**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, 2008**




**Commission
      File Number 119698**





**COSMO
      COMMUNICATIONSCORPORATON** ******


*(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  ̈ 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  ̈ 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  ̈





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. £





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  ̈ Accelerated
      filer  ̈ 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, 2008.









**COSMO
      COMMUNICATIONS CORPORATION**


**ANNUAL
      REPORT ON FORM 10-K**


**FOR
      THE FISCAL YEAR ENDED MARCH 31, 2008**




**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
              28Item 8.
              
              Financial
                  Statements and Supplementary
                  Data
              30Item 9.
              
              Changes
                  in and Disagreements with Accountants on Accounting
                  and Financial Disclosure
              46Item 9A.
              
              Controls
                  and Procedures
              46Item 9B.
              
              Other
                  Information
              46**PART III**Item 10.
              
              Directors
                  and Executive Officers of the
                  Registrant
              46Item 11.
              
              Executive
                  Compensation
              48Item 12.
              
              Security
                  Ownership of Certain Beneficial Owners and
                  Management and Related Stockholder Matters
              50Item 13.
              
              Certain
                  Relationships and Related
                  Transactions
              51Item 14.
              
              Principal
                  Accountant Fees and Services
              52**PART IV**Item 15.
              
              Exhibits,
                  Financial Statement Schedules and Reports on
                  Form 8-K
              53Signatures
              
              
              55










**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.***









**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 Compact Disc (“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
      2001, we closed our operation in United States and focused our business in
      Canada. We re-entered the USA market when Starlight became a licensee of Disney
      electronics products in September 2006. In fiscal 2007, we hired two sales
      executives and began selling in the United States in the second quarter of
      fiscal 2007. We are able to distribute Disney licensed electronics through
      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




**Product
      Lines**





We
      market
      and distribute an assortment of video products including DVD/TV combination
      units in both CRT’s and LCD’s with retails ranging from $99 – $299. In addition
      to the TV line up we also market a variety of DVD players both portable with
      TFT
      screens and stand alone players, retail pricing ranging from
      $25-$99.




We
      market
      and distribute a variety of MP3 players. This year we introduced to our product
      line a series of MP4 players which include both photo and video playback. Over
      the course of the year we have seen the elimination of both the 256MB &
512MB memory MP3 players and have sold all players with a memory size of 1GB
–
4GB capacity. Retail prices have ranged from $30 - $89.





**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 7% 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 8.3% of total sales during the
                year.




·
            *Digital
                Lab:*This
                Cosmo introduced Digital Lab an upgraded line up from the audio category
                including clock radio’s, MP3 players and audio products with Ipod
                connectivity. Digital Lab accounted for 13.7% 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 15.3% of the total sales of the
                group.




·
            *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 36% of the total sales
                of the
                group.




4




**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, MP4 player
                and IPOD docking unit;•
            Expand
                Cosmo’s distribution with new and existing customers;•
            Continue
                the penetration into the US market and expand focus in the Disney
                brand
                products





**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:





Years Ended
              March 31,**2008**
            
            **2007**
            
            **2006**
            
            **2005**Product
                Class:
            
            
            
            %
            
            
            %
            
            
            %
            
            
            %MP3
                Players
            
            
            7
            
            
            12
            
            
            7
            
            
            -Other
                Audio (1)
            
            
            36
            
            
            27
            
            
            29
            
            
            55Video
                (2)
            
            
            48
            
            
            59
            
            
            62
            
            
            40Clocks
            
            
            8
            
            
            2
            
            
            2
            
            
            5Tools
            
            
            1
            
            
            -
            
            
            -
            
            
            -Total
            
            
            100.0
            %
            
            100.0
            %
            
            100
            %
            
            100
            %





(1)
      Includes boom boxes, CD players, IPOD docking system


(2)
      Includes digital photo frames, DVD players, LCD TV, portable DVD and TV/DVD
      combo





Financial
      information about geographic segments may be found at Note 12 of the Notes
      to Consolidated Financial Statements of this Form 10-K.





5




***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.
      In fiscal 2008, we marketed and distributed over six Disney characters. 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 2008. In fiscal 2009, we expect to distribute a limited
      edition of karaoke products using the popular Disney characters Hannah Montana
      and Princess. Our product development team will launch a new youth line of
      electronics that incorporates a series of products with environmental theme
      in
      fiscal 2009.





**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 (USA and Canada), Super-Stores,
      Home Hardware, Bargain Shop, Toys “R” Us (Canada) and Army and Air Force
      Exchange Service (“AAFES”).





In
      fiscal
      2008, approximately 52% of our sales were to the customers within Canada, 47%
      of
      sales were to the customers in USA. Sales made to Mexico 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, 2008, 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, 2008, and 2007 were
      approximately 82% and 98% 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




***Geographic
      Distribution of Sales***





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





Years Ended March 31,Region
            
            2004
            
            2005
            
            2006
            
            2007
            
            2008
            
            2008%(In thousands)USA
            
            
            -
            
            
            -
            
            
            -
            
            
            13,350
            
            
            16,568
            
            
            48
            %Canada
            
            $
            30,934
            
            $
            34,179
            
            $
            49,743
            
            
            42,384
            
            
            17,891
            
            
            51
            %Europe
            
            
            1,225
            
            
            1,273
            
            
            920
            
            
            113
            
            
            -
            
            
            -
            %Others
            
            
            -
            
            
            -
            
            
            348
            
            
            440
            
            
            362
            
            
            1
            %Total
                sales
            
            $
            32,159
            
            $
            35,452
            
            $
            51,011
            
            $
            56,287
            
            
            34,821
            
            
            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 3% and 5% of our net sales in fiscal 2008 and 2007,
      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 five 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, 2008, approximately 76% of our
      sales were sales from our domestic warehouses ("Domestic Sales") and 24% were
      sales shipped directly from China ("Direct Sales").





