**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**Form 10-K**


**ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d)**


**OF
      THE SECURITIES AND EXCHANGE ACT OF 1934**


**FOR
      THE FISCAL YEAR ENDED MARCH 31, 2007**


**Commission
      File Number 119698**




**COSMO
      COMMUNICATIONS CORPORATON** ******


*(Exact
      name of Registrant as Specified in Its Charter)*





**FLORIDA**
              *(State
                or Other Jurisdiction of*
              *Incorporation
                or Organization)*
            
            **59-2268025**
              *(IRS
                Employer*
              *Identification
                No.)*




**Unit
      2 - 55 Travail Road**


**Markham,
      Ontario, Canada**


**(905) 209-0488**


*(Address
      and Telephone Number of Principal Executive Offices)*




**Securities
      Registered Pursuant to Section 12(b) of the Act:**


Common
      Stock, $.05 Par Value Per Share





**Securities
      Registered Pursuant to Section 12(g) of the Act:** None





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





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





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months (or for such shorter period that the
      registrant was required to file such reports), and (2) has been subject to
      such filing requirements for the past
      90 days.     Yes þ No o





Indicate
      by check mark if the disclosure of delinquent filers pursuant to Item 405
      of Regulation S-K is not contained herein, and will not be contained, to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-K or
      any amendment to this Form 10-K. o





Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer (as defined in Exchange Act
      Rule 12b-2).





Large
      accelerated filler o          Accelerated
      filer o          Non-accelerated
      filer þ




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





The
      aggregate market value of the Registrant's voting stock held by non-affiliates
      was undetermined as there have been no quotes on the bid and ask price of the
      registrant’s common stock. There were 40,467,636 shares of Common Stock
      issued and outstanding as of June 30, 2007.









**COSMO
      COMMUNICATIONS CORPORATION**


**ANNUAL
      REPORT ON FORM 10-K**


**FOR
      THE FISCAL YEAR ENDED MARCH 31, 2007**


**TABLE
      OF CONTENTS**


**Page****PART
                  I**Item
                  1.
              
              Business
              
              
              3Item
                  1A
              
              Risk
                  Factors
              
              
              12Item
                  2.
              
              Properties
              
              
              16Item
                  3.
              
              Legal
                  Proceedings
              
              
              17Item
                  4.
              
              Submission
                  of Matters to a Vote of Security Holders
              
              
              17**PART
                  II**Item
                  5.
              
              Market
                  for Registrant’s Common Equity, Related Stockholder Matters, and Issuer
                  Purchases of Equity Securities
              
              
              17Item
                  6.
              
              Selected
                  Financial Data
              
              
              18Item
                  7.
              
              Management’s
                  Discussion and Analysis of Financial Condition and Results of Continuing
                  Operations
              
              
              19Item
                  7A
              
              Quantitative
                  and Qualitative Disclosures About Market Risk
              
              
              26Item
                  8.
              
              Financial
                  Statements and Supplementary Data
              
              
              28Item
                  9.
              
              Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure
              
              
              44Item
                  9A.
              
              Controls
                  and Procedures
              
              
              44Item
                  9B.
              
              OtherInformation
              
              
              45**PART
                  III**Item
                  10.
              
              Directors
                  and Executive Officers of the Registrant
              
              
              45Item
                  11.
              
              Executive
                  Compensation
              
              
              47Item
                  12.
              
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters
              
              
              48Item
                  13.
              
              Certain
                  Relationships and Related Transactions
              
              
              48Item
                  14.
              
              Principal
                  Accountant Fees and Services
              
              
              49**PART
                  IV**Item
                  15.
              
              Exhibits,
                  Financial Statement Schedules and Reports on Form 8-K
              
              
              50Signatures
              
              
              52










**Table
      of Contents**




**Forward-Looking
      Statements and Risk Factors**




*We
      make forward-looking statements in this report including, without limitation,
      statements concerning the future of our industry, product development, business
      strategy, continued acceptance and growth of our products, dependence on
      significant customers and suppliers, and the adequacy of our available cash
      resources. Statements may contain projections of results of operations or of
      financial condition. These statements may be identified by the use of
      forward-looking terminology such as “may,” “will,” “believe,” “expect,”
“anticipate,” “estimate,” “continue” or other similar words.*


*Forward-looking
      statements are subject to many risks and uncertainties. We caution you not
      to
      place undue reliance on these forward-looking statements, which speak only
      as at
      the date on which they are made. Actual results may differ materially from
      those
      described in these forward-looking statements. We disclaim any obligation or
      undertaking to update these forward-looking statements to reflect changes in
      our
      expectations or changes in events, conditions, or circumstances on which our
      expectations are based.*




***When
      considering our forward-looking statements, you should keep in mind the risk
      factors and other cautionary statements identified in this report. The risk
      factors noted throughout this Annual Report, particularly in the discussion
      in
      Item 1A, and other risk factors that Cosmo has not anticipated or
      discussed, could cause our actual results to differ significantly from those
      anticipated in our forward-looking statements.***







**Table
      of Contents**




**PART I**




**Item 1.**
            ***Business***





**Overview**





Cosmo
      Communications Corporation (the “Company”, "Cosmo" "we," "us" or "our") was
      incorporated in the state of Florida in 1983.





The
      Company is engaged in the development, production, distribution, marketing
      and
      sale of consumer electronic audio and video equipment, accessories and clocks.
      We contract for the manufacture of all electronic equipment products with
      factories located in China. We market certain lines of our products under labels
      that we have distribution agreements with. We also sell products under private
      labels for our major clients.





During
      our early years of operations, the products we sold were principally that of
      quartz and digital clocks, and radio cassette players. In the 90’s, we began
      marketing CD equipment, cordless telephones and small screen televisions.





In
      April
      2000, we entered into a Stock Purchase Agreement pursuant to which we offered
      shares of common stock representing 84.89% of the outstanding common stock
      to
      Master Light Enterprise Limited. (“Master Light”), a subsidiary of Starlight
      International Limited (“Starlight”), a publicly held company traded on the Hong
      Kong Stock Exchange, for $1 million. Pursuant to an amendment to the Stock
      Purchase Agreement, in January 2001, the transactions contemplated by the Stock
      Purchase Agreement, as amended, were consummated and, after rescinding the
      purchase of 1,347,420 shares, Master Light acquired 26,585,008 of our common
      stock shares, representing 91.3% of our currently issued and outstanding common
      stock. In September, 2001, additional financing from Starlight allowed us to
      discharge all our obligations to our financial institution lenders. Starlight
      owns and operates a number of subsidiaries globally. Its principal activity
      is
      in the manufacture, sale and distribution of consumer electronic products.





Since
      joining Starlight, we phased out our operation in United States and focused
      our
      business in Canada. During the current fiscal year, we hired two sales
      executives and began selling in the United States in the second quarter. We
      decided to re-enter the USA market when Starlight became a licensee of Disney
      electronics products in September 2006. We became an authorized distributor
      through the connection with Starlight. Our principal executive office is located
      in Ontario, Canada with two sales offices located in California and Kansas,
      USA.





Since
      2001, our common stock shares have not traded on the OTC Bulletin Board. As
      used
      herein, the “Company”, "Cosmo," "we," us" and similar terms include Cosmo
      Communications Corporation, and its subsidiaries, Cosmo Communications
      Corporation Canada Inc., Cosmo Communications Corporation (HK) Limited and
      Cosmo
      Communication USA Corp. unless the context indicates otherwise.





3




**Table
      of Contents**




**Product
      Lines**




We
      currently have a product line of 20 different models of clocks with retail
      prices ranging from $5 to $20. We have 20 models of clock radios with retail
      prices ranging from $9 to $20.





We
      sell
      23 different models of compact CD players with retail price between $12 and
      $60.





We
      market
      and sell five models of televisions including flat screen models with retail
      prices range between $59 and $399. We sell five models of DVD players and two
      models of combination television / DVD players with retail prices range from
      $129 to $199.





We
      market
      and sell 24 different types of MP3 players with retail prices ranging from
      $25.00 to $90.00. They range in memory capacity from 512MB to 2GB.





**Cosmo’s
      Brands**





Cosmo
      marketing and product development efforts are designed to enhance its brand
      images and generate increased loyalty among its consumers in each market segment
      and among the retailers who sell Cosmo products. Cosmo markets its products
      under the following primary brands:




·
            *Cosmo*.
                Initially, we established Cosmo brand name for clocks and digital
                alarm
                clocks. We will keep this brand name for this product category to
                capitalize on brand recognition. This category represents 2% of our
                total
                sales.




·
            *Audiologic*.
                The Audiologic brand offers a range of radios, CD players, telephones,
                clock radios, portable boom boxes and multiple CD music systems.
                These
                items represent 8% of total sales during the
                year.




·
            *Diamond
                Brand.*Cosmo introduced Diamond Vision and Diamond Sound as a new brand
                at the
                end of the 2005 fiscal year with DVD players. We have since added
                to this
                line Televisions, portable DVD players and MP3 Players. These items
                represent 50% of the total sales of the
                group.




·
            *Audiovox.*This is a licensed brand name that offers television, portable CD
                players,
                personal CD players, clock radios, radios, multi CD players and
                telephones. This line represents 12% of our total sales. As of June
                2007,
                we have terminated the licensing agreement of this
                brand.




·
            *Disney.*This
                is a licensed brand name of Disney Enterprises, Inc. The licensed
                electronics products include television, DVD players, CD players,
                and
                radio alarm clocks. These items represent 3% of the total sales of
                the
                group.




4




**Table
      of Contents**




**Strategy
      for Cosmo’s Brands**




Cosmo’s
      goal is to develop, distribute, market and sell consumer electronic audio and
      video equipment, accessories and clocks of well recognized and respected brands
      to customers around the world. Cosmo’s strategy is intended to enhance and
      reinforce Cosmo’s global brand images among consumers and retailers. Key
      elements of Cosmo’s strategy are to:




·
                Continue
                    to introduce new and technologically innovative products that
                    embody
                    distinctive Cosmo qualities; style and new
                    features;




·
              Expand
                  the current product lines by introducing LCD and Plasma
                  TV’s;




·
              Expand
                  Cosmo’s distribution with new and existing
                  customers;
  ·
                Introduce
                    licensed Hyundai brand power tools and lawn and garden products,
                    such as
                    cordless drills, saws, blowers, edge trimmers and lawn
                    mowers;




·
                Continue
                    the penetration into the US market and expand focus into available
                    international markets.




As
      a
      result of Cosmo’s brands and strategy, Cosmo believes it can expand its business
      and become a more significant participant in the worldwide consumer electronic
      market.




**Cosmo
      Products**





***Percent
      of Sales by Product Class***




Cosmo
      sales since 2005 were divided among Cosmo’s principal product classes as shown
      in the following table:




Year
                  Ended March 31,**2007**
              
              
              **2006**
              
              
              **2005**Product
                    Class:
              
              
              %
              
              
              %
              
              
              %MP3
                  Players
              
              
              12
              
              
              7
              
              
              -Other
                  Audio
              
              
              27
              
              
              29
              
              
              55Video
              
              
              59
              
              
              62
              
              
              40Clocks
              
              
              2
              
              
              2
              
              
              5Total
              
              
              100.0
              %
              
              100.0
              %
              
              100.0
              %


Financial
      information about geographic segments may be found at Note 13 of the Notes
      to Consolidated Financial Statements of this Form 10-K.





5




**Table
      of Contents**




***New
      Products***





Cosmo
      introduces new products and enhances its existing products on a regular basis.
      During fiscal 2007, we began distributing Disney licensed electronics products.
      We marketed two Disney characters “CARS” and “PRINCESS” in fiscal 2007 to a
      major US retailer. In fiscal 2008, we expect to distribute more Disney
      characters under the co-ordination of Disney’s marketing guidelines. Our Canada
      sales force also introduced the Hyundai brand of home improvement products
      including small garden tools such as cordless weed cutters and edge trimmers
      in
      fiscal 2007. Our product development team will continue to launch new innovative
      products that appeal to the general consumer market in fiscal 2008.





**Sales,
      Marketing and Distribution**





Cosmo
      endeavors to have its brands project images that appeal to consumers who
      appreciate quality and value. Cosmo products are promoted with advertisements
      in
      the various flyers of the companies that sell its products including Wal-Mart,
      Home Hardware, Best Buy, Loblaws, Hart Department Stores, Bargain Shop,
      etc.




We
      also
      market our products at various trade shows each year. We regularly attend the
      following trade shows and conventions: the Consumer Electronics Show each
      January in Las Vegas; the Hardware Shop in Los Angeles and the Hong Kong
      Electronics Show each October in Hong Kong.





Our
      products are sold in United States, Canada and to selective customers in United
      Kingdom, Mexico, Argentina and Brazil, primarily through mass merchandisers,
      department stores, electronic stores, chains, and specialty stores. Our products
      are currently sold in such stores as Wal-Mart, Super-Stores, Home Hardware,
      Bargain Shop, and Best Buy/Future Shop.





In
      fiscal
      2007, approximately 76% of our sales was to the customers within Canada, 23%
      of
      sales were to the customers in USA. Sales made to Europe and South America
      made
      up approximately 1% of our sales revenue. Sales are handled by our in-house
      sales team and our independent sales representatives. Our independent sales
      representatives are paid a commission based upon sales in their respective
      territories. The sales representative agreements are generally one year
      agreements, which automatically renew on an annual basis, unless terminated
      by
      either party on 30 days' notice. During the fiscal year March 31, 2007, we
      worked with two independent sales representatives in Canada and one in
      USA.





***Sales***





As
      a
      percentage of total revenues, our net sales in the aggregate to our five largest
      customers during the fiscal years ended March 31, 2007, and 2006 were
      approximately 98% and 95% respectively.





Although
      we have long-established relationships with all of our customers, we do not
      have
      contractual arrangements with any of them. A decrease in business from any
      of
      our major customers could have a material adverse effect on our results of
      operations and financial condition.




6




**Table
      of Contents**




***Geographic
      Distribution of Sales***





Cosmo’s
      sales to external customers by geographic region were as follows:







Year
                Ended March 31,Region
            
            2004
            
            2005
            
            2006
            
            2007
            
            2007
                %(In
                thousands)USA
            
            -
            
            -
            
            -
            
            13,350
            
            23.7%Canada
            
            $
            30,934
            
            $
            34,179
            
            $
            49,743
            
            
            42,384
            
            
            75.3
            %Europe
            
            
            1,225
            
            
            1,273
            
            
            920
            
            
            113
            
            
            0.2
            %Others
            
            
            -
            
            
            -
            
            
            348
            
            
            440
            
            
            0.8
            %Total
                sales
            
            $
            32,159
            
            $
            35,452
            
            $
            51,011
            
            $
            56,287
            
            
            100.0
            %





***Returns***





Returns
      of electronic products by our customers are generally not permitted except
      in
      approved situations involving quality defects, damaged goods, or goods shipped
      in error. Our policy is to give credit to our customers for their returns.
      Our
      total returns represented 5% and 6% of our net sales in fiscal 2007 and 2006,
      respectively.





