10KSB 1 form10ksb.htm ANNUAL REPORT FOR THE FISCAL YEAR ENDED FEBRUARY 28, 2006 Filed by Automated Filing Services Inc. (604) 609-0244 - Sound Revolution Inc. - Form 10KSB

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 28, 2006

[           ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to ___________

Commission file number: 333 - 118398

SOUND REVOLUTION INC.
(Name of small business issuer in its charter)

Delaware N/A
(State or other jurisdiction of incorporation or  
organization) (I.R.S. Employer Identification No.)

345 – West 11th Avenue  
Unit 4  
Vancouver, British Columbia V5Y 1T3
(Address of principal executive offices) (Zip Code)

Issuer's telephone number 604-780-3914

Securities registered under Section 12(b) of the Exchange Act: None.

Securities registered under Section 12(g) of the Exchange Act: None.

Common Stock
(Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [               ] No [               ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB [               ].

State issuer's revenues for its most recent fiscal year. Nil.

The aggregate value of the voting stock held by non-affiliates of the registrant, computed by reference to the average closing sale price as of June 12, 2006, was approximately $2,568,120.

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 10,391,191 common shares, $0.0001 par value outstanding as of June 12, 2006

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

Transitional Small Business Disclosure Format (Check one): Yes [               ]  No [               ]


INDEX

    PAGE
PART I    
     
Item 1 Description of Business 3
     
Item 2 Description of Property 9
     
Item 3 Legal Proceedings 9
     
Item 4 Submission Of Matters to a Vote of Security Holders 9
     
PART II
     
Item 5 Market for Common Equity And Related Stockholder Matters 9
     
Item 6 Management's Discussion and Analysis or Plan of Operation 10
     
Item 7 Financial Statements 14
     
Item 8 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 15
     
Item 8A Controls and Procedures 15
     
PART III
     
Item 9 Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act 16
     
Item 10 Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related 18
     
Item 11 Stockholder Matters 19
     
Item 12 Certain Relationships and Related Transactions 20
     
Item 13 Exhibits and Reports on Form 8K 21
     
Item 14 Principal Accountant Fees and Services 22
     
Signatures 22

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PART I

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

As used in this annual report, the terms "we", "us", "our", and "Sound Revolution" mean Sound Revolution Inc., unless otherwise indicated.

All dollar amounts refer to US dollars unless otherwise indicated.

Item 1. Description of Business

Corporate History

Sound Revolution Inc. was incorporated on June 4, 2001 under the laws of the State of Delaware. Our principal offices and studio are located at 345 West 11th Avenue, Unit 4, Vancouver, British Columbia, V5Y 1T3, and our telephone number is (604)780-3914. We have one wholly owned subsidiary, Charity Tunes Inc., which we incorporated as a Delaware company on June 27, 2006.

Business Development

We have only recently begun our current operations and we have a limited history of revenues and significant operational losses to date as well as an accumulated shareholder deficit. For the year ended February 28, 2006, we had no total revenues, a net loss of $67,691 and an accumulated deficit of $124,619.

Sound Revolution is currently developing software to assist artists in maintaining, developing and communicating with their customers through email and the Internet. On May 31, 2006 we completed and launched our website www.charitytunes.com and on May 31, 2006, we received the first revenues from the sale of digital music on the site. Through charitytunes.com we sell digital music downloads, while allowing music purchasers to allocate 10% of each song price to a charitable cause chosen from our list of participating charities. We currently have the rights to over 6,000 songs and we have approximately 10 charities who have agreed to participate.

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Since our inception, on June 4, 2001, we have been developing our business plan and identifying potential products and services related to digital music distribution that we could develop, market and sell. In June, 2001 we developed plans to create software, called FanPro that will enable musicians to sell digital music and other products to their fans (potential customers) using emails and the Internet, and we actively began developing the outline containing the specifications for all of the features for this software.

In the beginning of 2002 we developed our website, www.soundrevolution.net and began working with musicians to assist them in promoting their music on our website and through live events, the proceeds of ticket sales of which were donated to charities.

In 2002 and 2003 we co-produced and marketed several live events where some of the musicians featured on our website performed live. For only one of these events, SHOW!, did we record any revenues, and these are the sole revenues we have generated to date.

Since our inception, we have contemplated that we would sell digital music online, and in July, 2004, we decided that we would develop a website which will allow customers to purchase digital music downloads, and allow customers to choose a charity that will receive a benefit equal to a portion of the purchase price for each song that they purchase. In August, 2004 we registered the domain name www.charitytunes.com for this purpose and since then we have been actively developing this website. We intend to make available other related products and services which will assist musicians in marketing their music online, but so far we have not commenced operations related to any other products or services.

