battery Management
System and Battery Charge System. Mr. Zhang is the head of one of “National 863
Plan Program” and the holder of 4 national patents. More than 20 of his essays
have been published in professional journals in China and overseas. He also was
the Co-Editor of the first professional book of “Electric Vehicle” in
China.





(a)
Significant Employees




Other
than our officers, there are no employees who are expected to make a significant
contribution to our corporation.




(b)
Family Relationships




There are
no family relationships among any of our directors and executive officers. There
are no family relationships among our officers, directors, or persons nominated
for such positions.




LEGAL
PROCEEDINGS




No
officer, director, or persons nominated for these positions, and no promoter or
significant employee of our corporation has been involved in legal proceedings
that would be material to an evaluation of our management.




AUDIT
COMMITTEE





As noted
on the Form 8-K filed with the Commission on August 15, 2008, on August 13,
2008, the Board of Directors approved the creation of an Audit Committee and its
Charter. Furthermore, the Board appointed Mr. Chao Jiang, independent director
and financial expert, and Mr. Chengning Zhang, independent director, to the
Audit Committee, thus ensuring that it has a qualified "audit committee
financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K, and is
"independent" as the term is used in Item 407(d) of Regulation S-K.





CODE OF
ETHICS




As noted
on the Form 8-K filed with the Commission on August 15, 2008, on August 15,
2008, the Board of Directors approved a Business Code of Conduct and a Financial
Code of Conduct (collectively the “Codes”). Our Codes define the standard of
conduct expected by our officers, directors and employees.  The Codes
were filed as Exhibits 14.1 and 14.2 to our Form 8-K filed with the Commission
on August 15, 2008 and are incorporated herein by reference.




COMPLIANCE
WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934




Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our directors
and executive officers and beneficial holders of more than 10% of our common
stock to file with the Commission initial reports of ownership and reports of
changes in ownership of our equity securities on Forms 3, 4 and 5. Based on the
copies of filings received by the Company during the most recent fiscal year the
directors, officers, and beneficial owners of more than ten percent of the
equity securities of the Company registered pursuant to Section 12 of the
Exchange Act have filed on a timely basis all required Forms 3, 4, and 5 and any
amendments thereto.


Page 34
of 41





Item
      11.
            Executive
      Compensation.





Background
and Compensation Philosophy





There are
altogether five (5) persons acting individually either as a director or an
executive officer or both in our Company:  (1) Mr. Xiaofeng Li, our
Chief Executive Officer and director, and beneficial owner of 6.64 % of our
common stock; (2) Mr. Xiangning Qin, our Chief Financial Officer, (3) Mr.
Jiancheng Fang, our independent director; (4) Mr. Chao Jiang, our independent
director and (5)Chengning Zhang, our independent director. Our board of
directors have historically determined the compensation to be paid to our
executive officers based on our financial and operating performance and
prospects, the level of compensation paid to similarly situated executives in
comparably sized companies and contributions made by the officers’ to our
success.  Each of the named officers will be measured by a series of
performance criteria by the board of directors, or the compensation committee
when it is established, on a yearly basis.  Such criteria will be set
forth based on certain objective parameters such as job characteristics,
required professionalism, management skills, interpersonal skills, related
experience, personal performance and overall corporate performance.





Our board
of directors have not adopted or established a formal policy or procedure for
determining the amount of compensation paid to our executive
officers.  Mr. Li has been and may continue to be involved when our
board of directors deliberates compensation issues related to his or Mr. Qin’s
compensation.





As our
executive leadership and board of directors grow, our board of directors may
decide to form a compensation committee charged with the oversight of executive
compensation plans, policies and programs.





Elements
of Compensation





We
provide our executive officers solely with a base salary to compensate them for
services rendered during the year.  Our policy of compensating our
executives with a cash salary has served us well.  Because of our
history of attracting and retaining executive talent, we do not believe it is
necessary at this time to provide our executives discretionary bonuses, equity
incentives, or other benefits in order for us to continue to be
successful.





Base
Salary





The
yearly base salary of Mr. Xiaofeng Li for the fiscal years ended March 31, 2009
and 2008 was $61,000 and $61,000, respectively.  Mr. Xiangning Qin
received $11,000 and $7,000 for the fiscal years ended March 31, 2009 and March
31, 2008, respectively.  He was appointed as CFO on April 1, 2009. Mr.
Jie Shi received $Nil during the fiscal years ended March 31, 2009. He was
appointed as the CEO in June 2008 and resigned in March 2009. Mr. Wai Chiu
Albert Leung received $26,000 for the fiscal years ended March 31,
2009.  He served as CFO from September 2008 to April 2009. Mr. Murry
Zuhe Xiao received $23,000 and $46,000 for the fiscal years ended March 31, 2009
and March 31, 2008, respectively.  He served as CFO from August 2005
to September 2009.





