swwh_10q-123108.htm

United States

Securities and Exchange Commission

Washington, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended December 31, 2008

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

For the transition period from _________________ to _________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-52116

SOUND WORLDWIDE HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

	Delaware		20-5153419
	(State of Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

	Flat K, 13/F (Phase 2) Superluck Industrial Centre 57 Sha Tsui Road, Tsuen Wan, N.T. Hong Kong, China		N/A
	(Address of Principal Executive Offices)		(Zip Code)

(852) 2414-1831

(Registrant's telephone number, including area code)

Not Applicable

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

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 þ No ¨

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

	Large accelerated filer	o	Accelerated filer	o
	Non-accelerated filer	o	Smaller reporting company	x

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

APPLICABLE ONLY TO CORPORATE ISSUERS

As of December 31, 2008, 14,236,250 shares of our common stock were outstanding.

PART 1—FINANCIAL INFORMATION

Item 1. Financial Statements.

SOUND WORLDWIDE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(Stated in US Dollars)

			As of
			December 31,			March 31,
			2008			2008
	Notes		(Unaudited)			(Audited)
			$				$
ASSETS

Current assets:
Cash and cash equivalents				82,824			288,356
Accounts receivable, net of allowance
for doubtful accounts		4		1,531,413			2,464,437
Prepaid expenses and other receivables				419			116,480
Inventories		5		15,370			938,661

Total current assets				1,630,026			3,807,934

Property and equipment, net		6		1,968,737			1,694,374

TOTAL ASSETS				3,598,763			5,502,308


LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES

Current liabilities:
Accounts payable				-			607,235
Bank and other borrowings				338,104			1,279,745
Accrued expenses and other liabilities				166,359			281,934

Total current liabilities				504,463			2,168,914

TOTAL LIABILITIES				504,463			2,168,914

Commitments and contingencies

Stockholder’s equity:
Common stock (US$0.0001 par value
- authorized 20,000,000 shares;
issued and outstanding 14,236,250
shares in December 31, 2008 and
20,000,000 shares in March 31, 2008)				1,424			2,000
Additional paid-in capital				628,522			627,916
Retained earnings				2,467,589			2,701,492
Accumulated other comprehensive income				(3,235	)		1,986

Total stockholders’ equity				3,094,300			3,333,394

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY				3,598,763			5,502,308

SOUND WORLDWIDE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Stated in US Dollars)

	Three months ended December 31,						Nine months ended December 31,
	2008			2007			2008			2007
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
	$			$			$			$

Net sales		42,820			2,080,595			4,113,370			8,509,183
Cost of sales		(80,491	)		(2,168,462	)		(3,755,472	)		(7,667,896	)

Gross (loss) / profit		(37,671	)		(87,867	)		357,898			841,287
Selling, general and administrative expenses		(70,717	)		(350,171	)		(297,991	)		(1,101,005	)
Other income		-			66,496			48			140,922

(Loss) / Income from operations		(108,388	)		(371,542	)		59,955			(118,796	)
Loss on disposal of a subsidiary		(280	)		-			(276,321	)		-
Interest expenses		(3,705	)		(25,638	)		(15,744	)		(78,605	)

Loss before taxes		(112,373	)		(397,180	)		(232,110	)		(197,401	)
Income taxes expenses		-			-			(1,793	)		-

Net loss		(112,373	)		(397,180	)		(233,903	)		(197,401	)

Loss per common share, basic and diluted	0.79 cents			1.91 cents			1.68 cents			1.06 cents

Weighted average number of common shares outstanding, basic and diluted		14,236,250			20,777,174			13,938,524			18,596,364

SOUND WORLDWIDE HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

AND COMPREHENSIVE INCOME

(Stated in US Dollars)

									Accumulated
							Additional		other
	Common stock						paid-in		Comprehensive			Retained
	Shares			Amount			capital		income/(loss)			earnings			Total
				$			$		$			$			$

Balance, April 1, 2008 (Audited)		20,000,000			2,000			627,916		1,986			2,701,492			3,333,394
Retirement of shares		(6,063,750	)		(606	)		606		-			-			-
Issuance of shares		300,000			30			-		-			-			30
Net loss		-			-			-		-			(233,903	)		(233,903	)
Foreign currency translation adjustments		-			-			-		(5,221	)		-			(5,221	)
Comprehensive loss		-			-			-		(5,221	)		(233,903	)		(239,124	)
Balance, December 31, 2008 (Unaudited)		14,236,250			1,424			628,522		(3,235	)		2,467,589			3,094,300

SOUND WORLDWIDE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

	Nine months ended December 31,
	2008			2007
	(Unaudited)			(Unaudited)
	$			$

Cash flows from operating activities:
Net loss		(233,903	)		(197,401	)
Adjustments to reconcile net income to
Net cash provided by operating activities:
Depreciation expense		111,459			13,013
Changes in current assets and liabilities
Accounts receivable		928,709			(67,620	)
Prepaid expenses and other receivables		100,552			(46,012	)
Inventories		922,101			(234,315	)
Accounts payable		(606,473	)		162,487
Amounts due to related parties		-			(68,330	)
Accrued expenses and other liabilities		(115,245	)		145,417
Tax prepayment		15,392			-