Our Products and Services

Fanpro(TM)

Sound Revolution is in the early stages of developing email management software that will enable musicians to maintain a database of fans (customers) through an email contact management system. The software we are designing will enable musicians to sell digital music and other products to their customers using emails and the Internet. We intend to build the software to encompass the following primary features:

  • Identification and maintenance of fans through an online database
  • Database to store specific information relating to fans
  • Set functions to allow distribution of promotions and news to selected fans
  • Automatic pop ups from a musician's website to collect fan information
  • Other online membership sign up which is connected to a database
  • Templates for promotions such as pre releasing new songs for a fee to a fan base and advertising live events
  • Collection of annual fan membership fees

Our intention is to build the core software by hiring software programmers as independent contractors to develop the software according to our specifications and to add special features through the acquisition or licensing of software components already developed. We have identified a software developer and we are currently in negotiations regarding development of this product.

Once the software is complete, we intend to generate revenues by licensing the software to musicians, record labels and musician managers. Also, we intend to build a vast database of

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music fans through the musicians and record labels that use our software and to generate revenues by sending paid promotional advertisements to this database of music fans.

Charitytunes.com

Though our wholly owned subsidiary, Charity Tunes Inc., we have developed a website, charitytunes.com which sells digital music downloads to customers on the Internet and allows customers to choose from a selection of charities which will receive a percentage of the purchase price of the songs being purchased.

On May 3, 2005, Sound Revolution’s subsidiary, Sound Revolution Recordings Inc. entered into an agreement with Gravit-e Technologies Inc. (“Gravit-e”) for the development of Sound Revolution’s charitytunes.com website, including custom development, standard application hosting and necessary hardware purchases (the “Development Agreement”). The total cost for the site was approximately $9,300, all of which has been paid. We have exclusive ownership and copyright for source code for any applications or modules which are entirely custom developed by Gravit-e for us.

The Development Agreement required development of the website so that charitytunes.com can provide a portal to information on artists who are featured on the site. The site allows for partial proceeds from each sale to be donated to charitable causes. The site has artist and charity databases, which can be accessed by both charities and music content owners to allow them to view directly information relating to sales and site traffic. The Development Agreement also required development by Gravit-e of a Charity Tunes engine which allows users to log in and listen to previews of songs, purchase songs in customized combinations or pre-set packages, purchase monthly subscriptions to songs, make gift purchases, and rate and post reviews on songs. As of June 12, 2006, the functions enabling site visitors to listen to previews and purchase songs in customized combinations are complete. Gravit-e is still working on enabling our site to sell pre-set packages. We expect these functions to be available within a week. Other functions of the site are to include tracking and reporting functions for artists and charities as well as mailing list sign-up and email broadcast capabilities and functions which will allow Sound Revolution’s management to view orders and account balances for purchasers, artists and charities. The Development Agreement estimates that the development of the site will take year, including beta testing.

We have completed the form of digital distribution agreement that we intend to use to build a library of digital music rights and we have made offers to several musicians to acquire digital music rights. On January 11, 2005, Sound Revolution’s wholly owned subsidiary, Sound Revolution Recordings Inc. (“SR Recordings”) entered into an agreement with David Hersk doing business as Hersk & Associates to acquire certain distribution rights to a library of approximately 6,664 sound recordings. For a period of six years from the date of the agreement, SR Recordings has the right to stream the songs from its websites, and to sell them through web sites, in-store kiosks, portable music players, mobile phones, personal digital assistants, wireless applications and other Internet enabled devices, as well as compilation CDs containing songs pre-determined by SR Recordings or as a customized compilation. Under the agreement, SR Recordings is entitled to choose the price to download the songs, and after accounting for expenses and promotional costs, including any donations to charities or non-profit organizations, the remainder of the purchase price shall be split 50/50 between SR Recordings and Hersk & Associates. The library consists of 6,664 songs in a wide variety of genres, including Children’s, Classical, Country, Big Band, Dance Music, Easy Listening, Holiday Favorites, Inspirational, Jazz, Rock, Pop, Specialty, Stage and Screen and World Music. Hersk & Associates is obligated to deliver SR masters to all of the licensed songs in MP3 format on DVD. SR Recordings is obligated to pay a total of $5,000 as a royalty advance for the distribution rights, $2,800 which was paid in January, 2005 and the balance of which was paid in July, 2005.

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The Hersk music library is the first major digital music rights acquisition by Sound Revolution which we have acquired for the purpose of selling through our website, charitytunes.com.