We
      have
      an ongoing arrangement with Starlight to refurbish our defective products,
      which
      are manufactured by Starlight’s factory. We do not have return privileges with
      the other 11 factories we work with. We have a workshop within our warehouse
      facility to refurbish minor defective products. Refurbished products are
      packaged to be resold in the secondary markets by secondary market dealers.
      We
      expect to recover at least 35% of the costs from the refurbishment.





***Distribution***





We
      distribute our products to retailers and wholesale distributors through two
      methods: shipment of products from inventory held at our warehouse facility
      in
      Canada and USA (domestic sales), and shipments directly through our Hong Kong
      subsidiary (direct sales). Domestic sales are made to customers located
      throughout USA and Canada from inventories maintained at our warehouse
      facilities. In the fiscal year ended March 31, 2007, approximately 34% of our
      sales were sales from our domestic warehouses ("Domestic Sales") and 66% were
      sales shipped directly from China ("Direct Sales").





7




**Table
      of Contents**




*Domestic
      Sales* .
      Our
      strategy of selling products from a domestic warehouse enables us to provide
      timely delivery and serve as a domestic supplier of imported goods. We purchase
      products overseas from certain factories in China for our own account, and
      warehouse the products in leased facilities in USA and in Canada. We are
      responsible for the costs of shipping, insurance, customs clearance, duties,
      storage and distribution related to such products and, therefore, domestic
      sales
      command higher sales prices than direct sales. We generally sell from our own
      inventory in less than container-sized lots.





*Direct
      Sales.* We ship
      some of our products directly to customers from China through our subsidiary
      in
      Hong Kong. Sales made through our subsidiary are completed by either delivering
      products to the customers' common carriers at the shipping point or by shipping
      the products to the customers' distribution centers, warehouses, or stores.
      Direct sales are made in larger quantities (generally container sized lots),
      who
      pay our subsidiary pursuant to irrevocable, transferable letters of credit
      or on
      open account.





**Manufacturing
      and Production**





Our
      products are manufactured and assembled by third parties pursuant to design
      specifications provided by us. Currently, substantially all of our video and
      CD
      products are manufactured by Starlight’s factory located in Guangdong Province
      in the People’s Republic of China (PRC). We also have ongoing relationships with
      11 factories, located in the southern provinces of the PRC. For fiscal 2008,
      we
      anticipate that our products will be produced more by Starlight’s factory. We
      believe that the manufacturing capacity of our factories is adequate to meet
      the
      demands for our products in fiscal year 2008. However, if Starlight’s primary
      factory in China was prevented from manufacturing and delivering our products,
      our operation would be severely disrupted (see Item 1A - Risk Factors). Our
      products are manufactured using molds and certain other tooling owned by
      Starlight and our other factories. Our products contain electronic components
      manufactured by other companies such as Sanyo, Toshiba, Hitachi and National
      Semiconductor. Our manufacturers purchase and install these electronic
      components in our products under our specifications.





While
      our
      equipment manufacturers purchase our supplies from a small number of large
      suppliers, all of the electronic components and raw materials used by us are
      available from several sources of supply, and we do not anticipate that the
      loss
      of any single supplier would have a material long-term adverse effect on our
      business, operations, or financial condition. To ensure that our high standards
      of product quality and factories meet our shipping schedules, we utilize
      independent contractors as our representatives. These contractors include
      product inspectors who are knowledgeable about product specifications and work
      closely with the factories to verify that such specifications are met.
      Additionally, our key personnel frequently visit our factories for quality
      assurance and to maintain good working relationships.





All
      of
      the electronic equipment sold by us is warranted to the end user against
      manufacturing defects for a period of ninety (90) days for labor and parts.
      During the fiscal years ended March 31, 2007 and 2006, warranty claims have
      not
      been material to our results of operations.





8




**Table
      of Contents**




Cosmo
      believes that its sources and supplies of finished goods, components and other
      materials are adequate for its needs. Cosmo has not experienced a significant
      inability to obtain necessary finished goods, components or other
      materials.





**Reverse
      Logistic Operation**





We
      have
      an arrangement with certain manufacturers that distribute television sets and
      DVD players in Canada to handle customer returns for them. Our warehouse
      facility in Canada has the capacity to handle a high volume of defective
      products. We charge the manufacturers a fee on a per piece basis or a percentage
      based on the retail sales value of the merchandise and reported this as
      commission and other income. Our agreement with these manufacturers to handle
      their returns is on an on-going and mutually agreed basis with no expiration
      date.





**Commission**





With
      our
      close relationship with Starlight, we have developed a good knowledge of their
      manufacturing capability and facility. Starlight pays us a commission based
      on
      sales made between Starlight and our customers at a percentage of sales. We
      report income on our consolidated income statement from this category under
      “Commission income”.





**License
      Agreements**





We
      entered into a licensing agreement with Audiovox in April, 2003. This license
      agreement expired in March, 2006. The agreement provides for an automatic
      rollover to extend unless notice is given to terminate. As of June 30, 2007,
      we
      have terminated the license agreement with Audiovox. We do not expect any loss
      in sales due to this termination as we have successfully replaced Audiovox
      brand
      with our other brand labels. Sales generated under the Audiovox license
      represent 12% of our sales revenue in fiscal 2007 and 18% in fiscal
      2006.





The
      license agreement with Disney Enterprises, Inc. is between Starlight
      International and Disney. We are not obligated to pay license fees to Disney.





**Competition**





Our
      business is highly competitive. Our major competitors of our CD category are
      Citizens, Philips and GE. Competitors of our TV and DVD category are Apex,
      Cyberhome and Philips. We believe that competition for our products is based
      primarily on price, product features, reputation, delivery times, and customer
      support. We believe that our brand names are recognized in the industry and
      help
      us to compete in these categories. Our financial position depends, among other
      things, on our ability to keep pace with changes and developments in the
      household entertainment industry and to respond to the requirements of our
      customers. Many of our competitors have significantly greater financial,
      marketing, and operating resources and broader product lines than we
      do.




9




**Table
      of Contents**




**Intellectual
      Property**





We
      have
      registered “Audiologic”, “Diamond Vision” and “Diamond Sound” as our trade marks
      in United States and in Canada.





We
      believe our intellectual property is adequately protected, but there are no
      assurances that these rights can be successfully asserted in the future or
      will
      not be invalidated or challenged.





**Government
      Regulation**





Our
      products must meet the safety standards imposed in various national, state,
      local and provincial jurisdictions. Our products sold in Canada are designed,
      manufactured and tested to meet the safety standards of Underwriters
      Laboratories, Inc. ("ULE") or Electronic Testing Laboratories ("ETL"). In Europe
      and other foreign countries, our products are manufactured to meet the CE
      marking requirements. CE marking is a mandatory European product marking and
      certification system for certain designated products. When affixed to a product
      and product packaging, CE marking indicates that a particular product complies
      with all applicable European product safety, health and environmental
      requirements within the CE marking system. Products complying with CE marking
      are now accepted to be safe in 28 European countries.





The
      manufacturing operations of our foreign suppliers in China are subject to
      foreign regulation. China has permanent "normal trade relations" ("NTR") status
      under Canadian tariff laws, which provides a favorable category of Canadian
      import duties. China's NTR status became permanent on January 1, 2002. This
      substantially reduces the possibility of China losing its NTR status, which
      would result in increasing costs for us.





**Seasonality
      and Seasonal Financing**





Our
      business is highly seasonal, with consumers making a large percentage of
      purchases of our products around the traditional holiday season in our second
      and third quarter. These seasonal purchasing patterns and requisite production
      lead times cause risk to our business associated with the underproduction or
      overproduction of products that do not match consumer demand. Retailers also
      attempt to manage their inventories more tightly, requiring that we ship
      products closer to the time that retailers expect to sell the products to
      consumers. These factors increase the risk that we may not be able to meet
      demand for certain products at peak demand times, or that our own inventory
      levels may be adversely impacted by the need to pre-build products before orders
      are placed. As of March 31, 2007, we had inventory of $9.6 million (net of
      reserves totaling $381,000) compared to inventory of $4.1 million as of March
      31, 2006 (net of reserves totaling $251,000). We carried higher inventory levels
      in the current fiscal year because we had more domestic sales (34%) compared
      with 10% in the prior year.




10




**Table
      of Contents**




Our
      financing of seasonal working capital during fiscal 2007 was from selling of
      the
      inventory carried over from prior year. We rely on credit terms from our
      manufacturers to finance the purchase of new inventory. We also have an
      understanding from Starlight to provide short term working funds to purchase
      inventory should we require them.





For
      fiscal 2008, we plan on financing our inventory purchases with short term
      working funds provided by Starlight.





**Information
      Systems**





Cosmo’s
      information systems are designed to respond quickly to inquiries from managers,
      employees, suppliers and customers. Cosmo has implemented internet-based systems
      to provide accurate and timely information and allow Cosmo’s representatives,
      dealers and distributors to check the status of their orders at a secure
      Internet site. Cosmo has also implemented internet systems to provide accurate
      and timely information to its suppliers in support of just-in-time delivery
      of
      components to Cosmo’s manufacturing facilities. These systems help Cosmo reduce
      costs by reducing inventory requirements and for a more timely and accurate
      exchange of information with our suppliers.





**Backlog**





We
      ship
      our products in accordance with delivery schedules specified by our customers,
      which usually request delivery within 3 months of the date of the order. In
      the
      consumer electronics industry, orders are subject to cancellation or change
      at
      any time prior to shipment. In recent years, a trend toward just-in-time
      inventory practices in the consumer electronics industry has resulted in fewer
      advance orders and therefore less backlog of orders for us. We believe that
      backlog orders at any given time may not accurately indicate future sales.
      As of
      March 31, 2007 we had no backlog of orders and none in the same period in fiscal
      2006. Backlog orders do not take into account of any sales ordered by customers
      directly from our domestic inventory with order turnaround time of one to two
      weeks. We normally have to keep the minimum inventory in our domestic warehouses
      for this type of sales.





**Employees**





As
      of
      March 31, 2007, we employed 39 people, all of whom are full-time employees,
      including four executive officers. Three of our employees are located at our
      subsidiary in Hong Kong and three in the United States. The remaining employees
      are based in Canada, 20 engaged in warehousing and technical support, and 13
      in
      accounting, marketing, sales and administrative functions. We have never had
      a
      work stoppage and none of our employees are unionized. We believe we have good
      employee relations.




11




**Table
      of Contents**




**Item1A.**
              *****Risk
                  Factors*****




**RISK
      FACTORS THAT MAY AFFECT COSMO’S OPERATING RESULTS, BUSINESS PROSPECTS AND STOCK
      PRICE**




*Before
      you buy or sell Cosmo stock, you should be aware that there are risks, including
      those described below and others Cosmo has not anticipated or discussed. You
      should consider carefully these and other risk factors, together with all of
      the
      other information included in Cosmo’s periodic filings and current reports filed
      with the SEC, before you decide to buy or sell shares of Cosmo’s common
      stock.*




*As
      you consider these risk factors, Cosmo also calls your attention to Cosmo’s
      statements about Forward Looking Statements and Risk Factors in Part I of
      this Annual Report.*




***We
                have significant working capital needs and if we are unable to obtain
                additional financing when needed, we may not have sufficient cash
                flow to
                continue operations.***




As
      of
      March 31, 2007, our cash on hand is limited. We will finance our working capital
      needs from the collection of accounts receivable, and sales of existing
      inventory. See "Liquidity and Capital Resources" beginning on page 22. As of
      March 31, 2007, our inventory was valued at approximately $9 million. If these
      sources do not provide us with adequate financing, we will be seeking financing
      from our factories. If we are not able to obtain adequate financing from our
      factories when needed, it will have a material adverse effect on our cash flow
      and our ability to continue operations.





A
      small
      number of our customers account for a substantial portion of our revenues,
      and
      the loss of one or more of these key customers could significantly reduce our
      revenues and cash flow.





As
      a
      percentage of total revenues, our net sales to our 5 largest customers during
      the fiscal period ended March 31, 2007 and 2006 were approximately 98% and
      95%
      respectively. We do not have long-term contractual arrangements with any of
      our
      customers and they can cancel their orders at any time prior to delivery. A
      substantial reduction in or termination of orders from our largest customers
      would decrease our revenues and cash flow significantly.




***We
                rely on Starlight to manufacture and produce the majority of our
                CD
                players, DVD players and television sets and if Starlight does not
                support
                our delivery schedule, it would affect our revenues and
                profitability.***




We
      believe that because Starlight has a substantial investment in our operation
      they will support us unconditionally. In the event of disruption in its factory,
      Starlight will source outside factories to manufacture our products but we
      risk
      losing sales and goodwill to our customers.




12




**Table
      of Contents**




***We
                are subject to pressure from our customers relating to price reduction
                and
                financial incentive and if we are pressured to make these concessions
                to
                our customers, it will reduce our revenues and
                profitability.***




Because
      there is intense competition in the consumer electronic market, we are subject
      to pricing pressure from our customers. Many of our customers have demanded
      that
      we lower our prices or they will purchase from our competitor's products. If
      we
      do not meet our customer's demands for lower prices, we will not sell as many
      products. We are also subject to pressure from our customers regarding certain
      financial incentives, such as return credits or advertising allowances, which
      effectively reduce our profit. We gave advertising allowances in the amount
      of
      $727,000 during fiscal 2007 and $233,000 during fiscal 2006. We have
      historically offered advertising allowances to our customers because it is
      standard practice in the retail industry.




***We
                experience difficulty forecasting the demand for our products and
                if we do
                not accurately forecast demand, our revenues, net income and cash
                flow may
                be affected.***




Because
      of our reliance on manufacturers in China for our products, our production
      lead
      times range from one to four months. Therefore, we must commit to production
      in
      advance of customers orders. It is difficult to forecast customer demand because
      we do not have any scientific or quantitative method to predict this demand.
      Our
      forecasting is based on management's general expectations about customer demand,
      the general strength of the retail market and management's historical
      experiences. In the past, our experienced management team has been able to
      plan
      our production and inventory requirements without building excessively high
      inventory.




***Our
                gross profit margins have not improved over the past year and we
                expect a
                continued competitive market in the
                future.***




Over
      the
      past year, our gross profit margins have not improved due to price competition.
      We expect that our gross profit margin might decrease under downward pressure
      in
      fiscal 2008 but we are also putting pressure on our manufacturers to lower
      their
      production costs. Based on past experience, we expect that we can pass on the
      price pressure to our manufacturers.




