**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**Washington, D.C. 20549

**FORM 10-Q**

(Mark One)

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

For the quarterly period ended: **March 31, 2013**

or

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

For the transition period from ________ to ________

Commission File Number:**333-173873**

**                   SW China Imports, Inc.                      **

 (Exact name of registrant as specified in its charter)

| **                    Nevada                    **

(State or other jurisdiction of

incorporation or organization)

**              45-0704149              **

(I.R.S. Employer

Identification Number)

**    15800 Crabbs Branch Way, Ste. 310, Rockville, MD  20855    **

 (Address of principal executive offices)

 

**            Tel: (240) 477-7738, Fax: (240) 715-9116         **

 (Registrant’s telephone number, including area code)

**                                                                   N/A                                                                 **

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

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

Yes x      No  ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations 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 x      No  ̈

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

 

Large Accelerated Filer  ̈                                                                                                        Accelerated Filer     ̈

Non-Accelerated Filer    ̈  (Do not check if a smaller reporting company)            Smaller Reporting Company x 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). 

Yes x      No  ̈

The number of shares outstanding of the Registrant's common stock, $0.0001 par value, as of April 29, 2013, was 500,000,000.

**TABLE OF CONTENTS**

**Item**

 

**Page**

 

 

 

**PART I – FINANCIAL INFORMATION**

 

**4**

 

Item 1

Financial Statements

 

4

 

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

 

Item 3

Quantitative and Qualitative Disclosures About Market Risk

 

31

 

Item 4

Controls and Procedures

 

31

 

 

 

**PART II – OTHER INFORMATION**

 

**32**

 

Item 1

Legal Proceedings

 

32

 

Item 1A

Risk Factors

 

33

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

 

33

 

Item 3

Defaults Upon Senior Securities

 

33

 

Item 4

Mine Safety Disclosures

 

33

 

Item 5

Other Information

 

33

 

Item 6

Exhibits

 

33

Signatures

 

33

2

** Forward-Looking Statements**

 

*Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” regarding the plans and objectives of management for future operations.  Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements of the Registrant to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements.  The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties.  The Registrant’s plans and objectives are based, in part, on assumptions involving it continuing as a going concern and executing on its stated business plan and objectives.  Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Registrant.  Although the Registrant believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate.  In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Registrant or any other person that the objectives and plans of the Registrant will be achieved.*

*As used in this Quarterly Report, the terms "we", "us", "our", "SW China", “Registrant”, and “Issuer” mean SW China Imports, Inc. unless the context clearly requires otherwise.*

3

**PART I – FINANICAL INFORMATION**

**Item 1.  Financial Statements**

**SW CHINA IMPORTS, INC.**

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

**ASSETS**

 

 

3/31/13

(unaudited)

 

12/31/12

(audited)

**Current assets:**

 

 

 

 

 

Cash and equivalents

$

753

$

600

 

Accounts receivable

 

293

 

-

 

 

 

1,046

 

600

 

 

 

 

 

**Total assets:**

$

1,046

$

600

**LIABILITIES AND STOCKHOLDERS’ (DEFICIT)**

**Current liabilities:**

 

 

 

 

 

Accounts payable

$

8,083

$

559

 

Note payable to stockholder

 

39,400

 

39,550

 

 

 

47,483

 

40,109

 

 

 

 

 

 

 

Total liabilities

$

47,483

$

40,109

 

 

 

 

 

**Commitments and contingencies**

 

-

 

-

 

 

 

 

 

 

**Stockholders’ (deficit):**

 

 

 

 

 

Preferred stock, $0.0001 par value, 50,000,000 shares authorized; 

     no shares issued and outstanding

 

-

 

-

 

Common stock, $0.0001 par value, 500,000,000 shares authorized; 

     500,000,000 and 500,000,000 shares issued and outstanding, respectively

 

50,000

 

50,000

 

Additional paid-in capital

 

58,955,766

 

58,954,763

 

(Deficit) accumulated during the development stage

 

(59,052,203)

 

(59,044,272)

 

 

 

 

 

 

 

Total stockholders’ (deficit)

$

(46,437)

$

(39,509)

 

 

 

 

 

**Total liabilities and stockholders’ (deficit)**

$

1,046

$

600

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

4

**SW CHINA IMPORTS, INC.**

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

 

 

 

For the three months ended

March 31,

 

For the period from 

February 23, 2011 (inception) to 3/31/13

 

 

 

2013

2012

 

 

 

 

 

 

 

 

 

**Revenues, net**

$

4,918

$

-

$

4,918

 

 

 

 

 

 

 

 

**Cost of revenues**

 

178

 

-

 

178

 

 

 

 

 

 

 

 

**Gross profit**

 

4,740

 

-

 

4,740

 

 

 

 

 

 

 

 

**Expenses:**

 

 

 

 

 

 

 

General and administrative

 

616

 

2,651

 

1,310

 

Consulting fees

 

-

 

1,000

 

23,514,375

 

Legal fees

 

7,575

 

8,825

 

116,863

 

Accounting fees

 

2,500

 

2,000

 

13,000

 

Director fees

 

-

 

-

 

35,400,000

 

Transfer agent fees

 

977

 

-

 

4,704

 

Total expenses

 

11,668

 

14,476

 

59,050,252

 

 

 

 

 

 

 

 

**(Loss) from operations**

 

(6,928)

 

(14,476)

 

(59,045,512)

 

 

 

 

 

 

 

 

**Other income (expense):**

 

 

 

 

 

 

 

Interest expense

 

(1,003)

 

(889)

 

(6,691)

 

Total other income (expense)

 

(1,003)

 

(889)

 

(6,691)

 

 

 

 

 

 

 

 

**Provision for income taxes**

 

-

 

-

 

-

 

 

 

 

 

 

 

 

**Net (loss)**

$

(7,931)

$

(15,365)

$

(59,052,203)

 

 

 

 

 

 

 

 

**(Loss) per common share,**

**     basic and diluted**

$

(0.00)

