UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
  x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the Fiscal Year Ended March 31, 2010
 
 OR
  o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the transition period from N/A to N/A
  Commission File Number:  000-52116
   Sound Worldwide Holdings, Inc.


(Name of registrant as specified in its charter)




Delaware
20-5153419State of Incorporation
IRS Employer Identification No.





Unit 1, 14/F, Leader Industrial Centre


Nos. 57-59 Au Pui Wan Street, Shatin, N.T.


Hong Kong, China


(Address of principal executive offices)




(852) 2414-1831


(Issuer’s telephone number)




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


Securities registered under Section 12(g) of the Exchange Act:


Common Stock, $0.0001 par value per share


(Title of Class)




Common Stock, $.0001 Par Value




Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes oNo x





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





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





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o   No o









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


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





Large accelerated filer o
Accelerated filer oNon-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 Act).  Yes o   No x




The aggregate market value of voting  and non-voting common equity  held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, September 30, 2009 was approximately $0.00. Solely for purposes of the foregoing calculation, all of the registrant’s directors and officers as of March 31, 2010, are deemed to be affiliates.This determination of affiliate status for this purpose does not reflect a determination that any persons are affiliates for any other purposes.




State the number of shares outstanding of each of the issuer’s classes of equity securities, as of the latest practicable date: As atJuly 9, 2010, there were 16,416,250 shares of Common Stock, $0.0001 par value per share issued and outstanding and no shares of preferred stock $0.0001 par value per share issued and outstanding.




Documents Incorporated By Reference - None









Sound Worldwide Holdings, Inc.





FORM 10-K ANNUAL REPORT


FOR THE FISCAL YEARS ENDED MARCH 31, 2010 AND 2009


TABLE OF CONTENTS





PART IITEM 1.

BUSINESS

1ITEM 1A.

RISK FACTORS

10ITEM 1B.

UNRESOLVED STAFF COMMENTS

21ITEM 2.

PROPERTIES

21ITEM 3.

LEGAL PROCEEDINGS

21ITEM 4.

REMOVED AND RESERVED

21PART IIITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

22ITEM 6.

SELECTED FINANCIAL DATA

27ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

28ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

44ITEM 8.

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

45ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

45ITEM 9A.

CONTROLS AND PROCEDURES

45ITEM 9B.

OTHER INFORMATION

46PART IIIITEM 10.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.

47ITEM 11.

EXECUTIVE COMPENSATION

49ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

53ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

54ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

54PART IVITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

56SIGNATURES

58CERTIFICATIONSExhibit 31 – Management certificationExhibit 32 – Sarbanes-Oxley Act










FORWARD-LOOKING STATEMENTS




This Annual Report contains certain forward-looking statements regarding management’s plans and objectives for future operations including plans and objectives relating to our planned marketing efforts and future economic performance. The forward-looking statements and associated risks set forth in this Annual Report include or relate to, among other things, (a)  our growth strategies, (b) anticipated trends in the mining industry, (c) our ability to obtain and retain sufficient capital for future operations, and (d) our anticipated needs for working capital. These statements may be found under “Management’s Discussion and Analysis or Plan of Operations” and “Business,” as well as in this Annual Report generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Annual Report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Annual Report will in fact occur.




The forward-looking statements herein are based on current expectations that involve a number of risks and uncertainties. Such forward-looking statements are based on assumptions described herein. The assumptions are based on judgments with respect to, among other things, future economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Accordingly, although we believe that the assumptions underlying the forward-looking statements are reasonable, any such assumption could prove to be inaccurate and therefore there can be no assurance that the results contemplated in forward-looking statements will be realized. In addition, as disclosed elsewhere in the “Risk Factors” section of this annual report, there are a number of other risks inherent in our business and operations which could cause our operating results to vary markedly and adversely from prior results or the results contemplated by the forward-looking statements. Management decisions, including budgeting, are subjective in many respects and periodic revisions must be made to reflect actual conditions and business developments, the impact of which may cause us to alter marketing, capital investment and other expenditures, which may also materially adversely affect our results of operations. In light of significant uncertainties inherent in the forward-looking information included in this annual report, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives or plans will be achieved.




Some of the information in this annual report contains forward-looking statements that involve substantial risks and uncertainties. Any statement in this annual report that is not a statement of an historical fact constitutes a “forward-looking statement”. Further, when we use the words “may”, “expect”, “anticipate”, “plan”, “believe”, “seek”, “estimate”, “internal”, and similar words, we intend to identify statements and expressions that may be forward- looking statements. We believe it is important to communicate certain of our expectations to our investors. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions that could cause our future results to differ materially from those expressed in any forward-looking statements. Many factors are beyond our ability to control or predict. You are accordingly cautioned not to place undue reliance on such forward-looking statements. Important factors that may cause our actual results to differ from such forward-looking statements include, but are not limited to, the risk factors discussed herein.





PART I





As used in this annual report, “we”, “us”, “our”, “Sound Worldwide”, “Company” or “our company” refers to Sound Worldwide Holdings, Inc. and our subsidiaries.




ITEM 1.  BUSINESS.





Company History





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.





Our business operations were conducted through our wholly-owned subsidiary, Sound Worldwide Limited, or SWL, a British Virgin Islands corporation, and its subsidiaries. At the fiscal year ended, March 31, 2010, SWL had one subsidiary, Asian Point Investment Limited, or Asian Point.  SWL is holding company. Asian Point Investment Limited ceased operations in 2010.





Organizational History





On October 25, 2007, we merged with Freedom 3, Inc., or Freedom, a Delaware corporation. On such date, Freedom redeemed 100,000 shares of its common stock, which was all of its issued and outstanding common stock, from its then current stockholder in exchange for 300,000 shares of restricted common stock of the resultant issuer after the merger as per the redemption agreement. Freedom then sold one share of its common stock to SWL for $1.00. This resulted in SWL owning 100% of Freedom. SWL and Freedom then entered into a Share Exchange Agreement or the Exchange Agreement, dated October 25, 2007, pursuant to which each share of common stock and preferred stock of SWL was converted into 350 shares of Freedom’s common stock and one share of Freedom’s preferred stock, respectively and all of the issued and outstanding shares of SWL’s common stock were retired and cancelled. This resulted in the stockholders of SWL to become stockholders of Freedom. The previous stockholder of Freedom was then issued 300,000 shares of Freedom as agreed previously. The one share of Freedom’s common stock held by SWL was then cancelled and SWL sold one share of its common stock to Freedom, which resulted in Freedom owning 100% of SWL. Freedom then changed its name to Sound Worldwide Holdings, Inc.




1


Prior the exchange, Freedom had no operations and nominal assets and was in the development stage.





The following summarizes the organizational history and location of our subsidiaries as of March 31, 2010, 2010




●
Sound Worldwide Limited, or SWL, was formed in July 1999 and was the holding company for Asian Point Investment Limited. SWL is currently the holding company of Asian Point.●
Asian Point Investment Limited, or Asian Point, which leases Heyuan Yuenya Weaving Factory in Heyuan, Guangdong Province, was registered in June 1999. Asian Point Investment Limited ceased operations in 2010.





Introduction to Freedom





SWL was introduced to Freedom by a group of businessmen. It was originated by Mr. Vincent Lau of International Professional Accountants Co. Ltd. of Hong Kong, or IPAC. IPAC has been providing accounting services to Sound Worldwide since the 1990. In 2005, Mr. Lau introduced Sound Worldwide to Mr. Alan Chan of Calgary, Alberta, Canada and indicated that Sound Worldwide wished to become a public company. Subsequently, Mr. Chan introduced Sound Worldwide to Mr. Larry Fortman of Oxford Group of Charlotte, North Carolina. Collectively, the three businessmen assisted Sound Worldwide throughout the whole process in becoming a public company. This included finding it a suitable reporting shell company in the U.S., helping it with its business plan, performing the necessary due diligence prior to introducing it to Freedom, negotiating a merger agreement with Freedom, and helping it throughout the merger process with Freedom.





For providing all of the above services, the group and their nominees were given an opportunity to acquire 2,000,000 shares of Sound Worldwide Holdings, Inc. at a cost of $0.0001 per share. As well, the group is also to receive compensation for other services, such as accounting services, administration and reimbursement for traveling expenses.





Change in Fiscal Year





On December 21, 2007, the Board of Directors of the Company, by unanimous written consent, approved to change the Company’s fiscal year end from December 31st to March 31st.




2


Our Business





Our Principal Products and Services





Asian Point, our indirectly held subsidiary, was engaged in the manufacturing of denim fabrics in China and in the sale of those fabrics to vendors, such as GAP, Levis, ECKO and Giordano, located throughout the world. Over 50% of our products are exported to the U.S. marketplace and the rest throughout Western Europe and other countries. Asian Point Investment Limited ceased operations in 2010.





Business Objectives





Our business objective is to become a cost-effective denim fabric and garment manufacturer with high quality, competitive prices and a comprehensive product range. We eventually want to expand our market share through advanced production technology, effective cost controls, superior quality control systems, and marketing efforts.





Growth Strategy





To ensure steady growth and income earnings during the future development of the Company, we anticipate implementing the following plans:





Increasing Operations





We intend to acquire state-of-the art machinery that we believe will the increase our production and processing efficiency. We also plan on increasing the number of weaving machines from 50 sets to 100 sets to meet anticipated demand.





We also intend to create a marketing team for the purpose of attracting additional clients. The current channels that we have used to develop our business have been adequate, but we believe an internal marketing team could offer more opportunities, especially in Eastern Europe.




3


Vertical Integration





Our future plan also includes eventually controlling all of the steps in the production process, from the extraction of raw materials through the manufacture and sale of the final products, known as vertical integration. We believe that a vertically integrated company that controls all of the steps of production, from supplying the raw materials to manufacturing the finished product has a very strong competitive advantage. By being vertically integrated, we would not have to depend on outside entities to add value to our products. We would be able to manage the quality of its product throughout the whole process, which we believe would result in superior products at reasonable price points.