We have signed up nine charities to participate in charitytunes.com and we are currently in discussions with several other charities to secure their participation in the website. The website will serve as a showcase for music as well as allowing certain charities to present their causes, raising awareness and money for the charities. Our intention is to generate revenues by selling digital music downloads through the website. The suppliers of the songs may be musicians, record labels, musician agents and managers and anyone who owns or controls digital music rights. We need to enter into agreements to acquire the rights to a significant number of songs in various genres in order for our website charitytunes.com to be fully-operational. According to the digital music distribution agreement we are currently using to negotiate music rights, a portion of the sale of each song will go to a charity selected by the purchaser of the song, some of the sale proceeds will be kept by Sound Revolution as reimbursement for expenses, and the remaining sale proceeds (the net profits) shall be split between the owner of the song and Sound Revolution.

Our Distribution Methods

We intent to distribute our digital music through software that we intend to develop and own. We are currently negotiating with a software development company to design a proprietary platform for the distribution of digital music through our website charitytunes.com.

New Products and Services

Charitytunes.com is a new service, since it was launched on May 31, 2006. We intend to launch new Fanpro(TM) are both new services which we intend to develop, and both are in the initial stages of development. Our goal is to develop the first phase of charitytunes.com by fall 2005 and to launch the website by the end of 2005. We intend to have the functional specifications of our Fanpro(TM) software completed by early 2006 and we intend to have the software fully developed and ready for distribution by the end of 2006. As we have not yet entered into written agreements for the development of either of these new products, we cannot be certain that we will complete these products by our anticipated dates or at all.

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General

Subsidiaries

Sound Revolution currently owns two wholly owned subsidiaries, one called Sound Revolution Recordings Inc., a company incorporated in British Columbia for the purposes of carrying on business in British Columbia, and another called Charity Tunes Inc, a company incorporated in Delaware for the purpose of carrying on online music distribution.

Intellectual Property

We own the copyright in the websites www.soundrevolution.net and www.charitytunes.com. We also own all the copyright in our logos for both Sound Revolution and Charity Tunes.

Competition

We currently have no share in the market for digital distribution, online music sales, or in any of our planned online music services. Our digital music sales business will face competition from traditional retail music distributors such as Tower Records as well as online retailers such as Amazon.com. These retailers may include regional and national mall-based music chains, international chains, deep-discount retailers, mass merchandisers, consumer electronics outlets, mail order, record clubs, independent operators and online physical retail music distributors, many of which have greater financial and other resources than we do. To the extent that consumers choose to purchase media in non-electronic formats, it may reduce our sales, reduce our gross margins, increase our operating expenses and decrease our profit margins in specific markets.

Our online music services competitors include Listen.com, the provider of the Rhapsody service and a subsidiary of RealNetworks, Inc., Apple Computer's iTunes Music Store, Buy.com, Inc., MusicNet, a joint venture between, among others, AOL Time Warner and RealNetworks, MusicMatch and other online efforts, including those of leading media companies. We anticipate competition for online music distribution service revenue from a wide range of companies, including broadband Internet service providers such as Yahoo! and MSN as well as from e-tailers such as Amazon.com, Bestbuy.com, Dell Computers, Virgin and Walmart.com.

Our online music services also face significant competition from free peer-to-peer services, such as KaZaA, Morpheus, Grokster and a variety of other similar services that allow computer users to connect with each other and to copy many types of program files, including music and other media, from one another's hard drives, all without securing licenses from owners of digital music rights. The legal status of these free services is uncertain, because although some courts have found that these services violate copyright laws, other services have been found to not violate any copyright laws, particularly in the case of Grokster. Additionally, enforcement efforts against those in violation have not effectively shut down these services, and there can be no assurance that these services will ever be shut down. The ongoing presence of these "free" services substantially impairs the marketability of legitimate services, regardless of the ultimate resolution of their legal status.

Many of our competitors have significantly more resources than we do, including access to digital music rights, and some of our competitors may be able to leverage their experience in providing online music distribution services or similar services to their customers in other businesses. Some of these competitors may be able to offer goods and services at a lower price than we can. In addition, competing services may be able to obtain more or better music content or may be able to license digital music on more favorable terms than we can, which could harm the ability of our online music services to compete effectively in the marketplace.

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The Internet and media distribution industries are undergoing substantial changes, which have resulted in increased consolidation. Many companies in these industries have been going out of business or are being acquired by competitors. As a result, we may be competing with larger competitors that have substantially greater resources than we do. We expect this consolidation and strategic partnering to continue.

We believe that consumers in the 35+ age group would be interested in a website which would allow them to buy music and at the same time benefit a charity or cause of their choice. We also believe that the 35+ age group is less likely to use file sharing services because they may be less comfortable with technology, and more likely to respect copyright laws. Accordingly, a significant market sector that we will focus our marketing efforts for our charity music website will be these older consumers. To do so we must recruit the best of those established and highly visible artists with whom this constituency identifies. It is certain that our ability to recruit such recording artists and effectively market to this audience will play a significant role in our success as a company.