$

(0.00)

 

 

 

 

 

 

 

 

**Weighted average number of    common shares outstanding,**

**     basic and diluted**

 

500,000,000

 

111,987,582

 

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

5

**SW CHINA IMPORTS, INC.**

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS’ (DEFICIT)

For the period from February 23, 2011 (inception) to March 31, 2013

Description

 

Common Stock

 

Additional

Paid-In

Capital

 

Common

Stock

 

(Deficit)

Accumulated

During the

Development

Stage

 

Total

 

Shares

 

Amount

 

 

Subscribed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**Balance, February 23, 2011**

**(inception)**

 

-

$

-

$

-

$

-

$

-

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares to

directors (founder’s shares)

100,000,000

 

10,000

 

(10,000)

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares to

consultants

 

10,000,000

 

1,000

 

99,000

 

-

 

-

 

100,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares for cash

 

1,570,000

 

157

 

15,543

 

-

 

-

 

15,700

 

 

 

 

 

 

 

 

 

 

 

 

 

Imputed interest on related party loan

 

-

 

-

 

1,629

 

-

 

-

 

1,629

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) for the period

 

-

 

-

 

-

 

-

 

(138,206)

 

(138,206)

 

 

 

 

 

 

 

 

 

 

 

 

 

**Balance, December 31, 2011 (audited)**

 

111,570,000

$

11,157

$

106,172

$

-

$

(138,206)

$

(20,877)

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

6

**SW CHINA IMPORTS, INC.**

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS’ (DEFICIT)

For the period from February 23, 2011 (inception) to March 31, 2013

 (continued)

Description

 

Common Stock

 

Additional

Paid-In

Capital

 

Common

Stock

 

(Deficit)

Accumulated

During the

Development

Stage

 

Total

 

Shares

 

Amount

 

 

Subscribed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**Balance, December 31, 2011 (audited)**

 

111,570,000

$

11,157

$

106,172

$

-

$

(138,206)

$

(20,877)

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares to officers

 

236,000,000

 

23,600

 

35,376,400

 

-

 

-

 

35,400,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares for retiring convertible note

 

1,007,500

 

101

 

20,049

 

-

 

-

 

20,150

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares to consultants

 

156,422,500

 

15,642

 

23,447,733

 

-

 

-

 

23,463,375

 

 

 

 

 

 

 

 

 

 

 

 

 

Rescinding of consulting agreement

 

(5,000,000)

 

(500)

 

500

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Imputed interest on related party loan

 

-

 

-

 

3,909

 

-

 

-

 

3,909

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) for the period

 

-

 

-

 

-

 

-

 

(58,906,066)

 

(58,906,066)

 

 

 

 

 

 

 

 

 

 

 

 

 

**Balance,**

**December 31, 2012 (audited)**

 

500,000,000

$

50,000

$

58,954,763

$

-

$

(59,044,272)

$

(39,509)

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

7

**SW CHINA IMPORTS, INC.**

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS’ (DEFICIT)

For the period from February 23, 2011 (inception) to March 31, 2013

 (continued)

**Balance,**

**December 31, 2012 (audited)**

 

500,000,000

$

50,000

$

58,954,763

$

-

$

(59,044,272)

$

(39,509)

 

 

 

 

 

 

 

 

 

 

 

 

 

Imputed interest on related party loan

 

-

 

-

 

1,003

 

-

 

-

 

1,003

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) for the period

 

-

 

-

 

-

 

-

 

(7,931)

 

(7,931)

 

 

 

 

 

 

 

 

 

 

 

 

 

**Balance,**

**March 31, 2013 (unaudited)**

 

500,000,000

$

50,000

$

58,955,766

$

-

$

(59,052,203)

$

(46,437)

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

8

**SW CHINA IMPORTS, INC.**

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

 

 

 

For the three months ended

March 31,

 

Cumulative from 2/23/11 (inception) to 3/31/13

 

 

 

2013

 

2012

 

**Cash flows from operating activities:**

 

 

 

 

 

 

 

Net (loss)

$

(7,931)

$

(15,365)

$

(59,052,203)

 

Adjustments to reconcile net (loss) to net cash (used in) operating activities

 

 

 

 

 

 

 

 

Common stock issued in connection with services provided by consultants

 

-

 

-

 

23,563,375

 

 

Common stock issued to officers

 

-

 

-

 

35,400,000

 

 

Imputed interest on related party loan

 

1,003

 

889

 

6,541

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

(Increase) decrease in accounts receivable

 

(293)

 

-

 

(293)

 

 

Increase (decrease) in accounts payable

 

7,524

 

1,778

 

8,083

 

 

 

 

 

 

 

 

 

 

Net cash provided (used) by operating activities

 

303

 

(12,698)

 

(74,497)

 

 

 

 

 

 

 

 

 

**Cash flows from financing activities:**

 

 

 

 

 

 

 

Increase in notes payable to a stockholder

 

3,800

 

5,100

 

58,350

 

Decrease in notes payable to a stockholder

 

(3,950)

 

-

 

(18,950)

 

Borrowings on debt

 

-

 

-

 

20,000

 

Interest expense on borrowings

 

-

 

-

 

150

 

Proceeds from issuance of common stock

 

-

 

-

 

15,700

 

 

 

 

 

 

 

 

 

 

Net cash provided (used) by financing activities

 

(150)

 

5,100

 

75,250

 

 

 

 

 

 

 

 

 

**Net increase (decrease) in cash**

 

153

 

(7,598)

 

753

 

 

 

 

 

 

 

 

 

**Cash – beginning of period**

 

600

 

14,773

 

-

 

 

 

 

 

 

 

 

 

**Cash – end of period**

$

753

$

7,175

$

753

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

9

**SW CHINA IMPORTS, INC.**

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

 (continued)

 

 

 

For the three months ended

March 31,

 

Cumulative from 2/23/11 (inception) to 3/31/13

 

 

 

2013

 

2012

 

