General

S3 Investment Company, Inc. (“the Company” or “SEIH”) was incorporated under the laws of California under the name of Retail Windows, Inc. on April 19, 2000 to engage in any lawful activity as shall be appropriate under laws of the State of California.  On June 30, 2001 the Company amended its Articles of Incorporation to change its name to Axtion Foods, Inc.  Prior to April 2003, Axtion Foods, Inc. was engaged in the development, manufacturing and distribution of health bars and health drinks. The business plan was not fully implemented and on April 16, 2003 Axtion Foods, Inc. changed its name to S3I Holdings, Inc. and pursuant to the Share Exchange Agreement (Agreement) closed the definitive agreement to acquire all of the issued and outstanding capital stock of Securesoft Systems, Inc., a Delaware corporation, making Securesoft Systems, Inc (Securesoft) a wholly-owned subsidiary of the Company, and exchanging all of Securesoft’s capital stock for shares of Company’s authorized but un-issued shares of common stock as provided in Agreement.

Further in connection with the Share Exchange Agreement, the controlling shareholders of the Company surrendered their stock in exchange for transfer of all right, title and interest to the sports nutrition products developed by the company since its inception.  In accordance with the agreement, it was the intention of the parties that the company would acquire all of the issued and outstanding capital stock of Securesoft in exchange solely for the number of shares of the Company’s authorized but un-issued common stock and that the exchange qualify as a tax-free reorganization under section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended, and related sections there under; and the exchange qualify as a transaction in securities exempt from registration or qualification under the Securities Act of 1933 and under the applicable securities laws of each state or jurisdiction where the shareholders reside.

Securesoft Systems, Inc.’s operations were discontinued during the fiscal year ended June 30, 2005.

The Company presently has two subsidiaries: Redwood Capital, Inc. and Sino UJE, LTD.

Redwood Capital, Inc., a privately-held investment advisory group, was acquired during November, 2004. S3 Investment acquired 100% of Redwood Capital, Inc. to participate in the fast growing investment banking market in China.  Redwood Capital specializes in Investment Banking for privately-held Chinese companies and has offices in China and the United States.   

The Company acquired 51% of the common stock of Sino UJE, LTD, a Hong Kong corporation during November, 2004. Sino has an extensive distribution network in China. It distributes medical and industrial supplies for a group of Original Equipment Manufacturers (OEM’s) in Europe and the US that are exclusively represented in China by Sino.  Sino was acquired from YaSheng for 5% of the outstanding stock of the company, a ratio that must be maintained until July of 2008.

Plan of Operation

On April 12, 2004 the Company’s filed an election with the U.S. Securities Exchange Commission to become a business development company (“BDC”) pursuant to Section 54 of the Investment Company Act of 1940.  On August 26, 2005, the Board of Directors unanimously approved a proposal to withdraw the Company’s election to be treated as a business development company as soon as practicable so that the Company could begin conducting business as an operating company rather than as a business development company subject to the Investment Company Act.  On April 5, 2006, a Special Meeting of the S3 Investment Company shareholders was held to consider and vote upon a proposal to authorize the Company’s Board of Directors to withdraw the Company’s election to be treated as a BDC and the proposal was approved.  On April 6, 2006 a Notification of Withdrawal was filed with the Securities Exchange Commission so that the Company could begin conducting business as an operating company rather than a BDC subject to the Investment Company Act.

During the fiscal year ended June 30, 2006, Redwood Capital completed a reverse merger transaction with Dalian Fushi Enterprise Group, Co., Ltd.  Redwood Capital has received fees and stock for the services that were performed in arranging this transaction.  Redwood Capital has a number of other clients in the pipeline and through its present and future deal flow will be able to repay the $523,206 that has been advanced to them by the Company as well as contribute a significant dividend to the Company.

Sino UJE, Ltd. has become cash positive and anticipates in the coming fiscal year commencing the repayment of the credit line of $436,080 that has been advanced to them by the Company.  

Employees

During the fiscal year ended June 30, 2006 the Company had one employee.  Through its subsidiaries, the Company had 5 full time employees who serve in administrative positions and 15 full time employees serving in sales and staff positions.  Management intends to hire additional employees only as needed and as funds are available. In such cases compensation to management and employees will be considered with prevailing wages for services rendered.

Compliance with the Sarbanes-Oxley Act of 2002

On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). The Sarbanes-Oxley Act imposes a wide variety of new regulatory requirements on publicly held companies and their insiders.  Many of these requirements will affect us.  For example:

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Our chief executive officer and chief financial officer must now certify the accuracy of the financial statements contained in our periodic reports;

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Our periodic reports must disclose our conclusions about the effectiveness of our controls and procedures;

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Our periodic reports must disclose whether there were significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses; and

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We may not make any loan to any director or executive officer and we may not materially modify any existing loans.

The Sarbanes-Oxley Act has required us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the new regulations promulgated thereunder.  We will continue to monitor our compliance with all future regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance therewith.

Code of Ethics and Audit Committee Charter

The Board of Directors of the Company adopted a Code of Ethics and an Audit Committee Charter.

The Code of Ethics applies to our directors, principal executive officers, principle financial officer, principal accounting officer or controller, or persons performing similar functions. The code of ethics is designed to deter wrongdoing and to promote:

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Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

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Full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Company;

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Compliance with applicable governmental laws, rules and regulations;

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The prompt internal reporting of violations of the Code; and

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Accountability for adherence to the Code.

The Board of Directors monitors the actions of the Company’s officers and directors to ensure compliance with the Code of Ethics.  Violations are brought to the attention of the Chairman and or appropriate government agencies, as necessary and appropriate.

The primary responsibility of the Audit Committee is to oversee the Company's financial reporting process on behalf of the Company's Board of Directors and report the result of their activities to the Board.  Such responsibilities shall exclude but shall not be limited to, the selection, and if necessary the replacement of the Company's independent auditors, review and discuss with such independent auditors and the Company's internal audit department  (i) the overall scope and plans for the audit, (ii) the adequacy and effectiveness of the accounting and financial controls, including the Company's system to monitor and manage business risks, and legal and ethical programs, and (iii) the results of the annual audit, including the financial statements to be included  in  the  Company's  annual  report  on Form 10-KSB. S3 Investment Company’s audit committee charter was incorporated by reference from the Company’s Annual Report on Form 10-K for the Fiscal Year Ended June 30, 2006 filed on October 14, 2005.