7




*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
      five factories, located in the southern provinces of the PRC. For fiscal 2009,
      we anticipate that majority of our products will be produced 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 2009. 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, 2008 and 2007, warranty claims have
      not
      been material to our results of operations.





8




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**





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




**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, 2008, we had inventory of $11 million (net of
      reserves totaling $554,224) compared to inventory of $9.6 million as of March
      31, 2007 (net of reserves totaling $381,000). We carried higher inventory levels
      in the current fiscal year because we had increased domestic sales activities
      (76%) compared with 34% in the prior year.




10




Our
      financing of seasonal working capital during fiscal 2008 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 2009, 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 three 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, 2008 we had no backlog of orders and none in the same period in fiscal
      2007. 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, 2008, we employed 36 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, 18 engaged in warehousing and technical support, and 12
      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




**Item 1A.*****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, 2008, 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, 2008, our inventory was valued at approximately $11 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 five largest customers during
      the fiscal period ended March 31, 2008 and 2007 were approximately 86% and
      98%
      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




***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
      $403,000 during fiscal 2008 and $727,000 during fiscal 2007. 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 2009 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. Sales in our second and third quarter,
      combined, accounted for approximately 65% and 46% of total sales in fiscal
      2008
      and 2007 respectively.




13





***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





***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 five 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




***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 76%, 93% and 91% of Cosmo’s sales in 2008, 2007
      and 2006 respectively. 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




**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 has settled a lawsuit
      concerning a certain agreement violation for a sum of $210,893 in March
      2008.





**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 2008 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 2008. We have 396 recorded
      holders of our common stock on June 30, 2008.





**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




**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, 2008, 2007, 2006, and 2005 and
      the
      balance sheet data at March 31, 2008, 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, 2005 and 2004
      and
      the balance sheet data at March 31, 2005 and 2004 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 2008
      presentation.





**Years Ended March 31,****2008**
            
            **2007**
            
            **2006**
            
            **2005**
              **Restated**
            
            **2004**(In thousands, except per share data)Consolidated
                Statements of Operations:Net
                sales
            
            
            34,821
            
            $
            56,287
            
            $
            51,011
            
            $
            35,452
            
            $
            32,159Cost
                of products sold
            
            
            32,915
            
            
            53,034
            
            
            48,157
            
            
            32,846
            
            
            29,476Gross
                profit
            
            
            1,906
            
            
            3,253
            
            
            2,854
            
            
            2,606
            
            
            2,683Other
                income
            
            
            852
            
            
            1,566
            
            
            1,509
            
            
            1,854
            
            
            1,283Operating
                expenses:Selling
                and delivery
            
            
            1,089
            
            
            1,677
            
            
            1,033
            
            
            1,382
            
            
            1,616General
                and administrative
            
            
            3,040
            
            
            2,901
            
            
            2,684
            
            
            1,921
            
            
            1,382Depreciation
                and amortization
            
            
            14
            
            
            19
            
            
            23
            
            
            32
            
            
            21Total
                operating expenses
            
            
            4,143
            
            
            4,597
            
            
            3,740
            
            
            3,335
            
            
            3,019Operating
                income (loss)
            
            
            (1,385
            )
            
            223
            
            
            623
            
            
            1,125
            
            
            947Interest
                and other expense
            
            
            126
            
            
            238
            
            
            304
            
            
            232
            
            
            257Taxes
                – current and deferred
            
            
            329
            
            
            (164
            )
            
            172
            
            
            697
            
            
            (29Net
                income (loss)
            
            
            (1,840
            )
            
            148
            
            
            147
            
            
            196
            
            
            719Income
                per common share:Income
                from operationsBasic
                and diluted
            
            
            (0.05
            )
            
            0.01
            
            
            0.01
            
            
            0.01
            
            
            0.02Weighted
                average shares:Basic
                and diluted
            
            
            40,467
            
            
            29,602
            
            
            29,104
            
            
            29,104
            
            
            29,104




18





**As of March 31**
              **(in thousands)****2008**
            
            **2007**
            
            **2006**
            
            **2005**
              **Restated**
            
            **2004****Balance
                Sheet Data**:Cash
            
            
            512
            
            $
            1,112
            
            $
            549
            
            $
            629
            
            $
            770Total
                assets
            
            
            15,486
            
            
            20,133
            
            
            8,249
            
            
            7,616
            
            
            7,642Total
                current liabilities
            
            
            12,287
            
            
            15,826
            
            
            5,989
            
            
            5,772
            
            
            6,485Total
                long-term liabilities
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Stockholders’
                equity
            
            
            3,199
            
            
            4,307
            
            
            2,260
            
            
            1,844
            
            
            1,157






**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 2008 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 2008 was in expanding the USA market by distributing more
      Disney electronics products. Our sales in this segment were $17 million. Our
      overall net sales decreased by 38% in fiscal 2008 due to extremely competitive
      price bidding in the MP3 players, television and DVD player market. Our gross
      margin remained steady at approximately 5.5% (2007 - 5.8%). Our gross margin
      did
      not deteriorate with sales decline because we made improvement in selling Disney
      brand products in USA and in Canada, which provide a better margin than the
      general consumer electronic products.