Products and Production





The current machinery installed in our production plants provides flexibility and efficiency for the production processes. We are therefore able to adjust our production schedule in response to the demand of the market and customers, without incurring any significant additional costs or expenses.





Product Characteristics





We are able to provide a number of different types of denim fabrics through special procedures. In recent years, the denim clothing market has become even more fashionable and brand driven. Different denim fabrics are currently manufactured using pigment-dyed, stone-washed, and stretch-and-blend techniques, which produce more varieties of denim fabrics such as ring denim, stretch denim, cowboy corduroy and colored denim (e.g., yellow and green shades).





Significant Suppliers and Clients:





Asian Point’s largest customers accounted for approximately 56% 50%, and 29% of its net sales in fiscal 2010, 2009 and 2008. We do not have any minimum purchase obligations or other contractual obligations with our suppliers. Asian Point Investment Limited ceased operations in 2010.





Market Analysis





Demand for Textiles and Garments





The textile and garment industries have become a basic part of global economics. We believe that the demand for textiles and garments is sensitive to the expenditure behavior of consumers as well as the price point of products but that changes in income do not have any significant effects on consumers’ buying habits of denim products.





4




World Textile and Garment Demand





Over the past ten years, we believe that the textile and garment industries have played major part of global trade. Based on our experienceinthese industries, we believe that although world spending on textiles and garments is significant, developed countries do not have the capacity to produce textile and garments to satisfy their demand. We believe that companies in developed countries, such as the U.S. and European countries, are able to satisfy their unmet demand for textiles and garments by importing these products from countries, such as China and Hong Kong, where Production costs are relatively low.





China Textile and Garment Industry





The PRC is one of the world’s largest manufacturers of textiles and garments. According to the PRC’s industrial production figures for December 2006 as prepared by National Bureau of China, total production of textile products is as follow:





Item
Unit
Annual Production
% Change YearOver YearYarn
10 Thousand Tons
1,001
8.4Cloth
100 Million Meters
462.37
8.2Silk Fabric
10 Thousand Meters
781,573
9.6





Production and processing of fabrics have become one of the major businesses in the PRC. In 2006, the PRC’s total export of garments and clothing accessories amount to $81.2 billion, which represents a 7.1% increase from 2005. The textile yarn and fabrics exports totaled $58.4 billion in 2006, which represented a 7.9% increase from 2005.





According to “China Textile Industry Profile: 2006,” in the past, industrial traders in the PRC have mainly exported low to medium grade textiles and garments to Africa, South America and developed countries. This has changed in recent years. The industry has seen an increase in the demand for value added fabrics and textiles consisting of higher grade material.





Under the Tenth Five Year Plan covering 2001 to 2005, which was approved in the fourth meeting of the Ninth PRC National People’s Congress held on March 15, 2001, PRC authorities intended to further expand production levels and upgrade production standards within PRC textileindustry.




5


Factors Contributing to the Development of PRC Textile industry:




●
Skilled and inexpensive labor;●
Relatively low value of RMB compared to other currencies;●
Inexpensive raw materials; and●
Relatively low shipment costs.
 
 Prospects for the Textile and Garment Industry in China





China's textile and garment industry has expanded at a significant pace in recent decades. Overall, management estimates that the industry employs around 20 million people directly-plus a large number in support activities-and the sector fulfils a vital role in the Chinese economy. In managements estimation, export sales expanded 42-fold in the 28 years to 2008 to reach US$185 billion more than ten times the value of Chinese textile and garment imports. China has become the world's largest supplier of textiles and garments, and is the largest source of textile and garment imports into the USA, the EU and Japan. China also ranks among the world's largest producers of natural and synthetic fibres, as well as having extensive operations for manufacturing yarns, fabrics and garments. In 2007 alone, management believes garment production amounted to 51 billion pieces.





In managements’ opinion, Chinese manufacturers also account for around half of the world's purchases of textile and garment manufacturing machinery. China's rapid expansion stems from the declaration of an "open door" policy by Deng Xiaoping 30 years ago. Since then a series of reforms has been implemented and international trade and investments have been promoted. In addition, successive Chinese leaders have pursued policies designed to encourage private enterprise and stimulate foreign investment. As a result, the industry is now characterized by ambitious private sector enterprises, which have an entrepreneurial spirit and a mission to expand their presence in international markets while meeting demand from the country's increasingly prosperous population of 1.34 billion people.





Management contends that the industry faces several challenges-including growing competition from Asian countries with lower labour costs, notably Bangladesh and Vietnam. One imperative is to move away from the low cost image which its products have in the global marketplace and to develop recognized international brands. Another imperative is to restructure manufacturing operations into larger units to secure greater economies of scale and generate higher profit margins. Meanwhile, the domestic market holds huge potential for growth and this will underpin future expansion. Also, while the global recession has affected the Chinese economy's short-term prospects, most experts have predicted significant economic growth over the next two years, from which the Chinese textile and garment sector stands to benefit.





6





Vulnerabilities and risk




It is not contradictory for China to amass a larger share of wealth and power while still suffering from domestic vulnerabilities. In 2010, China textile industry needs to remain vigilant about international pressure for renminbi revaluation. Few questions loom larger with currency strategists this year than whether. China is under growing pressure from its international trading partners, led by the US, Europe and Japan, to let the renminbi rise. Meanwhile, trade barriers and material price rising (e.g. raw materials prices) will affect the export of China's textile industry and further exacerbate competition on textile market.




Hong Kong Textile and Garment Industry





Since 1950, when Hong Kong first emerged as a manufacturing hub, its textile industry has grown steadily. Hong Kong’s textile industry serves not only the local clothing manufacturers, but also those on the Chinese mainland and other offshore production bases. Capitalizing on its experience in textiles manufacturing, many Hong Kong companies are also engaged in trading textiles. Hong Kong’s textiles industry is reputed as a supplier of quality dyed and printed fabrics. It is also a leader in cotton spinning, denim wearing, knit-to-shape panel knitting, and fine-gauge cotton knit manufacturing.





According to the Hong Kong Trade Development Council’s article ‘Profiles of Hong Kong Major Manufacturing Industries’, (January 30, 2007), the textile industry has a total of 889 manufacturing establishments as of September 2006, 10,599 workers, or 7.2% of the local manufacturing workforce. The article also states that textiles industry is one of Hong Kong's major export earners, accounting for 3.1% of total domestic exports in 2006 and that Asia is the main destination for textiles produced in Hong Kong. Approximately 90% of Hong Kong’s textiles remain in the region. The articles further states, that Chinese mainland is the predominant export market, accounting for 70% of Hong Kong’s textile exports in 2006.





Marketing and Business Strategies





Marketing Strategies





China and Hong Kong exports are expected to continue to increase due to China’s entry into the WTO and Closer Economic Partnership Arrangement (“CEPA”) between China and Hong Kong. Since SWL’s main export targets are the United States and the European Union, China’s entry into the WTO has had a positive impact on its competitiveness against other competitors in these markets. Moreover, the CEPA between Hong Kong and China removes tariffs on Hong Kong products, which provides an opportunity for the Hong Kong garment and textile industry to develop its business in the PRC. We will take advantage of these opportunities to develop the Chinese and the world markets by implementing the following marketing strategies:





7





þ Continue to strengthen relationships with major downstream clients in the United States and Japan. We believe that this will ensure the stability of our sales and prestige when negotiating with new clients.





þ Expand our marketing team for the Eastern European market, including but not limited to Russia), which we believe has huge potential for textile and garment consumption.





þ Develop our marketing network with reputable trading companies, such as Li & Fung Trading Limited, which has a strong textile and garment sales network with international clients. We believe that this will help increase our sales and widen our geographical network.





þ Develop our own garment-retailing network in China. Seeing as Hong Kong textile and garment products are favored by Chinese consumers, we believe that developing our own garment label and retailing network will enhance our profitability.





Business Strategies





Our short-term, mid-term and long-term strategies to implement our business plan are as follows:





Short-Term Strategies (within 5 years)





We intend to take advantage of the opportunities provided by CEPA and trade liberalization of the WTO. In the short term, we intend to focus on increasing our competitiveness by expanding our business in China and Eastern Europe.





Different short-term strategies will be carried out inthe Company’s subsidiaries.


Mid-Term Strategies (5 to 7 years)


We intend to change our  business  nature, we will change to the trading business and have a joint venture with a sizing factory and a shrinkage factory.




8


Long-Term Strategies (7 years and beyond)


Our long-term strategies are to further increase asset turnover and increase productivity. The long-term business strategies of Asian Point are as follows:




We expect that Asian Point will acquire or engage a retailer in XinTang, which serves as the center of the garment and textile industry in Guangdong province.





Employees





We currently employ 200 persons, five of whom are part of management.





We operate a Mandatory Provident Fund Scheme for all qualifying employees in Hong Kong. The assets of the plan are held separately from those of the Company by the trustees of the plan. We contribute 5% of the relevant payroll costs to the plan, which contribution is matched by employees. The contributions paid by the Company for the fiscal year ended March 31, 2010, 2009 and 2008 were $Nil, $Nil AND $42,579, respectively.





Our employees are not represented by a labor union. We have not experienced work stoppages and consider our employee relations to be good.




Off-Balance Sheet Arrangements




We do 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.







WHERE YOU CAN FIND MORE INFORMATION





You are advised to read this Form 10-K in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.





9





ITEM 1A - Risk Factors


An investment in our common stock involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information contained in this Annual Report on Form 10-K, before investing in our common stock. If any of the events anticipated by the risks described below occur, our results of operations and financial condition could be adversely affected which could result in a decline in the market price of our common stock, causing you to lose all or part of your investment.




Our Common Stock Is Subject To Penny Stock Regulation





Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act. The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on the NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Since our shares are deemed to be "penny stock", trading in the shares will be subject to additional sales practice requirements on broker/dealers who sell penny stock to persons other than established customers and accredited investors.




FINRA Sales Practice Requirements May Also Limit A Stockholder's Ability To Buy And Sell Our Stock.




In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.