Net cash provided by / (used in) operating activities		1,122,592			(292,761	)

Cash flows from investing activities:
Purchases of property and equipment		(389,520	)		(12,561	)

Net cash used in investing activities		(389,520	)		(12,561	)

Cash flow from financing activities:
New bank borrowings		674,383			783,611
Repayment of bank borrowings		(1,614,148	)		(455,755	)

Net cash (used in) / provided by financing activities		(939,765	)		327,856

Effect of exchange rate changes on cash
and cash equivalents		1,161			553

Net (decrease) / increase in cash and cash equivalents		(205,532	)		23,087
Cash and cash equivalents at beginning of the period		288,356			138,654

Cash and cash equivalents at end of the period		82,824			161,741

Supplementary disclosures of cash flow information:
Interest paid		15,744			51,111

Income taxes paid		1,793			-

SOUND WORLDWIDE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Stated in US Dollars)

1.	Basic of Presentation

The interim financial statements of Sound Worldwide Holdings, Inc., a Delaware corporation formerly known as Freedom 3, Inc. (the “Company”), included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. The accompanying financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended March 31, 2008, included in the Annual Report on Form 10-KSB filed with Securities and Exchange Commission on June 30, 2008. The Company follows the same accounting policies in the preparation of interim reports.

Results of operations for the interim periods are not indicative of annual results.

2.	Organization and nature of operations

Sound Worldwide Holdings, Inc. (the “Company”) and its subsidiaries (together, the “Group”) are principally engaged in manufacturing and trading of denim fabrics and garments. The Group owns production plants in Hong Kong and the People’s Republic of China and its customers are mainly in the United States, Europe and Japan.

On October 25, 2007, Freedom 3, Inc. a Delaware corporation (“Freedom 3”), sold one share of its common stock to Sound Worldwide Limited (“Sound Worldwide” or “SWL”) for $1.00 and redeemed 100,000 shares of its common stock from its prior sole stockholder constituting 100% of Freedom 3’s issued and outstanding shares of its common stock prior to the sale, resulting in Sound Worldwide owning 100% of Freedom 3. After the sale and redemption by Freedom 3, Sound Worldwide and Freedom 3 entered into a Share Exchange Agreement, dated October 25, 2007, or Exchange Agreement, pursuant to which each issued and outstanding share of Sound Worldwide’s common stock and preferred stock was converted into 350 shares of Freedom 3’s common stock and preferred stock, respectively, and all of the issued and outstanding shares of Sound Worldwide’s common and preferred stock were retired and cancelled, resulting in Freedom 3 owning 100% of Sound Worldwide (the “Exchange”). This resulted in the stockholders of Sound Worldwide to become stockholders of Freedom 3. The previous stockholder of Freedom was then issued 300,000 shares of Freedom 3 as agreed previously. The one share of Freedom’s common stock held by Sound Worldwide was then cancelled and Sound Worldwide sold one share of its common stock to Freedom 3, which resulted in Freedom 3 owning 100% of Sound Worldwide. Freedom 3 then changed its name to Sound Worldwide Holdings, Inc.

SOUND WORLDWIDE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Stated in US Dollars)

Organization and nature of operations (Continued)

For accounting purposes, the Exchange has been treated as an acquisition of Freedom 3 by Sound Worldwide and as a recapitalization of Sound Worldwide (i.e. a "reverse acquisition"), in which Sound Worldwide was deemed to be the accounting acquirer. As a result of the Exchange, the historical consolidated financial statements of the Company for periods prior to the date of the transaction are those of Sound Worldwide, as the accounting acquirer, and all references to the consolidated financial statements of the Company apply to the historical financial statements of Sound Worldwide prior to the transaction and the consolidated financial statements of the Company subsequent to the transaction. The Company’s shares have been restated retroactively to reflect the share exchange ratio as at the date of the transaction in a manner similar to a stock split.

On May 27, 2008, the Company and SWL, entered into a Share Purchase and Exchange Agreement (the “Exchange Agreement”) with Best Allied, a wholly-owned subsidiary of SWL, and Ms. Ivy S.K. Lam, a director and officer of Best Allied and a stockholder of an aggregate of 6,063,750 shares of the Company’s Common Stock. Pursuant to the Exchange Agreement, at a closing held on May 30, 2008, Ms. Lam purchased from the Company and SWL 10,000 shares of Common Stock of Best Allied owned by SWL, which constituted 100% of the issued and outstanding shares of Best Allied, in exchange for 6,063,750 shares of the Company’s Common Stock held by Ms. Lam, which constituted 100% of the shares of the Company’s Common Stock held by Ms. Lam (the “Exchange”). The effective date of the Exchange is April 1, 2008.