Discretionary
Bonus





We have
not provided our executive officers with any discretionary bonuses at the moment
but our board of directors may consider the necessity of such a scheme in the
future based on our financial and operating performance and prospects, the level
of compensation paid to similarly situated executives in comparably sized
companies and contributions made by the officers’ to our success.


Page 35
of 41





Equity
Incentives





We have
not established an equity based incentive program and have not granted stock
based awards as a component of compensation.  In the future, we may
adopt and establish an equity incentive plan pursuant to which awards may be
granted if our board of directors determines that it is in the best interests of
our stockholders and the Company to do so.





Retirement
Benefits





One of
our executive officers, namely, Xiaofeng Li, the Chief Executive Officer in
Shanghai participates in the government –mandated multi-employer defined
contribution retirement plan.





Perquisites





We have
not provided our executive with any material perquisites and other personal
benefits and, therefore, we do not view perquisites as a significant or
necessary element of our executive’s compensation.





Deferred
Compensation





We do not
provide our executives the opportunity to defer receipt of annual
compensation.





The
following table sets forth information for the period indicated with respect to
the persons who served as our CEO, CFO and other most highly compensated
executive officers who served on our board of directors.





SUMMARY
COMPENSATION TABLE





Name and Position
                                                    
                                                    Year
                                                    
                                                    Salary
                                                      ($)
                                                    
                                                    
                                                    Bonus
                                                      Shares
                                                      ($)
                                                    
                                                    
                                                    Stock
                                                      Awards
                                                      ($)
                                                    
                                                    
                                                    Option
                                                      Awards
                                                      ($)
                                                    
                                                    
                                                    Non-Equity
                                                      Incentive Plan
                                                      Compensation
                                                      ($)
                                                    
                                                    
                                                    Nonqualified
                                                      Deferred
                                                      Compensation
                                                      Earnings ($)
                                                    
                                                    
                                                    All Other
                                                      Compensation
                                                      ($)
                                                    
                                                    
                                                    Total
                                                      ($)Xiaofeng
      Li
                                                    
                                                    2009
                                                    
                                                    
                                                    61,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    6,400
                                                    
                                                    
                                                    
                                                    67,400Chief
      Executive Officer
                                                    
                                                    2008
                                                    
                                                    
                                                    61,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    5,200
                                                    
                                                    
                                                    
                                                    66,200Murry
      Zuhe Xiao
                                                    
                                                    2009
                                                    
                                                    
                                                    23,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    23,000EX-Chief
      Financial Officer
                                                    
                                                    2008
                                                    
                                                    
                                                    46,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    46,000Xiangning
      Qin
                                                    
                                                    2009
                                                    
                                                    
                                                    11,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    11,000Chief
      Financial Officer
                                                    
                                                    2008
                                                    
                                                    
                                                    7,000
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    7,000-Wai
      Chiu Albert Leung
                                                    
                                                    2009
                                                    
                                                    
                                                    26,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    26,000Ex-Chief
      Financial OfficerJie
      Shi
                                                    
                                                    2009
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Ex-Chief
      Executive Officer





SERVICE
AGREEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS





We will
bear all travelling and travel-related expenses, entertainment expenses and
other out-of-pocket expenses reasonably incurred by Mr. Li and Mr. Qin in the
process of discharging their respective duties on our behalf.


Page 36
of 41





Except as
disclosed herein, we have no other existing or proposed agreements with any of
our officers and directors.





BONUSES
AND DEFERRED COMPENSATION





We do not
have an incentive bonus plan at this time.





We do not
have any deferred compensation or retirement plans. We do not have a
compensation committee; all decisions regarding compensation are determined by
our entire board of directors.





OPTION
GRANTS IN THE LAST FISCAL YEAR





We did
not grant any options or stock appreciation rights to our named executive
officers or directors in the fiscal year 2009. As of March 31, 2009, Mr.
Xiaofeng Li, a director, owned 1,998,237 shares of common stock in our Company,
which represented 6.64% of the total number of shares issued and
outstanding.