10


We May Not Have Access To Sufficient Capital To Pursue Our Business And Therefore Would Be Unable To Achieve Our Planned Future Growth.





We intend to pursue a growth strategy that includes development of the Company business and technology.  Currently we have limited capital which is insufficient to pursue our plans for development and growth.  Our ability to implement our growth plans will depend primarily on our ability to obtain additional private or public equity or debt financing.  We are currently seeking additional capital.  Such financing may not be available at all, or we may be unable to locate and secure additional capital on terms and conditions that are acceptable to us.  Our failure to obtain additional capital will have a material adverse effect on our business.




Failure To Achieve And Maintain Effective Internal Controls In Accordance With Section 404 Of The Sarbanes-Oxley Act Could Have A Material Adverse Effect On Our Business And Operating Results.




It may be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implement appropriate additional internal controls, processes and reporting procedures. If we are unable to comply with these requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires of publicly traded companies.




If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock.




Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, beginning with our annual report on Form 10-K for our fiscal period ending December 31, 2009, we will be required to prepare assessments regarding internal controls over financial reporting and beginning with our annual report on Form 10-K for our fiscal period ending December 31, 2009, furnish a report by our management on our internal control over financial reporting. We have begun the process of documenting and testing our internal control procedures in order to satisfy these requirements, which is likely to result in increased general and administrative expenses and may shift management time and attention from revenue-generating activities to compliance activities. While our management is expending significant resources in an effort to complete this important project, there can be no assurance that we will be able to achieve our objective on a timely basis. There also can be no assurance that our auditors will be able to issue an unqualified opinion on management’s assessment of the effectiveness of our internal control over financial reporting. Failure to achieve and maintain an effective internal control environment or complete our Section 404 certifications could have a material adverse effect on our stock price.




11




In addition, in connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover “material weaknesses” in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB defines “significant deficiency” as a deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected.




In the event that a material weakness is identified, we will employ qualified personnel and adopt and implement policies and procedures to address any material weaknesses that we identify. However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we will take will remediate any material weaknesses that we may identify or that we will implement and maintain adequate controls over our financial process and reporting in the future.




Any failure to complete our assessment of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknesses that we may identify, would adversely affect the annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.




12




As A Result OfAsian Point Investment Limited Ceasing Operations In First Quarter Of Fiscal 2010, We May Be A "Shell" Company And Our Shares Will Subject To Restrictions On Resale.




Upon Asian Point Investments Limited ceasing operations in the first quarter of 2010, we may currently have nominal operations with our assets consisting of cash, and/or cash equivalents.  Accordingly, we may be deemed a "shell company" as defined in Rule 12b-2 of the Securities Exchange Act of 1934.  If we are deemed a “shell” company, until we are no longer a "shell company," we will file a Form 10 level disclosure, and continue to be a reporting company pursuant to the Securities Exchange Act of 1934, as amended, and for twelve months, shareholders holding restricted, non-registered shares will not be able to use the exemptions provided under Rule 144 for the resale of their shares of common stock. Preclusion from any prospective investor using the exemptions provided by Rule 144 may be more difficult for us to sell equity securities or equity-related securities in the future to investors that require a shorter period before liquidity or may require us to expend limited funds to register their shares for resale in a future prospectus.




Risks Related to the Peoples Republic of China (“PRC”)




Certain political and economic considerations relating to PRC could adversely affect our company.




The PRC is passing from a planned economy to a market economy. The Chinese government has confirmed that economic development will follow a model of market economy under socialism. While the PRC government has pursued economic reforms since its adoption of the open-door policy in 1978, a large portion of the PRC economy is still operating under five-year plans and annual state plans adopted by the government that set down national economic development goals. Through these plans and other economic measures, such as control on foreign exchange, taxation and restrictions on foreign participation in the domestic market of various industries, the PRC government exerts considerable direct and indirect influence on the economy. Many of the economic reforms are unprecedented or experimental for the PRC government, and are expected to be refined and improved. Other political, economic and social factors can also lead to further readjustment of such reforms. This refining and readjustment process may not necessarily have a positive effect on our operations or future business development. Our operating results may be adversely affected by changes in the PRC’s economic and social conditions as well as by changes in the policies of the PRC government, which we may not be able to foresee, such as changes in laws and regulations (or the official interpretation thereof), measures which may be introduced to control inflation, changes in the rate or method of taxation, and imposition of additional restrictions on currency conversion.




13




The recent nature and uncertain application of many PRC laws applicable to us create an uncertain environment for business operations and they could have a negative effect on us.




The PRC legal system is a civil law system. Unlike the common law system, such as the legal system used in the United States, the civil law system is based on written statutes in which decided legal cases have little value as precedents. In 1979, the PRC began to promulgate a comprehensive system of laws and has since introduced many laws and regulations to provide general guidance on economic and business practices in the PRC and to regulate foreign investment. Progress has been made in the promulgation of laws and regulations dealing with economic matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. The promulgation of new laws, changes of existing laws and the abrogation of local regulations by national laws could have a negative impact on our business and business prospects. In addition, as these laws, regulations and legal requirements are relatively recent, their interpretation and enforcement involve significant uncertainty.




If relations between the United States and China worsen, our stock price may decrease and we may have difficulty accessing the U.S. capital markets.




At various times during recent years, the United States and China have had disagreements over political and economic issues. Controversies may arise in the future between these two countries. Any political or trade controversies between the United States and China could adversely affect the market price of our common stock and our ability to access U.S. capital markets.




Governmental control of currency conversion may affect the value of your investment.




The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of the PRC. Currently, although the PRC has made certain policy changes, the Renminbi may not a freely convertible currency. Shortages in the availability of foreign currency may restrict our ability to remit sufficient foreign currency to pay dividends, or otherwise satisfy foreign currency denominated obligations. Under existing PRC as of the date of this report, foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from the transaction, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate governmental authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans and corporate debt obligations denominated in foreign currencies.




14




The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay certain of our expenses as they come due.




It may be difficult to effect service of process and enforcement of legal judgments upon our company and our officers and directors because some of them reside outside the United States.




As our operations are presently based in China and some of our key directors and officers reside outside the United States, service of process on our key directors and officers may be difficult to effect within the United States. Also, substantially all of our assets are located outside the United States and any judgment obtained in the United States against us may not be enforceable outside the United States. We have appointed Norbert Sporns, our Chief Executive Officer and President, as our agent to receive service of process in any action against our company in the United States.




Risks related to Our Business.




Our success is dependent on the success, strategies and reputation of our customers.




Our business is dependent on our customers’ ability to market their brands through multiple channels and multiple price points. Our customers’ products are targeted towards different market segments based on consumer demographics, design, suggested pricing and channel of distribution. If any of our customers decide to ‘‘reposition’’ its products under its brands, introduce similar products under similar brand names or otherwise change the parameters of design, pricing, distribution, target market or competitive set, we could experience a significant downturn in that customer’s business, adversely affecting our sales and profitability. In addition, as products may be personally associated with designers or celebrities, our sales of those products could be materially and adversely affected if any of those individuals’ image, reputation or popularity were to be negatively impacted.




15




There is substantial doubt about our ability to continue as a going concern.




Note 1b in our financial statements for the year ended March 31, 2010 contains explanatory paragraphs expressing substantial doubt about our ability to continue as a going concern. Asian Point Investment Limited, a major subsidairy, has sold out all its plant and equipment at a loss of US$1,108,946 resulting to a net financial loss of US$2,370,460 during the year. Asian Point Investment Limited has ceased operation during the year. To continue our growth and to fund our expansion plans we will require additional funding or merger with an entity that can provide capital. There can be no assurance that we will be able to obtain such financing or close a merger on beneficial terms, if at all.




If we are unable to successfully translate market trends into attractive product offerings, our sales and profitability could suffer.




Our ability to successfully compete depends on a number of factors, including our ability to effectively anticipate, gauge and respond to changing consumer demands and tastes across multiple product lines and tiers of distribution. We are required to translate market trends into attractive product offerings and operate within substantial production and delivery constraints. We cannot be sure we will continue to be successful in this regard.




Expansion of our product offerings involves significant costs and uncertainty and could adversely affect our results of operations.




An important part of our strategy is to expand the territories in which we sell our products. We intend to continue to add additional product lines in the future. As is typical with new products and new territories, demand and market acceptance for any new products we introduce will be subject to uncertainty. Producing and marketing new products require substantial expenditures. We cannot be certain that our efforts and expenditures will successfully generate sufficient sales or that sales that are generated will be sufficient to cover our expenditures.




If our customers change their buying patterns, request additional allowances or change or develop their own production facilities, our sales to these customers could be materially adversely affected.




Our customers’ buying patterns, as well as the need to provide additional allowances to vendors, could have a material adverse effect on our business, results of operations and financial condition. Customers’ strategic initiatives, including changing or developing their own production facilities and reducing the number of vendors they purchase from, could also impact our sales to these customers.




16




We have significant customer concentration, and the loss of one of our subsidiaries’ large customers could adversely affect our business.





Asian Point’s largest customers accounted for 31.42% of our net sales in fiscal 2010. We do not have long-term contracts with any customers, and sales to customers generally occur on an order-by-order basis that may be subject to cancellation or rescheduling by the customer. A decision by our major customers to decrease the amount of merchandise purchased from us, to increase the use of their own private label brands or to change the manner of doing business with us could reduce our revenues and materially adversely affect our results of operations. Asian Point Investment Limited ceased operations in 2010.




If we miscalculate the market for our products, we may end up with significant excess inventories for some products and missed opportunities for others.




We often produce garments to hold in inventory in order to meet our customers’ delivery requirements and to be able to quickly fulfill reorders. If we misjudge the market for our products, we may be faced with significant excess inventories for some products and missed opportunities for others. In addition, weak sales and resulting markdown requests from customers could have a material adverse effect on our results of operations.




We are dependent upon outside suppliers.