Pursuant to the agreement, Ms. Lam had agreed to the return and cancellation of 6,063,750 shares of our common stock held by her.

As of December 31, 2008, the subsidiaries of the Company include the following:

	Place and date	Attributable equity	Principal
Name of company	of incorporation	interest held	activities

Sound Worldwide	BVI	100%	Investment holding
Limited (“SWL”)	July 28, 1999

Asian Point	BVI	100%	Manufacturing and
Investment Limited	March 26, 1997		trading of denim fabrics

SOUND WORLDWIDE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Stated in US Dollars)

Summary of principal accounting policies

Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, at the date of the financial statements and reported amount of revenues and expenses during the reporting period.

Consolidation

The consolidated financial statements include the accounts of Sound Worldwide Holdings, Inc. and its subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal.

Revenue recognition

The Company recognized revenue when the following fundamental criteria are met: (i) persuasive evidence that an arrangement exists, (ii) delivery has occurred, (iii) our price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is reasonably assured. These criteria are usually met at the time of product shipment. The Company does not recognize revenue until all customer acceptance requirements have been met and no significant obligations remain, when applicable. Customer purchase orders and/or contracts are generally used to determine the existence of an arrangement. Shipping documents are used to verify product delivery. The Company assesses whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. The Company assesses the collectibility of the accounts receivable based primarily upon the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer’s payment history.

Sales of Goods represent the invoiced values of goods, net of sales returns, trade discounts and allowances. The Company records reductions to revenue for estimated product returns and pricing adjustments in the same period that the related revenue is recorded. The amount of these reductions is based on historical sales returns, analysis of credit memo data, and other factors known at the time. The amounts of reductions to revenue were $2,571 and $27,005 for the nine months ended December 31, 2008 and 2007, respectively.

SOUND WORLDWIDE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Stated in US Dollars)

3. Summary of principal accounting policies (Continued)

Trade accounts receivable

Accounts receivable are stated at original amount less allowance made for doubtful receivables, if any, based on a review of all outstanding amounts at the year end. An allowance is also made when there is objective evidence that the Group will not be able to collect all amounts due according to original terms of receivables. Bad debts are written off when identified. The Group extends unsecured credit to customers in the normal course of business and believes all accounts receivable in excess of the allowances for doubtful receivables to be fully collectible. The Group does not accrue interest on trade accounts receivable.

Inventory

Inventories, which primarily consist of yarns, denim fabrics, garments and other textile materials and products, are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. Write down of potentially obsolete or slow-moving inventory is recorded based on management’s assumptions about future demand and market conditions.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

SOUND WORLDWIDE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Stated in US Dollars)

3. Summary of principal accounting policies (Continued)

Recently Issued Accounting Pronouncements

In February 2008, FASB issued FASB Staff Position (“FSP”) FAS 157-1 “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements. That address Fair Value Measurement for Purposes of Lease Classification or Measurement under Statement 13,” and FSP FAS 157-2, “Effective Date of FASB Statement No. 157.” FSP FAS 157-1 amends the scope of SFAS No. 157 and other accounting standards that address fair value measurements for purpose of lease classification or measurement under Statement 13. The FSP is effective on initial adoption of Statement 157, FSP FAS 157-2 defers the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008 for all nonfinancial assets and nonfinancial liabilities, exception those that are recognized or disclosed at fair value in the financial statements on a recurring basis. We do not expect the adoption of FSP FAS 157-1 and FSP FAS 157-2 will have a material impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment to ARB No. 51”. SFAS No. 141(R) and SFAS No. 160 require most identifiable assets, liabilities, noncontrolling interests and goodwill acquired in business combination to be recorded at “full fair value” and require noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with noncontrolling interest holders. Both statements are effective for periods beginning on or after December 15, 2008, and earlier adoption is prohibited. SFAS No. 141(R) will be applied to business combinations occurring after the effective date. SFAS No. 160 will be applied prospectively to all noncontrolling interests, including any that arose before the effective date. We are currently evaluating the impact of adopting SFAS No. 160 on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” which requires enhanced disclosures about an entity’s derivative and hedging activities. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We do not expect the adoption of SFAS 161 will have a material impact on our results of operations and financial position.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). This statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in accordance with generally accepted accounting principles (“GAAP”). With the issuance of this statement, the FASB concluded that the GAAP hierarchy should be directed toward the entity and not its auditor, and reside in the accounting literature established by the FASB as opposed to the American Institute of Certified Public Accountants (“AICPA”) Statement on Auditing Standards No. 69, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” This statement is effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” We do not expect the adoption of SFAS 162 will have a material impact on our results of operations and financial position.

SOUND WORLDWIDE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Stated in US Dollars)

4.	Accounts receivable, net

Accounts receivable consist of the following:

	As of
	December 31,		March 31,
	2008		2008
	(Unaudited) $		(Audited) $

Accounts receivable		1,531,413		2,464,437
Less: allowance for doubtful accounts				-
		1,531,413		2,464,437

The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount.