**Non-cash investing and financing activities:**

 

 

 

 

 

 

 

Issuance of common shares to directors (founder’s shares)

$

-

$

10,000

$

10,000

 

Conversion of note payable into common stock

 

-

 

-

 

20,150

 

Rescinding of shares

 

-

 

-

 

500

 

 

 

 

 

 

 

 

**Supplemental disclosure of cash flow information:**

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest

$

-

$

-

$

-

 

 

 

 

 

 

 

 

 

 

 

Income taxes

$

-

$

-

$

-

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

10

**SW CHINA IMPORTS, INC.**

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

March 31, 2013

(unaudited)

**NOTE 1 – Summary of Significant Accounting Policies**

Unaudited Interim Financial Information

The accompanying Balance Sheet as of March 31, 2013, Statements of Operations for the three months ended March 31, 2013 and 2012, and cumulative from February 23, 2011 (Inception) to March 31, 2013, Statement of Stockholder’s (Deficit) for the cumulative period from February 23, 2011 (Inception) to March 31, 2013, and the Statements of Cash Flows for the three months ended March 31, 2013 and 2012, and cumulative from February 23, 2011 (Inception) to March 31, 2013, are unaudited.  These unaudited interim financial statements have been prepared in accordance with accounting principles accepted in the United States of America (“GAAP”).  In the opinion of the company’s management, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements and included all adjustments necessary for the fair presentation of the Company’s statement of financial position at March 31, 2013 and its results of operations and its cash flows for the period ended March 31, 2013 and cumulative from February 23, 2011 (inception) to March 31, 2013.  The results for the period ended March 31, 2013 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2013.

Basis of Presentation

 

The accompanying financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (US GAAP) for financial information and in accordance with the Securities and Exchange Commission’s (SEC) Regulation S-X.  They reflect all adjustments which are, in the opinion of the Company’s management, necessary for a fair presentation of the financial position and operating results as of March 31, 2013, for the three months ended March 31, 2013 and 2012, and for the period February 23, 2011 (inception) to March 31, 2013.

Use of Estimates

The accompanying financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America.  Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment.  Actual results may vary from these estimates.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.  As of March 31, 2013, the Company had $753 in cash and equivalents.

Fair Value of Financial Instruments

ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.  A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  It prioritizes the inputs into three levels that may be used to measure fair value:

*Level 1*

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

11

*Level 2*

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

*Level 3*

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The estimated fair values of the Company’s financial instruments are as follows:

 

**Fair Value Measurement at March 31, 2013 Using:**

 

 

 

 

 

 

 

 

 

 

 

**March 31, 2013**

 

**Quoted Prices In Active Markets For Identical Assets**

**(Level 1)**

 

**Significant Other Observable Inputs**

**(Level 2)**

 

**Significant Unobservable Inputs**

**(Level 3)**

**Assets**

 

 

 

 

 

 

 

 

 

Cash and equivalents

$

753

$

753

$

-

$

-

 

Accounts receivable

 

293

 

293

 

 

 

 

 

$

1,046

$

1,046

$

-

$

-

 

 

 

 

 

 

 

 

 

**Liabilities**

 

 

 

 

 

 

 

 

 

Accounts payable

$

8,084

$

8,084

$

-

$

-

 

Note payable to stockholder

 

39,400

 

39,400

 

-

 

-

 

$

47,484

$

47,484

$

-

$

-

Net Loss per Share Calculation

Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period.   Diluted earnings per shares is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  During the three months ended March 31, 2013 and 2012, and cumulative from February 23, 2011 (inception) to March 31, 2013 the Company had no dilutive financial instruments issued or outstanding.

Revenue Recognition

The Company follows the guidance of FASB ASC Topic 605 for revenue recognition.  In general, the Company recognizes revenue when (1) the price is fixed and determinable, (2) persuasive evidence of an arrangement exists, (3) the service has been provided, and (4) collectability is reasonably assured.

The Company generates revenue from two sources: (i) sales of its high-end handmade lace wigs and hairpieces and other beauty supplies to beauty supply stores, hair salons, independent hair stylists, and retail customers via the Internet and (ii) consulting services consisting of product and retail channel development for beauty and fashion products.  Revenue from sales of its high-end handmade lace wigs, hairpieces and other beauty supplies is recognized at the time of the sale and revenues from consulting services are recognized when the services are performed, evidence of an arrangement exists, the fee is fixed and determinable, and collectability is probable.

12

Income Taxes

The Company accounts for income taxes pursuant to FASB ASC 740, Income Taxes.  Under FASB ASC 740-10-25, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes.  The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

 

The Company maintains a valuation allowance with respect to deferred tax assets.  SW China Imports establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period.  Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.

 

Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about its ability to realize the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.

Fiscal Year

The Company elected December 31st for its fiscal year end. 

**NOTE 2 – Development Stage Activities and Going Concern**

The Company is in the development stage and has minimal operations,and as such has devoted most of its efforts since its inception to developing its business plan, issuing common stock, attempting to raise capital, establishing its accounting systems and other administrative functions.  The Company plans on importing high-end handmade lace wigs and hairpieces and other beauty supplies and accessories manufactured in China and South Korea into the United States.  After import, the Company intends to sell its products in bulk to beauty supply stores, hair salons, and independent hair stylists.  The Company also intends to sell its products directly to the retail consumer via the Internet.  Additionally, the Company intends to conduct additional capital formation activities through the issuance of its common stock and to achieve these long-term business growth strategies.

 

While management of the Company believes that SW China Imports will be successful in its planned operating activities under its business plan and capital formation activities, there can be no assurance that it will be able to successfully execute on either of these or that it will be able to generate adequate revenues to earn a profit or sustain its operations.

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United State of America, which contemplate continuation of the Company as a going concern.  The Company has not established a source of revenues sufficient to cover its operating costs, and as such, has incurred an operating loss since its inception.  Further, as of March 31, 2013, the Company had a working capital deficiency of ($59,052,204).  These and other factors raise substantial doubt about the Company’s ability to continue as a going concern.  The accompanying financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern.