Legislation and Government Regulation

Laws and regulations directly applicable to Internet communications, commerce and advertising are becoming more prevalent. In addition to recent laws enacted by the United States Congress regulating children's privacy, copyrights and taxation, Sound Revolution is subject to rules and regulations around the world which effect the business of the Internet. Also, because Sound Revolution carries on business in Canada, it is subject to laws regarding employment, taxes and other regulatory issues for its Canadian operations.

The European Union recently enacted its own privacy regulations that may result in limits on the collection and use of certain user information. The laws governing the Internet, however, remain largely unsettled, even in areas where there has been some legislative action. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy, libel and commerce may prompt calls for more stringent consumer protection laws, both in the United States and abroad, that may impose additional burdens on companies conducting business on the Internet. Furthermore, the Federal Trade Commission has recently investigated the disclosure of personal identifying information obtained from individuals by Internet companies. Evolving areas of law that are relevant to our business include privacy law, proposed encryption laws, regulation on what websites contain, and sales and use tax. For example, changes in copyright law could require us to change the manner in which we conduct business or increase our costs of doing business. Because of this rapidly evolving and uncertain regulatory environment, we cannot predict how these laws and regulations might affect our business. In addition, these uncertainties make it difficult to ensure compliance with the laws and regulations governing the Internet. These laws and regulations could harm us by subjecting us to liability or forcing us to change how we do business.

Environmental Law Compliance

To the extent which environmental compliance may be necessary, we do not anticipate any significant compliance expense.

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Item 2. Description of Property.

Our offices and studio are located at 345 West 11th Avenue, Unit 4, Vancouver, British Columbia, V5Y 1T3, telephone (604)780-3914, fax (604) 408 5177. We lease the studio, which is approximately 400 square feet, from Ryan Tunnicliffe, who is an officer of Sound Revolution. We pay Mr. Tunnicliffe $162 U.S. Dollars ($200 Canadian) per month for the facilities. The property is equipped with full music production and multimedia production facilities, including the following: Computer DAW Running Emagic Logic, Nuendo and Pro tools Computer Non-Linear Editing System, 210gb Adobe Premeire, After Effects Roland JV-30 midi controller Yamaha RM1x Midi Sequencer Emu Launch Pad Midi Controller Korg Electribe ES Groove Sampler Yamaha Ry-30 Rhythm Programmer Korg MicroKorg Synthesiser, Ensoiq DP4+, Aphex Aural Exciter, Emu ESI-4000 Sampler Lexocon Vortex Signal Processor, DeltaLab Effectron Delay Line, Symtrix SG-200 Dual Signal Gates (2), Spirirt Folio Mixer, Videoonics Mx1. video mixer, Yamaha cs-10 Vintage Analog Synth, Yamaha cs-15, Vestex Turntables and Mixer Sony TRV-900 3CCD DV, Canon Vistua Digital Video Camera, and an Audio Technica 291b Mic. Internet connection and fax are included in our monthly lease payment. We pay an additional fee for our telephones.

Item 3. Legal Proceedings.

We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholders are an adverse party or has a material interest adverse to us.

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

We had no submissions of matters to a vote of security holders during the last quarter of our fiscal year.

Item 5. Market for Common Equity and Related Stockholder Matters.

Our common stock is quoted on the OTC Bulletin Board under the symbol "SRVN". Our common stock began quotation on the OTC Bulletin Board on June 23, 2005. The following quotations reflect the high and low bids for our common stock based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The high and low prices of our common stock (obtained from Stockgroup and the OTC Bulletin Board) for the periods indicated below are as follows:

Quarter Ended High Low
May 31, 2004 N/A N/A
August 31, 2004 N/A N/A
November 30, 2004 N/A N/A
February 28, 2005 N/A N/A
May 31, 2005 N/A N/A
August 31, 2005 $1.47 $0.255
November 30, 2005 $1.25 $0.35
February 28, 2006 $0.65 $0.26

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Holladay Stock Transfer, Inc., 2949 North 67th Place, Scottsdale, Arizona 85251 (telephone 480-481-3940, facsimile 480-481-3941) is the transfer agent for our shares of common stock.

As of June 12, 2006, we had 10,391,191 shares of common stock outstanding and approximately 60 stockholders of record.

Dividend Policy

We have not declared or paid any cash dividends since inception. We intend to retain future earnings, if any, for use in the operation and expansion of our business and do not intend to pay any cash dividends in the foreseeable future.

Although there are no restrictions that limit our ability to pay dividends on our shares of common stock, we intend to retain future earnings for use in our operations and the expansion of our business.