***Our
                business is seasonal and therefore our annual operating results will
                depend, in large part, on our sales during the relatively brief holiday
                season.***




Sales
      of
      consumer electronics in the retail channel are highly seasonal, with a majority
      of retail sales occurring during the period from September through December
      in
      anticipation of the holiday season, which includes Christmas. A substantial
      majority of our sales occur during the second quarter ended September 30 and
      the
      third quarter ended December 31. However, an exception occurred in fiscal 2007.
      We were able to continue our sales in USA beyond the holiday season due to
      sales
      of the Disney electronics. Sales in our second and third quarter, combined,
      accounted for approximately 46% and 89% of total sales in fiscal 2007 and 2006
      respectively.




13


Table
        of
        Contents


***If
                Cosmo does not continue to develop, introduce and achieve market
                acceptance of new and enhanced products, sales may
                decrease.***




The
      consumer electronic industry is characterized by rapid technological change,
      frequent new product introductions and enhancements and ongoing customer demands
      for greater performance. In addition, the average selling price of an electronic
      product has historically decreased over its life cycle, and we expect that
      trend
      to continue. As a result, our products may not be competitive if we fail to
      introduce new products or product enhancements that meet evolving customer
      demands. The development of new products is complex, and we may not be able
      to
      complete development in a timely manner. To introduce products on a timely
      basis, we must:





·
            accurately
                define and design new products to meet market
                needs;


·
            design
                features that continue to differentiate our products from those of
                our
                competitors;


·
            update
                our manufacturing process technologies;


·
            identify
                emerging technological trends in our target
                markets;


·
            anticipate
                changes in end-user preferences with respect to our customers'
                products;


·
            introduce
                products to market on a timely basis at competitive prices;
                and


·
            respond
                effectively to technological changes or product announcements by
                our
                competitors.





We
      believe that we will need to continue to enhance our products and develop new
      merchandise to keep pace with competition, technological developments, and
      to
      achieve market acceptance for our products. At the same time, we are identifying
      other products which may be different from audio and video
      equipment.




***Our
                products are shipped from China and any disruption of shipping could
                prevent or delay our customers’ receipt of
                inventory.***




We
      rely
      principally on independent ocean carriers to ship virtually all of the products
      that we import to our warehouse facility in Los Angeles, USA and in Toronto,
      Canada. Retailers that take delivery of our products in China rely on a variety
      of carriers to import those products. Any disruptions in shipping, whether
      in
      Los Angeles, Toronto or China, caused by labor strikes, other labor disputes,
      terrorism, and international incidents may prevent or delay our customers'
      receipt of inventory. If our customers do not receive their inventory on a
      timely basis, they may cancel their orders or return products to us.
      Consequently, our revenues and net income would be affected.





14




**Table
      of Contents**





***Our
                manufacturing operations are located in the People’s Republic of China,
                subjecting us to risks common in international operations. If there
                is any
                problem with the manufacturing process, our revenues and net profitability
                may be affected.***




We
      are
      using 12 factories in the People's Republic of China to manufacture the majority
      of our products. These factories will be producing all of our products in fiscal
      2008. Our arrangements with these factories are subject to the risks of running
      business abroad, such as import duties, trade restrictions, work stoppages,
      and
      foreign currency fluctuations, limitations on the repatriation of earnings
      and
      political instability, which could have an adverse impact on our business.
      Furthermore, we have limited control over the manufacturing processes
      themselves. As a result, any difficulties encountered by our third-party
      manufacturers that result in product defects, production delays, cost overruns
      or the inability to fulfill orders on a timely basis could adversely affect
      our
      revenues, profitability and cash flow. Also, since we do not have written
      agreements with any of these factories, we are subject to additional uncertainty
      if the factories do not deliver products to us on a timely basis.




***We
                depend on third party suppliers for parts for our products, and if
                we
                cannot obtain supplies as needed, our operations will be severely
                damaged.***




Our
      growth and ability to meet customer demand depends in part on our ability to
      obtain timely deliveries of our electronic products. We rely on third party
      suppliers to produce the parts and materials we use to manufacture and produce
      these products. If our suppliers are unable to provide our factories with the
      parts and supplies, we will be unable to produce our products. We cannot
      guarantee that we will be able to purchase the parts we need at reasonable
      prices or in a timely fashion. In the last several years, there have been
      shortages of certain components that we use in our DVD players. If we are unable
      to anticipate any shortages of parts and materials in the future, we may
      experience severe production problems, which would impact our
      sales.




***We
                are exposed to the credit risk of our customers who are experiencing
                financial difficulties, and if these customers are unable to pay
                us, our
                revenues and profitability will be
                reduced.***




We
      sell
      products to retailers, including department stores, hardware stores and
      specialty stores. In the past, we have been diligent to screen credit worthiness
      of our customers and experience of bad debts has been insignificant.
      Deterioration in the financial condition of our customers could have a material
      adverse effect on our revenues and future profitability.




***Our
                common stock currently is not actively
                traded.***




Our
      common stock is inactive and has no bid and ask price. We believe that if we
      can
      establish a pattern of profitability in the near future, our common stock may
      be
      more actively traded.





15




**Table
      of Contents**




***The
                loss of its largest customer or significant reductions in the purchases
                of
                Cosmo’s products would reduce
                sales.***




Cosmo’s
      largest customer accounts for 93%, 91% and 88% of Cosmo’s sales in 2007, 2006
      and 2005. Cosmo anticipates that this customer will continue to account for
      a
      significant portion of its sales for the foreseeable future but is not obligated
      to any long-term purchases. It has considerable discretion to reduce, change
      or
      terminate purchases of Cosmo’s products. Cosmo cannot be certain that it will
      retain this customer or maintain a favorable relationship.




***If
                Cosmo fails to manage its inventory effectively, Cosmo could incur
                additional costs or lose
                sales.***




Cosmo
      customers have many brands to choose from when they decide to order products.
      If
      Cosmo cannot deliver products quickly and reliably, customers will order from
      a
      competitor. Cosmo must stock enough inventories to fill orders promptly, which
      increases Cosmo’s financing requirements and the risk of inventory obsolescence.
      Because competition has forced Cosmo to shorten its product life cycles and
      more
      rapidly introduce new and enhanced products, while simultaneously sourcing
      more
      products overseas and carrying larger inventories, there is a significant risk
      that Cosmo’s inventory could become obsolete.




***Currency
                fluctuations may reduce the profitability of Cosmo’s foreign
                sales.***




Cosmo
      currently makes sales to Canadian and certain European dealers and distributors
      in their respective currencies. However, as part of the transition to local
      distributors, an increasing portion of Cosmo’s sales are denominated in
      U.S. dollars. If Cosmo is unsuccessful in its transition to distributors,
      Cosmo’s exposure to gains and losses on foreign currency transactions will
      continue. Cosmo does not trade in derivatives or other financial instruments
      to
      reduce currency risks. In some instances this will subject Cosmo’s earnings to
      fluctuations because Cosmo is not protected against substantial currency
      fluctuations.





**Item 2.**
            ***Properties***




Our
      corporate headquarters are located in Markham, Ontario, Canada in a 35,000
      sq.
      ft. office and warehouse facility.





We
      have
      two sales offices in USA, one located in San Jose, California and one located
      in
      Kansas.





Our
      subsidiary in Hong Kong shares office space with Starlight in Hong Kong from
      which we oversee China based manufacturing operations. There is no lease
      agreement with Starlight and we do not pay rent to Starlight for the
      facility.





We
      believe that our facility is well maintained, in substantial compliance with
      environmental laws and regulations, and adequately covered by insurance. We
      also
      believe that our leased facility is not unique and could be replaced, if
      necessary, at the end of the term of the existing lease.





16




**Table
      of Contents**




**Item 3.**
            ***Legal
                Proceedings***




We
      are
      from time to time involved in routine litigation incidental to our business,
      most of which is adequately covered by insurance and none of which is expected
      to have a material adverse affect on our business, financial condition or
      results of operation. Our subsidiary company in Canada is a defendant in a
      lawsuit concerning a certain agreement violation for a sum of $100,000 filed
      in
      March 2007. The case has been referred to our Canadian attorney for further
      advice and action.




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




No
      matters were submitted to a vote of security holders during the fourth quarter
      of our 2007 fiscal year.




**PART II**




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




Since
      2001, our common stock shares have not been traded on the OTC Bulletin Board.
      There were no quotes of high and low during fiscal 2007. We have 396 record
      holders of our common stock on June 30, 2007.





**Dividends**





Our
      policy is to retain earnings and we have not declared any dividends in the
      past.
      Any payment of cash dividends in the future will be dependent upon the financial
      condition, capital requirements, earnings, contractual restrictions and other
      factors considered relevant by our Board of Directors.





**Equity
      Compensation Plan Information**





The
      Company does not have any stock option plan or 401K plan as long-term
      compensation.





**Recent
      Sales of Unregistered Securities**





None.




17




**Table
      of Contents**




**Item 6.**
            ***Selected
                Financial Data***




The
      following selected consolidated financial data should be read in conjunction
      with Item 7, “Management’s Discussion and Analysis of Financial Condition
      and Results of Continuing Operations” and Item 8, “Financial Statements and
      Supplementary Data” Included elsewhere in this Annual Report. The statements of
      operations data for the years ended March 31, 2007, 2006, and 2005 and the
      balance sheet data at March 31, 2007 and 2006 are derived from our audited
      financial statements which are included elsewhere in this Annual Report. The
      statement of operations data for the year ended March 31, 2004 and 2003 and
      the
      balance sheet data at March 31, 2005, 2004 and 2003 are derived from our audited
      financial statements which are not included in this Form 10-K. The historical
      results are not necessarily indicative of results to be expected for future
      periods. Prior period amounts have been reclassified to conform to the 2007
      presentation.







**Years
                Ended March 31,****2007**
            
            **2006**
            
            **2005**
              **Restated**
            
            **2004**
            
            **2003**(In
                thousands, except per share data)Consolidated
                Statements of Operations:Net
                sales
            
            $
            56,287
            
            $
            51,011
            
            $
            35,452
            
            $
            32,159
            
            $
            19,753Cost
                of products sold
            
            
            53,034
            
            
            48,157
            
            
            32,846
            
            
            29,476
            
            
            17,686Gross
                profit
            
            
            3,253
            
            
            2,854
            
            
            2,606
            
            
            2,683
            
            
            2,067Other
                income
            
            
            1,566
            
            
            1,509
            
            
            1,854
            
            
            1,283
            
            
            460Operating
                expenses:Selling
                and delivery
            
            
            1,677
            
            
            1,033
            
            
            1,382
            
            
            1,616
            
            
            937General
                and administrative
            
            
            2,901
            
            
            2,684
            
            
            1,921
            
            
            1,382
            
            
            876Depreciation
                and amortization
            
            
            19
            
            
            23
            
            
            32
            
            
            21
            
            
            12Total
                operating expenses
            
            
            4,597
            
            
            3,740
            
            
            3,335
            
            
            3,019
            
            
            1,825Operating
                income
            
            
            223
            
            
            623
            
            
            1,125
            
            
            947
            
            
            702Interest
                and other expense
            
            
            238
            
            
            304
            
            
            232
            
            
            257
            
            
            79Taxes
                - current and deferred
            
            
            (164
            )
            
            172
            
            
            697
            
            
            (29
            
            
            33Net
                income
            
            
            148
            
            
            147
            
            
            196
            
            
            719
            
            
            590Income
                per common share:Income
                from operationsBasic
                and diluted
            
            
            0.01
            
            
            0.01
            
            
            0.01
            
            
            0.02
            
            
            0.02Weighted
                average shares:Basic
                and diluted
            
            
            29,602
            
            
            29,104
            
            
            29,104
            
            
            29,104
            
            
            29,104




18




**Table
      of Contents**




**As
                of March 31****(in
                thousands)********2007**
            
            
            **2006**
            
            
            **2005**
              **Restated**
            
            
            **2004**
            
            
            **2003****Balance
                Sheet Data**:Cash
            
            $
            1,112
            
            $
            549
            
            $
            629
            
            $
            770
            
            $
            815Total
                assets
            
            
            20,133
            
            
            8,249
            
            
            7,616
            
            
            7,642
            
            
            5,645Total
                current liabilities
            
            
            15,826
            
            
            5,989
            
            
            5,772
            
            
            6,485
            
            
            5,460Total
                long-term liabilities
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Stockholders’
                equity (deficit)
            
            
            4,307
            
            
            2,260
            
            
            1,844
            
            
            1,157
            
            
            185






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




The
      following discussion should be read in conjunction with the Financial Statements
      and Notes filed herewith. Our fiscal year ends March 31. This document contains
      certain forward-looking statements including, among others, regarding
      anticipated trends in our financial condition and results of operations and
      our
      business strategy. (See Part I, Item 1A, "Risk Factors "). These forward-looking
      statements are based largely on our current expectations and are subject to
      a
      number of risks and uncertainties. Actual results could differ materially from
      these forward-looking statements. Important factors to consider in evaluating
      such forward-looking statements include (i) changes in external factors or
      in
      our internal budgeting process which might impact trends in our results of
      operations; (ii) unanticipated working capital or other cash requirements;
      (iii)
      changes in our business strategy or an inability to execute our strategy due
      to
      unanticipated changes in the industries in which we operate; and (iv) various
      competitive market factors that may prevent us from competing successfully
      in
      the marketplace.




**Results
      of Operations**




***Overview***




Our
      primary objectives for fiscal 2007 were to expand our sales and build solid
      relationships with our major customers. We consider these factors necessary
      to
      position us for further growth and to compete in the industry. Our major focus
      in sales in fiscal 2007 was in opening the USA market by distributing Disney
      electronics products and other brand labels. Our sales in this segment were
      $13.4 million. Our net sales in the video category decreased by $8 million
      in
      fiscal 2007 due to extremely competitive price bidding in the television market.
      Our gross margin remained steady at approximately 5.8% (2006 -
      5.6%).





Our
      operating expenses (compensation, selling, general and administrative expenses)
      in fiscal 2007 increased to $4.6 million from $3.7 million in the prior year.
      The increase in operating expenses was mainly due to opening sales offices
      and
      hiring sales executives in the United States.




19


**Table
        of Contents**
  **Fiscal
        Year Ended March 31, 2007 Compared with Fiscal Year Ended March 31,
        2006**


***Sales***




Net
      sales
      for the fiscal year ended March 31, 2007 increased to $56 million compared
      to
      revenues of $51 million in the fiscal year ended March 31, 2006. The increase
      in
      sales is primarily attributed to:





·
            Penetration
                in the toys section of electronics by distributing Disney characters
                electronics in television sets, DVD players, and CD players in the
                United
                States market (new sales in 2007 $13M).


·
            focusing
                on the products which are popular among the younger consumers such
                as MP3
                Players;


·
            competing
                aggressively by providing advertising allowances to our retail customers
                to promote our products





Despite
      our success in re-opening the US market, sales of television and DVD products
      declined in Canada by $8 million. As the United States imposed a deadline of
      March 2007 to import NTSC TV system into the country, Canada was flooded with
      NTSC system TV sets which resulted in deterioration in prices. We opted to
      sell
      less rather than suffering an erosion of our gross profit margin. Our audio
      and
      clock radio lines showed steady sales in the two years in
      comparison.