**NOTE 3 – Common Stock**

The total number of common shares authorized that may be issued by the Company is 500,000,000 shares with a par value of $0.0001 per share.

During the period February 23, 2011 (inception) to March 31, 2013 the Company issued an aggregate of 506,000,000 shares as follows: 

·

100,000,000 shares to its officers as Founder’s Shares;

·

10,000,000 shares to consultants for total consideration of $100,000, or $0.01 per share, based on the value of the services performed;

·

1,570,000 shares to investors for $15,700 in cash ($0.01 per share);

·

1,000,000 shares to an investor that has subscribed to pay the Company $10,000 in cash ($0.01 per share);

13

·

1,007,500 shares to retire an outstanding convertible promissory note aggregating $20,150 in principal and accrued interest ($0.02 per share, which was a fixed conversion price as per the Promissory Note Agreement entered into with M Stocks, LLC on August 29, 2012; as such, no gain or loss was incurred with this issuance);

·

236,000,000 shares to the Company’s officers valued at $35,376,400 ($0.15 per share, which was the closing price of the Company’s stock as reported by the OTC Bulletin Board on the date of issue); and

·

156,422,500 shares to consultants valued at $23,463,375 ($0.15 per share, which was the closing price of the Company’s stock as reported by the OTC Bulletin Board on the date of issue).

On August 6, 2012, after making numerous attempts to collect the cash due for subscribed stock, the Company cancelled and returned to its treasury 1,000,000 shares of its subscribed common stock, $0.0001 par value.

On November 27, 2012, the Company mutually agreed to rescind its consulting agreement with Arctic Eyes, LLC.  Arctic Eyes returned 5,000,000 shares of the Company’s common stock, $0.0001 par value, which was subsequently cancelled by the Company.

As of March 31, 2013, the Company had 500,000,000 shares of its common stock issued and outstanding.

**NOTE 4 – Preferred Stock**

The total number of preferred shares authorized that may be issued by the Company is 50,000,000 shares with a par value of $0.0001 per share.

As of March 31, 2013, the Company had no shares of its preferred stock issued and outstanding.

**NOTE 5 – Income Taxes**

The provision (benefit) for income taxes for the period from February 23, 2011 (inception) to March 31, 2013 was as follows, assuming a 35 percent effective tax rate:

 

 

For the three months ended 3/31/13

 

For the period

February 23, 2011

(inception) to

3/31/13

**Current tax provision:**

 

 

 

 

 

Federal

 

 

 

 

 

Taxable income

$

-

$

 

 

 

 

 

 

 

 

Total current tax provision

$

-

$

 

 

 

 

 

 

**Deferred tax provision:**

 

 

 

 

 

Federal

 

 

 

 

 

Loss carryforwards

$

2,777

$

29,152

 

Change in valuation allowance

 

(2,777)

 

(29,152)

 

 

 

 

 

 

 

Total deferred tax provision

$

-

$

-

As of March 31, 2013, the Company had approximately $83,291 in tax loss carryforwards that can be utilized in future periods to reduce taxable income through 2031.

The Company provided a valuation allowance equal to the deferred income tax assets for the period from February 23, 2011 (inception) to March 31, 2013 because it is not presently known whether future taxable income will be sufficient to utilize the tax loss carryforwards.

The Company has no uncertain tax positions.

14

**NOTE 6 – Related Party Transactions**

As of March 31, 2013, the Company operated out of office space that is being provided to us by our former treasurer and secretary, Jae Hwang, free of charge.  There is no written agreement or other material terms relating to this arrangement.

For the period February 23, 2011 (inception) to March 31, 2013 the Company’s rent expense was zero.  This is because of the short time period and the minimal level of operating activities that have transpired during this period of time.

As of March 31, 2013, the Company had a note payable to a related party stockholder in the amount of $39,400.  This note is payable on demand and is non-interest bearing.  As of March 31, 2013 this note has accrued $6,691 in imputed interest that has been recorded in the financial statements as additional paid-in capital.  During the three months ended March 31, 2013 this note accrued $1,003 in imputed interest.

**NOTE 7 – Note Payable from Non-Related Party**

On August 29, 2012, the Company borrowed $20,000 from a non-related party, M Stock, LLC (“M Stock”).  This note payable was for a term of one (1) year, accrued interest a rate of 2% per annum, and was convertible at a fixed rate of $0.02 per share into shares of the Company’s common stock.

On November 27, 2012, M Stock opted to convert this note payable into shares of the Company’s common stock at the predetermined conversion rate of $0.02 a share.  M Stock was subsequently issued 1,007,500 shares of our common stock in exchange for retiring this note payable, inclusive of principal ($20,000) and accrued interest ($150).  No gain or loss was incurred because the fixed conversion price of $0.02 a share was predetermined and within the terms of the Promissory Note entered into on August 29, 2012.

**NOTE 8 – Recent Accounting Pronouncements**

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This update amended explanations of how to measure fair value to result in common fair value measurement and disclosure requirements in GAAP and International Financial Reporting Standards.  ASU 2011-04 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 with prospective application required.  The adoption of this did not have a material effect on the Company’s financial position, results of operations or cash flows.

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income.”  This update amended the presentation options in Accounting Standards Codification (“ASC”) 220, “Comprehensive Income,” to provide an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  ASU 2011-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 with retrospective application required.  The adoption of this standard did not have a material effect on the Company’s financial position, results of operations or cash flows.

In September 2011, the FASB issued ASU 2011-08 “Intangibles – Goodwill and Other”.  This new guidance on testing goodwill provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If an entity determines that this is the case, it is required to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit (if any).  If an entity determines that the fair value of a reporting unit is less than its carrying amount, the two-step goodwill impairment test is not required.  ASU 2011-08 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 with prospective application required.  The adoption of this standard did not have a material effect on the Company’s financial position, results of operations or cash flows.