Our
      operating expenses (compensation, selling, general and administrative expenses)
      in fiscal 2008 decreased to approximately $4.1 million from $4.6 million in
      the
      prior year. The decrease in operating expenses was mainly in selling and
      distribution. Freight expenses decreased compared with the previous year because
      we changed the selling terms from freight prepaid to freight collect with some
      of our customers.




19





**Fiscal
      Year Ended March 31, 2008 Compared with Fiscal Year Ended March 31,
      2007**





***Sales***




Net
      sales
      for the fiscal year ended March 31, 2008 decreased by approximately $21 million
      compared to revenues of $56 million in the fiscal year ended March 31, 2007.
      The
      decrease in sales is primarily
      due to weakening of consumer spending during the holiday season and strong
      competition in the low end TV and DVD player market.





We
      continuously made improvement in selling in the USA market using the Disney
      brand but sales of consumer electronics of television and DVD products declined
      in Canada by $16 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. In Canada, sales of the
      MP3 player line declined by $4 million due to severe price competition. Our
      audio and clock radio lines showed steady sales in the two years in
      comparison.





In
      fiscal
      2008, 24% of our sales were direct sales, which represented sales made by our
      subsidiary in Hong Kong, and 76% were domestic sales, which represent sales
      made
      from our warehouses in USA and in Canada. In fiscal 2007, 66% of our sales
      were
      direct sales, and 34% were domestic sales.





In
      fiscal
      2008, sales in Canada represent 51% of our total sales; sales in USA represent
      48% and the remaining 1% was sales to other countries. In fiscal 2007, 75%
      of
      our sales were made to Canada, 24% in USA and 1% to Europe and other
      countries.





***Gross
      Profit***




Gross
      profit for fiscal 2008 was approximately $1.9 million or 5.5% of total revenues
      compared to $3.2 million or 5.8% of sales for fiscal 2007. 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 out 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





***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 $0.9 million in fiscal 2008 compared with $1.6 million in fiscal
      2007. Our plan is to increase income earned on brokering sales. We are less
      certain with income earned on handling returns since we cannot forecast how
      many
      pieces of returns we will process for our customers, therefore we have no
      control over the revenue we earn from the reverse logistic
      operation.





***Operating
      Expenses***





Operating
      expenses for the fiscal year ended March 31, 2008 decreased to $4.1 million
      from
      $4.6 million in fiscal 2007. The decrease in operating expenses consists of
      a
      decrease in variable expenses and fixed expenses. The variable expenses
      (advertising, commission, freight and royalty expenses) decreased proportionally
      as revenues decreased. The fixed expense increase of $0.2 million was primarily
      due to higher cost of operation in general.





***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, 2008, we recovered income tax expense in the amount
      of $254,247. In the current and prior year a tax audit on the Canadian
      subsidiary was conducted on years 2004 and 2005 and additional taxes were
      reassessed. Taxes related to these audits amounted to $714,638 in 2008. Tax
      recovery was a result of an adjustment for the 2006 fiscal year related to
      foreign exchange gains in our Canadian subsidiary and to carryback of losses
      in
      the current year to the 2005 year. 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.





**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




21





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 out 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.





***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:




l consultancy fees
      to provide marketing research and opening new accounts in the USA


l insurance
      costs in our business package; and


l 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.




22




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.





23




**Liquidity
      and Capital Resources**




On
      March
      31, 2008, we had cash on hand of $512,172 compared to cash on hand of $1,112,228
      on March 31, 2007. The decrease of cash on hand was primarily due to cash used
      in operating activities, rather than provided by operating
      activities.





Cash
      flows used in operating activities were $1,416,734 for the year ended March
      31,
      2008. We carried a lower receivable balance in 2008 due to exceptionally higher
      sales activity in the first quarter of calendar 2007 when the USA imposed a
      deadline to import TV built for the NTSC system. The majority of our receivables
      are due from large chain discount stores and we expect our receivable turnover
      will be steady throughout the year.





We
      increased our inventory level at fiscal 2008 year end by approximately $1.5
      million because of sales during the holiday season had been less than expected.
      Receivables and inventory were financed by trade payables due to our parent
      company.





Cash
      used
      in investing activities for the year ended March 31, 2008 was $2,298. Cash
      used
      in investing activities was for the purchase of office equipment in
      Canada.





There
      have been no cash flows from financing activities for the fiscal year ended
      March 31, 2008.





As
      of
      March 31, 2008, our working capital was $3.1 million. Our current liabilities
      of
      $12 million include:





·
            amount
                due to Starlight resulting from normal course of the business for
                $10.7
                million;


·
            current
                liabilities resulting from normal course of the business with other
                factories for $0.6 million;


·
            advance
                from Starlight for $0.6 million




As
      of
      June 2008, our cash on hand is sufficient to cover approximately two 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, 2008, Cosmo did not have any unconsolidated VIE’s.





24




**Contractual
      Obligations as of March 31, 2008**




Cosmo
      had
      contractual obligations at March 31, 2008 as follows:





**Payments
                Due by Period****Less
                Than**
            
            
            
            **More
                Than****Contractual
                Obligations**
            
            **Total**
            
            **1 Year**
            
            **1-3 Years**
            
            **3-5 Years**
            
            **5 Years**Interest
                payable to related party
            
            $
            604,627
            
            $
            604,627
            
            $
            —
            
            
            —
            
            
            —Operating
                leases
            
            $
            172,268
            
            $
            172,268
            
            $
            
            
            $
            —
            
            
            —




**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 2009.





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 2009, we will continue to control our operating costs. We expect domestic
      sales will continue to expand 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.