All of our products are purchased from independent suppliers. The failure of these suppliers to ship products to us in a timely manner or to meet required quality standards could cause us to miss the delivery date requirements of our customers. The failure to make timely deliveries could cause customers to cancel orders, refuse to accept delivery of products or demand reduced prices, any of which could have a material adverse effect on our business. We do not have long-term written agreements with any of our suppliers. As a result, any of these suppliers may unilaterally terminate its relationship with us at any time.




We are also dependent on these suppliers for compliance with our policies and the policies of our customers regarding labor practices employed by factories that produce product for us. Any failure by these suppliers to comply with required labor standards or any other divergence in their labor or other practices from those generally considered ethical in the United States, and the potential negative publicity relating to any of these events, could harm us and our reputation which could result in a loss of customers.




17




Fluctuations in the price, availability and quality of materials used in our products could have a material adverse effect on our cost of goods sold and our ability to meet our customers’ demands.




Fluctuations in the price, availability and quality of the materials used in our products could have a material adverse effect on our cost of sales or our ability to meet our customers’ demands. We compete with numerous entities for supplies of materials. The prices for denim and other fabrics used in our products depend largely on the market prices for the raw materials used to produce them, such as raw wool or cotton, which are vulnerable, in part, to natural disasters. We may not be able to pass on all or any portion of higher material prices to our customers.




We depend on inexpensive labor to produce our products. Our failure to retain our employees could decrease our output and harm our business.




The production of textiles is labor-intensive. We depend on inexpensive labor available in the Guangdong province of China. However, there are signs of a labor shortage in the Guangdong province. Due to the development of other provinces in China, there are fewer migrant workers in Guangdong. In order for us to retain our current staff and add additional staff, the Company will have to offer a moderately higher wage. It is important for us to expand our human capital to achieve the goal of increasing competitiveness.




Our failure to comply with environmental and production safety regulations would harm our business operations.




Our production facilities are located in Hong Kong and China and are subject to the environmental and production regulations of those areas. The main pollutants resulting from production in the manufacturing factory are noise and dust particles to the surrounding areas. To tackle this problem, we have taken necessary measures during the setting up of our manufacturing plant to minimize the level of noise, so that it is aligned with the requirements of the applicable environmental laws and regulations. In addition, we carry out regular on-site environmental testing to ensure that our operations comply with regulatory requirements and standards. In regards to our production safety issues, we take strict measures that comply with the production safety regulations of the PRC and Hong Kong. These production audits ensure reasonable working conditions and an adherence to western labor laws. The failure of us to maintain compliance with applicable environmental and safety laws and regulations could cause a temporary shut down of our operations which would delay shipments, divert management’s attention from our business and cause us to incur applicable fees and penalties, all or any of which would harm or operations.




18




Risk Factors Relating to the Apparel Industry




The competitive nature of the apparel industry may result in lower prices for our products and decreased gross profit margins.




The apparel business is highly competitive. We have numerous competitors with respect to the production and sale of apparel, including distributors that import apparel from abroad and domestic retailers with established foreign manufacturing capabilities. Many of our competitors have greater financial and marketing resources and greater manufacturing capacity than we do. We also compete with vertically integrated apparel manufacturers that also own retail stores. The general availability of contract manufacturing capacity also allows ease of access by new market entrants. The competitive nature of the apparel industry may result in lower prices for our products and decreased gross profit margins, either of which may materially adversely affect our sales and profitability. Sales of our products are affected by style, price, quality, brand reputation and general fashion trends.




If major department, mass merchant and specialty store chains continue to consolidate, our business could be negatively affected.




We sell our products to major department, mass merchant and specialty store chains. Continued consolidation in the retail industry, such as the recent purchase of May Department Store Company by Federated Department Stores, Inc., could negatively impact our business. Consolidation could reduce the number of our customers and potential customers. With increased consolidation in the retail industry, we are increasingly dependent on retailers whose bargaining strength may increase and whose share of our business may grow. As a result, we may face greater pressure from these customers to provide more favorable terms. If purchasing decisions become more centralized, the risks from consolidation would increase. Customers may also concentrate purchases among a narrowing group of vendors. This could adversely affect our business.




The cyclical nature of the apparel industry and uncertainty over future economic prospects and consumer spending could have a materially adverse effect on our results of operations.




19




The apparel industry is cyclical. Purchases of outerwear, sportswear and other apparel tend to decline during recessionary periods and may decline for a variety of other reasons, including changes in fashion trends and the introduction of new products or pricing changes by our competitors. Uncertainties regarding future economic prospects could affect consumer-spending habits and have an adverse effect on our results of operations. Uncertainty with respect to consumer spending as a result of weak economic conditions has in the past caused our customers to delay the placing of initial orders and to slow the pace of reorders during the seasonal peak of our business. Weak economic conditions have had a material adverse effect on our results of operations at times in the past and could have a material adverse effect on our results of operations in the future as well.




The significant increase in fuel prices could adversely affect our results of operations.




Fuel prices have increased significantly during the past few years. Increased gasoline prices could adversely affect consumer spending, including discretionary spending on apparel. In addition, higher fuel prices could cause our operating expenses to increase, especially with respect to warehousing and freight. Any significant decrease in sales or increase in expenses as a result of higher fuel prices could adversely affect our results of operations.




If new legislation restricting the importation or increasing the cost of textiles and apparel produced abroad is enacted, our business could be adversely affected.




Legislation that would restrict the importation or increase the cost of textiles and apparel produced abroad has been periodically introduced in the U.S. Congress. The enactment of new legislation or international trade regulation, or executive action affecting international textile or trade agreements, could adversely affect our business. International trade agreements that can provide for tariffs and/or quotas can increase the cost and limit the amount of product that can be imported.




The quota system established by the World Trade Organization was eliminated on December 31, 2004. We cannot be certain of the full impact that this elimination will have on international trade in general and the apparel industry in particular. We also cannot be certain of the impact of quota elimination on our business, including increased competition that could result from the importation of an increasing amount of lower priced apparel into the United States. Notwithstanding quota elimination, China’s accession agreement for membership in the WTO provides that WTO member countries, including the United States, may re-impose safeguard quotas on specific products. In May 2005, the United States imposed unilateral quotas on several product categories, limiting growth in imports of these categories to 7.5% a year. The safeguard quotas in several categories have been extended by the United States government and will likely continue through 2008. These limitations apply to a limited number of products imported by us from China. We are unable to assess the potential for additional action by the United States government with respect to these or other product categories in the event that the quantity of imported apparel significantly disrupts the apparel market in the United States. Additional action by the United States in response to a disruption in its apparel markets could limit our ability to import apparel and increase our costs.




20




ITEM 1B.  UNRESOLVED STAFF COMMENTS





None





ITEM 2.  PROPERTIES





The Company has operating lease agreements principally for its office facilities. The leases have remaining terms of 3 to 24 months. Rental expense was $36,557 and $25,454 for the years ended March 31, 2010 and 2009, respectively.




Future minimum lease payments under non-cancellable operating lease agreements as of March 31, 2010 were as follows:




$Year ending March 31,2011


92,4002012


23,100Total


115,500





In general, all facilities are in good condition and are operating at capacities that range from 80% to 100%. All facilities are leased under operating leases. In comparison to similar facilities in the area, we believe the terms of the lease are fair, and the monthly lease rate is at or below the cost for comparable space.




ITEM 3.  LEGAL PROCEEDINGS




We are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our company’s or our company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.




ITEM 4.  REMOVED AND RESERVED




21





PART II


ITEM 5.  MARKET FOR REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUERS PURCHASES OF EQUITY SECURITIES.





Under our Certificate of Incorporation, we are authorized to issue an aggregate of 110,000,000 shares of capital stock, of which 100,000,000 are shares of common stock, par value $0.0001 per share, or Common Stock and 10,000,000 are preferred stock, par value $0.0001 per share, or Preferred Stock. As of March 31, 2010  15,646,250 shares of our common stock are issued and outstanding, and there are approximately 70 holders of record of our Common Stock.





Common Stock





Pursuant to our bylaws, our common stock is entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Except as otherwise required by law or provided in any resolution adopted by our board of directors with respect to any series of preferred stock, the holders of our common stock possess all voting power. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of our common stock that are present in person or represented by proxy, subject to any voting rights granted to holders of any preferred stock. Holders of our common stock representing one-percent (1%) of our capital stock issued, outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our Certificate of Incorporation. Our Certificate of Incorporation do not provide for cumulative voting in the election of directors.





Subject to any preferential rights of any outstanding series of preferred stock created by our board of directors from time to time, the holders of shares of our common stock will be entitled to such cash dividends as may be declared from time to time by our board of directors from funds available therefore.





Subject to any preferential rights of any outstanding series of preferred stock created from time to time by our board of directors, upon liquidation, dissolution or winding up of our company, the holders of shares of our common stock will be entitled to receive, on a pro rata basis, all assets of our company available for distribution to such holders.




22


In the event of any merger or consolidation of our company with or into another company in connection with which shares of our common stock are converted into or exchangeable for shares of stock, other securities or property (including cash), all holders of our common stock will be entitled to receive the same kind and amount of shares of stock and other securities and property (including cash), on a pro rata basis.





Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.





Preferred Stock





Our Certificate of Incorporation authorizes our board of directors to issue up to 10,000,000 shares of preferred stock in one or more designated series, each of which shall be so designated as to distinguish the shares of each series of preferred stock from the shares of all other series and classes. Our board of directors is authorized, within any limitations prescribed by law and our Certificate of Incorporation, to fix and determine the designations, rights, qualifications, preferences, limitations and terms of the shares of any series of preferred stock including but not limited to the following:


(a)the rate of dividend, the time of payment of dividends, whether dividends are cumulative, and the date from which any dividends shall accrue;


(b)whether shares may be redeemed, and, if so, the redemption price and the terms and conditions of redemption;


(c)the amount payable upon shares of preferred stock in the event of voluntary or involuntary liquidation;


(d)sinking fund or other provisions, if any, for the redemption or purchase of shares of preferred stock;


(e)the terms and conditions on which shares of preferred stock may be converted, if the shares of any series are issued with the privilege of conversion;


(f)voting powers, if any, provided that if any of the preferred stock or series thereof shall have voting rights, such preferred stock or series shall vote only on a share for share basis with our common stock on any matter, including but not limited to the election of directors, for which such preferred stock or series has such rights; and


(g)subject to the above, such other terms, qualifications, privileges, limitations, options, restrictions, and special or relative rights and preferences, if any, of shares or such series as our board of directors may, at the time so acting, lawfully fix and determine under the laws of the State of Delaware.