In
      fiscal
      2007, 66% of our sales were direct sales, which represented sales made by our
      subsidiary in Hong Kong, and 34% were domestic sales, which represent sales
      made
      from our warehouses in USA and in Canada. In fiscal 2006, 90% of our sales
      were
      direct sales, and 10% were domestic sales. All our Disney characters sales
      were
      from our warehouse facility in USA.





In
      fiscal
      2007, sales in Canada represent 75% of our total sales; sales in USA represent
      24% and the remaining 1% was sales to Europe and other countries. In fiscal
      2006, 98% of our sales were made to Canada, 2% to Europe and other
      countries.




***Gross
                Profit***




Gross
      profit for fiscal 2007 was $3.3 million or 5.8% of total revenues compared
      to
      $2.9 million or 5.6% of sales for fiscal 2006. Our future expansion is to
      continue to target a product mix that will improve our gross profit margin.
      It
      is uncertain if existing products will suffer further deterioration in gross
      profit margin as we cannot predict how our competitors will cut
      prices.





Our
      gross
      profit may not be comparable to those of other entities, since some entities
      include the costs of warehousing, inspection, freight charges and other
      distribution costs in their cost of sales. We account for the above expenses
      as
      operating expenses and classify them under selling, general and administrative
      expenses.




20


**Table
        of Contents**


***Commission
                Income***




Our
      commission and other income which consist of commissions earned on brokering
      sales and handling return products for Starlight and another manufacturer.
      Total
      income was $1.6 million in fiscal 2007 compared with $1.5 million in fiscal
      2006. Our plan is to increase income earned on brokering sales. We are less
      certain with income earned on handling returns since our customers choose how
      many of their returns they will give to us to process, therefore we have no
      control over how many returns are received.




***Operating
                Expenses***




Operating
      expenses for the fiscal year ended March 31, 2007 increased to $4.6 million
      from
      $3.7 million in fiscal 2006. The increase in operating expenses consists of
      an
      increase in variable expenses and fixed expenses. The variable expenses
      (advertising, commission, freight and royalty expenses) increased proportionally
      as revenues increased. The fixed expense increase of $0.5 million was primarily
      due to the following factors:





·
              consultancy
                  fees to provide marketing research and opening new accounts in
                  the
                  USA
 
 ·
              insurance
                  costs in our business package; and
 
 ·
              storage
                  costs due to a higher percentage of domestic sales than direct
                  sales




***Income
                Tax Expenses***




Significant
      management judgment is required in developing our provisions for income taxes,
      including the determination of foreign tax liabilities, deferred tax assets
      and
      liabilities and any valuation allowances that might be required against deferred
      tax assets. Management evaluates its ability to realize its deferred tax assets
      on a quarterly basis and adjusts its valuation allowance when it believes that
      it is not likely to be realized.





For
      the
      fiscal year ended March 31, 2007, we recovered income tax expense in the amount
      of $310,442 and a prior year reassessment of taxes of $189,610. Prior year
      reassessment was the result of a tax audit on the Canadian subsidiary conducted
      on years 2004 and 2005. Tax recovery was also a result of some prior year
      adjustments related to foreign exchange gains in our Canadian subsidiary. The
      Company does not anticipate future changes in rates and as such does not
      anticipate such variances in its current or deferred taxes in subsequent
      years.





We
      operate within multiple taxing jurisdictions and we are subject to audit in
      each
      jurisdiction. Because of the complex issues involved, any claims can require
      an
      extended period of time to resolve. In management's opinion, adequate provisions
      for income taxes have been made.





21




**Table
      of Contents**




**Liquidity
      and Capital Resources**




On
      March
      31, 2007, we had cash on hand of $1,112,228 compared to cash on hand of $548,506
      on March 31, 2006. The increase of cash on hand was primarily due to increases
      in cash provided by operating activities.





Cash
      flows provided by operating activities were $1,781,586 for the twelve months
      ended March 31, 2007. We carried a higher receivable balance in 2007 due to
      an
      increase in domestic sales and higher sales activities. The majority of our
      receivables are due from one of the world’s largest mass retailers and we do not
      foresee any collection problems.





We
      increased our inventory level at fiscal 2007 year end by $5,446,264 because
      of
      the need to carry inventory in warehouses in USA for domestic shipments.
      Receivables and inventory were financed by trade payables provided by our parent
      company.





Cash
      used
      in investing activities for the twelve months ended March 31, 2007 was $5,254.
      Cash used in investing activities was for the purchase of office equipment
      in
      Canada.





Cash
      flows used in financing activities were $1,111,480 for the fiscal year ended
      March 31, 2007 through a loan conversion transaction in March 2007. As of March
      31, 2007, our working capital was $4.3 million. Our current liabilities of
      $16
      million include:





·
            amount
                due to Starlight resulting from normal course of the business for
                $13.4
                million;


·
            current
                liabilities resulting from normal course of the business with other
                factories for $1.7 million;


·
            advance
                from Starlight for $0.6 million


As
      of
      June 2007, our cash on hand is sufficient to cover approximately four months
      of
      operation. We expect our factories will continue to provide credits to us and
      that Starlight will provide financing to us if we require additional short
      term
      working capital.




**Off
      Balance Sheet Arrangements**




Cosmo
      does not participate in transactions that generate relationships with
      unconsolidated entities or financial partnerships, such as entities referred
      to
      as structured finance or variable interest entities (VIE’s), which would be
      established for the purpose of facilitating off-balance sheet arrangements.
      As
      of March 31, 2007, Cosmo did not have any unconsolidated VIE’s.




22




**Table
      of Contents**




**Contractual
      Obligations as of March 31, 2007**




Cosmo
      had
      contractual obligations at March 31, 2007 as follows:




**Payments
                Due by Period****Total**
            
            **Less
                Than**
              **1 Year**
            
            **1-3 Years**
            
            **3-5 Years**
            
            **More
                Than**
              **5 Years****Contractual
                  Obligations**Loan
                from related party
            
            $
            604,627
            
            $
            604,627
            
            $
            —
            
            
            —
            
            
            —Operating
                leases
            
            $
            452,721
            
            $
            300,457
            
            $
            152,264
            
            $
            —
            
            
            —




**Working
      Capital Requirements for the Short and Long Term**




During
      the next twelve month period, we plan on financing our working capital needs
      from:





·
            The
                collection of accounts receivable;


·
            Sales
                of existing inventory; and


·
            The
                Continued support of factories in China that finance our purchases
                of
                goods for fiscal 2008.





Our
      sources of cash for working capital in the long term are the same as our sources
      for the short term. If we need additional financing for the long term use,
      one
      of the options that we may explore in the near future is by private offerings.
      However, we cannot guarantee that our financing plan will succeed. If we need
      to
      obtain additional financing and fail to do so, it may have a material adverse
      effect on our ability to meet our financial obligations and continue our
      operations.





During
      fiscal 2008, we will institute steps to control our operating costs. We expect
      to generate a higher portion of our total sales through domestic sales which
      will put pressure on our working capital to finance inventory and accounts
      receivable.





Except
      for the foregoing, we do not have any present commitment that is likely to
      cause
      our liquidity to increase or decrease in any material way. In addition, except
      for the Company's need for additional capital to finance inventory purchases,
      the Company is not aware of any trend, additional demand, event or uncertainty
      that will result in, or that is reasonably likely to result in, the Company's
      liquidity increasing or decreasing in any material way.





23




**Table
      of Contents**




**Exchange
      Rates**




For
      direct sales, we sell our products in U.S. dollars and pay for all of our
      manufacturing costs in either U.S. or Hong Kong dollars. Operating expenses
      of
      the Hong Kong office are paid in Hong Kong dollars. The exchange rate of the
      Hong Kong dollar to the U.S. dollar has been fixed by the Hong Kong government
      since 1983 at HK $7.80 to U.S. $1.00 and, accordingly, has not represented
      a
      currency exchange risk to the U.S. dollar. Operating expenses of our Canada
      office is paid in Canadian dollar, and domestic sales are received in Canadian
      dollar. The exchange rate between the Canadian dollar and US dollar can
      represent an exchange risk to us. Therefore any adverse fluctuation in this
      exchange rate may have a material effect on our business, financial condition
      or
      results of operation. The overall percentage of domestic sales in Canadian
      dollar is relatively small at approximately 10% of total sales. We have not
      taken any steps to hedge the exchange risk. In the event that domestic sales
      will increase to a higher level, we will be considering entering into hedging
      transactions to insure currency risk is minimized.





**Seasonal
      and Quarterly Results**




Historically,
      our operations have been seasonal, with the highest net sales occurring in
      the
      second and third quarters (reflecting increased orders for electronic audio
      and
      video equipment during the Christmas selling months) and to a lesser extent
      the
      first and fourth quarters of the fiscal year. Sales in our fiscal second and
      third quarter, combined, accounted for approximately 46% and 89% of net sales
      in
      fiscal 2007, and 2006, respectively.





Our
      results of operations may also fluctuate from quarter to quarter as a result
      of
      the amount and timing of orders placed and shipped to customers, as well as
      other factors. The fulfillment of orders can therefore significantly affect
      results of operations on a quarter-to-quarter basis.





**Inflation**




Inflation
      has not had a significant impact on the Company's operations. The Company has
      historically passed any price increases on to its customers since prices charged
      by the Company are generally not fixed by long-term contracts.





**Critical
      Accounting Policies and Estimates**


The
      methods, estimates and judgments Cosmo uses in applying its accounting policies
      have a significant impact on the results reported in its consolidated financial
      statements. Cosmo evaluates its estimates and judgments on an on-going basis.
      Cosmo bases its estimates on historical experience and assumptions that Cosmo
      believes to be reasonable under the circumstances. Cosmo’s experience and
      assumptions form the basis for its judgments about the carrying value of assets
      and liabilities that are not readily apparent from other sources. Actual results
      may vary from what Cosmo anticipates and different assumptions or estimates
      about the future could change its reported results.


Cosmo
      believes the following accounting policies are the most critical to Cosmo,
      in
      that they are important to the portrayal of Cosmo’s consolidated financial
      statements and they require Cosmo’s most difficult, subjective or complex
      judgments in the preparation of its consolidated financial statements:




24




**Table
      of Contents**




***Use
                of Estimates***




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States 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 amounts of revenues and expenses during the
      reporting period. Actual results could differ from those estimates. These
      estimates are reviewed periodically, and, as adjustments become necessary,
      they
      are reported in earnings in the period in which they become known.




***Revenue
                Recognition***




Sales,
      net of estimated sales returns, are recognized upon passage of title to the
      customer. This occurs upon shipment or upon receipt by the customer depending
      on
      the country of the sale and the agreement with the customer. Revenue is
      recognized if persuasive evidence of an agreement exists, the sales price is
      fixed or determinable, and collectability is reasonably assured.





Commission
      income is derived from reverse logistic services that consist of handling other
      distributor companies returned goods. In providing these services, the Company
      acts as an agent or broker without assuming the risks and rewards of ownership
      of the goods and therefore reports the commissions on a net basis. Revenue
      is
      recognized based on the completion of the contracted services.




***Inventories***




Inventories
      are valued at the lower of cost or net realizable value. Cost is determined
      on a
      first-in, first-out basis. Inventory is comprised of finished products that
      the
      Company intends to sell to its customers. The Company periodically makes
      judgments and estimates regarding the future utility and carrying value of
      its
      inventory. The carrying value of inventory is periodically reviewed and
      impairments, if any, are recognized when the expected future benefit from the
      inventory is less than its carrying value. The Company has inventory reserves
      for estimated obsolescence or unmarketable inventory which is equal to the
      difference between the cost of inventory and the estimated market value based
      upon assumptions about future demand and market conditions.




***Foreign
                Translation
                Adjustment***




The
      accounts of the foreign subsidiaries were translated into U.S. dollars in
      accordance with the provisions of SFAS No. 52, Foreign Currency Translation.
      Management has determined that the Hong Kong dollar is the functional currency
      of the Hong Kong subsidiaries and the Canadian dollar is the functional currency
      of the Canadian subsidiary. Certain current assets and liabilities of these
      foreign entities are denominated in U.S. dollars. In accordance with the
      provisions of SFAS 52, transaction gains and losses on these assets and
      liabilities are included in the determination of income for the relevant
      periods. Adjustments resulting from the translation of the financial statements
      from their functional currencies to United States dollars are accumulated as
      a
      separate component of accumulated other comprehensive income and have not been
      included in the determination of income for the relevant periods.




25


**Table
        of Contents**





***Income
                Taxes***




The
      Company accounts for income taxes pursuant to SFAS No. 109, Accounting for
      Income Taxes. Deferred tax assets and liabilities are recorded for differences
      between the financial statement and tax basis of the assets and liabilities
      that
      will result in taxable or deductible amounts in the future based on enacted
      tax
      laws and rates. Valuation allowances are established when necessary to reduce
      deferred tax assets to the amount expected to be realized. Income tax expense
      is
      recorded for the amount of income tax payable or refundable for the period
      increased or decreased by the change in deferred tax assets and liabilities
      during the period.




***Fair
                Value of Financial
                Instruments***




The
      Company's financial instruments include cash and cash equivalents, receivables,
      payables, and advances from the parent company.





The
      estimated fair value of financial instruments has been determined by the Company
      using available market information and valuation methodologies. Considerable
      judgment is required in estimating fair value. Accordingly, the estimates may
      not be indicative of the amounts the Company could realize in a current market
      exchange.




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




Market
      risk represents the risk of loss that may impact our financial position, results
      of operations or cash flows due to adverse changes in financial and commodity
      market prices and interest rates. We are exposed to market risk in the areas
      of
      changes in Canada and International borrowing rates and changes in foreign
      currency exchange rates. In addition, we are exposed to market risk in certain
      geographic areas that have experienced or remain vulnerable to an economic
      downturn, such as China. We purchase substantially all our inventory from
      companies in China and, therefore, we are subject to the risk that such
      manufacturers will be unable to provide inventory at competitive prices.




While
      we
      believe that if such an event were to occur we would be able to find alternative
      sources of inventory at competitive prices, we cannot assure you that we would
      be able to do so. These exposures are directly related to our normal operating
      and funding activities. Historically and as of March 31, 2007, we have not
      used
      derivative instruments or engaged in hedging activities to minimize market
      risk.





**Interest
      Rate Risk**




As
      of
      March 31, 2007, we have borrowed from Starlight and discounted our trade bills
      to obtain cash advance on our direct sales. An increase in prime rate will
      increase our costs of borrowing accordingly.