Recent Sales of Unregistered Securities

During our fiscal year ended February 28, 2006, we did not make any unregistered sales of any of our common stock.

Item 6. Management's Discussions and Analysis or Plan of Operation.

The following discussion should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing elsewhere in this report. The discussions of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.

Overview

Sound Revolution is a development stage company and our efforts have been principally devoted to developing a website through which we intend to sell digital music downloads, and developing email management software which will enable musicians to market their music and music related products online.

We anticipate that our business will incur significant operating losses in the future. At this time, we believe that our success depends on our ability to complete development of our products and bring them to market quickly.

Sound Revolution's existence is dependent upon management's ability to develop profitable. Management anticipates Sound Revolution will attain profitable status and improve its liquidity through the continued developing of its products and establishing a profitable market for Sound

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Revolution's products and additional equity investment in Sound Revolution. Sound Revolution just launched its website charitytunes.com. We have acquired the rights to sell a catalogue of over 6,000 songs in various genres, and we intend to continue entering into agreements with music rights owners to distribute their songs online. One of the features we are building into our website charitytunes.com, is an automated feature that allows musicians to agree to our digital distribution agreement and upload their music to us via the Internet. We have entered into agreements with approximately 10 charities, but we still need to enter into agreements for the participation of more charities for our business plan to work. Our plans are to have our website www.charitytunes.com fully functioning with a good selection of digital music for sale and the participation of several charities to assist us in marketing the website by the end of 2006.

We are currently designing the specifications for our email management software and are currently in negotiation to enter into an agreement for the full development of the software. We hop to have this product available for launch into the market by the summer of 2007. The email marketing software is not generating revenues, however the website charitytunes.com just began generating revenues. We also hope to be generating revenues from our email management software by summer, 2007.

In order to improve Sound Revolution's liquidity, Sound Revolution intends to, in the fall of 2006, begin pursuing additional equity financing through discussion with investment bankers and private investors. There can be no assurance Sound Revolution will be successful in its efforts to secure additional equity financing. If Sound Revolution is unable to raise equity or obtain alternative financing, Sound Revolution may not be able to continue operations with respect to the continued development of charitytunes.com, or the development of its fan management software and we may have to cease development activities.

If operations and cash flow improve through these efforts, management believes that Sound Revolution can continue to operate. However, no assurance can be given that management's actions will result in profitable operations or the resolution of its liquidity problems.

We intend to spend approximately $100,000 over the course of the next year to continue to develop our website charitytunes.com and another $10,000 in the development of our fan management software.

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We estimate that our expenses over the next 12 months will be approximately $1,000,000 as follows:

  $100,000 for continued development of our website charitytunes.com
$50,000 in auditor and legal fees
$10,000 for development of the first phase of our email management software
$18,000 in director's fees
$12,000 general administration expenses
$100,000 in marketing fees
$450,000 in management fees
$100,000 in consulting fees relating to promotion and marketing of our website, charitytunes.com
$50,000 in delivery fees for obtaining copies of songs we plan to license
$100,000 consulting fees relating to the continued development of charitytunes.com through music acquisitions and alliances
$10,000 in market research costs

Sound Revolution will continue to engage outside contractors and consultants who are willing to be paid in stock rather than cash. Expenses incurred which cannot be paid in stock, such as Auditors fees, will be paid through cash. If the cash in our account is insufficient to cover our Auditor fees, we will cover our expenses by accessing loans from Bacchus through our loan agreement signed on February 28, 2005, or by seeking financing through equity placements. If Sound Revolution is unable to raise necessary capital to meet its capital requirements, Sound Revolution may not be able to pay its internet hosting fees, which may mean Sound Revolution's website and digital music may never become available to the public, and Sound Revolution may not be able to pay its auditor which could result in a failure to comply with accounting disclosure requirements.

As Sound Revolution expands in the future, and once our products are ready for distribution, Sound Revolution will incur additional costs for personnel. In order for Sound Revolution to attract and retain quality personnel, management anticipates it will need to offer competitive salaries, issue common stock to consultants and employees, and grant Sound Revolution stock options to future employees. We anticipate that we will need approximately $550,000 per year beginning in 2007 to pay salaries to employees or consultants in working in the areas of marketing, sales music acquisitions and accounting.

The effect of inflation on Sound Revolution's revenue and operating results was not significant. Sound Revolution's operations are located primarily in Canada. Sound Revolution's

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independent certified public accountants have stated in their report dated June 9, 2006 included herein, that Sound Revolution has incurred operating losses from its inception, and that Sound Revolution is dependent upon management's ability to develop profitable operations. These factors among others may raise substantial doubt about Sound Revolution's ability to continue as a going concern.