25




**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 approximately 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 dollars. 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 29% 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 are 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 65% and 46% of net sales
      in
      fiscal 2008, and 2007, 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:




26




***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.




27





***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, 2008, we have not
      used
      derivative instruments or engaged in hedging activities to minimize market
      risk.





**Interest
      Rate Risk**




As
      of
      March 31, 2008, 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.





28





**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.




29




**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
              31Consolidated
                  Balance Sheets as at March 31,
                  2008 and 2007
              32Consolidated
                  Statements of Income and Comprehensive
                  Income for the years ended March 31, 2008, 2007, and 2006
              33Consolidated
                  Statements of Stockholders’ Equity for
                  the years ended March 31, 2008, 2007, and 2006
              34Consolidated
                  Statements of Cash Flows for the years
                  ended March 31, 2008, 2007, and 2006
              35Notes
                  to the Consolidated Financial
                  Statements
              36




30




**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 sheets of **Cosmo
      Communications Corporation and Subsidiaries** as of 31
      March 2008 and 2007 and the related consolidated statements of income,
      stockholders' equity and cash flows for the years ended 31 March 2008, 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. The Company is not
      required to have, nor were we engaged to perform, an audit of its internal
      control over financial reporting. Our audit included consideration of internal
      control over financial reporting as a basis for designing audit procedures
      that
      are appropriate in the circumstances, but not for the purpose of expressing
      an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide 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 2008 and 2007 and the results of
      its
      operations and cash flows for the years ended 31 March 2008, 2007 and 2006,
      in
      conformity with accounting principles generally accepted in the United States
      of
      America.





**/s/
      DNTW Chartered Accountants, LLP**





Licensed
      Public Accountants


Markham,
      Ontario, Canada





6
      June
      2008




31


**COSMO
      COMMUNICATIONS CORPORATION AND SUBSIDIARIES**




**CONSOLIDATED
      BALANCE SHEETS**




**AS
      AT 31 MARCH**




**(Expressed
      in United States Dollars)**





**Note**
            
            **2008**
            
            **2007****ASSETS****Current
                Assets**Cash
            
            
            
            
            $
            512,172
            
            $
            1,112,228Accounts
                receivable, less allowance of $25,927 and $6,520 at 31 March 2008
                and
                2007, respectively
            
            
            3
            
            
            3,842,366
            
            
            8,917,837Inventories
            
            
            
            
            
            11,029,996
            
            
            9,515,488Prepaid
                expenses and other
            
            
            
            
            
            48,227
            
            
            16,
                496Taxes
                recoverable
            
            
            
            
            
            -
            
            
            514,327**Total
                Current Assets**
            
            
            
            
            
            15,432,761
            
            
            20,076,376**Equipment
                and Other Assets**Equipment,
                net
            
            
            4
            
            
            44,847
            
            
            56,752Deferred
                taxes
            
            
            5
            
            
            8,317
            
            
            -**Total
                Equipment and Other Assets**
            
            
            
            
            
            53,164
            
            
            56,752**Total
                Assets**
            
            
            
            
            $
            15,485,925
            
            $
            20,133,128**LIABILITIES
                AND STOCKHOLDERS' EQUITY****Current
                Liabilities**Accounts
                payable and accrued liabilities
            
            
            
            
            $
            630,563
            
            $
            1,725,237Accounts
                payable to parent company
            
            
            6
            
            
            10,739,893
            
            
            13,372,367Taxes
                payable
            
            
            5
            
            
            311,767
            
            
            -Interest
                payable to parent company
            
            
            6
            
            
            604,627
            
            
            604,627Deferred
                taxes
            
            
            5
            
            
            -
            
            
            123,590**Total
                Liabilities**
            
            
            
            
            
            12,286,850
            
            
            15,825,821**Commitments**
            
            
            7**Stockholders'
                Equity**Capital
                stock
            
            
            8
            
            
            2,023,382
            
            
            2,023,382Additional
                paid-in capital
            
            
            
            
            
            27,704,592
            
            
            27,704,592Accumulated
                other comprehensive income (loss)
            
            
            
            
            
            323,676
            
            
            (408,005
            )Accumulated
                deficit
            
            
            
            
            
            (26,852,575
            )
            
            (25,012,662
            )**Total
                Stockholders' Equity**
            
            
            
            
            
            3,199,075
            
            
            4,307,307**Total
                Liabilities and Stockholders' Equity**
            
            
            
            
            $
            15,485,925
            
            $
            20,133,128





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




32


**COSMO
      COMMUNICATIONS CORPORATION AND SUBSIDIARIES**




**CONSOLIDATED
      STATEMENTS OF INCOME AND COMPREHENSIVE
      INCOME**




**FOR
      THE YEARS ENDED 31 MARCH**




**(Expressed
      in United States Dollars)**





**2008**
            
            **2007**
            
            **2006****SALES**
            
            $
            34,820,750
            
            $
            56,287,515
            
            $
            51,010,554**COST
                OF PRODUCTS SOLD**
            
            
            32,915,382
            
            
            53,034,341
            
            
            48,156,516**GROSS
                PROFIT**
            
            
            1,905,368
            
            
            3,253,174
            
            
            2,854,038**COMMISSION
                INCOME**
            
            
            852,238
            
            
            1,566,157
            
            
            1,508,990**OPERATING
                EXPENSES**Salaries
                and wages
            