23


In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company. Although there are no shares of preferred stock currently issued and outstanding and we have no present intention to issue any shares of preferred stock, no assurance can be given that it will not do so in the future.





Holders of Our Preferred Stock





As of March 31, 2010, we had 0 holders of record of our preferred stock.





Illiquid Trading Market





Our common stock trades on the OTC Bulletin Board under the symbol “SWWH.OB” However, since our registration statement on Form S-1 became effective on April 23, 2008, no active trading market for sellers or buyers has developed for our common stock except for some brief trading in October, 2010 where our stock price closed as high as $0.10 but subsequently returned to its current price of $0.05.





We consider our stock to be “thinly traded” and the fact that there are no reported sale prices for our common stock may not be a true market-based valuation of the stock. Some of the bid quotations from the OTC Bulletin Board set forth below may reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.





The Securities and Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities' laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type, size and format, as the Securities and Exchange Commission shall require by rule or regulation. The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a suitably written statement.




24




These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock if it becomes subject to these penny stock rules. Therefore, if our common stock becomes subject to the penny stock rules, stockholders may have difficulty selling those securities.




As of March 31, 2010, there were approximately 70 record holders of our common stock.




Securities Authorized for Issuance Under Equity Compensation Plans.




On March 9, 2009 we instituted and put into place the 2009 Stock Incentive Plan. The Plan’s termination date is December 14, 2019. A description of the Plan was included in a Form S-8 Registration Statement filed with the Securities and Exchange Commission on March 9, 2009. The purpose of the 2009 Stock Incentive Plan of is to further align the interests of employees, directors and non-employee Consultants with those of the stockholders by providing incentive compensation opportunities tied to the performance of the Common Stock and by promoting increased ownership of the Common Stock by such individuals. The Plan is also intended to advance the interests of the Company and its stockholders by attracting, retaining and motivating key personnel upon whose judgment, initiative and effort the successful conduct of the Company’s business is largely dependent.




The Plan shall be administered by a Committee comprised of one or more members of the Board, or if no such committee exists, the Board. The Committee shall have the right, from time to time, to delegate to one or more officers of the Company the authority of the Committee to grant and determine the terms and conditions of Awards granted under the Plan, subject to the requirements of state law and such other limitations as the Committee shall determine. The maximum aggregate number of shares of Common Stock that may be issued and sold under all Awards granted under the Plan is Six Million (6,000,000) shares. Shares of Common Stock issued and sold under the Plan may be either authorized but unissued shares or shares held in the Company’s treasury.




All Eligible Persons are eligible to be designated by the Committee to receive Awards and become Participants under the Plan. The Committee has the authority, in its discretion, to determine and designate from time to time those Eligible Persons who are to be granted Awards, the types of Awards to be granted and the number of shares of Common Stock or units subject to Awards granted under the Plan. In selecting Eligible Persons to be Participants and in determining the type and amount of Awards to be granted under the Plan, the Committee shall consider any and all factors that it deems relevant or appropriate.




25





The Plan allows for the Company to issue stock options as well as common stock. A Stock Option may be granted to any Eligible Person selected by the Committee and shall be designated, in the discretion of the Committee, as an Incentive Stock Option. The exercise price per share of a Stock Option shall not be less than 85 percent of the Fair Market Value of the shares of Common Stock on the Date of Grant, provided that the Committee may in its discretion specify for any Stock Option an exercise price per share that is higher than the Fair Market Value on the Date of Grant, except that the price shall not be less than 110 percent of the Fair Market Value in the case of any person who owns securities possessing more than 10 percent of the total combined voting power of all classes of securities of the Company.




Share Purchase Warrants




We have not issued and do not have outstanding any warrants to purchase shares of our common stock.




Options




We do not have any outstanding exercisable for shares of our common stock.




Convertible Securities




We have not issued and do not have outstanding any securities convertible into shares of our common stock or any rights convertible or exchangeable into shares of our common stock.




Dividend Policy




We may never pay any dividends to our shareholders. We did not declare any dividends for the year ended March 31, 2010. Our Board of Directors does not intend to distribute dividends in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the Board of Directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the Board of Directors considers relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend.




Transfer Agent




Our transfer agent is Continental Stock Transfer, 17 Battery Place, New York, NY 10004


Telephone: (212) 509-4000.




26





Recent Sales of Unregistered Securities





None.


ITEM 6.  SELECTED FINANCIAL DATA





While not required for small business issuers, the following information has been summarized from financial information included elsewhere and should be read in conjunction with such financial statements and notes thereto.





The table below summarizes (i) our audited balance sheet at March 31, 2010 and 2009 and (ii) our statement of operations for the audited years ended March 31, 2010, 2009 and 2008.




As at:March 31, 2009

(Audited)

March 31, 2009

(Audited)Balance Sheet:Cash

$
30,837

$
7,989Total Assets

$
1,035,646

$
3,576,294Total Liabilities

$
242,949

$
587,750Total Stockholders’ Equity

$
793,152

$
2,988,544





For the Year Ended:March 31, 2010

(Audited)

March 31, 2009

(Audited)

March 31, 2008

(Audited)Statement of Operations:Revenue

$
2,280,608

$
4,227,552

$
17,652,601Net (Loss)/Income

$
(2,370,460)

$
(380,290)

$
1,500,424(Loss)/Earnings Per Share of Common Stock

$
(0.15)

$
(0.03)


0.08





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ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OR PLAN OF OPERATION





The following is management’s discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management. This report includes forward-looking statements. Generally, the words “believes,” “anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,” “continue,” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.





The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information contained elsewhere in this Form 10-K.





Overview





Business Operations





We are a holding company formed in the state of Delaware. On October 25, 2007, we merged with a registered company, Freedom 3, Inc., or Freedom, a Delaware corporation.





Through our wholly-owned subsidiary, Sound Worldwide Limited, or Sound Worldwide or SWL, a British Virgins Island corporation, and its subsidiaries, we manufactured and sold denim fabrics and garments from our facilities in Hong Kong and China. SWL’s subsidiary is Asian Point Investment Limited, or Asian Point.





Through our subsidiaries, Sound Worldwide was able to produce various types of fabric and garment products. Additionally, Sound Worldwide was a garment contractor for a number of well known brands such as GAP, Levis, ECKO, and Giordano. The Company’s products were sold to customers worldwide, with over 50% exported to the U.S. marketplace and the rest throughout Western Europe and other countries. Sound Worldwide has been devoting resources to enhance its fabric and garment production technology, capacity, efficiency, and flexibility. This is intended to help Sound Worldwide to meet the perceived increasing and changing demand of the textile and garment market.




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Our Subsidiaries’ Organizational History





The following summarizes the organizational history:




●
SWL was formed in July 1999.●
Asian Point was registered in China in June 1999.


Business Objective





Our business objective is to become a cost-effective denim fabric and garment manufacturer with high quality, competitive prices, a comprehensive product range and eventually expand the market share by advanced production technology, effective cost control techniques, superior quality control system, strong marketing effort and excellent management experience.





Market Forecast1





Whereas it is expected that world spending on textiles and garments will continue to increase by 4% to 5% per year due to the economic growth of developed countries, the industry expects textile and garment exports from China and Hong Kong will increase by more than 5% per year.





China:





China enters Word Trade Organization (WTO)





Due to PRC’s entry into the WTO in December 2001, the average tariff rates on imported textiles have dropped from approximately 22% - 25 % pre-WTO entry to approximately 14% -16% in 2005. Pursuant to the Agreement on Textile and Clothing (ATC) implemented under the WTO, the historic quota system imposed by other counties on the importing of PRC textile products on select product categories has been phased out in 2005. This is expected to continue to boost the textile processing and manufacturing volumes in the PRC as well as the export of clothing manufactured in the PRC.




1 Source: CEPA-A Survey of Garment Shoppers in Southern, Central and Western China, 2004 and CEPA- A Survey of Garment Shoppers in Eastern and Northern China, 2004.




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Hong Kong:





Benefits from China’s entry to WTO





The complete removal of quotas worldwide under the ATC has and is expected to speed up the rationalization of globalize clothing manufacturing. Clothing production in the Asian region is set to expand. As such, Hong Kong’s textiles export to other Asian markets, particularly the PRC, is anticipated to increase in the future. China’s entry into the WTO is widely believed to offer good opportunities for Hong Kong’s textiles industry. Quota elimination on imports of China-origin textiles from trade liberalization encourages Hong Kong manufacturers to shift more of their production to the mainland, thereby enhancing their cost competitiveness. On the other hand, China’s commitment to further opens its domestic market facilitates Hong Kong’s textiles manufacturers and traders contemplating or expanding sales in the Chinese market. Together with steady improvements in the general living standard in the PRC, it is anticipated that demand for foreign made clothing will increase in the PRC market.





Closer Economic Partnership Agreement (CEPA)





The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) was brought into effect in June 2003. A total of 50 Hong Kong-made textile items, subject to the CEPA’s rules of origin, enjoy duty-free access to the Chinese mainland as of January 1, 2004, whereas non-Hong Kong made counterparts will remain subject to tariffs ranging from 5 to 18.7%. Eligible items include products under HS codes defined by the Mainland Customs. In 2006, management estimates Hong Kong’s domestic exports of these eligible items to the mainland amounted to about $464 million.





Chinese textile and garment consumption trend towards Hong Kong products





According to a survey taken by Hong Kong Trade Development Council on consumption trend of textile and garment in China, the result concluded that Chinese consumers have a strong desire for Hong Kong textile and garment products, seeing that the average spending on textile and garment products is $406.50 per person in the PRC.