5.	Inventories

Inventories by major categories are summarized as follows:

	As of
	December 31,		March 31,
	2008		2008
	(Unaudited) $		(Audited) $

Raw materials		-		102,439
Work-in-progress		-		456,216
Finished goods		15,370		380,006

		15,370		938,661

No inventories were written off for the nine months ended December 31, 2008 and for the year ended March 31, 2008.

SOUND WORLDWIDE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Stated in US Dollars)

6.	Property and equipment, net

Property and equipment consists of the following:

	As of
	December 31,			March 31,
	2008			2008
	(Unaudited) $			(Audited) $

Machinery		2,079,516			2,272,563
Furniture and office equipment		590			89,299
Leasehold improvement		-			27,025
Motor vehicles		45,894			89,259
Total		2,126,000			2,478,146
Less: accumulated depreciation		(157,263	)		(783,772	)
Property and equipment, net		1,968,737			1,694,374

Depreciation expenses for the nine months ended December 31, 2008 and 2007 were $111,459 and $13,013, of which $111,459 and $Nil was included in cost of sales, and $Nil and $13,013 was included in selling, general and administrative expenses for the nine months ended December 31, 2008 and 2007, respectively.

7.	Financing arrangements

Banking facilities

At December 31, 2008, the banking facilities consisting of bank loans and other credit facilities were $564,247, of which $338,104 has been drawn down and $226,143 remains available. Below is a summary of Asian Point’s banking facilities:

Revolving trading facility of $564,247 between Asian Point and Industrial and Commercial Bank of China (Asia) Limited. This agreement was signed on November 26, 2007. The trading facility has an interest rate of prime or prevailing funding cost, whichever is higher, plus 2%. The revolving trading facility is guaranteed by the personal assets of Mr. Roger K. W. Fan and Ms. Szeto Mei Ling. As of December 31, 2008 $338,104 has been drawn down and $226,143 remains available.

8.	Loss per share

Basic loss per share of common stock was calculated by dividing the net loss by the weighted average number of shares of common stock outstanding for the period.

There is no dilution effect to the basic loss per share of common stock for the periods presented.

SOUND WORLDWIDE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Stated in US Dollars)

9.	Commitments and contingencies

Long-term contractual payment obligations as of December 31, 2008 were as follows:

	$
Payment by period,
Less than 1 year		123,335

Total		123,335

The Company has operating lease agreements principally for its office facilities. The leases have remaining terms of 3 to 24 months. Rental expenses were $6,199 and $80,769 for the nine months ended December 31, 2008 and 2007, respectively.

Future minimum lease payments under non-cancellable operating lease agreement as of December 31, 2008 were as follows:

	$
Nine months ending December 31,
2009		11,551

Total		11,551

Other than as disclosed above, the Company had no other material contractual obligations and had no off-balance sheet guarantees or arrangements or transactions as at December 31, 2008.

10.	Comprehensive (loss) / income

Other comprehensive (loss) / income refers to revenues, expenses, gains and losses that under U.S. GAAP are included in comprehensive (loss) / income but are excluded from net (loss) / income as these amounts are recorded as a component of stockholders’ equity. The Company’s other comprehensive (loss) / income represented foreign currency translation adjustment.

Item 2. Management’s Discussion and Analysis or Plan of Operation.

The following discussion and analysis is provided to increase the understanding of, and should be read in conjunction with, our unaudited financial statements and related notes included elsewhere in this Report. Historical results and percentage relationships among any amounts in these financial statements are not necessarily indicative of trends in operating results for any future period. This report contains “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The statements, which are not historical facts contained in this Report, including this Management’s discussion and analysis of financial condition and results of operation, and notes to our unaudited financial statements, particularly those that utilize terminology such as “may” “will,” “should,” “expects,” “anticipates,” “estimates,” “believes,” or “plans” or comparable terminology are forward-looking statements. Such statements are based on currently available operating, financial and competitive information, and are subject to various risks and uncertainties. Future events and our actual results may differ materially from the results reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, dependence on existing and future key strategic and strategic end-user customers, limited ability to establish new strategic relationships, ability to sustain and manage growth, variability of operating results, our expansion and development of new service lines, marketing and other business development initiatives, the commencement of new engagements, competition in the industry, general economic conditions, dependence on key personnel, the ability to attract, hire and retain personnel who possess the technical skills and experience necessary to meet the service requirements of our clients, the potential liability with respect to actions taken by our existing and past employees, risks associated with international sales, and other risks described herein and in our other filings with the Securities and Exchange Commission.

The safe harbor for forward-looking statements provided by Section 21E of the Securities Exchange Act of 1934 excludes issuers of “penny stock” (as defined under Rule 3a51-1 of the Securities Exchange Act of 1934). Our common stock currently falls within that definition.

All forward-looking statements in this document are based on information currently available to us as of the date of this report, and we assume no obligation to update any forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward looking statements.

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes appearing elsewhere in this report.