Known Material Trends and Uncertainties

Sound Revolution intends to continue negotiating with owners of digital music rights to obtain digital licensing rights to music. We anticipate that some of these agreements will requires us to make royalty payments, some will allow us to pay a wholesale price, and some will be complete buy outs. Our goal is to acquire 500,000 songs over the next 12 months. We anticipate that we If we are successful in concluding music licensing agreements for 500,000 songs, we anticipate that the costs of implementing these songs into our system will be in the range of $2,000 to $10,000.

As of June 12, 2006, Sound Revolution has no off balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

We believe that the above discussion contains a number of forward-looking statements. Our actual results and our actual plan of operations may differ materially from what is stated above. Factors which may cause our actual results or our actual plan of operations to vary include, among other things, decisions of the board of directors not to pursue a specific course of action based on its re-assessment of the facts or new facts, changes in the online music sales or music distribution industry or general economic conditions.

Certain Relationships and Related Transactions

We have not entered into any transactions with our officers, directors, persons nominated for these positions, beneficial owners of 5% or more of our common stock, or family members of these persons wherein the amount involved in the transaction or a series of similar transactions exceeded $60,000. We are a partially owned subsidiary of Bacchus Entertainment Ltd., a company incorporated in British Columbia which is 100% owned by Penny Green.

Plan of Operation for the 12 Months ending February 28, 2006

Our plan is to build content for our website www.charitytunes.com and build alliances to increase traffic to our site. We intend to hire several business development consultants to assist us in marketing charitytunes.com, as well as assist Sound Revolution in making alliances with music rights owners, charities and marketing partners. If we are successful in hiring several consultants, we may require larger offices, which could increase our monthly administration costs significantly. We also plan to devote some resources to building our FanPro™ email management software in 2006 if we are successful in raising additional capital.

Research and Development

During the fiscal year ended February 28, 2006, we did not incur any expenses on research and development. We anticipate that we will spend approximately $10,000 relating to market research over the next 12 months.

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Purchase of Significant Equipment

We do not intend to purchase any significant equipment through February 28, 2006, unless we identify a suitable business opportunity or business combination that may require us to invest in such equipment.

Employees

Over the twelve months ending February 28, 2006, we anticipate that we will increase our number of employees. To market and further develop alliances for charitytunes.com, we intend to hire three of four new officers, including a Vice President of Niche Markets, a Chief Technology Officer, a Vice President of Music and Marketing and a Vice President of Business Development. If we are successful in retaining such individuals, we may retain them as consultants or as employees. We have identified candidates for several of these positions and we are currently negotiating compensation packages and service agreements.

Item 7. Financial Statements.

We do not have our financial statements for the year ended February 28, 2005 available today and we have not yet received an audit report for our financial statements for that period. We intend to file an amended 10-KSB to include this information once it is available.

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Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 8A. Controls and Procedures.

As required by Rule 13a-15 under the Exchange Act, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of February 28, 2006, being the date of our fiscal year end covered by this Annual Report. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting management to material information relating to us required to be included in our periodic SEC filings.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms.

During our fiscal year ended February 28, 2006, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.

The term "internal control over financial reporting" is defined as a process designed by, or under the supervision of, the registrant's principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

  (1)

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;

     
  (2)

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and

     
  (3)

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant's assets that could have a material effect on the financial statements.

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PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act.

Directors and Executive Officers

All directors of our company hold office until the next annual meeting of the shareholders or until their successors have been elected and qualified. The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office.

As at June 12, 2006 our directors and executive officers, their ages, positions held, and duration of such, are as follows:

Name Position Held with our
Company
Age Date First
Elected or
Appointed
Penny Green President, Chief Executive Officer,
Chief
Financial Officer, Secretary,
Treasurer, Chairman and Director
34 June 4, 2001
Susanne Milka Director 30 March 14, 2004

Business Experience

The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee, indicating the principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.

Penny Green, President, Chief Executive Officer, Chief Financial Officer, Chair of the Board

Ms. Green is the founder of Sound Revolution and served as President and Chief Executive Officer of Sound Revolution from May 2001 to March 2004. She has been a director of Sound Revolution since May 2001 to the present, and in March 2004 she was appointed Chair of the Board. On August 11, 2004, Ms. Green was appointed by the Board to act as the Chief Financial Officer and on June 1, 2005, Ms. Green was appointed as President and Chief Executive Officer of Sound Revolution. Ms. Green has worked in various aspects of the entertainment industry for over 8 years. From October, 2000 to April, 2004, Ms. Green was Director, President and Chief Executive Officer of Mediatelevision.tv, Inc. (formerly OTC.BB.MTVI), which was in the business of developing original streaming media shows for the Internet. Ms. Green worked as VP, Business Development of Angelaudio.com, Inc. (formerly OTC.BB.AADC), an online music distribution company, from May, 2000 to September, 2000. She has been practicing law and has been a member in good standing with the Law Society of British Columbia since 1996. She is qualified to practice law in Washington State and is a member of the Washington State Bar Association.