In December 2011, the FASB issued ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income” in Accounting Standards Update No. 2011-05.  This update defers the requirement to present items that are reclassified from accumulated other comprehensive income to net income in both the statement of income where net income is presented and the statement where other comprehensive income 

15

is presented.  The adoption of ASU 2011-12 is not expected to have a material impact on the Company’s financial position or results of operations.

In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” in Accounting Standards Update No. 2012-02.  This update amends ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles - Goodwill and Other - General Intangibles Other than Goodwill.  The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.  Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.  The adoption of ASU 2012-02 is not expected to have a material impact on the Company’s financial position or results of operations.

In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03.  This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114.  The adoption of ASU 2012-03 is not expected to have a material impact on the Company’s financial position or results of operations.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial statements.

**NOTE 9 – Subsequent Events**

There were no material subsequent events through the date these financial statements were filed with the Securities and Exchange Commission on Form 10-Q.

16

**Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations**

We are a development stage corporation with limited operations and have only recently begun to generate nominal revenue from operating activities.  

Our independent registered public accounting firm has issued a going concern opinion in their audit report dated February 11, 2013, which can be found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 11, 2013.  This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months.  Accordingly, we must raise additional cash to sustain our limited operations.

We presently are exploring other such sources of funding, including raising funds through a second public offering, a private placement of securities, or loans.  If we are unable to raise this additional funding, we will either have to suspend operations until we do raise the cash or cease operations entirely.

The following discussion should be read in conjunction with our Financial Statements and the notes thereto and the other information included in this Quarterly Report as filed with the SEC on Form 10-Q.

**Limited Operating History; Need for Additional Capital**

 

There is limited historical financial information about us upon which to base an evaluation of our performance.  We remain in the start-up stage of operations and have only begun to generate nominal revenue.  We cannot guarantee that we will be successful in our business operations.  Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns, such as increases in marketing costs, increases in administration expenditures associated with daily operations, increases in accounting and audit fees, and increases in legal fees related to filings and regulatory compliance.

 

To become profitable and competitive, we need to be able to purchase a broad inventory of high-end handmade wigs and hairpieces and commence selling our products through beauty supply stores, hair salons, independent hair stylists, and directly to the retail consumer via the Internet.  We anticipate relying on equity sales of our common stock in order to continue to fund our business operations until we are able to generate sufficient revenues to cover our operating expenses, which may never happen.  Issuances of additional shares will result in dilution to our then existing stockholders.  There is no assurance that we will be able to make any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.  We may also rely on loans from our directors.  However, there are no assurances that our directors will provide us with any additional funds.

It is important to note that as of April 29, 2013 we had 500,000,000 shares of our common stock issued and outstanding.  Our Articles of Incorporation authorizes us to issue a maximum of 500,000,000 shares of common stock.  In order to continue financing our operations through the issuance and sale of common stock we will need to amend our Articles of Incorporation to increase the number of authorized shares of common stock.  Presently there are no plans to increase the number of authorized shares of common stock, but we cannot give any assurances that we will not increase – possibly significantly – the number of authorized shares of our common stock in the future should the opportunity to secure the additional financing necessary to continue and expand our operations arise.

 

Currently, we do not have any arrangements for additional financing.  We have no assurance that future financing will be available to us on acceptable terms.  If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations.  Equity financing could result in additional dilution to existing shareholders.

**Status as a Shell Company**

As of March 31, 2013, because we have nominal operations and minimal assets, we are considered to be a shell company under the Securities Exchange Act of 1934, as amended.  Because we are considered a shell company, the securities sold in previous offerings can only be resold through (i) registration under the Securities Act of 1933, as amended (“Securities Act”), (ii) Section 4(1) of the Securities Act, if available, for non-affiliates, or (iii) by meeting the conditions of Rule 144(i) of the Securities Act.

24

**Plan of Operations**

We plan to import high-end handmade lace wigs and hairpieces manufactured overseas, as well as other beauty supplies and accessories, into the United States.  We intend to sell our products in bulk to beauty supply stores, hair salons, and independent hair stylists.  We will also offer our products directly to the retail consumer via the Internet.

It is important to note that we are a development stage business with minimal business activity.  As of March 31, 2013 we have imported a limited number of lace wigs or hairpieces.  Further, we do not have any formal agreements in place with any beauty supply stores, hair salons or independent hair stylists; our discussions with potential distributors have been limited solely to exploratory talks until we can demonstrate our ability to procure and deliver our products in a timely manner and in sufficient quantities.

Products and Services

We intend to import high-end handmade lace wigs and hairpieces manufactured overseas, as well as other beauty supplies and accessories, into the United States.  These wigs and hairpieces will initially be sold in the greater Washington, D.C. metropolitan area through beauty supply stores, hair salons and independent hair stylists; nationwide will sell them directly to the consumer through our website www.swchinaimports.com, which is currently under development.

We will also be offering free training to our future network of beauty supply stores, hair salons and independent hair stylists.  This training will include general education about lace wigs, how to apply the lace wig on their clients’ head correctly, and how to properly care for the lace wig.  The planned training courses will be offered through interactive on-line classes and prerecorded DVDs.

Lace Wigs and Hairpieces

The lace wigs and hairpieces we will be importing from China and South Korea will primarily be made from human hair and will be fully customizable.  Our customers will be able to choose the style, color, length, size, density and texture of each wig or hairpiece.  The wigs and hairpieces will be made by hand-tying the human hair into a lace sheet in a manner so that when it is properly attached to the customer’s head it will create an invisible hairline.

Future Products

Once we are successful in securing reliable and price competitive sources of high-end handmade wigs and hairpieces and develop a sizeable network of beauty supply stores, hair salons, and independent hair stylists, we intend to expand our product line to include a comprehensive high-end line of hair extensions as well as complementary shampoos and conditioners specially formulated for wigs and hairpieces.