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Industry Trends





China2





China's textile industry has returned to a regular growth after the period of high-speed growth which followed the country's entry into the World Trade Organization (WTO). According to the latest statistics jointly issued by the Industry Department and the Statistics Centre of the China National Textile and Apparel Council (CNTAC), in the nine months ended December 31, 2007 versus the same period ended December 31, 2006, the operation of China's textile industry demonstrated steady growth of production, slower export growth and change of growth method, import volume reduction.





Several factors influenced the operations of the industry. Firstly, the growing demand in China and abroad. In 2007, the demand on the international market is steady; developing countries in Asia and Africa have become the new engine for the increase in the textile industry's export. Statistics show that China is export to the United States increased 27.11% in the nine months ended December 31, 2007 versus the same period in 2006; that to the 25 countries of the EU, up 26.67%; Japan, up 4.11%; and that to African countries increased rapidly to 38.55% and 40.1%, respectively, contributing 25% to the country's export growth. At the same time, the domestic demand remained strong. The output value for domestic sales of large textile enterprises accounted for 74.86% of the total industrial sales output value, 17.3% higher than that in the same period of last year.





Secondly, the adjustment and upgrading of industrial structure have started taking effect. China's textile industry has achieved consistent improvement of equipment in the nine months in 2007 versus the same period in 2006. Its total import of textile machinery and parts reached US$3.172 billion in January-August, rising 21.81% year over year. The per capita labor productivity of large textile enterprises rose 22% year over year.





2 Source: tdctrade.com article, “Textile Industry’s Growth Steady in 1st Three Quarters,” (December 3, 2007)





Hong Kong3





According to the Hong Kong Trade Development Council’s article ‘Profiles of Hong Kong Major Manufacturing Industries’, (January 30, 2007), in recent years, with rising production costs inflated in part by stringent environmental regulations, Hong Kong's textiles manufacturers have established offshore production facilities in low-cost countries, particularly on the Chinese mainland and in Southeast Asian countries. A few companies have also set up offshore production in Latin America, including Mexico, to take advantage of preferential treatments allowed by trade agreements between these countries and their trading partners, typically the US.




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In the face of fierce competition in the global market, Hong Kong's textiles industry is moving up-market to supply sophisticated textile products with original designs. Today, the operation of the textiles industry in Hong Kong is focused on higher value-added activities such as sales and marketing, quality control, designs and development while offshore plants are specialized in lower value-added operations.





The textiles industry has invested heavily in capital-intensive and advanced machinery to keep up with the latest technology know-how. Advanced production technologies are sourced mostly from vendors from Germany, Switzerland and Japan. Modern machinery has been widely adopted by local manufacturers. As such, Hong Kong textiles manufacturers are able to offer a wide range of fibers and fabrics to clients.





Product Trends4





Cotton remains the preferred fiber for most consumers. Europeans, in particular, are enthusiastic about the environmentally friendly properties of biodegradable natural fibers. Consumers also tend to buy more manmade fiber fabrics, particularly polyester and polyester blends. The growth in demand for polyester is partly due to the technical improvements achieved over the last few years, particularly in respect of moisture absorption.





In addition, innovative new fibers and fabrics have buoyed demand in many different areas. The successful fabrics which appear to have answered the needs of consumers include the wrinkle-free, water-resistant, more washable, soft-stretch fabrics and environmental friendly. For example, cellulosic fibers, including viscose, lyocell and acetate, have gained greater popularity.





Microfibers have been getting more and more attention. The major benefits of textile products made of microfibers are its light in weight and superior performance in keeping warm. In the field of furnishings, microfibers are more often used in the area of decorative fabrics and drapery.





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Additional Challenges





The following are additional challenges facing our company:




●
Signs of a labor shortage in Guangdong Province


In the last few years, there have been signs of a labor shortage in the Guangdong Province in the PRC due to the rapid development of other parts of China. Due to the fact that textile and garment manufacturing is relatively labor intensive, a shortage of labor could cause an increase in production costs and weaken our profitability.




●
Appreciation of the Renminbi (RMB) versus the U.S. Dollar


Other than increasing production costs in China, the appreciation of the RMB, the currency of mainland China, against foreign currencies, mainly the U.S. Dollar, could harm the competitiveness of China-made textile and garment products. The U.S. Dollar has been currently depreciating against the RMB and other foreign currencies, making it more expensive for U.S. importers of foreign goods. As the value of the RMB increases against other currencies of major exporting partners, buyers would turn to other countries to manufacture lower priced products.








3 Source: Hong Kong Trade Development Council’s article ‘Profiles of Hong Kong Major Manufacturing Industries’, (January 30, 2007),


4 Source: Hong Kong Trade Development Council’s article ‘Profiles of Hong Kong Major Manufacturing Industries’, (January 30, 2007),





Strengths, Weakness, Opportunities and Threats (SWOT) Analysis and Control Policies





SWOT Analysis





We believe our Strengths, Weaknesses, Opportunities and Targets (SWOT) are the following:





Strengths:




●
Advanced production facilities:


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Our newly acquired weaving machinery and technology for production meet market standards.


●
Experienced management team:





We employ a professional management team with substantial experience in the denim fabrics industry, particularly in terms of applying advanced technology to improve product quality and production efficiency.




●
Excellent quality of product with a good reputation:


We believe we maintain an excellent quality of product in order to uphold our reputation amongst our globally recognized name brands and clients. Our quality control standards have always been strictly enforced.




●
Solid distribution network:
 
 We have maintained solid relationships with many large suppliers, buyers and direct users around the world. Our sales are largely based on its enduring business foundation.





We are a holding company formed in the state of Delaware. On October 25, 2007, we merged with a registered shell company, Freedom 3, Inc., or Freedom, a Delaware corporation.





Through our wholly-owned subsidiary, Sound Worldwide Limited, or Sound Worldwide or SWL, a British Virgins Island corporation, and its two subsidiaries, we manufacture and sell denim fabrics and garments from our facilities in Hong Kong and China.




Through our subsidiaries, Sound Worldwide is able to produce various types of fabric and garment products. Additionally, Sound Worldwide is a garment contractor for a number of well known brands such as GAP, Levis, ECKO, and Giordano. The Company’s products are sold to customers worldwide, with over 50% exported to the U.S. marketplace and the rest throughout Western Europe and other countries. Sound Worldwide has been devoting resources to enhance its fabric and garment production technology, capacity, efficiency, and flexibility. This is intended to help Sound Worldwide to meet the perceived increasing and changing demand of the textile and garment market.





Weaknesses:




●
Non-diversified geographical marketing:
  34
 
 Although have a number of well-known clients, sales of our products is limited to the U.S., Western Europe and Japan. We believe we need to diversify our sales to different geographic locations so that fluctuation in sales will be minimized. These fluctuations are generally caused by economic downturns and a change in preferences for garments and textiles.


●
Insufficient production backup:
 Our production chain, from raw materials to textiles and garments, requires separated production backups of weaving (sizing factories) and shrinking (shrinkage factories). Currently, weout-source these operations to our affiliates. Future concerns regarding stability in production timing and quality control may not allow us to operate at our full potential.


Opportunities:


●
China entry to WTO
  Following China’s entry into the WTO, average tariff rates on imported textiles have dropped from approximately 22%-25 % pre-WTO entry to approximately 14% - 16% in 2005. Eventually, these tariffs will be eliminated sometime in the future. Moreover, the Agreement on Textile and Clothing (ATC) implemented under the WTO in 2005 phased out the historic quota system imposed by other counties on the importing of certain PRC textile products. This is expected to continue to boost textile processing and manufacturing volumes in the PRC.


●
Opportunities of CEPA
  The PRC and Hong Kong Closer Economic Partnership Arrangement (CEPA) was concluded in June 2003. Subject to the CEPA’s rules of origin, Hong Kong products have enjoyed duty-free access to the Chinese mainland since January 2004, whereas non-Hong Kong made counterparts have remained subject to tariffs ranging from 5%-18.7%. This has provided a comparative advantage to our products against foreign-made textiles and garments.





Policies





In order to mitigate any damages to the future prospects of the Company, which may result from the industry and product trends and other threats and weaknesses previously outlined, we intend to implement the following policies:


●
Expand the sales and marketing teams in order to develop Eastern European markets. We believe that this should allow product sales to diversify into different geographical areas.
  35
  ●
Acquiring more advanced equipment to transform our operations from labor-intensive to capital intensive. This should not only allow us to avoid the effects of increased production costs caused by lack of labor, but also enhance the efficiency of production.
 ●
Vertical integration to provide stability as well as improve our profitability by reducing our margins.
 ●
We anticipate putting in place currency hedging strategy so that fluctuations in the RMB or U.S. dollar should not have a significant effect on our profitability.


We believe that the above-mentioned control policies, to a large extent, should minimize the volatility of the threats and weaknesses encountered by SWL. However, to the extent consumers replace, rather than supplement, their purchases of garments made from cotton fibers with synthetic fibers, we will be further pressured to decrease our margins in order to be profitable.




Revenue Recognition Policies





We recognize revenue when goods are delivered and the customer takes ownership and assumes risk of loss, collections of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable.





Sales of goods represent the invoiced value of goods, net of sales returns, trade discounts and allowances.





Critical Accounting Policies





The Company’s consolidated financial statements have been prepared in conformity 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. Actual results could differ from those estimates. Management uses its best judgment in valuing these estimates and may, as warranted, solicit external professional advice and other assumptions believed to be reasonable. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. The following critical accounting policies, some of which are impacted significantly by judgments, assumptions and estimates, affect the Company’s consolidated financial statements.




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Revenue Recognition





The Company recognizes 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. We assess 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. We assess the collectibility of our 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 value 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.





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 Company will not be able to collect all amounts due according to original terms of receivables. Bad debts are written off when identified. They do 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.




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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.