            
            1,822,066
            
            
            1,748,757
            
            
            1,669,275General
                and administrative
            
            
            1,217,493
            
            
            1,151,962
            
            
            1,014,849Selling
                and delivery
            
            
            1,088,947
            
            
            1,677,460
            
            
            1,033,210Amortization
            
            
            14,202
            
            
            18,622
            
            
            23,183**TOTAL
                OPERATING EXPENSES**
            
            
            4,142,708
            
            
            4,596,801
            
            
            3,740,517**(LOSS)
                INCOME FROM OPERATIONS**
            
            
            (1,385,102
            )
            
            222,530
            
            
            622,511Financial
            
            
            104,916
            
            
            345,838
            
            
            266,644Loss
                (gain) on foreign exchange
            
            
            21,413
            
            
            (107,817
            )
            
            36,696**(LOSS)
                INCOME BEFORE TAXES**
            
            
            (1,511,431
            )
            
            (15,491
            )
            
            319,171**INCOME
                TAXES (RECOVERY)**
            
            
            (254,247
            )
            
            (310,442
            )
            
            296,013**DEFERRED
                INCOME TAXES**
            
            
            (131,906
            )
            
            (42,746
            )
            
            (151,738
            )**REASSESSMENT
                OF PRIOR YEARS INCOME TAXES**
            
            
            714,638
            
            
            189,610
            
            
            27,918**NET****(LOSS) INCOME**
            
            $
            (1,839,916
            )
            $
            148,087
            
            $
            146,978**FOREIGN
                CURRENCY TRANSLATION ADJUSTMENT**
            
            
            731,681
            
            
            (101,130
            )
            
            269,150**COMPREHENSIVE****(LOSS) INCOME**
            
            $
            (1,108,235
            )
            $
            46,957
            
            $
            416,128**(LOSS)****INCOME PER WEIGHTED NUMBER OF SHARES OUTSTANDING
                - BASIC
                AND DILUTED**
            
            $
            (0.05
            )
            $
            0.01
            
            $
            0.01**WEIGHTED
                AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND
                DILUTED**
            
            
            40,467,636
            
            
            29,602,132
            
            
            29,104,000




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




33


**COSMO
      COMMUNICATIONS CORPORATION AND SUBSIDIARIES**




**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS'
      EQUITY**




**FOR
      THE YEARS ENDED 31 MARCH 200** **8,
      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,
                  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 restated
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              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**B****alance,
                  31 March 2007**
              
              
              40,467,636
              
              
              2,023,382
              
              
              27,704,592
              
              
              (408,005
              )
              
              (25,012,662
              )
              
              4,307,307Foreign
                  currency translation
              
              
              -
              
              
              -
              
              
              -
              
              
              731,681
              
              
              -
              
              
              731,681Net
                  ( loss) for the period
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,839,916
              )
              
              (1,839,916
              )**Balance,
                  31 March 200****8**
              
              
              40,467,636
              
              $
              2,023,382
              
              $
              27,704,592
              
              $
              323,676
              
              $
              (26,852,575
              )
              $
              3,199,075





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




34


**COSMO
      COMMUNICATIONS CORPORATION AND SUBSIDIARIES**




**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**




**FOR
      THE YEARS ENDED 31 MARCH**




**(Expressed
      in United States Dollars)**





**200****8**
            
            **200****7**
            
            **2006****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                (loss) income
            
            $
            (1,839,916
            )
            $
            148,087
            
            $
            146,978**Adjustment
                to reconcile net earnings to net cash provided by (used in) operating
                activities**Depreciation
            
            
            14,202
            
            
            18,622
            
            
            23,183Deferred
                income taxes
            
            
            (131,906
            )
            
            (42,746
            )
            
            (151,738
            )Common
                stock issued for debt
            
            
            -
            
            
            2,000,000
            
            
            -(1,957,620
            )
            
            2,123,963
            
            
            18,423**Changes
                in operating assets and liabilities:**Accounts
                receivable
            
            
            5,075,471
            
            
            (5,795,642
            )
            
            (1,399,688
            )Inventories
            
            
            (1,514,507
            )
            
            (5,379,148
            )
            
            929,490Prepaid
                expenses and other
            
            
            (31,731
            )
            
            355,525
            
            
            (369,457
            )Accounts
                payable and accrued liabilities
            
            
            (1,094,672
            )
            
            713,737
            
            
            104,829Taxes
                payable
            
            
            826,095
            
            
            (791,072
            )
            
            123,821Accounts
                payable to parent company
            
            
            (2,632,474
            )
            
            10,554,223
            
            
            152,176**CASH
                FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES**
            
            
            (1,329,438
            )
            
            1,781,586
            
            
            (440,406
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES**Acquisition
                of equipment
            
            
            (2,299
            )
            
            (5,254
            )
            
            (7,604
            )**CASH
                FLOWS USED IN INVESTING ACTIVITIES**
            
            
            (2,299
            )
            
            (5,254
            )
            
            (7,604
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES**Advances
                to (from) related parties
            
            
            -
            
            
            (1,111,480
            )
            
            98,805**CASH
                FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES**
            
            
            -
            
            
            (1,111,480
            )
            