Organizational History and Operations

Pursuant to the agreement, Ms. Lam had agreed to the return and cancellation of 6,063,750 shares of our common stock held by her.

As of September 30, 2008, the subsidiaries of the Company include the following:

þ Sound Worldwide Limited (“SWL”), incorporated in the British Virgin Islands on July 28, 1999, 100% of which is owned by the Company. SWL’s primary business is as an investment holding company;

þ Asian Point Investment Limited (“Asian Point”) , incorporated in the British Virgin Islands on March 26, 1997, 100% of which is owned by the Company. Asian Point’s primary business is manufacturing and trading denim fabrics.

SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

Consolidation

The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal.

Revenue Recognition

The Company recognized revenue when the following fundamental criteria are met: (i) persuasive evidence that an arrangement exists, (ii) delivery has occurred, (iii) our price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is reasonably assured. These criteria are usually met at the time of product shipment. The Company does not recognize revenue until all customer acceptance requirements have been met and no significant obligations remain, when applicable. Customer purchase orders and/or contracts are generally used to determine the existence of an arrangement. Shipping documents are used to verify product delivery. The Company assesses whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. The Company assesses the collectability of the accounts receivable based primarily upon the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer’s payment history.

Trade Accounts Receivable

Inventory

Income Taxes

Recently Issued Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements - an amendment to ARB No. 51”. SFAS No. 141(R) and SFAS No. 160 require most identifiable assets, liabilities, noncontrolling interests and goodwill acquired in business combination to be recorded at “full fair value” and require noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with noncontrolling interest holders. Both statements are effective for periods beginning on or after December 15, 2008, and earlier adoption is prohibited. SFAS No. 141(R) will be applied to business combinations occurring after the effective date. SFAS No. 160 will be applied prospectively to all noncontrolling interests, including any that arose before the effective date. We are currently evaluating the impact of adopting SFAS No. 160 on our consolidated financial statements.

Item 3. Controls and Procedures.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit 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. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal controls over financial reporting. There was no change in our internal controls, which are included within disclosure controls and procedures, during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls.

Item 3A(T). Controls and Procedures.

Evaluation of disclosure and controls and procedures. As of the end of the period covered by this Quarterly report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act). Based on this evaluation, our chief executive officer and treasurer, the sole officers and directors of the company, concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. The purpose of the Company’s establishment and maintenance of such controls is to identify material weaknesses that have more than a remote likelihood of leading to a material misstatement in the financial statements. While identifying control deficiencies and significant deficiencies represents an important component of management's assessment, the overall focus of internal control reporting is on those items that could result in material errors in the Company’s financial statements. As of the end of the period covered by this report, our chief executive officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15b under the Securities Exchange Act of 1934. Based on his review of our disclosure controls and procedures, he concluded that our disclosure controls and procedures are effective in timely alerting him to material information relating to us that is required to be included in our periodic SEC filings. Management is in the continuing process of analyzing and adopting new policies and procedures to improve the design and operations of our disclosure controls. These efforts include identifying and tasking available staff to better segregate duties; the review and consideration of more sophisticated software and other office procedures that would aid us in timely flagging potential material information that requires staff and management review and possible action prior to filing; and consideration of hiring additional staff geared towards review of our financial data and reporting. We continue to train to our existing staff in order to achieve reasonable assurance regarding the reliability of the financial statements.

We also expect that through the natural learning process management will achieve efficiencies as they complete future assessments of internal control. For example, management's knowledge of the prior year's assessment results will impact its current year risk-based analysis of the significant accounts and the related required documentation and testing that may be necessary. Management may determine that certain controls require more extensive testing, while other controls require little testing in a given year. Additionally, in reaching its conclusion of reasonable assurance, management may find it appropriate to adjust the nature, extent and timing of testing from year to year - in some years delving deeply into selected internal control areas while performing less extensive testing in other areas and changing that focus from year to year and quarter to quarter.

In any event, we will, consistent with Section 404 of the Sarbanes-Oxley Act of 2002, implement reasonable assurance, risk-based reviews of our internal financial reporting controls; evaluate internal control deficiencies; disclose material weaknesses; review information technology issues; and seek communications with auditors in order to periodically review our control procedures, and create new controls to address perceived material issues regarding financial reporting

RESULTS OF OPERATIONS

Assets

At December 31, 2008, our total assets were $3,598,763, compared to $5,502,308 at March 31, 2008. This decrease was primarily due to the disposal of the subsidiary Best Allied, on April 1, 2008.

Cash and Cash Equivalents

At December 31, 2008, we had $82,824 in cash and cash equivalents, compared to $288,356 at March 31, 2008. This decrease was primarily due to repayment of bank borrowings during the nine months ended December 31, 2008, offset in part by the net cash provided by operating activities.

Accounts Receivable

Our accounts receivable typically operate at a one to two-month cycle. At December 31, 2008, our accounts receivable, net of allowance of doubtful accounts, was $1,531,413 compared to $2,464,437 at March 31, 2008. This decrease was primarily due to the decreased demand in our products in the three months ended December 31, 2008. The decrease in sales volume as a result of the disposal of Best Allied also contributed to the decrease in accounts receivable balance. We have a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount.