26




**Table
        of Contents**


**Foreign
      Currency Risk**




We
      have a
      wholly-owned subsidiary in USA, a wholly-owned subsidiary in Canada and a
      wholly-owned subsidiary in Hong Kong. Sales by the Canadian operations made
      in
      Canada are denominated in Canadian dollar; purchases of inventory are
      denominated in US or Hong Kong dollar, and operating expenses in Canadian
      dollar. The Hong Kong operating expenses are denominated in Hong Kong dollar,
      sales are denominated in U.S. dollar, and purchases of inventory are denominated
      in U.S. or Hong Kong dollar. These transactions create exposures to changes
      in
      exchange rates. Changes in the Hong Kong dollar exchange rate and Canadian
      dollar exchange rate with the U.S. dollar may positively or negatively affect
      our gross margins, operating income and retained earnings. We do not believe
      that near-term changes in the exchange rates, if any, will result in a material
      effect on our future earnings, fair values or cash flows, and therefore, we
      have
      chosen not to enter into foreign currency hedging transactions. We cannot assure
      you that this approach will be successful, especially in the event of a
      significant and sudden change in the value of the Canadian and Hong Kong
      dollar.




27







**Item 8.**
            ***Financial
                Statements and Supplementary
                Data***




**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**


Page
                  #Consolidated
                  Financial Statements of Cosmo Communications Corporation and
                  SubsidiariesReport
                  of Independent Registered Public Accounting Firm
              
              29Consolidated
                  Balance Sheets as at March 31, 2007 and 2006
              
              30Consolidated
                  Statements of Income and Comprehensive Income for the years ended
                  March 31, 2007, 2006 and 2005
              
              31Consolidated
                  Statements of Stockholders’ Equity for the years ended March 31,
                  2007, 2006 and 2005
              
              32Consolidated
                  Statements of Cash Flows for the years ended March 31, 2007, 2006 and
                  2005
              
              33Notes
                  to the Consolidated Financial Statements
              
              34






28




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




To
      the
      Board of Directors and Stockholders of


**Cosmo
      Communications Corporation and Subsidiaries**







We
      have
      audited the accompanying consolidated balance sheet of **Cosmo
      Communications Corporation and Subsidiaries** as of 31
      March 2007 and 2006 and the related consolidated statement of income,
      stockholders' equity and cash flows for the year ended 31 March 2007 and 2006.
      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 audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance whether the consolidated
      financial statements are free of material misstatement. 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 consolidated financial statement presentation. We
      believe that our audits provides a reasonable basis for our
      opinion.




In
      our
      opinion, based on our audits, such consolidated financial statements present
      fairly, in all material respects, the financial position of Cosmo Communications
      Corporation and Subsidiaries as of 31 March 2007 and 2006 and the related
      consolidated statements of income, stockholders' equity and cash flows for
      the
      year ended 31 March 2007 and 2006 in accordance with accounting principles
      generally accepted in the United States of America.


***‘Walker
                  & Company’*****Markham,
                  Canada**
              **Chartered
                  Accountants****8
                  June 2007**
              **Professional
                  Corporation**




29


**COSMO
      COMMUNICATIONS CORPORATION AND SUBSIDIARIES**




**CONSOLIDATED
      BALANCE SHEETS**




**AS
      AT 31 MARCH**




**(Expressed
      in United States Dollars)**


Note
                
                2007
                
                2006**ASSETS****Current
                    Assets**Cash
                
                
                
                
                $
                1,112,228
                
                $
                548,506Accounts
                    receivable, less allowance of $6,520 and $14,040 at 31 March
                    2007 and
                    2006, respectively
                
                
                3
                
                
                8,917,837
                
                
                3,122,195Inventories
                
                
                
                
                
                9,515,488
                
                
                4,136,341Prepaid
                    expenses and other
                
                
                
                
                
                16,496
                
                
                372,021Taxes
                    recoverable
                
                
                
                
                
                514,327
                
                
                -**Total
                    Current Assets**
                
                
                
                
                
                20,076,376
                
                
                8,179,063**Equipment
                    and Other Assets**Equipment,
                    net
                
                
                4
                
                
                56,752
                
                
                64,716Intangibles
                
                
                
                
                
                -
                
                
                5,403**Total
                    Equipment and Other Assets**
                
                
                
                
                
                56,752
                
                
                70,119**Total
                    Assets**
                
                
                
                
                $
                20,133,128
                
                $
                8,249,182**LIABILITIES
                    AND STOCKHOLDERS' EQUITY****Current
                    Liabilities**Accounts
                    payable and accrued liabilities
                
                
                
                
                $
                1,725,237
                
                $
                1,011,500Accounts
                    payable to parent company
                
                
                5
                
                
                13,372,367
                
                
                2,818,144Taxes
                    payable
                
                
                
                
                
                -
                
                
                276,745Advances
                    and interest payable to parent company
                
                
                5
                
                
                604,627
                
                
                1,716,107Deferred
                    taxes
                
                
                6
                
                
                123,590
                
                
                166,336**Total
                    Liabilities**
                
                
                
                
                
                15,825,821
                
                
                5,988,832**Commitments**
                
                
                7**Contingency**
                
                
                8**Stockholders'
                    Equity**Capital
                    stock
                
                
                9
                
                
                2,023,382
                
                
                1,455,200Additional
                    paid-in capital
                
                
                
                
                
                27,704,592
                
                
                26,272,774Accumulated
                    other comprehensive loss
                
                
                
                
                
                (408,005
                )
                
                (306,875
                )Accumulated
                    deficit
                
                
                
                
                
                (25,012,662
                )
                
                (25,160,749
                )**Total
                    Stockholders' Equity**
                
                
                
                
                
                4,307,307
                
                
                2,260,350**Total
                    Liabilities and Stockholders' Equity**
                
                
                
                
                $
                20,133,128
                
                $
                8,249,182




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





30




**COSMO
      COMMUNICATIONS CORPORATION AND SUBSIDIARIES**




**CONSOLIDATED
      STATEMENTS OF INCOME AND COMPREHENSIVE INCOME**




**FOR
      THE YEARS ENDED 31 MARCH**




**(Expressed
      in United States Dollars)**


**2007**
              
              **2006**
              
              **2005**
                **Restated****SALES**
              
              $
              56,287,515
              
              $
              51,010,554
              
              $
              35,452,041**COST
                  OF PRODUCTS SOLD**
              
              
              53,034,341
              
              
              48,156,516
              
              
              32,846,284**GROSS
                  PROFIT**
              
              
              3,253,174
              
              
              2,854,038
              
              
              2,605,757**COMMISSION
                  INCOME**
              
              
              1,566,157
              
              
              1,508,990
              
              
              1,853,534**OPERATING
                  EXPENSES**Salaries
                  and wages
              
              
              1,748,757
              
              
              1,669,275
              
              
              1,186,213Selling
                  and delivery
              
              
              1,677,460
              
              
              1,033,210
              
              
              1,381,924General
                  and administrative
              
              
              1,151,962
              
              
              1,014,849
              
              
              734,245Amortization
              
              
              18,622
              
              
              23,183
              
              
              32,345**TOTAL
                  OPERATING EXPENSES**
              
              
              4,596,801
              
              
              3,740,517
              
              
              3,334,727**INCOME
                  FROM OPERATIONS**
              
              
              222,530
              
              
              622,511
              
              
              1,124,564Interest
              
              
              345,838
              
              
              266,644
              
              
              221,679(Gain)
                  loss on foreign exchange
              
              
              (107,817
              )
              
              36,696
              
              
              10,536**(LOSS)
                  INCOME BEFORE TAXES**
              
              
              (15,491
              )
              
              319,171
              
              
              892,349**INCOME
                  TAXES (RECOVERY)**
              
              
              (310,442
              )
              
              296,013
              
              
              251,598**DEFERRED
                  INCOME TAXES**
              
              
              (42,746
              )
              
              (151,738
              )
              
              444,525**REASSESSMENT
                  OF PRIOR YEARS INCOME TAXES**
              
              
              189,610
              
              
              27,918
              
              
              -**NET
                  INCOME**
              
              $
              148,087
              
              $
              146,978
              
              $
              196,226**FOREIGN
                  CURRENCY TRANSLATION ADJUSTMENT**
              
              
              (101,130
              )
              
              269,150
              
              
              459,009**COMPREHENSIVE
                  INCOME**
              
              $
              46,957
              
              $
              416,128
              
              $
              655,235**INCOME
                  PER WEIGHTED NUMBER OF SHARES OUTSTANDING - BASIC AND
                  DILUTED**
              
              $
              0.01
              
              $
              0.01
              
              $
              0.01**WEIGHTED
                  AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND
                  DILUTED**
              
              
              29,602,132
              
              
              29,104,000
              
              
              29,104,000




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




31


**COSMO
      COMMUNICATIONS CORPORATION AND SUBSIDIARIES**




**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY**




**FOR
      THE YEARS ENDED 31 MARCH 2007 AND 2006**




**(Expressed
      in United States Dollars)**





**Shares**
            
            **Capital
                Stock**
            
            **Additional
                Paid-In Capital**
            
            **Accumulated
                Other Comprehensive Income (Loss)**
            
            **Accumulated
                Deficit**
            
            **Total
                Stockholders' Equity**Balance,
                1 April 2005
            
            
            29,104,000
            
            
            1,455,200
            
            
            26,272,774
            
            
            (1,035,034
            )
            
            (25,503,953
            )
            
            1,188,987Foreign
                currency translation
            
            
            -
            
            
            -
            
            
            -
            
            
            459,009
            
            
            -
            
            
            459,009Net
                gain for the period restated
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            196,226
            
            
            196,226**Balance,
                31 March 2005 Restated**
            
            
            29,104,000
            
            
            1,455,200
            
            
            26,272,774
            
            
            (576,025
            )
            
            (25,307,727
            )
            
            1,844,222Foreign
                currency translation
            
            
            -
            
            $
            -
            
            $
            -
            
            $
            269,150
            
            $
            -
            
            $
            269,150Net
                gain for the period
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            146,978
            
            
            146,978**Balance,
                31 March 2006**
            
            
            29,104,000
            
            
            1,455,200
            
            
            26,272,774
            
            
            (306,875
            )
            
            (25,160,749
            )
            
            2,260,350Common
                stock issued for debt
            
            
            11,363,636
            
            
            568,182
            
            
            1,431,818
            
            
            -
            
            
            -
            
            
            2,000,000Foreign
                currency translation
            
            
            -
            
            
            -
            
            
            -
            
            
            (101,130
            )
            
            -
            
            
            (101,130
            )Net
                gain for the period
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            148,087
            
            
            148,087**Balance,
                31 March 2007**
            
            
            40,467,636
            
            $
            2,023,382
            
            $
            27,704,592
            
            $
            (408,005
            )
            $
            (25,012,662
            )
            $
            4,307,307




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





32


**COSMO
      COMMUNICATIONS CORPORATION AND SUBSIDIARIES**




**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**




**FOR
      THE YEARS ENDED 31 MARCH**




**(Expressed
      in United States Dollars)**


**2007**
              
              **2006**
              
              **2005**
                **Restated****CASH
                  FLOWS FROM OPERATING ACTIVITIES**Net
                  earnings
              
              $
              148,087
              
              $
              146,978
              
              $
              196,226**Adjustment
                  to reconcile net earnings to net cash provided by (used in) operating
                  activities**Depreciation
              
              
              18,622
              
              
              23,183
              
              
              32,345Deferred
                  income taxes
              
              
              (42,746
              )
              
              (151,738
              )
              
              444,525Common
                  stock issued for debt
              
              
              2,000,000
              
              
              -
              
              
              -2,123,963
              
              
              18,423
              
              
              673,096**Changes
                  in operating assets and liabilities:**Accounts
                  receivable
              
              
              (5,795,642
              )
              
              (1,399,688
              )
              
              2,199,334Inventories
              
              
              (5,379,148
              )
              
              929,490
              
              
              (2,532,197
              )Prepaid
                  expenses and other
              
              
              355,525
              
              
              (369,457
              )
              
              -Accounts
                  payable and accrued liabilities
              
              
              713,737
              
              
              104,829
              
              
              225,924Taxes
                  payable
              
              
              (791,072
              )
              
              123,821
              
              
              106,139Accounts
                  payable to parent company
              
              
              10,554,223
              
              
              152,176
              
              
              (1,356,643
              )**CASH
                  FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES**
              
              
              1,781,586
              
              
              (440,406
              )
              
              (684,347
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES**Acquisition
                  of equipment
              
              
              (5,254
              )
              
              (7,604
              )
              
              (8,516
              )**CASH
                  FLOWS USED IN INVESTING ACTIVITIES**
              
              
              (5,254
              )
              
              (7,604
              )
              
              (8,516
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES**Advances
                  to (from) related parties
              
              
              (1,111,480
              )
              
              98,805
              
              
              92,518**CASH
                  FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES**
              
              
              (1,111,480
              )
              
              98,805
              
              
              92,518**EFFECT
                  OF FOREIGN CURRENCY TRANSLATION**
              
              
              (101,130
              )
              
              269,150
              
              
              459,009**NET
                  INCREASE (DECREASE) IN CASH**
              
              
              563,722
              
              
              (80,055
              )
              
              (141,336
              )**CASH,
                  BEGINNING OF YEAR**
              
              
              548,506
              
              
              628,561
              
              
              769,897**CASH,
                  END OF YEAR**
              
              $
              1,112,228
              
              $
              548,506
              
              $
              628,561




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





33




**COSMO
      COMMUNICATIONS CORPORATION AND SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**




**FOR
      THE YEARS ENDED 31 MARCH 2007 AND 2006**




**(Expressed
      in United States Dollars)**




**1.**  **NATURE
      OF OPERATIONS**




Cosmo
      Communications Corporation and subsidiaries (the "Company" or "Cosmo") market
      and distribute consumer electronic products. The Company has operations in
      the
      United States, Hong Kong and Canada.




**2.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**




The
      accounting policies of the Company are in accordance with accounting principles
      generally accepted in the United States of America. Presented below are those
      policies considered particularly significant:




**Principles
      of Consolidation**




The
      Company includes, in consolidation, its wholly owned subsidiaries, Cosmo
      Communications Canada Inc., Cosmo Communications (H.K.) Limited and Cosmo USA
      Inc. All significant intercompany transactions and balances have been eliminated
      upon consolidation.




**Use
      of Estimates**




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States 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 amounts of revenues and expenses during the
      reporting period. Actual results could differ from those estimates. These
      estimates are reviewed periodically, and, as adjustments become necessary,
      they
      are reported in earnings in the period in which they become known.




**Revenue
      Recognition**




Sales,
      net of estimated sales returns, are recognized upon passage of title to the
      customer. This occurs upon shipment or upon receipt by the customer depending
      on
      the country of the sale and the agreement with the customer. Revenue is
      recognized if persuasive evidence of an agreement exists, the sales price is
      fixed or determinable, and collectability is reasonably assured.




Commission
      income is derived from reverse logistic services that consist of handling other
      distributor companies returned goods. In providing these services, the Company
      acts as an agent or broker without assuming the risks and rewards of ownership
      of the goods and therefore reports the commissions on a net basis. Revenue
      is
      recognized based on the completion of the contracted services.