Share-based Compensation





Effective January 1, 2006, the Group adopted Statements of Financial Accounting Standards (“SFAS”) No. 123R, Share-Based Payment (“SFAS No. 123R”). Under SFAS No. 123R, the Group measures the cost of employee and consultant services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the costs over the period the employee or consultant is required to provide service in exchange for the award, which generally is the vesting period.





Share-based compensation expense of $149,686, $17,214 & $nil for the years ended March 31 2010, 2009 and 2008, respectively. Since share-based compensation is not tax deductible in Hong Kong, the PRC and the United States, no related tax benefit has been recognized.





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 a business combination to be recorded at “full fair value” and require noncontrolling interests (previously referred to as minority interest) 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. The Company does not expect the initial adoption of SFAS No. 160 will have a material effect on the Company’s consolidated financial statements.




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In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities”, which requires enhanced disclosures about an entity’s derivatives and hedging activities. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Since SFAS No. 161 only provides for additional disclosure requirements, management assessed that there will be no impact on the results of operations and financial position.




In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective for us with the reporting period beginning January 1, 2010, except for the disclosure on the roll forward activities for Level 3 fair value measurements, which will become effective for us with the reporting period beginning July 1, 2011. Other than requiring additional disclosures, adoption of this new guidance did not have a material impact on our financial statements. See Note 6 – Fair Value Measurements.





On July 1, 2009, we adopted guidance issued by the FASB on business combinations. The guidance retains the fundamental requirements that the acquisition method of accounting (previously referred to as the purchase method of accounting) be used for all business combinations, but requires a number of changes, including changes in the way assets and liabilities are recognized and measured as a result of business combinations. It also requires the capitalization of in-process research and development at fair value and requires the expensing of acquisition-related costs as incurred. We have applied this guidance to business combinations completed since July 1, 2009.





On July 1, 2009, we adopted guidance issued by the FASB that changes the accounting and reporting for non-controlling interests. Non-controlling interests are to be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control are to be accounted for as equity transactions. In addition, net income attributable to a non-controlling interest is to be included in net income and, upon a loss of control, the interest sold, as well as any interest retained, is to be recorded at fair value with any gain or loss recognized in net income. Adoption of the new guidance did not have a material impact on our financial statements.





39





On July 1, 2009, we adopted guidance on fair value measurement for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Adoption of the new guidance did not have a material impact on our financial statements.





Recent Accounting Guidance Not Yet Adopted





In October 2009, the FASB issued guidance on revenue recognition that will become effective for us beginning July 1, 2010, with earlier adoption permitted. Under the new guidance on arrangements that include software elements, tangible products that have software components that are essential to the functionality of the tangible product will no longer be within the scope of the software revenue recognition guidance, and software-enabled products will now be subject to other relevant revenue recognition guidance. Additionally, the FASB issued guidance on revenue arrangements with multiple deliverables that are outside the scope of the software revenue recognition guidance. Under the new guidance, when vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance includes new disclosure requirements on how the application of the relative selling price method affects the timing and amount of revenue recognition. We believe adoption of this new guidance will not have a material impact on our financial statements.





In June 2009, the FASB issued guidance on the consolidation of variable interest entities, which is effective for us beginning July 1, 2010. The new guidance requires revised evaluations of whether entities represent variable interest entities, ongoing assessments of control over such entities, and additional disclosures for variable interests. We believe adoption of this new guidance will not have a material impact on our financial statements.





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Basis of Presentation





Prior to its merger with SWL on October 25, 2007, Freedom was a reporting shell company with no operations and nominal operations. The sole founder and stockholder of Freedom funded Freedom’s pre-merger operations from such stockholder’s personal funds. Therefore, the Results of Operations in this MD&A for the fiscal years ended March 31, 2007 and March 31, 2006 and the three and nine months ended December 31, 2007 and 2006 (pro forma) reflect the consolidated business assets and operations of Sound Worldwide. We believe such information is beneficial to potential investors in order to allow them to make an informed investment decision in our common stock.





Results of Operations





Comparison of Results of Operations for the Fiscal Years Ended March 31, 2009 and 2008





Revenues





Our revenues decreased from $4,227,552 in the fiscal year ended March 31, 2009 to $2,280,608 in the fiscal year ended March 31, 2010. The decrease was mainly attributable a  decrease in sales volume.


Cost of Revenues





For the fiscal year ended March 31, 2010, our total cost of revenues decreased to $2,242,917 from $3,907,813 for the fiscal year ended March 31, 2009. This decrease was primarily due to the decrease in sales volume.





Gross Profit





Our gross profit amount decreased from $319,739 for the fiscal year ended March 31, 2009 to $37,691for the fiscal year ended March 31, 2010. The decreased gross profit percentage was mainly due to the change in sales mix, in which more lower margin products were manufactured and sold for the fiscal year ended March 31, 2010 than for the same period of 2009.





41





Operating Expenses




Our total operating expenses (selling, general & administrative expenses (SG&A)) for the fiscal year ended March 31, 2010 increased from $407,199 for the fiscal year ended 2009 to $1,267,925 for the fiscal year ended 2010. These increase can be primarily contributed to the expenses related to share based compensation




Loss on disposal of plant and equipment




We incurred a loss on disposal of plant and equipment of $1,108,046 for the fiscal year ended 2010.  The loss was a result of a major operating subsidiary, Asian Point Investment Limited, selling out all its plant and equipment at a loss of resulting to a net financial loss of US$2,370,460 during the year.




(Loss)/Income from Operations





Our loss from operations for the fiscal years ended March 31, 2010 was $2,339,180 compared to a  loss from operations of $87,412 for the fiscal year ended March 31, 2009. The decrease was primarily due to the disposal of plant and equipment and increase in selling, general & administrative expenses.





Net (Loss)/Income





We had net loss of $2,370,460 for the fiscal year ended March 31, 2010 as compared to net loss of $380,290 for the fiscal year ended March 31, 2009. The decrease was primarily due to the disposal of plant and equipment and increase in selling, general & administrative expenses..





Accounts Receivable





Accounts receivable, decreased from $1,538,779 as of March 31, 2009 to $494,650 as of March 31, 2010. This decrease was primarily due to a decrease in revenue.





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Inventories





At March 31, 2010, we had $nil in inventories, compared to $137,260 at March 31, 2009. Our inventories consist of raw materials, products which are work-in-progress, and finished goods.  No inventories were written off in 2010 and 2009





Liquidity and Capital Resources





Prior to the merger with SWL on October 25, 2007, Freedom was a reporting shell company with no operations and nominal operations. For accounting purposes, we treated our acquisition of SWL as a recapitalization of our company. As a result, we treat the historical financial information of SWL as our historical financial information. The sole founder and stockholder of Freedom funded Freedom’s pre-merger operations from such stockholder’s personal funds.





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.





Comparison of Liquidity for the Fiscal Years Ended March 31, 2010 and 2009





Net cash provided by operating activities totaled  used in operating activities decreased to $173,506 for the year ended March 31, 2010 from $1,051,352 generated from operating activities for the year ended March 31, 2009. This change is primarily attributable to The decrease was primarily due to the disposal of plant and equipment.





Net cash used in investing activities totaled $510,721for the year ended march 31, 2010 compared to  ($390,272) for the year ended March 31, 2009. The difference is due to disposal of plant and equipment.





Net cash used in financing activities totaled $314,233 for the year ended March 31, 1010 compared to $941,581 for year ended March 31, 2009.The difference is due to no borrowings from bank.




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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.





Off Balance Sheet Arrangements





None.





Other Considerations





There are numerous factors that affect the business and the results of its operations. Sources of these factors include general economic and business conditions, federal and state regulation of business activities, the level of demand for product services, the level and intensity of competition in the health drink industry, and the ability to develop new services based on new or evolving technology and the market's acceptance of those new services, the Company’s ability to timely and effectively manage periodic product transitions, the services, customer and geographic sales mix for any particular period, and our ability to continue to improve our infrastructure including personnel and systems to keep pace with the Company’s anticipated rapid growth.




ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




We do not hold any derivative instruments and do not engage in any hedging activities




44


ITEM 8.  FINANCIAL STATEMENTS





The financial statements and related notes are included as part of this report as indexed in the appendix beginning on page F-1.




ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.





None.


ITEM 9A.  CONTROLS AND PROCEDURES





a) Evaluation of Disclosure Controls and Procedures





Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.





Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.





Management’s report on internal control over financial reporting





Management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. In order to evaluate the effectiveness of internal control over financial reporting, management has conducted an assessment, including testing, using the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Telephone’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.




45


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the Company's operation and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls





Based on our assessment, under the criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control -- Integrated Framework, management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2009.





This annual report does not include an attestation report of our independent registered public accounting firm over management’s assessment regarding internal control over financial controls due to a transition period established by rules of the SEC for non-accelerated filers.





b) Changes in Internal Control over Financial Reporting.





During the year ended March 31, 2010, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


ITEM 9B.  OTHER INFORMATION





None.




46





PART III





ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.





Director and Executive Officer





Set forth below is information regarding the Company’s current directors and executive officers. There are no family relationships between any of our directors or executive officers. The directors are elected annually by stockholders. The executive officers serve at the pleasure of the Board of Directors.





Person and Position:

Age:

SWL Director Since:Roger Kwok Wing Fan

— Chief Executive Officer and Chairman

48

July 1999Tony Ka Kin Chui

— Chief Financial Officer

54

—Hung Man To

— Operation Director and Director

48

February 2007Mei Ling Szeto

—Secretary

46

—





Management and Director Biographies





Roger K. W. Fan


Chief Executive Officer, President and Chairman





Mr. Roger K. W. Fan has been serving as the Chief Executive Officer and Chairman of Sound Worldwide Holdings, Inc. since the Effective Date and as President since May 20, 2008. From the Effective Date to November 14, 2007, Mr. Fan also served as the President of Sound Worldwide Holdings, Inc. Mr. Fan has been serving as the President and Chairman of SWL since its inception in July 1999. Since 1997, he was the Chairman of Asian Point. Mr. Fan has over 20 years of experience in textile industry, starting with his family’s textile manufacturing company, Yin Kee Weaving Factory. Mr. Fan also serves as a Director of Yin Kee Weaving Factory, Ltd.