Prepaid Expenses and Other Receivables

At December 31, 2008, we had $419 in prepaid expenses and other receivables, compared to $116,480 at March 31, 2008. Prepaid expenses consist of rental and utility deposits and other receivables. The decrease was due to the decrease in rental and utility deposits as a result the disposal of Best Allied on April 1, 2008.

Inventories

At December 31, 2008, we had $15,370 in inventories, compared to$938,661 at March 31, 2008. Our inventories consist of raw materials, products which are work-in-progress, and finished goods. The decrease was due to a decrease in all three categories. Our raw materials decreased from $102,439 at March 31, 2008 to $0 at December 31, 2008 primarily due to the decrease in purchases during the three and nine months ended December 31, 2008, as compared to the same periods ended March 31, 2008. Our Work-in-Progress inventory significantly decreased from $456,216 at March 31, 2008 to $0 at December 31, 2008 primarily due to the implementation of more efficient production schedules, which led to a shorter manufacturing lead time. Our Finished Goods decreased from $380,006 to $15,370 primarily due to less finished goods manufactured for the quarter ended December 31, 2008, as compared to the last quarter ended March 31, 2008. No inventories were written off for the three and nine months ended December 31, 2008.

Liabilities

Total current liabilities, consisting of accounts payable, bank and other borrowings, amounts due to related parties and accrued expenses and other liabilities, decreased from $2,168,914 at March 31, 2008 to $504,463 at December 31, 2008. This decrease was primarily due to a decrease in Accounts Payable, Bank and Other Borrowings and Accrued Expenses and Other Liabilities.

Accounts Payable

Accounts payable, which typically operates on a two to three-week cycle, decreased from $607,235 at March 31, 2008 to $0 at December 31, 2008 primarily due to the decrease in purchases for the quarter ended December 31, 2008, as compared to the last quarter ended March 31, 2008, as a result of a decrease in sales order.

Bank and Other Borrowings

Bank and other borrowing, which consist of bank overdrafts, short-term loans, and other borrowings, decreased from $1,279,745 at March 31, 2008 to $338,104 at December 31, 2008. This decrease was primarily due to the repayment of bank borrowings of $1,614,148 for the nine months ended December 31, 2008. The decrease was offset in part by new bank borrowings of $674,383.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities decreased from $281,934 at March 31, 2008 to $166,359 at December 31, 2008. Accrued expenses consist of legal and professional fees, accrued staff related costs and other accruals and liabilities. This decrease was primarily due to the decrease in operating expenses as a result of decrease in sales volume.

Three Months Ended December 31, 2008 Compared to Three Months Ended December 31, 2007

Revenues

Our revenues significantly decreased by $2,037,775, or 97.9%, from $2,080,595 in the quarter ended December 31, 2007 to $42,820 in the quarter ended December 31, 2008. The decrease was mainly attributable to the decrease in sales volume as a result of the exceptionally low demand for the products during the quarter ended December 31, 2008. The disposal of Best Allied on April 1, 2008 also contributed to the decrease in revenues.

Cost of Revenues

For the quarter ended December 31, 2008, our total cost of revenues decreased by $2,087,971, or 96.3%, to $80,491 from $2,168,462 for the quarter ended December 31, 2007. This decrease was primarily due to the decrease in net revenues as a result of the decreased product demand, and the disposal of Best Allied on April 1, 2008.

Gross Loss

Our gross loss amount decreased by $50,196, or 57.1%, from $87,867 for the quarter ended December 31, 2007, to $37,671 for the quarter ended December 31, 2008. The gross loss was primarily due to the decrease in net revenues as a result of the decrease in product demand, and the disposal of Best Allied.

Operating Expenses

Our total operating expenses (selling, general & administrative expenses (SG&A)) for the quarter ended December 31, 2008 decreased by $279,454 or 79.8%, to $70,717 from $350,171 for the quarter ended December 31, 2007. The decrease was primarily due to the decrease in sales volume as a result of the decrease in product demand, and the disposal of Best Allied.

Other Income

Our other income, mainly consisting of commission and handling income, for the quarter ended December 31, 2008 and 2007 were $0 and $66,496, respectively. The decrease was primarily due to the decrease in provision of handling services.

Loss from Operations

Our loss from operations for the quarter ended December 31, 2008 and 2007 were $108,388 and $371,542, respectively. The loss from operation was primarily due to the decrease in manufacturing operations as a result of the decrease in product demand.

Depreciation

Depreciation expense for office units, machinery, furniture equipment and motor vehicles, increased for the quarter ended December 31, 2008 to $39,824, from $6,491 for the same period in 2007. This increase in depreciation expense was mainly due to the increase in purchases of property and equipment for 2008 as compared to 2007.