INDEMNIFICATION
OF DIRECTORS AND EXECUTIVE OFFICERS





Our
bylaws provide for the indemnification of our present and prior directors and
officers or any person who may have served at our request as a director or
officer of another corporation in which we own shares of capital stock or of
which we are a creditor, against expenses actually and necessarily incurred by
them in connection with the defense of any actions, suits or proceedings in
which they, or any of them, are made parties, or a party, by reason of being or
having been director(s) or officer(s) of us or of such other corporation, in the
absence of negligence or misconduct in the performance of their duties. This
indemnification policy could result in substantial expenditure by us, which we
may be unable to recoup.





Insofar
as indemnification by us for liabilities arising under the Securities Exchange
Act of 1934 may be permitted to our directors, officers and controlling persons
pursuant to provisions of the Amended Articles of Incorporation and Bylaws, or
otherwise, we have been advised that in the opinion of the SEC, such
indemnification is against public policy and is, therefore, unenforceable. In
the event that a claim for indemnification by such director, officer or
controlling person of us is in the successful defense of any action, suit or
proceeding is asserted by such director, officer or controlling person in
connection with the securities being offered, we will, unless in the opinion of
our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
us is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.





At the
present time, there is no pending litigation or proceeding involving a director,
officer, employee or other agent of ours in which indemnification would be
required or permitted. We are not aware of any threatened litigation or
proceeding which may result in a claim for such indemnification.





Compensation
of Directors




Our Board
of Directors receives no compensation.





Item
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.





Security
Ownership - Certain Beneficial Owners




Beneficial
ownership is shown as of June 24, 2009, for shares held by (i) each person or
entity known to us to be the beneficial owner of more than 5% of our issued and
outstanding shares of common stock based solely upon a review of filings made
with the Commission and our knowledge of the issuances by us, (ii) each of our
directors, (iii) our Chief Executive Officer and our three other most highly
compensated officers whose compensation exceeded $100,000 during the fiscal year
ended March 31, 2009, or the Named Executive Officers, and (iv) all of our
current directors and executive officers as a group. Unless otherwise indicated,
the persons listed below have sole voting and investment power with respect to
the shares and may be reached at Room 917, YongSheng Building, ZhongShan Xi
Road, Xuhui District, Shanghai, China.


Page 37
of 41





Security
Ownership - Certain Beneficial Owners





No
individual shareholder, outside of those listed below in “Security Ownership –
Management” held 5% or more of the Company’s stock as of June 24,
2009.





Security
Ownership – Management





AmountAnd
                                    
                                    
                                    
                                    
                                    
                                    PercentageNature of
                                    
                                    
                                    
                                    
                                    
                                    of ClassBeneficial
                                    
                                    
                                    
                                    
                                    
                                    BeneficiallyBeneficial Owner (including address)
                                    
                                    Title of class
                                    
                                    
                                    Ownership (1)
                                    
                                    
                                    Total
                                    
                                    
                                    OwnedXiaofeng
      Li (2)(3)
                                    
                                    Common
                                    
                                    
                                    
                                    1,998,237
                                    D
                                    
                                    
                                    1,998,237
                                    
                                    
                                    
                                    6.64
                                    %9th
      Fl, YongSheng Building
                                      Xhong
      Shang Xi Road
                                      Xuhui
      District, Shanghai, ChinaXiangning
      Qin (2)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -9th
      Fl, YongSheng Building
                                      Xhong
      Shang Xi Road
                                      Xuhui
      District, Shanghai, ChinaJiancheng
      Fang (3)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -9th
      Fl, YongSheng Building
                                      Xhong
      Shang Xi Road
                                      Xuhui
      District, Shanghai, ChinaJiang
      Chao (3)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -9th
      Fl, YongSheng Building
                                      Xhong
      Shang Xi Road
                                      Xuhui
      District, Shanghai, ChinaChengning
      Zhang (3)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -9th
      Fl, YongSheng Building
                                      Xhong
      Shang Xi Road
                                      Xuhui
      District, Shanghai, ChinaOfficers
      and Directors as a group
                                      Five
      (5) People
                                    
                                    Common
                                    
                                    
                                    
                                    17,948,237
                                    
                                    
                                    
                                    17,948,237
                                    
                                    
                                    
                                    59.65
                                    %





Notes:





(1)
            (D)
      stands for direct ownership; (I) stands for indirect
    ownership





(2)
            Officer





(3)
            Director


Page 38
of 41





Changes
in Control





There are
no arrangements, known to the Registrant, including any pledge by any person of
securities of the Registrant which may at a subsequent date result in a change
in control of the Registrant.