Cost
      of
      Products Sold




Included
      in cost of sales are




**Advertising
      Allowances**




Effective
      1 January 2002, the Company adopted Emerging Issues Task Force Issue No. 01-9, *Accounting
      for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor’s
      Products* (“EITF
      01-9”). Upon adoption of EITF 01-9, the Company is required to classify certain
      payments to its customers as a reduction of sales. The Company grants
      advertising allowances to its major customers as contributions to promote the
      Company's products. Management has determined that the Company meets the
      requirements of EITF 01-9 in order to characterize these contributions as a
      cost
      as opposed to a reduction in revenue and accordingly these costs are included
      in
      selling and delivery expenses.





34




**2.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**




**Consolidated
      Statements of Income Classifications**




The
      Company calculates its gross profit as the difference between its revenue and
      the associated cost of products sold. Cost of products sold includes direct
      product costs, inbound freight, excise taxes, casualty insurance, import duties
      and broker fees, vendor allowances, and increases or decreases to the Company’s
      FIFO reserve. The Company’s gross profit may not be comparable to other entities
      whose shipping and handling expenses are a component of cost of sales. Instead
      the Company includes these costs in selling and delivery expenses which amounted
      to $912,829 (2006 - $580,676).




The
      Company classifies the following expense categories separately on its statement
      of operations: salaries and wages; selling and delivery; and general and
      administrative. The Company’s labour costs of the warehouse and office staff are
      included in the salaries and wages expense category. The Company’s selling
      expenses primarily include shipping and handling costs, sales commissions,
      travel, entertainment, and product promotional costs. General and administrative
      expenses of the Company primarily include legal costs, insurance, rent, repairs,
      and general office expenses.




**Cash
      and Cash Equivalents**




Cash
      and
      cash equivalents consist of commercial accounts and interest-bearing bank
      deposits and are carried at cost, which approximates current value. Items are
      considered to be cash equivalents if the original maturity is three months
      or
      less.




**Inventories**




Inventories
      are valued at the lower of cost or net realizable value. Cost is determined
      on a
      first-in, first-out basis. Inventory is comprised of finished products that
      the
      Company intends to sell to its customers. The Company periodically makes
      judgments and estimates regarding the future utility and carrying value of
      its
      inventory. The carrying value of inventory is periodically reviewed and
      impairments, if any, are recognized when the expected future benefit from the
      inventory is less than its carrying value. The Company has inventory reserves
      for estimated obsolescence or unmarketable inventory which is equal to the
      difference between the cost of inventory and the estimated market value based
      upon assumptions about future demand and market conditions. For the year ended
      31 March 2007, the Company increased its inventory reserve to
      $274,268.





**Trade
      receivables**





Trade
      and
      other receivables are recognized initially at fair value and subsequently
      measured at amortized cost using the effective interest method, less provision
      for impairment. A provision for impairment of trade and other receivables is
      established when there is objective evidence that we will not be able to collect
      all amounts due according to the original terms of receivables. The amount
      of
      the provision is the difference between the asset’s carrying amount and the
      present value of estimated future cash flows, discounted at the effective
      interest rate. The amount of the provision is recognized in the income
      statement.




**Equipment**




Equipment
      is stated at historical cost less accumulated depreciation. Depreciation, based
      on the estimated useful lives of the assets, is provided using the under noted
      annual rates and methods:





Furniture
                and fixtures
            20%
                declining balanceEquipment
            20%
                declining balanceComputer
            25%
                declining balanceWarehouse
                equipment
            20%
                declining balance






35




**2.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**




**Intangible
      Assets**




Intangible
      assets with finite lives are amortized by the straight-line method (which,
      for
      loan acquisition costs, also approximates the yield method) over the terms
      of
      the agreements or their estimated useful lives of five years.




**Foreign
      Translation Adjustment**




The
      accounts of the foreign subsidiaries were translated into U.S. dollars in
      accordance with the provisions of SFAS No. 52, *Foreign
      Currency Translation* .
      Management has determined that the Hong Kong dollar is the functional currency
      of the Hong Kong subsidiaries and the Canadian dollar is the functional currency
      of the Canadian subsidiary. Certain current assets and liabilities of these
      foreign entities are denominated in U.S. dollars. In accordance with the
      provisions of SFAS 52, transaction gains and losses on these assets and
      liabilities are included in the determination of income for the relevant
      periods. Adjustments resulting from the translation of the financial statements
      from their functional currencies to United States dollars are accumulated as
      a
      separate component of accumulated other comprehensive income and have not been
      included in the determination of income for the relevant periods.




**Income
      Taxes**




The
      Company accounts for income taxes pursuant to SFAS No. 109, *Accounting
      for Income Taxes* .
      Deferred tax assets and liabilities are recorded for differences between the
      financial statement and tax basis of the assets and liabilities that will result
      in taxable or deductible amounts in the future based on enacted tax laws and
      rates. Valuation allowances are established when necessary to reduce deferred
      tax assets to the amount expected to be realized. Income tax expense is recorded
      for the amount of income tax payable or refundable for the period increased
      or
      decreased by the change in deferred tax assets and liabilities during the
      period.




**Fair
      Value of Financial Instruments**




The
      Company's financial instruments include cash and cash equivalents, receivables,
      payables, and advances from the parent company.




The
      estimated fair value of financial instruments has been determined by the Company
      using available market information and valuation methodologies. Considerable
      judgment is required in estimating fair value. Accordingly, the estimates may
      not be indicative of the amounts the Company could realize in a current market
      exchange. At 31 March 2007 and 2006, the carrying amounts of cash, accounts
      receivable, accounts payable and accrued liabilities, and loans payable
      approximate their fair values due to the short-term maturities of these
      instruments.





36




**2.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**




**Comprehensive
      Income**




The
      Company adopted SFAS No. 130, *Reporting
      Comprehensive Income* that
      establishes standards for reporting and presentation of comprehensive income
      and
      its components in a full set of financial statements. Comprehensive income
      is
      presented in the statements of changes in stockholders' equity, and consists
      of
      net income (loss) and unrealized gains (losses) on available for sale marketable
      securities, foreign currency translation adjustments and changes in market
      value
      of future contracts that qualify as a hedge; and negative equity adjustments
      recognized in accordance with SFAS 87, *Employers'
      Accounting for Pensions* .
      SFAS
      No. 130 requires only additional disclosures in the financial statements and
      does not affect the Company's financial position or results of
      operations.




**Earnings
      or Loss Per Share**




The
      Company accounts for earnings per share pursuant to SFAS No. 128, *Earnings
      per Share* ,
      which
      requires disclosure on the financial statements of "basic" and "diluted"
      earnings (loss) per share. Basic earnings (loss) per share is computed by
      dividing net income (loss) by the weighted average number of common shares
      outstanding for the year. Diluted earnings (loss) per share is computed by
      dividing net income (loss) by the weighted average number of common shares
      outstanding plus common stock equivalents (if dilutive) related to stock options
      and warrants for each year.




There
      were no dilutive financial instruments for the years ended 31 March 2007 and
      2006.




**Valuation
      of Long-Lived Assets**




In
      accordance with SFAS No. 144, *Accounting for the Impairment or Disposal of Long-Lived Assets* ,
      long-lived assets to be held and used are analyzed for impairment whenever
      events or changes in circumstances indicate that the related carrying amounts
      may not be recoverable. The Company evaluates at each balance sheet date whether
      events and circumstances have occurred that indicate possible impairment. If
      there are indications of impairment, the Company uses future undiscounted cash
      flows of the related asset or asset grouping over the remaining life in
      measuring whether the assets are recoverable. In the event such cash flows
      are
      not expected to be sufficient to recover the recorded asset values, the assets
      are written down to their estimated fair value. Long-lived assets to be disposed
      of are reported at the lower of carrying amount or fair value of the asset
      less
      cost to sell.




**Concentration
      of Credit Risks**




SFAS
      No.
      105, *Disclosure of Information About Financial Instruments with Off-Balance Sheet
      Risk and Financial Instruments with Concentration of Credit
      Risk* ,
      requires disclosure of any significant off-balance sheet risk and credit risk
      concentration. The Company is exposed to credit risk on accounts receivable
      from
      its customers. In order to reduce its credit risk, the Company has adopted
      credit policies which includes the analysis of the financial position of its
      customers and the regular review of their credit terms.





37




**2.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**




**Recent
      Accounting Pronouncements**




In
      February 2006, the FASB issued Statement of Financial Accounting Standards
      (“SFAS”) No. 155, *Accounting
      for Certain Hybrid Financial Instruments* ,
      which
      amends SFAS No. 133, *Accounting
      for Derivatives Instruments and Hedging Activities* and SFAS
      No. 140, *Accounting for Transfers and Servicing of Financial Assets and Extinguishment
      of
      Liabilities* .
      SFAS
      No. 155 amends SFAS No. 133 to narrow the scope exception for interest-only
      and
      principal-only strips on debt instruments to include only such strips
      representing rights to receive a specified portion of the contractual interest
      or principle cash flows. SFAS No. 155 also amends SFAS No. 140 to allow
      qualifying special-purpose entities to hold a passive derivative financial
      instrument pertaining to beneficial interests that itself is a derivative
      instrument. Management does not expect the adoption of SFAS No. 155 to have
      a
      material impact on the Company’s consolidated financial statements.




In
      March
      2006, the FASB released SFAS No. 156, *Accounting
      for Servicing of Financial Assets: an amendment of FASB Statement No.
      140* to
      simplify accounting for separately recognized servicing assets, servicing
      liabilities. SFAS No. 156 permits an entity to choose either the amortization
      method or the fair value measurement method for measuring each class of
      separately recognized servicing assets and servicing liabilities after they
      have
      been initially measured at fair value. SFAS No. 156 applies to all separately
      recognized servicing assets and liabilities acquired or issued after the
      beginning of an entity’s fiscal year that begins after 15 September 2006. The
      Company does not anticipate the adoption of SFAS No. 156 will have a material
      impact on its consolidated financial statements.




In
      July
      2006, the FASB issued FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes—an interpretation of FASB Statement No.
      109* ("FIN
      48"), which clarifies the accounting for uncertainty in tax positions. This
      interpretation requires that the Company determine whether it is more likely
      than not that a tax position will be sustained upon examination based on the
      technical merits of the position, and measure the amount of benefit to be
      recognized in the financial statements for a tax position that meets the more-
      likely-than-not recognition threshold. FIN 48 is effective for fiscal years
      beginning after 15 December 2006. Management does not expect the adoption of
      FIN
      48 to have a material impact on the Company’s consolidated financial
      statements.




In
      September 2006, the U.S. Securities and Exchange Commission (the “SEC”) issued
      Staff Accounting Bulletin (“SAB”) No. 108, which expresses the views of the SEC
      staff regarding the process of quantifying financial statement misstatements.
      SAB No. 108 provides guidance on the consideration of the effects of prior
      year
      misstatements in quantifying current year misstatements for the purpose of
      a
      materiality assessment. The guidance of this SAB is effective for annual
      financial statements covering the first fiscal year ending after 15 November
      2006, which is 31 December 2006 for the Company. SAB No. 108 did not have an
      impact on the Company’s consolidated financial statements.




In
      September 2006, the FASB issued SFAS No. 157, *Defining
      Fair Value Measurement,* which
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles and expands disclosures about fair
      value measurements. SFAS No. 157 is effective for financial statements issued
      for fiscal years beginning after 15 November 2007. The Company is currently
      evaluating the impact of adopting SFAS No. 157 on its consolidated financial
      statements.





38




**2.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**




**Recent
      Accounting Pronouncements (Continued)**




In
      December 2006, the FASB issued FASB Staff Position Emerging Issues Task Force
      ("FSP EITF") 00-19-2, *Accounting
      for Registration Payment Arrangements* which
      addresses accounting for registration payment arrangements. FSP 00-19-2
      specifies that the contingent obligation to make future payments or otherwise
      transfer consideration under a registration payment arrangement, whether issued
      as a separate agreement or included as a provision of a financial instrument
      or
      other agreement, should be separately recognized and measured in accordance
      with
      FASB Statement No. 5, *Accounting
      for Contingencies* .
      FSP
      00-19-2 further clarifies that a financial instrument subject to a registration
      payment arrangement should be accounted for in accordance with other applicable
      generally accepted accounting principles without regard to the contingent
      obligation to transfer consideration pursuant to the registration payment
      arrangement. For registration payment arrangements and financial instruments
      subject to those arrangements that were entered into prior to the issuance
      of
      EITF 00-19-2, this guidance is effective for financial statements issued for
      fiscal years beginning after 15 December 2006 and interim periods within those
      fiscal years. The adoption of FSP 00-19-2 is not expected to have a material
      impact on the Company’s financial condition or results of
      operations.




In
      February 2007, the FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial
      Liabilities.* SFAS No.
      159 permits entities to choose to measure many financial instruments, and
      certain other items, at fair value. SFAS No. 159 applies to reporting periods
      beginning after 15 November 2007. The adoption of SFAS No. 159 is not expected
      to have a material impact on the Company’s financial condition or results of
      operations.




39




**3.**  **VALUATION
      AND QUALIFYING ACCOUNTS AND RESERVES**




The
      carrying amounts of trade accounts receivable are reduced by an allowance that
      reflects management’s best estimate of the amounts that will not be collected.
      Management individually reviews all accounts receivable balances and creates
      an
      allowance for doubtful accounts based on the credit worthiness of specific
      accounts and an estimate of other uncollectible accounts based on historical
      performance and current economic conditions.




Allowances
      for estimated returns are recorded at the estimated gross profit based upon
      our
      historical return patterns. Sales return allowances are recorded in accounts
      payable and accrued liabilities in the consolidated balance sheets.




The
      following is the activity within the Company’s consolidated valuation and
      qualifying accounts and reserves for fiscal 2007 and 2006:


**Balance
                  at Beginning of Year**
              
              **Additions
                  (Reductions) Charged to Costs and Expenses**
              
              **Deductions**
              
              **Balance
                  at End of Year****Year
                  ended 31 March****2007**Deducted
                  from asset account:Allowance
                  for doubtful accounts
              
              $
              14,040
              
              $
              (18,387
              )
              $
              (10,867
              )
              $
              6,520Sales
                  return and allowance reserve
              
              
              245,770
              
              
              2,992,413
              
              
              2,856,913
              
              
              381,270Total
              
              $
              259,810
              
              $
              2,974,026
              
              $
              2,846,046
              
              $
              387,790**Year
                  ended 31 March****2006**Deducted
                  from asset account:Allowance
                  for doubtful accounts
              
              $
              4,401
              
              $
              10,855
              
              $
              1,216
              
              $
              14,040Sales
                  return and allowance reserve
              
              
              81,017
              
              
              3,756,254
              
              
              3,591,501
              
              
              245,770Total
              
              $
              85,418
              
              $
              3,767,109
              
              $
              3,592,717
              
              $
              259,810




**4.**  **EQUIPMENT**




The
      components of equipment are as follows:




**Cost**
            
            **Accumulated
                Depreciation**
            
            **Net**
              **2007**
            
            **Net**
              **2006**Furniture
                and fixtures
            
            $
            42,462
            
            $
            (38,201
            )
            $
            4,261
            
            $
            4,886Equipment
            
            
            31,858
            
            
            (28,838
            )
            
            3,020
            
            
            4,770Computer
            
            
            50,997
            
            
            (32,468
            )
            
            18,529
            
            
            17,166Warehouse
                equipment
            
            
            68,308
            
            
            (37,366
            )
            
            30,942
            
            
            37,894$
            193,625
            
            $
            (136,873
            )
            $
            56,752
            
            $
            64,716





40




**5.**  **AMOUNTS
      PAYABLE TO PARENT COMPANY**




As
      of 31
      March 2007, the Company owed $13,976,994 (2006 - $4,534,251) to The Starlight
      Group of Companies, the principal corporate shareholder of the Company
      ("Starlight"). Of this amount $13,372,367 (2006 - $2,818,144) was owed in the
      form of trade payable and the remainder was in the form of advances and interest
      on advances. The advances from Starlight were paid for by the issuance of shares
      during the year, leaving only the accrued interest as payable. These amounts
      are
      payable on demand and Starlight has agreed not to charge further interest on
      the
      accrued interest payable. Interest accrued as of 31 March 2007 was $604,627
      (2006 - $505,475).