Interest Expense

Interest expense, net, decreased for the quarter ended December 31, 2008 to $3,705 from $25,638 for the quarter ended December 31, 2007. The decrease was primarily due to the decrease in average bank borrowings.

Net Loss

We had net loss of $112,373 for the quarter ended December 31, 2008 as compared to net loss of $397,180 for the quarter ended December 31, 2007. The decrease in net loss was primarily due to the decrease in loss from operations.

Loss Per Share

We reported basic and diluted per share loss of 0.79 cents for the quarter ended December 31, 2008 based on 14,236,250 outstanding weighted average shares, compared to basic and diluted per share loss of 1.91 cents for the same period of 2007, based on 20,777,174 outstanding weighted average shares.

Nine Months Ended December 31, 2008 Compared to Nine Months Ended December 31, 2007

Revenues

Our revenues decreased by $4,375,813 or 51.4%, from $8,509,183 in the nine months ended December 31, 2007 to $4,113,370 in the nine months ended December 31, 2008. The decrease was mainly attributable to the decrease in sales volume as a result of the decrease in product demand, and the disposal of Best Allied on April 1, 2008.

Cost of Revenues

For the nine months ended December 31, 2008, our total cost of revenues decreased by $3,912,424, or 51.0%, to $3,755,472 from $7,667,896 for the nine months ended December 31, 2007. This decrease was primarily due to the decrease in net revenues as a result of the decrease in product demand, and the disposal of Best Allied on April 1, 2008.

Gross Profit

Our gross profit amount decreased by $483,389, or 57.5%, from $841,287 for the nine months ended December 31, 2007, to $357,898 for the nine months ended December 31, 2008. The decrease was primarily due to the decrease in net revenues as a result of the decrease in product demand, and the disposal of Best Allied on April 1, 2008. Gross profit percentage decreased from 9.9% for the nine months ended December 31, 2007, to 8.7% for the nine months ended December 31, 2008. The decrease in gross profit percentage was attributable to the decrease in product average selling prices in the first three quarters ended December 31, 2008.

Operating Expenses

Our total operating expenses (selling, general & administrative expenses (SG&A)) for the nine months ended December 31, 2008 decreased by $803,014 or 72.9%, to $297,991 from $1,101,005 for the nine months ended December 31, 2007. The decrease was primarily due to the decrease in sales volume as a result the decrease in product demand, and the disposal of Best Allied on April 1, 2008.

Other Income

Our other income, mainly consisting of commission and handling income, for the nine months ended December 31, 2008 and 2007 were $48 and $140,922, respectively. The decrease was primarily due to the decrease in provision of handling services.

Income/(loss) from Operations

Our income/(loss) from operations for the nine months ended December 31, 2008 and 2007 were $59,955 and ($118,796), respectively. The increase was primarily due to the decrease in operating expenses, offset in part by the decrease in net revenue.

Loss on Disposal of Best Allied

Our loss on our disposal of Best Allied for the nine months ended December 31, 2008 and 2007 were $276,321 and $0 respectively. The 2008 loss was in relation to the disposal of Best Allied on April 1, 2008.

Depreciation

Depreciation expense for office units, machinery, furniture equipment and motor vehicles, increased for the nine months ended December 31, 2008 to $111,459, from $13,013 for the same period in 2007. This increase in depreciation expense was mainly due to the increase in purchases of property and equipment for the nine months ended December 31, 2008 as compared to the same period of 2007.

Interest Expense

Interest expense, net, decreased for the nine months ended December 31, 2008 to $15,744 from $78,605 for the nine months ended December 31, 2007. The decrease was primarily due to the decrease in average bank borrowings.

Net Loss

We had net loss of $233,903 for the nine months ended December 31, 2008 as compared to net income of $197,401 for the nine months ended December 31, 2007. The increase was primarily due to the loss on disposal of Best Allied in 2008.

Loss Per Share

We reported basic and diluted per share loss of 1.68 cents for the nine months ended December 31, 2008 based on 13,938,524 outstanding weighted average shares, compared to basic and diluted per share loss of 1.06 cents for the same period of 2007, based on 18,596,364 outstanding weighted average shares.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2008, we had $82,824 cash and cash equivalents on hand, compared to $288,356 at March 31, 2008. Our primary liquidity and capital resource needs are to finance the costs of our operations and to make capital expenditures. To date, we have financed our business operations through our banking facility and loans from officers and directors. We believe we will have adequate liquidity through the next twelve months to operate our business and to meet our cash requirements.

Operating Activities

Net cash provided by operating activities totaled $1,122,592 for the nine months ended December 31, 2008, which was an increase from the net cash used in operating activities, which totaled $292,761 for the nine months ended December 31, 2007. This change is primarily attributable to a decrease in accounts receivable of $928,709 and a decrease in inventory of $922,101. The net cash provided by operating activities was offset in part by a decrease in accounts payable of $606,473.

Investing Activities

Net cash used in investing activities totaled $389,520 for the nine months ended December 31, 2008, which was an increase from the net cash used in investing activities of $12,561 for the nine months ended December 31, 2007. The net cash used in investing activities was due to an increase in purchases of property and equipment.