Item
      13.
            Certain
      Relationships and Related Transactions, and Director
      Independence.





Certain
Relationships and Related Transactions





None.





Director
Independence





As of
March 31, 2009, the Board of Directors consisted on four (4) members: Mr.
Xiaofeng Li, Mr. Jiancheng Fang, Mr.Chao Jiang and Mr.Chengning Zhang. Mr.
Jiancheng Fang, Mr.Chao Jiang and Mr.Chengning Zhang meet the requirement to be
considered “independent” as defined by Rule 407(a) of Regulation
S-K.





Item
      14.
            Principal
      Accounting Fees and Services.





The
following is a summary of the fees billed to us by Moore Stephens for
professional services rendered for the years ended March 31, 2009 and
2008:





Service
                                  
                                  2009
                                  
                                  
                                  2008Audit
      Fees
                                  
                                  $
                                  154,000
                                  
                                  
                                  $
                                  154,000Audit
      RelatedFees
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Tax
      Fees
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -All
      Other Fees
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -TOTAL
                                  
                                  $
                                  154,000
                                  
                                  
                                  $
                                  154,000




Audit
fees consist of the aggregate fees billed for services rendered for the audit of
our annual financial statements, the reviews of the financial statements
included in our Forms 10-QSB and for any other services that are normally
provided by our independent auditors in connection with our statutory and
regulatory filings or engagements.




Audit
related fees consist of the aggregate fees billed for professional services
rendered for assurance and related services that reasonably related to the
performance of the audit or review of our financial statements that were not
otherwise included in Audit Fees.





Tax
fees consist of the aggregate fees billed for professional services rendered for
tax compliance, tax advice and tax planning. These services include assistance
regarding federal, state and local tax compliance and consultation in connection
with various transactions and acquisitions.




All other
fees consist of the aggregate fees billed for products and services provided by
our independent auditors and not otherwise included in Audit Fees, Audit Related
fees or Tax Fees.


Page 39
of 41





Item
15. Exhibits, Financial Statement Schedules.





(a)(1)
Financial Statements





The
financial statements and notes are listed in the Index to Financial Statements
on page F-1 of this Report.





(a)(2)
Exhibits




14
            *
      Business Code of Conduct and Financial Code of Conduct (Exhibit 14.1 and
      14.2 to Form 8-K filed with the Commission on August 15,
    2008)





21      
*Subsidiaries List





31.1    *Certification
of Chief Executive Officer pursuant to 13a-14 and 15d-14 of the Exchange
Act




31.2    *Certification
of Chief Financial Officer pursuant to 13a-14 and 15d-14 of the Exchange
Act




32.1    *Certificate
pursuant to 18 U.S.C. ss. 1350 for Xiaofeng Li, Chief Executive
Officer




32.2    *Certificate
pursuant to 18 U.S.C. ss. 1350 for Xiangning Qin, Chief Financial
Officer




* - Filed
herein





(a)(3)
Financial Statement Schedules




Financial
statement schedules not filed herein have been omitted as they are not
applicable or the required information or equivalent information has been
included in the financial statements or the notes thereto.





SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.




T-BAY
      HOLDINGS, INC./s/ Xiaofeng LiDated:
      July 13, 2009
                Xiaofeng
      Li, Chief Executive Officer
                  (Principal
      executive officer)




/s/ Xiangning QinXiangning
      Qin, Chief Financial Officer
                (Principal
      financial officer)


Dated:
July 13, 2009


Page 40
of 41





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities indicated on July 14, 2009.




Each
person whose signature appears below constitutes and appoints Xiaofeng Li and
Xiangning Qin as his true and lawful attorneys-in-fact and agents, each acting
alone, with full power of substitution and re-substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
to this Annual Report on Form 10-K and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the U.S. Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact and agents, each acting alone, or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.




Signature
                
                Title
                
                Date/s/ Xiaofeng Li
                
                Chief
      Executive OfficerXiaofeng
      Li
                
                (Chief
      principal officer) and Director/s/ Xiangning QinXiangning
      Qin
                
                Chief
      Financial Officer (Chief financial officer)/s/ Jiancheng FangJiancheng
      Fang
                
                Director/s/ Chao JiangChao
      Jiang
                
                Director/s/ Chengning ZhangChengning
      Zhang
                
                Director


Page 41
of 41