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Susanne Milka, Director

Ms. Milka was appointed as a director for Sound Revolution on March 14, 2004. She worked in the motion picture industry for the past six years. She has worked on the sets of several Hollywood films and television series, including "Scary Movie 3" "Stargate-Atlantis" and "Get Carter", as well as several Canadian feature film productions. Ms. Milka has developed expertise in various areas of film production, and most recently has been developing experience in the costume department. She has been wardrobe stylist on several commercials and music videos. In November 2005, Ms. Milka became a licensed mortgage broker in British Columbia, after attending courses at the UBC Sauder School of Business. For the past three months, Ms. Milka has acted as a mortgage broker as her main occupation.

Significant Employees

Sound Revolution anticipates that it will be hiring a Chief Technology Officer as well as several Vice Presidents during the next 12 months, to assist Sound Revolution in fully developing and executing our business plan.

Family Relationships

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

Legal Proceedings

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

Audit Committee

The Audit Committee is currently composed of one member, Susanne Milka, who is independent within the meaning of the NASD listing standards and who is otherwise qualified to serve on the Audit Committee under those standards. Sound Revolution's board of directors has determined that Sound Revolution does not have an audit committee financial expert serving on its audit committee. The board of directors has determined that the cost of hiring a financial expert to act as a director of Sound Revolution and to be a member of the audit committee outweighs the benefits of having a financial expert on the committee.

Committees of the Board

We do not have a compensation committee or a nominating committee at this time. Sound Revolution does not have a nominating committee. The Board of Directors, sitting as a Board, selects those individuals to stand for election as members of our Board. Since the Board of Directors does not include a majority of independent directors, the decision of the Board as to director nominees is made by persons who have an interest in the outcome of the determination. The Board will consider candidates for directors proposed by security holders, although no formal procedures for submitting candidates

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have been adopted. Until otherwise determined, not less than 90 days prior to the next annual Board of Directors' meeting at which the slate of Board nominees is adopted, the Board accepts written submissions that include the name, address and telephone number of the proposed nominee, along with a brief statement of the candidate's qualifications to serve as a director and a statement of why the shareholder submitting the name of the proposed nominee believes that the nomination would be in the best interests of shareholders. If the proposed nominee is not the security holder submitting the name of the candidate, a letter from the candidate agreeing to the submission of his or her name for consideration should be provided at the time of submission. The letter should be accompanied by a resume supporting the nominee's qualifications to serve on the Board of Directors, as well as a list of references.

The Board identifies director nominees through a combination of referrals, including by management, existing Board members and security holders, where warranted. Once a candidate has been identified the Board reviews the individual's experience and background, and may discuss the proposed nominee with the source of the recommendation. If the Board believes it to be appropriate, Board members may meet with the proposed nominee before making a final determination whether to include the proposed nominee as a member of management's slate of director nominees submitted for shareholders for election to the Board.

Among the factors that the Board considers when evaluating proposed nominees are their experience in the information technology industry, knowledge of and experience with and knowledge of and experience in business matters, finance, capital markets and mergers and acquisitions. The Board may request additional information from the candidate prior to reaching a determination. The Board is under no obligation to formally respond to all recommendations, although as a matter of practice, it will endeavor to do so.

Family Relationships

There are no family relationships between any of our directors or executive officers.

Code of Ethics

We have not adopted a code of conduct. Companies whose equity securities are listed for trading on the OTCBB are not currently required to do so.

Item 10. Executive Compensation.

None of our officers or directors received annual compensation in excess of $100,000 during the last three complete fiscal years.

Employment/Consulting Agreements

We have several consultants who work with us in the areas of web design, marketing materials, writing, programming, legal services, accounting services, investor relations and business development.

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Stock Options/SAR Grants

Sound Revolution made no grants of stock options or stock appreciation rights during the fiscal year ended February 28, 2006.

Long-Term Incentive Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers.

We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.

Directors Compensation

We reimburse our directors for expenses incurred in connection with attending board meetings but did not pay director's fees or other cash compensation for services rendered as a director in the year ended February 28, 2006

One of our directors, Susanne Milka, has an agreement regarding compensation with Sound Revolution. The agreement entitles Ms. Milka to payment of $500 annually for services as a director and $1500 annually for services as the sole member of the audit committee. She was owed $2,000 for her director services for the fiscal year ended February 28, 2006, which was paid in full to her by May 31, 2006.