**6.**  **DEFERRED
      TAXES**




The
      components of deferred income taxes have been determined at the combined
      Canadian federal and provincial statutory rate of 36.12% as
      follows:





**2007**
            
            **2006**Deferred
                income tax assets (liabilities):Book
                over tax depreciation
            
            
            5,946
            
            
            14,441Unrealized
                foreign exchange transaction gains
            
            
            (129,536
            )
            
            (180,777
            )Deferred
                income taxes
            
            $
            (123,590
            )
            $
            (166,336
            )




**7.**  **COMMITMENTS**




The
      Company leases premises under an operating lease with a five year term in Canada
      and shares the facilities for its Hong Kong operation. Minimum lease commitments
      under the leases at 31 March 2007 were:




2008
            
            $
            300,4572009
            
            
            152,264$
            452,721




**8.**  **CONTINGENCY**




The
      Company is a defendant in a lawsuit in the amount of $100,000. The outcome
      of
      this matter is not determinable as at the date of the financial statements
      therefore no accrual has been made.





41




**9.**  **CAPITAL
      STOCK**




Authorized30,000
            
            preferred
                stock, cumulative, convertible at $0.01 par value9,970,000
            
            preferred
                stock, at $0.01 par value50,000,000
            
            common
                stock at $0.05 par value, voting, participating




**2007**
              
              **2006**Issued40,467,636Common
                  stock (2006 - 29,104,000)
              
              $
              2,139,132
              
              $
              1,570,9502,314,567Treasury
                  stock
              
              
              (115,750
              )
              
              (115,750
              )$
              2,023,382
              
              $
              1,455,200




On
      15
      March 2007, the Board of Directors approved the issuance of 11,363,636 shares
      of
      common stock in exchange for advances and trade payables to Starlight in the
      amount of $2,000,000. The parties agreed to issue one share for every $0.176
      of
      debt.




**10.
      INCOME TAXES**




The
      Company accounts for income taxes in accordance with SFAS No. 109. SFAS No.
      109
      prescribes the use of the liability method whereby deferred tax asset and
      liability account balances are determined based on differences between the
      financial reporting and tax bases of assets and liabilities and are measured
      using the enacted tax rates. The effects of future changes in tax laws or rates
      are not anticipated. Under SFAS No. 109 income taxes are recognized for the
      following: a) amount of tax payable for the current year, and b) deferred tax
      liabilities and assets for future tax consequences of events that have been
      recognized differently in the financial statements than for tax
      purposes.




The
      provision for income taxes reconciles to the amount obtained by applying the
      statutory income tax rates of 36.12% (2006 - 36.12%) in Canada, 17.5% (2006
      -
      17.5%) in Hong Kong and 15.5% (2006 - 15.5%) in US to income before provision
      for taxes as follows:





**2007**
            
            **2006**Computed
                expected tax
            
            
            (53,879
            )
            
            130,392Expenses
                not deductible for tax purposes
            
            
            13,119
            
            
            1,543Equipment
            
            
            (7,224
            )
            
            (7,270
            )Unrealized
                foreign exchange gains
            
            
            (10,851
            )
            
            (13,386
            )Recognition
                of previously unrealized foreign exchange gains
            
            
            -
            
            
            189,495Utilization
                of tax losses carried forward
            
            
            -
            
            
            (4,761
            )Prior
                year adjustments
            
            
            (255,450
            )
            
            -Other
            
            
            3,843
            
            
            -Provision
                for income taxes
            
            $
            (310,442
            )
            $
            296,013





42




**11.
      RELATED PARTY TRANSACTIONS**




Apart
      from those as disclosed in note 5, the Company's transactions with related
      parties were, in the opinion of the directors, carried out on normal commercial
      terms and in the ordinary course of the Company's business.




During
      the year ended 31 March 2007, the Company purchased $46,377,415 (2006 -
      $36,339,662) of goods from Starlight and received $29,014 (2006 - $610,540)
      in
      commissions.




**12.
      ECONOMIC DEPENDENCE**




The
      Company is economically dependent on its parent company for the supply of
      inventory products to its customers. A mass-market merchandiser and chain store
      located in Canada and US is the Company's largest customer, which accounted
      for
      approximately 93% of sales in 2007 and 90% in 2006. Economic dependence exists
      with this identified customer. Loss of the customer may have significant adverse
      results to the financial position of the Company.




As
      of 31
      March 2007, the accounts receivable from this customer amounted to approximately
      $7,914,451 (2006 - $2,033,346) and claims payable for inventory returns amounted
      to approximately $485,486 (2006 - $322,585).




**13.
      OPERATING SEGMENT INFORMATION**




The
      Company operated in one business segment and all of its sales are consumer
      electronic products. The Company's customers are principally in Canada.
      Borrowings are principally in the United States.




**Canada**
            
            **Hong
                Kong**
            
            **United
                States**
            
            **Total****2007**Assets
            
            
            6,239,283
            
            
            652,480
            
            
            13,241,365
            
            
            20,133,128Sales,
                net
            
            
            5,844,032
            
            
            37,093,544
            
            
            13,349,939
            
            
            56,287,515Gross
                margin
            
            
            329,664
            
            
            1,868,043
            
            
            1,055,467
            
            
            3,253,174Net
                income (loss)
            
            
            32,922
            
            
            236,209
            
            
            (121,044
            )
            
            148,087**2006**Assets
            
            
            5,081,785
            
            
            3,161,016
            
            
            6,381
            
            
            8,249,182Sales,
                net
            
            
            5,373,562
            
            
            45,636,992
            
            
            -
            
            
            51,010,554Gross
                margin
            
            
            910,226
            
            
            1,943,812
            
            
            -
            
            
            2,854,038Net
                income (loss)
            
            
            (333,697
            )
            
            579,481
            
            
            (98,806
            )
            
            146,978





**14.
      SUPPLEMENTAL CASH FLOW INFORMATION**




During
      the year ended 31 March 2007 interest of $356,705 (2006 - $265,427) and income
      taxes of $703,117 (2006 - $212,123) were paid.




**15.
      COMPARATIVE FIGURES**




Certain
      figures in the 2005 and 2006 financial statements have been reclassified to
      conform with the basis of presentation used in 2007.




43







**Item 9.**
            ***Changes
                In and Disagreements with Accountants on Accounting and Financial
                Disclosure***





On
      September 16, 2005, SF Partnership, LLP (the "Former Accountant") resigned
      as
      our independent certified public accountants. On the same date we engaged Walker
      & Company, (the "New Accountant"), as our independent certified public
      accountants. Our decision to engage the New Accountant was approved by the
      Board
      of Directors also on September 15, 2005.





The
      reports of the Former Accountant on the financial statements of the Company
      for
      each of the two most recent fiscal years did not contain an adverse opinion
      or
      disclaimer of opinion and was not qualified or modified as to uncertainty,
      audit
      scope or accounting principles for the two most recent fiscal years and all
      subsequent interim periods.





During
      the Company's two most recent fiscal years and the subsequent interim period
      through the date of resignation, there were no reportable events as the term
      described in Item 304(a)(1)(v) of Regulation S-K.





During
      the Company's two most recent fiscal years and the subsequent interim period
      through the date of resignation, there were no disagreements with the Former
      Accountant on any matters of accounting principles or practices, financial
      statement disclosure or auditing scope or procedure, which, if not resolved
      to
      the satisfaction of the Former Accountant would have caused it to make reference
      to the subject matter of the disagreements in connection with its reports on
      these financial statements for those periods.





The
      Company did not consult with the New Accountant regarding the application of
      accounting principles to a specific transaction, either completed or proposed,
      or the type of audit opinion that might be rendered on the Company's financial
      statements, and no written or oral advice was provided by the New Accountant
      that was a factor considered by the Company in reaching a decision as to the
      accounting, auditing or financial reporting issues.


**Item 9A.**
            ***Controls
                and Procedures***




**(a)** ***Evaluation
      of Disclosure Controls and Procedures***




The
      Company carried out an evaluation, under the supervision and with the
      participation of its management, including its Chief Executive Officer and
      Chief
      Financial Officer, of the effectiveness of the design and operation of the
      Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and
      15d-15(e) of the Securities Exchange Act of 1934) as of the end of March 31,
      2007. Based on that evaluation, the Chief Executive Officer and the Chief
      Financial Officer concluded that the Company’s current disclosure controls and
      procedures are effective in ensuring that material information relating to
      the
      Company required to be disclosed in the Company’s periodic SEC filings is made
      known to them in a timely manner.





In
      designing and evaluating our disclosure controls and procedures, management
      recognizes that any controls and procedures, no matter how well designed and
      operated, can provide only reasonable assurance of achieving the desired control
      objectives, and management necessarily is required to apply its judgment in
      evaluating the relationship between the benefit of desired controls and
      procedures and the cost of implementing new controls and
      procedures.





***(b)
                Changes in Internal
                Controls***




There
      was
      no change in our internal control over financial reporting that occurred during
      our most recent fiscal quarter as reported or during our fourth fiscal quarter,
      that has materially affected, or is reasonably likely to materially affect,
      our
      internal control over financial reporting.




44






**Item 9B.**
            ***Other
                Information***




None.





**PART III**


**Item 10.**
            ***Directors
                and Executive Officers of the
                Registrant***




The
      following table sets forth information concerning the directors, executive
      officers and significant employees of Cosmo as of June 30, 2007:




**Name**
            
            **Age**
            
            **Position**Philip
                Lau
            
            59
            
            Chairman
                of the Board of Directors and PresidentPeter
                Horak
            
            65
            
            Chief
                Executive Officer and DirectorCarol
                Atkinson
            
            58
            
            Chief
                Financial OfficerRick
                Bond
            
            57
            
            Vice
                President - sales and marketing - USA operationYu
                Wing King
            
            55
            
            Vice
                President, Hong Kong operationJacky
                Lau
            
            48
            
            DirectorJeff
                Horak
            
            49
            
            Vice
                President -Sales and Marketing - Canada
                Operations





45


**Philip
        Lau** - *Chairman
        and President*





Mr.
      Philip Lau, Chairman of the Board of Directors, was appointed in January 2001
      after Starlight International Limited acquired 49% of the voting shares of
      the
      Company. Since 1987, Mr. Lau has been the Chairman of Starlight International,
      an electronics company the shares of which are listed on the Hong Kong Stock
      Exchange, and has extensive experience in the consumer electronics
      business.





**Peter
      Horak** - *Chief
      Executive Officer, Canada*





Mr.
      Peter
      Horak, President of Cosmo Canada, was appointed as the Chief Executive Officer
      in January 2001. Mr. Horak was the co-founder of Cosmo's Canadian subsidiary
      and
      has been its chief executive officer since 1988. Mr. Horak is the Company's
      chief sales, marketing, and sourcing executive.





**Carol
      Atkinson** - *Chief
      Finance Officer*





Ms.
      Atkinson has served as Chief Finance Officer of the Company since January 2001
      after Starlight International Limited acquired its shares. Ms Atkinson is a
      licensed public accountant.





**Rick
      Bond -** Vice
      President, sales and marketing





Mr.
      Bond
      joined the company in January 2007 and is responsible for sales and marketing
      in
      the USA operation. Mr. Bond held high level of sales executive positions in
      the
      consumer electronics industry prior to joining the Company.





**Yu
      Wing Kin** - *Vice
      President, Administration, Hong Kong*





Mr.
      Kin
      has served as Vice President of Administration of Cosmo Hong Kong since joining
      the Company in August 1978.




**Jacky
      Lau** - *Director*





Mr.
      Jacky
      Lau has served as a director of the Company since January 2001 after Starlight
      International Limited acquired its shares. He joined Starlight International
      in
      1987 as the Director of Material Sourcing.





**Anthony
      Lau** -
      Director





Mr.
      Anthony Lau was appointed in September 2006 and has been a director of Starlight
      International since 1987.





Directors
      are elected annually by the shareholders and hold office until the next annual
      meeting and until their respective successors are elected and qualified. There
      are no other family relationships among any of the Company's directors and
      executive officers.





**Family
      Relationships**




46





Mr.
      Philip Lau, Mr. Jacky Lau, Mr. Anthony Lau and Ms Carol Atkinson are siblings. Peter
      Horak is the brother of Jeff Horak





**Code
      of Ethics**





Our
      Board
      of Directors has not yet adopted a formal Code of Ethics and Business Conduct
      that applies to our Chief Executive Officer and Chief Financial Officer, as
      well
      as to our directors, officers and employees. Once adopted, a copy of our Code
      of
      Ethics will be filed as an exhibit to an amendment to this registration
      statement or filed as part our future filings with the SEC.





***Compliance
      with Section 16(A) of the Exchange Act.***





To
      our
      knowledge, based solely on a review of the copies of such reports furnished
      to
      the Company and written representations that no other reports were required,
      the
      Company believes that during the year ended March 31, 2007, its officers,
      directors and 10% shareholders complied with all Section 16(a) filing
      requirements.





**Item 11.**
            ***Executive
                Compensation***




***Compensation
                of Directors***





The
      following table sets forth with respect to the named directors, compensation
      information inclusive of equity awards and payments made in the fiscal year
      ended March 31, 2007.





**Director
      Compensation (1)**





**Name**
              **(a)**
            
            **Fees Earned**
              **or Paid in**
              **Cash**
              **($)**
              **(b)**
            
            **Stock**
              **Awards**
              **($)**
              **(c)**
            
            **Option**
              **Awards**
              **($)**
              **(d)(1)**
            
            **Non-Equity Incentive**
              **Plan Compensation**
              **($)**
              **(e)**
            
            **Change in Pension Value and**
              **Nonqualified Deferred**
              **Compensation Earnings**
              **(f)**
            
            **All Other**
              **Compensation**
              **($)**
              **(g)**
            
            **Total**
              **($)**
              **(h)**




(1)
      As
      permitted under the rules promulgated by the Securities and Exchange Commission,
      this table omits columns that are not applicable.