Proposed Milestones to Implement Business Operations

The following milestones are based on estimates made by our management team.  The working capital requirements and the projected milestones are approximations and are subject to adjustments.  Our initial baseline budget is based on our internal projections on minimal capital needs of $125,000 over the next 12 months.  Presently we are seeking sources of financing to commence execution of our business plan.  There is no assurance that we will be able to secure this financing, or if available, on terms that will be acceptable to us.

 

We estimate generating sustainable revenues approximately nine to ten months following receipt of adequate funding.  We plan to complete our milestones as follows:

*0 - 2 Months*

We will establish a formal relationship with a quality manufacturer of custom handmade lace wigs and hairpieces in either China or South Korea.  Our initial inventory purchase order will be for approximately $50,000 in product.  In order to minimize our start-up costs during this period, our former treasurer and secretary, Jae Hwang, has agreed to allow us to continue using a portion of his personal offices as our corporate headquarters until we receive our initial inventory and are required to lease warehouse space.

 

25

*3 – 5 Months*

While our initial inventory purchase order is being fulfilled and shipped to us via container ship, we will start formalizing reseller relationships with beauty supply stores, hair salons, and independent hair stylists throughout the greater Washington, D.C. metropolitan area.  Concurrently, we will complete the development of our beta website (www.swchinaimports.com) to enable on-line purchases of our handmade wigs and hairpieces; the website will not go “live” until our inventory has been received and is ready for shipment to the retail consumer.  We anticipate spending approximately $20,000 to accomplish these milestones ($15,000 on purchasing computers, servers and furthering the website development, and $5,000 in general expenses associated with securing reseller relationships).

*6 - 8 Months*

We will enter into a lease for a small office/warehouse space (~2,000 square feet) in Washington, D.C. and receive our initial inventory of handmade wigs and hairpieces.  Simultaneously we will hire our first outside employee who will be an experienced salesperson in the hair goods industry.  Our salesperson’s focus will be on selling our handmade wigs and hairpieces to local beauty supply stores, hair salons, and independent hair stylists.  We estimate that these activities will cost us an aggregate of approximately $15,000.

*9 - 10 Months*

We anticipate we will start generating our first revenue around this time frame.  With the generation of initial sales we will hire a part-time (initially) warehouse employee to assist with order fulfillment.

Further, we will embark on a small sales and marketing campaign aimed at building our brand and boosting general awareness of our products.  These activities will include Internet efforts aimed at directing web traffic to our website (www.swchinaimports.com) and in-store displays and promotions.

We estimate that these activities will cost an aggregate of approximately $20,000.

*11 - 12 Months*

We anticipate we will need to place another purchase order with our selected manufacturer of handmade wigs and hairpieces in order to maintain a sufficient level of inventory.  This purchase order will be similar to the initial order and should be for approximately $50,000.

Note: The amounts allocated to each line item in the above milestones are subject to change without notice.  Our planned milestones are based on the estimated amount of time to complete each milestone following receipt of adequate funding.  Any line item amounts not expended completely as detailed in the milestones above shall be held in reserve as working capital and subject to reallocation as required for ongoing operations.

**Long-Term Plan (5 Years)**

Over the ensuing five years our growth and expansion efforts will include:

·

Increasing the number of salespersons and warehouse personnel;

 

·

Expanding the size of our warehouse(s);

·

Expanding into new territories, including Philadelphia, New York and Boston;

·

Formalizing relationships with additional manufacturers in China and South Korea capable of providing us with high-end handmade wigs and hairpieces to insure that we maintain a stable and cost competitive level of inventory;

·

Adding new and innovative products, including a comprehensive high-end line of hair extensions as well as complementary shampoos and conditioners specially formulated for wigs and hairpieces.

We estimate that we will need to raise up to an additional $3 million over the next five years to build-up our inventory levels and achieve the foregoing.

26

**Results of Operations**

Three Months Ended March 31, 2013 and 2012

*Revenues*.  We generated $4,918 in revenue during the three months ended March 31, 2013 and $-0- for the same period a year ago.  This revenue was derived from selling $260 in products and $4,658 in design consulting services.

*Cost of Revenues*.  Our cost of revenues was $178 during the three months ended March 31, 2013 and $-0- for the same period a year ago.

*Gross Profit*.  Our gross profit was $4,740 during the three months ended March 31, 2013 and $-0- for the same period a year ago.  Excluding revenue and gross profits generated from design consulting services, our gross profit for product sales was $82, which represents a gross profit margin of 46.1%. 

*Net Income (Loss)*.  We had a net loss of ($7,931) for the three months ended March 31, 2013 compared to a net loss of ($15,365) for the same period a year ago, which represented a ($7,433), or (48.4%), decrease in net loss.  The decrease in net loss was primarily the result of us generating our initial revenues and first gross profit.

 

*Operating Expenses*.  Our total operating expenses for the three months ended March 31, 2013 were $11,668, which is a ($2,808), or (19.4%), decrease compared to operating expenses of $14,476 for the same period a year ago.  Our operating expenses were primarily attributable to costs related to our ongoing SEC reporting requirements, which have consisted primarily of legal, accounting and outside consulting fees.

*Other income (expenses)*.  During the period ended March 31, 2013 we recorded $1,003 in imputed interest expenses related to a note outstanding payable to a related party.  The imputed interest was recorded in our financial statements under additional paid-in capital.

Cumulative During the Development Stage – February 23, 2011 (inception) through March 31, 2013

For ease of reading we refer to the period of February 23, 2011 (inception) through March 31, 2013 as the “Developmental Period”.

*Revenues*.  We have generated $4,918 in revenue during the Developmental Period.  This revenue was derived from selling $260 in products and $4,658 in design consulting services.

*Cost of Revenues*.  Our cost of revenues was $178 during the Developmental Period.

*Gross Profit*.  Our gross profit was $4,740 during the Developmental Period.  Excluding revenue and gross profits generated from design consulting services, our gross profit for product sales was $82, which represents a gross profit margin of 46.1%. 