            98,805**EFFECT
                OF FOREIGN CURRENCY TRANSLATION**
            
            
            731,681
            
            
            (101,130
            )
            
            269,150**NET
                INCREASE (DECREASE) IN CASH**
            
            
            (600,056
            )
            
            563,722
            
            
            (80,055
            )**CASH,
                BEGINNING OF YEAR**
            
            
            1,112,228
            
            
            548,506
            
            
            628,561**CASH,
                END OF YEAR**
            
            $
            512,172
            
            $
            1,112,228
            
            $
            548,506





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




35




**COSMO
      COMMUNICATIONS CORPORATION AND SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL
      STATEMENTS**




**FOR
      THE YEARS ENDED 31 MARCH 200** **8
      AND 2007**




**(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
      Communication USA Corp. 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 cost of purchases (FOB cost) and cost associated with
      the
      import of the products. Import cost components are customs entry fees levied
      by
      the country of import and the freight and handling cost to unload
      containers.




**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.




36




**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 $ 606,396
      (2007 - $912,829).




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 labor 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 and 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 2008, the Company increased its inventory reserve to
      $554,224.





**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 statement of
      income.




**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





37




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




**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 subsidiary, the US dollar is the functional currency of the
      US
      subsidiary 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 200 8
      and
      2007, 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.




38




**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 2008 and
      2007.




**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.




39




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




**Recent
      Accounting Pronouncements**




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. The adoption of FIN 48 did not have a material
      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.




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 FIN 48 did not have a material impact on the
      Company’s consolidated financial statements.




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.





In
      December 2007, the FASB issued SFAS No. 141 (R) *Business
      Combinations* .
      SFAS
      141R establishes principles and requirements for how the acquirer of a business
      recognizes and measures in its financial statements the identifiable assets
      acquired, the liabilities assumed, and any non-controlling interest in the
      acquiree. SFAS 141R also provides guidance for recognizing and measuring the
      goodwill acquired in the business combination and determines what information
      to
      disclose to enable users of the financial statements to evaluate the nature
      and
      financial effects of the business combination. The guidance will become
      effective as of the beginning of the Company’s fiscal year beginning after 15
      December 2008. Management believes the adoption of this pronouncement will
      not
      have a material impact on the Company's consolidated financial
      statements.




40




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




**Recent
      Accounting Pronouncements (Continued)**





In
      December 2007, the FASB issued SFAS No. 160 *Noncontrolling
      Interests in Consolidated Financial Statements—an amendment of ARB No.
      51* .
      SFAS
      160 establishes accounting and reporting standards for the noncontrolling
      interest in a subsidiary and for the deconsolidation of a subsidiary. The
      guidance will become effective as of the beginning of the Company’s fiscal year
      beginning after 15 December 2008. Management believes the adoption of this
      pronouncement will not have a material impact on the Company's consolidated
      financial statements.





In
      January 2008, the FASB issued Statement No. 133 Implementation Issue
      No. E23, *Hedging —
      General: Issues Involving the Application of the Shortcut Method under
      Paragraph 68* (Issue
      No. E23). Issue No. E23 provides guidance on certain practice issues
      related to the application of the shortcut method by amending paragraph 68
      of FASB Statement No. 133 with respect to the conditions that must be met
      in order to apply the shortcut method for assessing hedge effectiveness of
      interest rate swaps. The provisions of Issue No. E23 became effective for
      us for our hedging arrangements designated on or after January 1, 2008.
      Additionally, pre-existing hedging arrangements must be assessed on
      January 1, 2008 to determine whether the provisions of Issue No. E23
      were met as of the inception of the hedging arrangement. We have evaluated
      the
      effects of the adoption of Issue No. E23 and have determined it to have no
      material impact on our consolidated financial position, results of operations
      and cash flows.





In
      March
      2008, the FASB issued Statement No. 161, *Disclosures
      about Derivative Instruments and Hedging Activities* ,
      an
      amendment of FASB Statement No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* .
      FASB
      Statement No. 161 changes the disclosure requirements for derivative
      instruments and hedging activities. Entities are required to provide enhanced
      disclosures about (i) how and why an entity uses derivative instruments,
      (ii) how derivative instruments and related hedged items are accounted for
      under FASB Statement No. 133, *Accounting
      for Derivative Instruments and Hedging Activities,* and
      its
      related interpretations and (iii) how derivative instruments and related
      hedged items affect an entity’s financial position, results of operations, and
      cash flows. FASB Statement No. 161 is effective for financial statements
      issued for fiscal years and interim periods beginning after November 15,
      2008, with early application permitted. FASB Statement No. 161 permits, but
      does not require, comparative disclosures for earlier periods at initial
      adoption. We have not yet commenced evaluating the potential impact, if any,
      of
      the adoption of FASB Statement No. 161 on our consolidated financial
      position, results of operations, cash flows or disclosures related to derivative
      instruments and hedging activities.





In
      May
      2008, the FASB issued Statement No. 162, *The
      Hierarchy of Generally Accepted Accounting Principles* .
      FASB
      Statement No. 162 defines the order in which accounting principles that are
      generally accepted should be followed. FASB Statement No. 162 is effective
      60 days following the SEC’s approval of the Public Company Accounting
      Oversight Board (“PCAOB”) amendments to AU Section 411, *The
      Meaning of Present Fairly in Conformity with Generally Accepted Accounting
      Principles* .
      We have
      not yet commenced evaluating the potential impact, if any, of the adoption
      of
      FASB Statement No. 162 on our consolidated financial position, results of
      operations and cash flows.