Board
      Directors generally receive meeting attendance fees of $300. However, each
      such
      director waived his/her rights to receive such fees during fiscal 2007. Annual
      retainers are not currently provided to directors; however, such retainers
      may
      be re-instituted in the future.





***Executive
                Compensation***





The
      following table sets forth certain compensation information for the fiscal
      years
      ended March 31, 2007, 2006 and 2005 with regard to (i) Peter Horak, our Chief
      Executive Officer, and to each of the four most highly compensated executive
      officers of Cosmo for fiscal 2007, 2006 and 2005:




47





**Summary
      Compensation Table**


Name
                  & Principal Position
              
              Year
              
              Salary
                  ($)
              
              Bonus
                  ($)
                (5)
              
              Stock
                  Awards($)
                (5)
              
              Option
                  Awards ($)
              
              Non-Equity
                  Incentive Plan Compensation ($)
              
              Change
                  in Pension Value and Non-Qualified Deferred Compensation Earnings
                  ($)
              
              All
                  Other Compensation ($) (1)
              
              Total
                  ($)**Peter
                  Horak**
                CEO
                  and Director (2)
              
              
              2007
                2006
                2005
              
              
              175,800
                138,000
                138,000
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              13,600
                3,000
                4,000
              
              
              194,400
                141,000
                142,000**Jeff
                  Horak**
                Vice
                  President - Canada
              
              
              2007
                2006
                2005
              
              
              175,800
                138,000
                138,000
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              9,493
                22,000
                17,500
              
              
              185,293
                160,000
                155,500**Rick
                  Bond**
                Vice
                  President - USA
              
              
              2007
                2006
                2005
              
              
              25,000
                —
                —
              (2)
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              25,000
                —
                —**Yu
                  Wing King**
                Vice
                  President - Hong Kong
              
              
              2007
                2006
                2005
              
              
              42,832
                47,114
                45,246
              
              
              14,318
                4,017
                2,290
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              63,150
                51,131
                47,536**E.
                  J. Colin**
                National
                  Sales Manager - Canada
              
              
              2007
                2006
                2005
              
              
              92,300
                64,200
                64,200
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              —
                —
                —
              
              
              5,800
                12,600
                12,400
              
              
              98,100
                76,800
                76,600




(1)
              Includes
                  automobile expense allowances and other employee benefits(2)
              Salary
                  commenced on January 1,
                  2007




48






***Employment
                Agreements***




The
      Company signed two employment agreements with two executive officers during
      fiscal 2007 and none in 2006.




**OPTION
      GRANTS IN FISCAL 2007 (1)**




The
      following table set forth information concerning each grant of an award made
      to
      a named executive officer in the last completed fiscal year under any plan,
      including awards that subsequently have been transferred.


**GRANTS
                  OF PLAN-BASED AWARDS**Estimated
                  Future Payouts Under Non-Equity Incentive Plan Awards
              
              Estimated
                  Future Payouts Under Equity Incentive Plan Awards
              
              All
                  Other Stock Awards: Number of Shares of Stocks or
              
              All
                  Other Option Awards: Number of Securities Underlying
              
              Exercise
                  or Base Price of
              
              Grant
                  Date Fair Value of StockName
                (a)
              
              Grant
                  Date
                (b)
              
              Threshold
                  ($)
                (c)
              
              Target
                ($)
                (d)
              
              Maximum
                  ($)
                (e)
              
              Threshold
                ($)
                (f)
              
              Target
                ($)
                (g)
              
              Maximum
                ($)
                (h)
              
              Units
                (#)
                (i)
              
              Options
                (#)
                (j)
              
              Option
                  Awards
                ($/Sh)
                k
              
              and
                  Option Awards
                l




(1)
      As
      permitted under the rules promulgated by the Securities and Exchange Commission,
      this table omits columns that are not applicable.





**Outstanding
      Equity Awards At Fiscal Year-End (1)**




The
      following table sets forth information for the named executive officers
      regarding the number of shares subject to both exercisable and unexercisable
      stock options, as well as the exercise prices and expiration dates thereof,
      as
      of March 31, 2007.




**Option
                Awards**
            
            **Stock
                Awards****Name**
            
            **Number**
              **of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options**
              **(#)**
              **Exercisable**
            
            **Number**
              **of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options**
              **(#)**
              **Unexercisable**
            
            **Equity**
              **Incentive**
              **Plan**
              **Awards:**
              **Number**
              **of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Unearned**
              **Options**
              **(#)**
            
            **Option**
              **Exercise**
              **Price**
              **($)**
            
            **Option**
              **Expiration**
              **Date**
            
            **Number**
              **of**
              **Shares**
              **or Units**
              **of Stock**
              **That**
              **Have**
              **Not**
              **Vested**
              **(#)**
            
            **Market**
              **Value**
              **of**
              **Shares**
              **or**
              **Units**
              **of**
              **Stock**
              **That**
              **Have**
              **Not**
              **Vested**
              **($)**
            
            **Equity**
              **Incentive**
              **Plan**
              **Awards:**
              **Number**
              **of**
              **Unearned**
              **Shares,**
              **Units or**
              **Other**
              **Rights**
              **That**
              **Have**
              **Not**
              **Vested**
              **(#)**
            
            **Equity Incentive**
              **Plan Awards:**
              **Market or Payout**
              **Value**
              **of**
              **Unearned**
              **Shares,**
              **Units or**
              **Other**
              **Rights**
              **That Have**
              **Not**
              **Vested**
              **($)**




(1)
      As
      permitted under the rules promulgated by the Securities and Exchange Commission,
      this table omits columns that are not applicable.







***Long-term
                Compensation - Stock Option Grants and 401K Plan***




The
      Company does not have any stock option plan or 401K plan as long-term
      compensation.




49




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





The
      following table sets forth the name, address, number of shares beneficially
      owned, and the percentage of the Registrant’s total outstanding common stock
      shares owned by: (i) each of the Registrant’s Officers and Directors; (ii) the
      Registrant’s Officers and Directors as a group; and (iii) other shareholders of
      5% or more of the Registrant’s total outstanding common stock shares. The
      percentages have been calculated by taking into account all Shares owned on
      the
      record date as well as all such Shares with respect to which such person has
      the
      right to acquire beneficial ownership at such date or within 60 days thereafter.
      Unless otherwise indicated, all persons listed below have sole voting and sole
      investment power over the Shares owned. Unless otherwise provided, each person's
      address is c/o Cosmo Communications Corporation, Unit 2 - 55 Travail Road,
      Markham, Ontario, Canada.





**Title
                of Class**
            
            **Name
                and Address of**
              **Beneficial
                Owner**
            
            **Amount
                and**
              **Nature
                of**
              **Beneficial**
              **Ownership**
            
            **Percent**
              **of
                Class**Common
                Stock
            
            
            Philip
                Lau
              Chairman
                and President
            
            
            —
            
            
            —Common
                Stock
            
            
            Peter
                Horak
              Chief
                Executive Officer and Director
            
            
            257,500
            
            
            *Common
                Stock
            
            
            Carol
                Atkinson
              Chief
                Financial Officer
            
            
            —
            
            
            —Common
                Stock
            
            
            Rock
                Bond
              Vice
                President - sales and marketing - USA operation
            
            
            —
            
            
            —Common
                Stock
            
            
            Yu
                Wing King
              Vice
                President, Hong Kong operation
            
            
            —
            
            
            —Common
                Stock
            
            
            Jacky
                Lau
              Director
            
            
            —
            
            
            —Common
                Stock
            
            
            Jeff
                Horak
              Vice
                President -Sales and Marketing - Canada Operations
            
            
            —
            
            
            —Common
                Stock
            
            
            Starlight
                International,
              5/F,
                232 Aberdeen Road
              Hong
                Kong
            
            
            37,948,644
            
            
            93.8
            %Common
                Stock
            
            
            All
                Officers and Directors,
              as
                a Group
            
            
            257,500
            
            
            *





*
      Less
      then one percent.





**Equity
      Compensation Plan Information**





The
      Company does not have any stock option plan or 401K plan as long-term
      compensation.




50






**Item 13.**
            ***Certain
                Relationships and Related
                Transactions***




During
      the year ended March 31, 2007, we purchased $46,377,415 (2006 - $36,339,662)
      of
      goods from our parent company, Starlight and received $29,014 (2006 - $610,540)
      in commissions.




51






**Item 14.**
            ***Principal
                Accountant Fees and
                Services***





The
      following is a summary of the fees billed to the Company by Walker & Company
      Chartered Accounts Professional Corporation, SF Partnership LLP, Chartered
      Accountants, Deloitte & Touche LLP and Chan & Watt Company for
      professional services rendered to our company for the fiscal years ended March
      31, 2007 and 2006:


**2007**
              
              **2006**1.
                  Audit Fees (a)
              
              $
              29,000
              
              $
              29,2472.
                  Audit Related Fees
              
              
              4,498
              
              
              5,6703.
                  Tax Fees (b)
              
              
              59,000
              
              
              3,0004.
                  Total Fees
              
              
              92,498
              
              
              37,917




(a)
            
            Consists
                of fees billed for professional services rendered for the audit of
                the
                Company's consolidated financial statements and review of the interim
                consolidated financial statements included in quarterly
                reports.(b)
            
            Consists
                primarily of fees paid for tax compliance and tax planning services.
                This
                category includes services regarding tax return assistance, assistance
                with tax return filings in certain foreign jurisdictions, assistance
                with
                tax audits and appeals, and general U.S. and foreign tax
                advice.





***Policy
                on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
                Services of Independent Registered Public Accounting
                Firm***





The
      Company currently does not have a designated Audit Committee, and accordingly,
      the Company's Board of Directors' policy is to pre-approve all audit and
      permissible non-audit services provided by the independent auditors. These
      services may include audit services, audit-related services, tax services and
      other services. Pre-approval is generally provided for up to one year and any
      pre-approval is detailed as to the particular service or category of services
      and is generally subject to a specific budget. The independent auditors and
      management are required to periodically report to the Company's Board of
      Directors regarding the extent of services provided by the independent auditors
      in accordance with this pre-approval, and the fees for the services performed
      to
      date. The Board of Directors may also pre-approve particular services on a
      case-by-case basis.





52




**PART IV**


**Item 15.**
            ***Exhibits,
                Financial Statement Schedules.***





**Consolidated
      Financial Statements**





See
      Index
      to Consolidated Financial Statements on page 28 of this report.





**Financial
      Statement Schedule**




**SCHEDULE II —
      VALUATION AND QUALIFYING ACCOUNTS AND RESERVES**


**COSMO
      COMMUNICATIONS CORPORATION**


**Description**
              
              **Balance
                  at**
                **Beginning**
                **of
                  Year**
              
              **Additions**
                **(Reductions)**
                **Charged
                  to**
                **Costs
                  and**
                **Expenses**
              
              **Deductions**
              
              **Balance
                  at**
                **End
                  of Period**Year
                  ended March 31, 2007Deducted
                  from asset account:Allowance
                  for doubtful accounts
              
              $
              14,401
              
              $
              (18,387
              )
              $
              (10,867
              )
              $
              6,520Sales
                  return and allowance reserve
              
              
              245,770
              
              
              2,992,413
              
              
              2,856,913
              
              
              381,270Total
              
              $
              259,810
              
              $
              2,974,026
              
              $
              2,846,046
              
              $
              387,790Year
                  ended March 31, 2006Deducted
                  from asset account:Allowance
                  for doubtful accounts
              
              $
              4,401
              
              $
              10,855
              
              $
              1,216
              
              $
              14,040Sales
                  return and allowance reserve
              
              
              81,017
              
              
              3,756,254
              
              
              3,591,501
              
              
              245,770Total
              
              $
              85,418
              
              $
              3,767,109
              
              $
              3,592,717
              
              $
              259,810Year
                  ended March 31, 2005Deducted
                  from asset account:Allowance
                  for doubtful accounts
              
              $
              11,070
              
              $
              5,475
              
              $
              12,144
              
              $
              4,401Sales
                  return and allowance reserve
              
              
              32,409
              
              
              4,280,160
              
              
              4,231,552
              
              
              81,017Total
              
              $
              43,479
              
              $
              4,285,635
              
              $
              4,243,696
              
              $
              85,418




Other
      financial statement schedules have not been presented, as they are not
      applicable.




53


**Exhibits**




**Exhibit****Number**
            
            **Description
                of Document**3
            .1
            
            Articles
                of Incorporationas
                amended +3
            .2
            
            Registrant's
                Bylaws ++16
            .1
            
            Letter
                on Change in Accountant +++21
            .1
            
            List
                of Subsidiaries of Cosmo Communications Corporation
                ++++31
            .1
            
            Certification
                pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Peter
                Horak *31
            .2
            
            Certification
                pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Carol
                Atkinson *32
            .1
            
            Certification
                by the Chief Executive Officer pursuant to 18 U.S.C.
                Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002 *32
            .2
            
            Certification
                by the Chief Financial Officer pursuant to 18 U.S.C.
                Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002 *




+
            
            Incorporated
                by reference to our Annual Report on Form 10-K for the year ended
                March 31, 1992, as amended.++
            
            Incorporated
                by reference to our Registration Statement (File No.
                2-83088).+++
            
            Incorporated
                by reference to our Current Report on Form 8-K filed with the SEC
                on
                September 28, 2005.++++
            
            Incorporated
                by reference to our Annual Report on Form 10-K for the year ended
                March 31, 2006 filed with the SEC on August 8, 2006.*
            
            Filed
                herewith.







54




**SIGNATURES**





Pursuant
      to the requirements of the Section 13 or 15(d), as amended, the registrant
      has duly caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized, in the City of Markham, Ontario, Canada on June
      29,
      2007.


COSMO
                COMMUNICATIONS CORPORATIONBy:
            */s/
                Peter Horak*Peter
                HorakChief
                Executive Officer (Principal Executive
                Officer)


By:
            */s/
                Carol Atkinson*Carol
                AtkinsonChief
                Executive Officer (Principal Financial Officer and Principal Accounting
                Officer)




Pursuant
      to the requirements of the Securities Exchange Act of 1934, as amended, this
      Report has been signed by the following persons in the capacities and on the
      dates indicated:




**Name**
            
            **Title**
            
            **Date**/s/PETER
                HORAK
              Peter
                Horak
            
            Chief
                Executive Officer and
              Director
                (Principal Executive Officer)
            
            June
                29, 2007/s/CAROL
                ATKINSON
              Carol
                Atkinson
            
            Chief
                Financial Officer and
              Director
                (Principal Financial Officer and Principal Accounting
                Officer)
            
            June
                29, 2007/s/
              Jacky
                Lau
            
            Director
            
            June
                29, 2007






55