Financing Activities

Net cash used in financing activities totaled $939,765 for the nine months ended December 31, 2008, as compared to $327,856 provided by financing activities for the nine months ended December 31, 2007. The change from net cash provided by to net cash used in financing activities was mainly due to repayment of bank borrowings of $1,614,148, but only off set in part by new bank borrowings of $674,383 for the nine months ended December 31, 2008.

The summary of our cash flow statement was as follows:

	For the Nine Months Ended
	December 31, 2008			December 31, 2007
Net cash provided by/(used in) operating activities	$	1,122,592		$	(292,761	)

Net cash used in investing activities	$	(389,520	)	$	(12,561	)

Net cash (used in)/provided by financing activities	$	(939,765	)	$	327,856

Effect of exchange rate on cash	$	1,161		$	553

Net (decrease)/increase in cash	$	(205,532	)	$	23,087

Cash at beginning of period	$	288,356		$	138,654

Cash at end of period	$	82,824		$	161,741

Impact of Inflation and Changing Prices

We were not impacted by inflation during the past two fiscal years in any material respect. Interest rate hikes have increased the rental cost of our vault cash. As the interest rates increase and vault cash costs increase, this will have a less favorable impact on our income.

The following table sets forth the Company Contractual Payment Obligations:

Contractual Obligation	Payment by Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-Term Obligations	$	123,335	$	123,335		—		—		—
Capital Obligations		—		—		—		—		—
Operating Lease Obligations		—		—		—		—		—
Other Long—Term Liabilities Reflected on the Registrant’s Balance Sheet under GAAP		—		—		—		—		—
Total	$	123,335	$	123,335		—		—		—

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements 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 that is material to investors.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

None.

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

On June 27, 2006, Freedom issued 100,000 shares of its common stock to Getting You There, LLC, or GYT, an entity owned by Virginia K. Sourlis, Esq., the sole officer and director of Freedom, for aggregate purchase price of $2,100. The Company sold these shares of common stock under the exemption from the registration requirements of the Securities Act of 1933, as amended, afforded the company under Section 4(2) and Regulation D promulgated thereunder due to the fact that the issuance did not involve a public offering and in light of fact that Ms. Sourlis is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Act. On October 25, 2007, we redeemed all of the 100,000 shares from GYT in exchange for 300,000 shares of the resultant issuer’s common stock after the merger.

In connection with its merger with SWL, on October 25, 2007, Freedom issued 350 shares of its common stock for each share of common stock held by stockholders of SWL of which 2,330,200 are being registered by the Selling Stockholders listed in this Registration Statement. The Company issued these shares under the exemption from the registration requirements of the Securities Act of 1933, as amended, afforded the company under Regulation S promulgated thereunder due to the investors were non-US residents.

As previously reported on a Current Report on Form 8-K filed with the Securities and Exchange Commission on May 30, 2008, on May 27, 2008, the Company and SWL, entered into a Share Purchase and Exchange Agreement (the “Exchange Agreement”) with Best Allied, a wholly-owned subsidiary of SWL, and Ms. Ivy S.K. Lam, a director and officer of Best Allied and a stockholder of an aggregate of 6,063,750 shares of the Company’s Common Stock. Pursuant to the Exchange Agreement, at a closing held on May 30, 2008, Ms. Lam purchased from the Company and SWL 10,000 shares of Common Stock of Best Allied owned by SWL, which constituted 100% of the issued and outstanding shares of Best Allied, in exchange for 6,063,750 shares of the Company’s Common Stock held by Ms. Lam, which constituted 100% of the shares of the Company’s Common Stock held by Ms. Lam (the “Exchange”). The effective date of the Exchange is April 1, 2008. Pursuant to the agreement, Ms Lam had agreed to the return and cancellation of 6,063,750 shares of our common stock held by her. The Company issued these shares under the exemption from the registration requirements of the Securities Act of 1933, as amended, afforded the Company under Regulation S promulgated thereunder due to the fact that Ms. Lam is not a US resident.

On September 19, 2008, the Company issued 300,000 shares of common stock to Wakabayashi Fund, LLC in consideration for services rendered. . The Company issued these shares under the exemption from the registration requirements of the Securities Act of 1933, as amended, afforded the Company under Regulation S promulgated thereunder due to the fact that none of the members of Wakabayashi Fund, LLC are non- US residents.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

None.

Item 6. Exhibits

Item No.	Description	Method of Filing
31.1	Certification of Roger Kwok Wing Fan pursuant to Rule 13a-14(a).	Filed electronically herewith

32.1	Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. § 1350 adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.	Filed electronically herewith

SIGNATURES

Dated: February 17, 2009

/s/ ROGER KWOK WING FAN

Roger Kwok Wing Fan

President and Chief Executive Officer and Chairman

(Principal Executive Officer) of Sound Worldwide Holdings, Inc.