41




**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 2008 and 2007:


**Balance
                  at Beginning of**
                **Year**
              
              **Additions(Reductions)
                  Charged to**
                **Costs
                  and**
                **Expenses**
              
              **Deductions**
              
              **Balance at End**
                **of
                  Year****Year
                  ended 31 March** **2008**Deducted
                  from asset account:Allowance
                  for doubtful accounts
              
              $
              6,520
              
              $
              30,323
              
              $
              10,916
              
              $
              25,927Sales
                  return and allowance reserve
              
              
              381,270
              
              
              1,359,375
              
              
              1,602,207
              
              
              138,438Total
              
              $
              387,790
              
              $
              1,389,698
              
              $
              1,613,123
              
              $
              164,365**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




**4.**
            **EQUIPMENT**




The
      components of equipment are as follows:




**Cost**
            
            **Accumulated
                Depreciation**
            
            **Net**
              **200****8**
            
            **Net**
              **200****7**Furniture
                and fixtures
            
            $
            42,462
            
            $
            (39,315
            )
            $
            3,147
            
            $
            4,261Equipment
            
            
            31,858
            
            
            (29,014
            )
            
            2,844
            
            
            3,020Computer
            
            
            53,295
            
            
            (38,062
            )
            
            15,233
            
            
            18,529Warehouse
                equipment
            
            
            68,308
            
            
            (44,685
            )
            
            23,623
            
            
            30,942$
            193,625
            
            $
            (136,873
            )
            $
            44,847
            
            $
            56,752




**5.**
            **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.




42




The
      provision for income taxes reconciles to the amount obtained by applying the
      statutory income tax rates of 36.12% (200 7
      -
      36.12%) in Canada, 17.5% (2007 - 17.5%) in Hong Kong and 15.5% (2007 - 15.5%)
      in
      US to income before provision for taxes as follows:





**200****8**
            
            **200****7**Computed
                expected tax
            
            
            (278,083
            )
            
            (53,879
            )Expenses
                not deductible for tax purposes
            
            
            15,653
            
            
            13,119Equipment
            
            
            3,376
            
            
            (7,224
            )Unrealized
                foreign exchange gains
            
            
            -
            
            
            (10,851
            )Tax
                losses avalaible for carryforward
            
            
            3,907
            
            
            -Prior
                year adjustments
            
            
            -
            
            
            (255,450
            )Other
            
            
            900
            
            
            3,843Provision
                for income taxes
            
            $
            (254,247
            )
            $
            (310,442
            )




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





**200****8**
            
            **200****7**Deferred
                income tax assets (liabilities):Book
                over tax depreciation
            
            
            8,317
            
            
            5,946Unrealized
                foreign exchange transaction gains
            
            
            -
            
            
            (129,536
            )Deferred
                income taxes
            
            $
            8,317
            
            $
            (123,590
            )





During
      the year, Cosmo Communications Canada Inc. settled a corporate tax audit with
      the Canada Revenue Agency related to allocation of income between Canada and
      Hong Kong. The adjustments were to taxable income for the fiscal years 31 March
      2004 and 2005 and totaled $714,638 in corporate taxes payable. The tax audits
      are now closed for these years.




43







**6.**
            **AMOUNTS
                PAYABLE TO PARENT COMPANY**




As
      of 31
      March 2008, the Company owed $11,344,520 (2007 - $13,976,994) to The Starlight
      Group of Companies, the principal corporate shareholder of the Company
      ("Starlight"). Of this amount $10,739,893 (2007 - $13,372,367) 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
      in the fiscal year ended 31 March 2007, 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 2008 was $604,627 (2007 - $604,627).




**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 200 8
      were:




2009
            
            $
            172,268Thereafter
            
            
            -$
            172,268




44




**8.**
            **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





**2008**
            
            **2007**Issued40,467,636
            
            
            Common
                stock (2006 - 29,104,000)
            
            $
            2,139,132
            
            $
            2,139,1322,314,567
            
            
            Treasury
                stock
            
            
            (115,750
            )
            
            (115,750
            )$
            2,023,382
            
            $
            2,023,382




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.**
            **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 200 8,
      the
      Company purchased $27,532,352 (2007 - $46,377,415) of goods from Starlight
      and
      received $56,648 (2007 - $29,014) in commissions.




**11.**
            **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 76% of sales in 2008 and 93% in 2007. 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 200 8,
      the
      accounts receivable from this customer amounted to approximately $1,721,833
      (2007 - $7,914,451) and claims payable for inventory returns amounted to
      approximately $56,771 (2007 - $485,486).




**12.**
            **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 and in
      the USA. Borrowings are principally in the United States.




**Canada**
            
            **Hong Kong**
            
            **United States**
            
            **Total****2008**Assets
            
            
            6,966,433
            
            
            783,441
            
            
            7,978,424
            
            
            15,728,298Sales,
                net
            
            
            9,882,697
            
            
            8,369,762
            
            
            16,568,291
            
            
            34,820,750Gross
                margin
            
            
            736,784
            
            
            348,152
            
            
            820,432
            
            
            1,905,368Net
                income (loss)
            
            
            (1,660,839
            )
            
            (153,868
            )
            
            (25,209
            )
            
            (1,839,916
            )**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
            
            
            329,644
            
            
            1,868,034
            
            
            1,055,467
            
            
            3,253,174Net
                income (loss)
            
            
            32,922
            
            
            236,209
            
            
            (121,044
            )
            
            148,087




**13.**
            **SUPPLEMENTAL
                CASH FLOW INFORMATION**




During
      the year ended 31 March 2008 the Company paid interest of $74,593 (2007 -
      $356,705) and income taxes of $392,118 were recovered (2006 - $703,117 were
      paid).