 

*Net Loss*.  We have incurred a net loss of ($59,052,203) during the Developmental Period.  The net loss was primarily attributable to organizational costs related to our formation, an early offering of our common stock, complying with our ongoing SEC reporting requirements, obtaining a listing on the OTC Bulletin Board, applying for DTC Eligibility, and issuing shares of our common stock to our officers – current and former – and outside consultants.  These expenses have consisted primarily of legal, accounting, and outside consulting fees.

*Operating Expenses*.  Our total operating expenses for the Developmental Period were $59,045,513.  These operating expenses were primarily attributable to organizational costs related to our formation, an early offering of our common stock, complying with our ongoing SEC reporting requirements, obtaining a listing on the OTC Bulletin Board, applying for DTC Eligibility, and issuing shares of our common stock to our officers – current and former – and outside consultants.  These expenses have consisted primarily of legal, accounting, and outside consulting fees.

*Other income (expenses)*.  During the Developmental Period we recorded ($6,691) in other expenses, which included ($6,691) in imputed interest expenses related to a note outstanding payable to a related party.  The imputed interest was recorded in our financial statements under additional paid-in capital.

*Total Stockholders’ Deficit*.  Our stockholders’ deficit was ($46,437) as of March 31, 2013.

27

Liquidity and Capital Resources

As of March 31, 2013, we had total assets of $1,046, consisting of $753 in cash and $293 in accounts receivable.  Our total liabilities were $47,483, which consisted of accounts payable of $8,083 and a note payable aggregating $39,400 to one of our stockholders.  This note is a demand note and does not bear interest.  Further, we had no external credit facilities (i.e. bank loans, revolving lines of credit, etc.).

We expect to incur continued losses over the next 12 months, possibly even longer.  We believe that we need at least $125,000 in additional funding to commence operations and meet our minimal working capital requirements over the next 12 months.

We are presently exploring various sources of funding, including raising funds through a secondary public offering, a private placement of our securities, or loans.  Without limiting our available options, future equity financings will most likely be through the sale of additional shares of our common stock.  It is possible that we could also offer warrants, options and/or rights in conjunction with any future issuances of our common stock.  However, we can give no assurance that financing will be made available to us, and if made available to us, in amounts or on terms acceptable to us.  If we cannot secure adequate financing, we may be forced to cease operations and you will lose your entire investment.

It is important to note that as of April 29, 2013 we had 500,000,000 shares of our common stock issued and outstanding.  Our Articles of Incorporation authorizes us to issue a maximum of 500,000,000 shares of common stock.  In order to continue financing our operations through the issuance and sale of common stock we will need to amend our Articles of Incorporation to increase the number of authorized shares of common stock.  Presently there are no plans to increase the number of authorized shares of common stock, but we cannot give any assurances that we will not increase – possibly significantly – the number of authorized shares of our common stock in the future should the opportunity to secure the additional financing necessary to continue and expand our operations arise.

Going Concern Consideration

Our independent registered public accounting firm has issued a going concern opinion in their audit report dated February 11, 2013, which can be found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 11, 2013.  This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months.  Our financial statements found within this Quarterly Report on Form 10-Q and the aforementioned Annual Report on Form 10-K contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

Off –Balance Sheet Operations

As of March 31, 2013, we had no off-balance sheet activities or operations.

**CRITICAL ACCOUNTING POLICIES**

The accompanying financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (US GAAP) for financial information and in accordance with the Securities and Exchange Commission’s (SEC) Regulation S-X.  They reflect all adjustments which are, in the opinion of SW China’s management, necessary for a fair presentation of the financial position and operating results as of and for the three months ended March 31, 2013 and 2012, and cumulative from February 23, 2011 (inception) to March 31, 2013.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management 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 the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent in the financial reporting process, actual results may differ significantly from those estimates.

28

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.  As of March 31, 2013, we had $753 in cash and equivalents.

Fair Value of Financial Instruments

ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.  A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  It prioritizes the inputs into three levels that may be used to measure fair value:

*Level 1*

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

*Level 2*

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

*Level 3*

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The estimated fair values of the Company’s financial instruments are as follows:

 

**Fair Value Measurement at March 31, 2013 Using:**

 

 

 

 

 

 

 

 

 

 

 

**March 31, 2013**

 

**Quoted Prices In Active Markets For Identical Assets**

**(Level 1)**

 

**Significant Other Observable Inputs**

**(Level 2)**

 

**Significant Unobservable Inputs**

**(Level 3)**

**Assets**

 

 

 

 

 

 

 

 

 

Cash and equivalents

$

753

$

753

$

-

$

-

 

Accounts receivable

 

293

 

293

 

 

 

 

 

$

1,046

$

1,046

$

-

$

-

 

 

 

 

 

 

 

 

 

**Liabilities**

 

 

 

 

 

 

 

 

 

Accounts payable

$

8,084

$

8,084

$

-

$

-

 

Note payable to stockholder

 

39,400

 

39,400

 

-

 

-

 

$

47,484

$

47,484

$

-

$

-

Net Loss per Share Calculation

Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period.   Diluted earnings per shares is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  During the three months ended March 31, 2013 and the period February 23, 2011 (inception) to March 31, 2013 we had no dilutive financial instruments issued or outstanding.

29

Revenue Recognition

SW China follows the guidance of FASB ASC Topic 605 for revenue recognition.  In general, SW China recognizes revenue when (1) the price is fixed and determinable, (2) persuasive evidence of an arrangement exists, (3) the service has been provided, and (4) collectability is reasonably assured.

SW China generates revenue from two sources: (i) sales of its high-end handmade lace wigs and hairpieces and other beauty supplies to beauty supply stores, hair salons, independent hair stylists, and retail customers via the Internet and (ii) consulting services consisting of product and retail channel development for beauty and fashion products.  Revenue from sales of its high-end handmade lace wigs, hairpieces and other beauty supplies is recognized at the time of the sale and revenues from consulting services are recognized when the services are performed, evidence of an arrangement exists, the fee is fixed and determinable, and collectability is probable.