Other than Susanne Milka, no director received compensation during the fiscal year ended February 28, 2006. We have no standard arrangement pursuant to which our directors are compensated for their services in their capacity as directors. The board of directors may award special remuneration to any director undertaking any special services on behalf of our company other than services ordinarily required of a director. No director received and/or accrued any compensation for his services as a director, including committee participation and/or special assignments.

Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Principal Stockholders

The following table sets forth, as of June 12, 2006, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock, as well as by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.

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Name and Address of Beneficial
Owner
Amount and Nature of
Beneficial Ownership
(1)
Percentage
of Class (2)
Penny Green (3) 7,897,302 76%
Susanne Milka (4) 5,400 Less than 1%
Directors and Executive Officers
as a Group
7,902,702 76.05%
Heather Remillard 940,000 9.05%
Violet Green 705,000 6.78%

(1) Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.

(2) Based on 10,391,191 shares of common stock issued and outstanding as of June 12, 2006.

(3)Penny Green is a Director and the Chief Executive Officer, Chair, Chief Financial Officer and President of Sound Revolution.

(4) Susanne Milka is a director of Sound Revolution.

Item 12. Certain Relationships and Related Transactions.

Except as otherwise indicated below, we have not been a party to any transaction, proposed transaction, or series of transactions in which the amount involved exceeds $60,000, and in which, to its knowledge, any of its directors, officers, five percent beneficial security holder, or any member of the immediate family of the foregoing persons has had or will have a direct or indirect material interest.

Sound Revolution has an agreement with Ryan Tunnicliffe, an officer of Sound Revolution, for full access to his multimedia facilities which include a digital camera, full editing suite, encoding facilities, sound and music production, and compact disk duplication. The term of the agreements requires payment to Mr. Tunnicliffe of $200 Canadian per month. The agreement expires on May 31, 2007, but may be terminated by Sound Revolution on one month’s notice.

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Item 13. Exhibits and Reports on Form 8-K.

Exhibits

(3) Articles of Incorporation/Bylaws
   
3.1 Articles of Incorporation (incorporated by reference as Exhibit Number 3.1 of our Prospectus of Form SB-2 filed December 8, 2004).
   
3.2 Bylaws (incorporated by reference as Exhibit Number 3.2 of our Prospectus of Form SB-2 filed December 8, 2004).
   
(10) Material Contracts
   
10.1 Lease Agreement with Ryan Tunnicliffe (incorporated by reference as Exhibit Number 10.2 of our Prospectus of Form SB-2 filed December 8, 2004).
   
10.2 Addendum to Lease Agreement with Ryan Tunnicliffe dated May 1, 2005 (incorporated by reference as Exhibit Number 10.2 of our Report on Form 10-KSB filed June 15, 2006)
   
10.3 Loan Agreement with Bacchus Entertainment Ltd. and Penny Green (incorporated by reference as Exhibit Number 10.5 of our Prospectus of Form SB-2 filed December 8, 2004).
   
10.4 Amendment to Loan Agreement with Bacchus Entertainment Ltd. dated (incorporated by reference as Exhibit Number 10.2 of our Report on Form 10-QSB filed January 14, 2005).
   
10.5 Agreement with David Hersk & Associates dated January 11, 2005 (incorporated by reference as Exhibit Number 10.7 of our Report on Form 10-KSB filed June 15, 2006)
   
10.6 Development Agreement with Gravit-e Technologies Inc. dated May 3, 2005 (incorporated by reference as Exhibit Number 10.8 of our Report on Form 10-KSB filed June 15, 2006)
   
(31) Certifications
   
31.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
(32) Certifications
   
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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Item 14. Principal Accountant Fees and Services.

The aggregate fees billed for the two most recently completed fiscal years ended February 28 for professional services rendered by the principal accountant for the audit of our company's annual financial statements and review of the financial statements included our Annual Report on Form 10-KSB and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:

  Year Ended
  February 28, February 28,  
  2006 (1) 2005
Audit Related Fees $10,000 $26,500
Tax Fees 0 0
All Other Fees 0 0
Total 0 $26,500

(1) estimated.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SOUND REVOLUTION INC.
a Delaware corporation

/s/ Penny Green                                                      
Penny Green, President, Chair, Secretary,
Chief Executive Officer, Chief Financial
Officer and Director

Date: June 13, 2006

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signatures

/s/ Penny Green                                                      
Penny Green, President, Chair, Secretary,
Chief Executive Officer, Chief Financial
Officer and Director

Date: June 13, 2006

/s/ Susanne Milka                                                    
Susanne Milka , Director

Date: June 13, 2006

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