45




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





None.




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





***Evaluation
      of Disclosure 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,
      2008. 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.




**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
            
            60
            
            Chairman
                of the Board of Directors and PresidentPeter
                Horak
            
            66
            
            Chief
                Executive Officer and DirectorCarol
                Atkinson
            
            59
            
            Chief
                Financial OfficerRick
                Bond
            
            58
            
            Vice
                President – sales and marketing – USA
                operationYu
                Wing King
            
            56
            
            Vice
                President, Hong Kong operationJacky
                Lau
            
            49
            
            DirectorJeff
                Horak
            
            50
            
            Vice
                President – Sales and Marketing - Canada
                Operations




46




**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**





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, 2008, its officers,
      directors and 10% shareholders complied with all Section 16(a) filing
      requirements.




47




**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, 2008.





**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 2008. 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:





**Summary
      Compensation Table**




Name & Principal
              Position
            
            Year
            
            Salary ($)
            
            Bonus ($)
            
            Stock
              Awards($)
            
            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
            
            
            2008
              2007
              2006
            
            
            99,324
              175.800
              138,000
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            11,370
              13,600
              3.000
            
            
            110,694
              194,.400
              141,000**Jeff
                Horak**
              Vice
                President - Canada
            
            
            2008
              2007
              2006
            
            
            131,063
              175,800
              138.000
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            12,671
              9,493
              22,000
            
            
            143,734
              185,293
              160,000**Rick
                Bond**
              Vice
                President - USA
            
            
            2008
              2007
              2006
            
            
            100.000
              25,000
              —
            (2)
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            159,250
              —
              —
            
            
            259,250
              25,000
              —**Yu
                Wing King**
              Vice
                President – Hong Kong
            
            
            2008
              2007
              2006
            
            
            43,524
              42,832
              47,114
            
            
            14,318
                  4,017
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            2,418
              —
              —
            
            
            45,942
              63,150
              51,131**E.
                J. Colin**
              National
                Sales Manager - Canada
            
            
            2008
              2007
              2006
            
            
            67,959
              92,300
              64,200
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            7,511
              5,800
              12,600
            
            
            75,470
              98,100
              76,800





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




48





***Employment
          Agreements***
  The
        Company signed no new employment agreements during fiscal 2008 and signed
        two
        employment agreements with two executive officers during fiscal
        2007.
  **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**
  Name
                  (a)
                Grant
                  Date
                  (b)
                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 Units
                  (#)
                  (i)
                All
                    Other Option
                  Awards:
                    Number
                  ofSecurities
                  Underlying
                  Options
                  (#)
                  (j)
                Exercise
                    or
                  Base
                    Price of
                  Option
                    Awards
                  ($/Sh)
                  k
                Grant
                    Date Fair Value of Stock and Option Awards
                  lThreshold
                  ($)
                  (c)
                Target
                  ($)
                  (d)
                Maximum
                  ($)
                  (e)
                Threshold
                  ($)
                  (f)
                Target
                  ($)
                  (g)
                Maximum
                  ($)
                  (h)
  (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
              
              Rick
                  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, 2008, we purchased $27,532,352 (2007 - $46,377,415)
        of
        goods from our parent company, Starlight and received $56,648 (2007 - $29,014)
        in commissions.
  51
  **Item 14.**
              ***Principal
                  Accountant Fees and
                  Services***
 
 The
        following is a summary of the fees billed to the Company by DNTW Chartered
        Accountants, LLP, Deloitte & Touche LLP and Chan & Watt Company for
        professional services rendered to our company for the fiscal years ended
        March
        31, 2008 and 2007:
 
 **2008**
              
              **2007**1.
                  Audit Fees (a)
              
              $
              37,500
              
              $
              29,0002.
                  Audit Related Fees
              
              
              -
              
              
              4,4983.
                  Tax Fees (b)
              
              
              29,315
              
              
              59,0004.
                  Total Fees
              
              
              66,815
              
              
              92,498
 
 (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, 2008Deducted
                        from asset account:Allowance
                        for doubtful accounts
                    
                    $
                    6,520
                    
                    $
                    30,323
                    
                    $
                    10,916.
                    
                    $
                    25,927Sales
                        return and allowance reserve
                    
                    
                    381,270
                    
                    
                    1,359,375
                    
                    
                    1,602,207
                    
                    
                    138,438Total
                    
                    $
                    387,790,
                    
                    $
                    1,389,698.
                    
                    $
                    1,613,123
                    
                    $
                    164,365.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
                    
                    $
                    259,810
 
 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
        30,
        2008.
 
 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
              
              Chief
                  Executive Officer and Director
              
              June
                  30, 2008Peter
                  Horak
              
              (Principal
                  Executive Officer)/s/
                  CAROL ATKINSON
              
              Chief
                  Financial Officer and Principal Financial Officer and
              
              June
                  30, 2008Carol
                  Atkinson
              
              Principal
                  Accounting Officer/s/
                  JACKY LAU
              
              Director
              
              June
                  30, 2008Jacky
                  Lau
 
 55