Income Taxes

We account for income taxes pursuant to FASB ASC 740, Income Taxes.  Under FASB ASC 740-10-25, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes.  The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

 

We maintain a valuation allowance with respect to deferred tax assets.  SW China establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration SW China’s financial position and results of operations for the current period.  Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.

 

Changes in circumstances, such as SW China generating taxable income, could cause a change in judgment about its ability to realize the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.

Recently Issued Accounting Pronouncements

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This update amended explanations of how to measure fair value to result in common fair value measurement and disclosure requirements in GAAP and International Financial Reporting Standards.  ASU 2011-04 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 with prospective application required.  The adoption of this did not have a material effect on our financial position, results of operations or cash flows.

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income.”  This update amended the presentation options in Accounting Standards Codification (“ASC”) 220, “Comprehensive Income,” to provide an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  ASU 2011-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 with retrospective application required.  The adoption of this standard did not have a material effect on our financial position, results of operations or cash flows.

In September 2011, the FASB issued ASU 2011-08 “Intangibles – Goodwill and Other”.  This new guidance on testing goodwill provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If an entity determines that this is the case, it is required to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit (if any).  If an entity determines that the fair value of a reporting unit is less than its carrying amount, the two-step goodwill impairment test is not required.  ASU 2011-08 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 with prospective application required.  The adoption of this standard did not have a material effect on our financial position, results of operations or cash flows.

In December 2011, the FASB issued ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income” in Accounting Standards Update No. 2011-05.  

30

This update defers the requirement to present items that are reclassified from accumulated other comprehensive income to net income in both the statement of income where net income is presented and the statement where other comprehensive income is presented.  The adoption of ASU 2011-12 is not expected to have a material impact on our financial position or results of operations.

In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” in Accounting Standards Update No. 2012-02.  This update amends ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles - Goodwill and Other - General Intangibles Other than Goodwill.  The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.  Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.  The adoption of ASU 2012-02 is not expected to have a material impact on our financial position or results of operations.

In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03.  This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114.  The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.

SW China Imports has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial statements.

Contractual Obligations

As of March 31, 2013, SW China no contractual obligations.

**Item 3.  Quantitative and Qualitative Disclosures About Market Risk**

Not applicable since we are a smaller reporting company.

**Item 4.  Controls and Procedures**

**Disclosure Controls and Procedures**

As of the end of the period covered by this report, we conducted an evaluation under the supervision and with the participation of our sole officer and director, Seon Won, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act).

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 our annual or interim financial statements will not be presented or detected on a timely basis.

Based on management’s assessment, we have concluded that, as of March 31, 2013, our disclosure controls and procedures were not effective in timely alerting management to the material information relating to us required to be included in our annual and interim filings with the SEC.

Mr. Won has concluded that our disclosure controls and procedures had the following material weaknesses:

·

We were unable to maintain any segregation of duties within our financial operations due to our reliance on limited personnel in the finance function.  While this control deficiency has not resulted in any audit adjustments to our interim or annual financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties;

31

 

·

SW China lacks sufficient resources to perform the internal audit function and does not have an Audit Committee;

·

We do not have an independent Board of Directors, nor do we have a board member designated as an independent financial expert to SW China.  The Board of Directors is comprised of one (1) member who also serves as SW China’s sole executive officers.  As a result, there is a lack of independent oversight of the management team, lack of independent review of our operating and financial results, and lack of independent review of disclosures made by SW China; and

·

Documentation of all proper accounting procedures is not yet complete. 

These weaknesses have existed since our inception on February 23, 2011 and, as of March 31, 2013, have not been remedied.

To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned material weaknesses, including, but not limited to, the following:

·

Considering the engagement of consultants to assist in ensuring that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures;

 

·

Hiring additional qualified financial personnel, including a Chief Financial Officer, on a full-time basis;

·

Expanding our current board of directors to include additional independent individuals willing to perform directorial functions; and

·

Increasing our workforce in preparation for exiting the development stage and commencing revenue producing operations. 

Since the recited remedial actions will require that we hire or engage additional personnel, these material weaknesses may not be overcome in the near-term due to our limited financial resources.  Until such remedial actions can be realized, we will continue to rely on the limited advice of outside professionals and consultants.

**Changes in Controls and Procedures**

There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

**PART II**

**Item 1.  Legal Proceedings**

No officer, director, or persons nominated for these positions, and no promoter or significant employee (current or former) of our corporation has been involved in legal proceedings that would be material to an evaluation of our management.  We are not aware of any pending or threatened legal proceedings involving SW China Imports, Inc.

 

During the past ten (10) years, Seon Won has not been the subject of the following events:

 

1)

Any bankruptcy petition filed by or against any business of which Mr. Won was a general partner or executive officer either at the time of the bankruptcy or within two (2) years prior to that time;

2)

Any conviction in a criminal proceeding or being subject to a pending criminal proceeding;

3)

An order, judgment, or decree, not subsequently reversed, suspended or vacated, or any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting Mr. Won’s involvement in any type of business, securities or banking activities; and

4)

Found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Future Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

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**Item 1A.  Risk Factors**

Not applicable since we are a smaller reporting company.

**Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds**

None.

**Item 3.  Default Upon Senior Securities**

None.

**Item 4.  Mine Safety Disclosures**

Not Applicable.

**Item 5.  Other Information**

None.

**Item 6.  Exhibits**

**Exhibit Number**

 

**Description of Exhibit**

 

 

 

3.1*

 

Articles of Incorporation

3.2*

 

Bylaws

31.1

 

Section 302 Certifications under Sarbanes-Oxley Act of 2002

32.1

 

Section 906 Certification under Sarbanes Oxley Act of 2002

* Incorporated by our Registration Statement on Form S-1 filed May 3, 2011.

**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 behalf by the undersigned, thereto duly authorized on this 30th day of April, 2013.

**SW CHINA IMPORTS, INC.**

By: 

*/s/ Seon Won                                                 *

Seon Won

President, Chief Executive Officer, 

Principal Executive Officer and Director

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