Tony Ka Kin Chui


Chief Financial Officer





Mr. Chui has been serving as the Chief Financial Officer of Sound Worldwide Holdings, Inc. since the Effective Date and of SWL since its inception in July 1999. From 1984 to 1987, Mr. Chui served as the Accounts Executive of China Dyeing Works Ltd. From 1987 to 1991, Mr. Chui served as the Factory Manager of Tak Po Printing Factory Ltd. From 1991 to 1999, Mr. Chui served as the Sales Manager of Deep Success Industrial Ltd.




47


Hung Man To


Operation Director and Director





Mr. Hung Man To has been serving as the Operation Director and Director of Sound Worldwide Holdings, Inc. since the Effective Date and of SWL since 2007. From 1987 to 2001, Mr. To served as the Operation Manager of Fordcan Industries Ltd.  From 2001 to January, 31, 2007 he served as General Manager of SWL.





Mei Ling Szeto


Secretary





Ms. Szeto has been serving as the Secretary of Sound Worldwide Holdings, Inc. since the Effective Date and of SWL since its inception in July 2009. Miss Szeto has over 20 years of experience in textile industry during her employment with Po Lung Garment Manufacturing Ltd., from 1981 to 1983 as Secretary. From 1983 to 199l served as Secretary of Telly Weaving & Dyeing Factory Ltd., From 1992 to 2000 served as Secretary of Yin Kee Weaving Factory Ltd., and from 2000 to now as Director of Yin Kee Weaving Factory Ltd. From 1997 to now as Director of Asian Point Investment Ltd.





Family Relationships amongst Directors and Officers:





Mei Ling Szeto, the Company’s Secretary, is the spouse of Roger Kwok Wing Fan, the Company’s Chief Executive Officer and Chairman of the Board.





Compliance with Section 16(a) of the Securities Exchange Act of 1934





Section 16(a) of the Exchange Act requires the Company’s directors and officers, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of beneficial ownership and changes in beneficial ownership of the Company’s securities with the SEC of Forms 3, 4 and 5. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.




The Company is aware that all filings of Form 4 and 5 required of Section 16(a) of the Exchange Act of Directors, Officers or holders of 10% of the Company's shares have been timely.





Code of Ethics





We have adopted a Code of Ethics and Code of Business Conduct that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions in that our officers and directors serves in all the above capacities. The Code of Ethics and Code of Business Conduct are attached to the annual statement for the year ended March 31, 2008 as Exhibits 14.1 and 14.2 respectively.





48





ITEM 11.  EXECUTIVE COMPENSATION





Summary Compensation Table





The following table sets forth for the year ended March 31, 2010 and 2009 compensation awarded to, paid to, or earned by, the Chief Executive Officer, and our other most highly compensated executive officers whose total compensation during the last fiscal year exceeded $100,000, if any.





2010 and 2009 SUMMARY COMPENSATION TABLE


Name and Principal Position

Year

Salary ($)

Bonus ($)

Stock

Awards

($)

Option

Awards

($)

Non-Equity

Incentive Plan

Compensation-ion

($)

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($)

All Other

Compensation-ion

($)

Total

($)Roger Kwok Wing Fan

2010

46,428

0

0

0

0

0

0

46,4282009

43,254

0

0

0

0

0

0

43,254








2010 and 2009 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE




Option Awards

Stock AwardsNumber of

Securities

Underlying

Unexercised

Options

(#)

Number of

Securities

Underlying

Unexercised

Options

(#)

Equity

Incentive

Plan Awards:

Number of

Securities

Underlying

Unexercised

Option



Number of

Shares or

Units of

Stock That

Market

Value of

Shares or

Units of

Stock That

Equity

Incentive

Plan Awards:

Number of

Unearned

Shares, Units

or Other

Rights That

Equity

Incentive

Plan Awards:

Market or

Payout Value

of Unearned

Shares, Units

or Other

Rights ThatName

Exercisable

Unexercisable

Unearned

Options

(#)

Exercise

Price

($)

Option

Expiration

Date

Have Not

Vested

(#)

Have Not

Vested

($)

Have Not

Vested

(#)

Have Not

Vested

($)Roger Kwok Wing Fan

0

0

0

0

0

0

0

0

00

0

0

0

0

0

0

0

0
  49
  2010 and 2009 OPTION EXERCISES AND STOCK VESTED TABLE
  2007 and 2006 PENSION BENEFITS TABLE





Name

Year

Plan

Name

Number ofYears

Credited Service

(#)

PresentValue of

Accumulated

Benefit

($)

Payments

During Last

Fiscal Year

($)Roger Kwok Wing Fan

2010



0

0

02009



0

0

0








2010 and 2009 NONQUALIFIED DEFERRED COMPENSATION TABLE





Name

Year

Executive

Contributions

in Last Fiscal Year

($)

RegistrantContributions

in LastFiscal Year

($)

Aggregate

Earnings

in Last Fiscal Year

($)

Aggregate

Withdrawals /

Distributions

($)

Aggregate

Balance at

Last Fiscal Year-End

($)Roger Kwok Wing Fan

2010

0

0

0

0

02009

0

0

0

0

0








2010 and 2009 DIRECTOR COMPENSATION TABLE





Name

Year

Fees Earned or

Paid in Cash

($)

Stock Awards

($)

Option Awards

($)

Non-Equity

Incentive Plan

Compensation

($)

Change

in Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($)

All Other

Compensation

($)

Total

($)Roger Kwok Wing Fan

2010

0

0

0

0

0

0

02009

0

0

0

0

0

0

0




50





2010 and 2009 ALL OTHER COMPENSATION TABLE





Name

Year

Perquisites

and Other

Personal

Benefits

($)

Tax

Reimbursements

($)

Insurance

Premiums

($)

Company

Contributions

to Retirement and

401(k) Plans

($)

Severance

Payments /

Accruals

($)

Change

in Control

Payments /

Accruals

($)

Total

($)Roger Kwok Wing Fan

2010

0

0

0

0

0

0

02009

0

0

0

0

0

0

0





2010 and 2009 PERQUISITES TABLE





Name

Year

Personal Use of

Company

Car/Parking

Financial Planning/

Legal Fees

Club Dues

Executive

Relocation

Total Perquisites

andOther

PersonalBenefitsRoger Kwok Wing Fan

2010

0

0

0

0

02009

0

0

0

0

0








2010 and 2009 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE




Name

Year

Benefit

BeforeChange

inControl

Termination

w/o Cause or for

Good Reason

After Change in

Control

Termination w/o Cause or

for GoodReason

Voluntary

Termination

Death

Disability

Change in

ControlRoger Kwok Wing Fan

2010

None2009

None











-





Management Compensation





Except for as stated in the preceding Summary Compensation Table, we have not paid any salary, bonus or other compensation to our officers and directors since our inception. We presently have no compensation arrangements with our officers and directors.




51


Stock Option Grants





No stock options or stock appreciation rights under any stock incentive plans or otherwise were granted to our executive officers and directors since our inception. No such grants have otherwise been made pursuant to the 2009 Stock Incentive Plan.





Director Compensation





The Company currently does not pay any cash fees to directors, but we pay directors' expenses in attending board meetings. During the year ended March 31, 2010, no director expenses were reimbursed.





Significant Employees





We have no significant employees other than our executive officers and directors named in this Annual Report. We conduct our business through agreements with consultants and arms-length third parties.





Committees of the Board of Directors





Our audit committee presently consists of our directors. Our board at this time does not have compensation, governance, nominating or executive committees or any other committees.





Limitation of Director Liability; Indemnification





Indemnity





Section 145 of the Delaware General Corporation Law and our certificate of incorporation and bylaws contain provisions for indemnification of our officers and directors, and under certain circumstances, our employees and other persons. The bylaws require us to indemnify such persons to the fullest extent permitted by Delaware law. Each such person will be indemnified in any proceeding if such person acted in good faith and in a manner that such person reasonably believed to be in, or not opposed to, our best interests. The indemnification would cover expenses, including attorney's fees, judgments, fines and amounts paid in settlement. Our bylaws also provide that we may purchase and maintain insurance on behalf of any of our present or past directors or officers insuring against any liability asserted against such person incurred in their capacity as a director or officer or arising out of such status, whether or not we would have the power to indemnify such person.




52


We have no other indemnification provisions in our Certificate of Incorporation, Bylaws or otherwise specifically providing for indemnification of directors, officers and controlling persons against liability under the Securities Act.





Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act 1993”), as amended, may be permitted to directors or officers pursuant to the foregoing provisions, we are informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy, as expressed in the Act 1933 and is, therefore, unenforceable.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.





The following table lists stock ownership of our Common Stock as of March 31, 2010 based on 15,646,250shares of common stock issued and outstanding. The information includes beneficial ownership by (i) holders of more than 5% of our Common Stock, (ii) each of two directors and executive officers and (iii) all of our directors and executive officers as a group. Except as noted below, to our knowledge, each person named in the table has sole voting and investment power with respect to all shares of our Common Stock beneficially owned by them.




Name and Address
Number of Shares

Beneficially Owned
Percentage(1)Roger K.W. Fan, President, CEO
11,261,250
71.97%Tony Ka Kin Chui, CFO
1,750
*Hung Man To, Operations Dir.
43,050
*Mei Ling Szeto, Secretary
0
-All Directors, Officers as a Group
11,306,050
72.26%


* Represents less than 1%




(1)
Applicable percentage of ownership is based on 15,646,250 shares of common stock issued and outstanding. Pursuant to Rule 13d-3 promulgated under the Exchange Act, any securities not outstanding which are subject to warrants, rights or conversion privileges exercisable within 60 days are deemed to be outstanding for purposes of computing the percentage of outstanding securities of the class owned by such person but are not deemed to be outstanding for the purposes of computing the percentage of any other person.




There are no arrangements, known to us, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of Sound Worldwide Holdings, Inc. There are no arrangements or understandings among members of both the former and the new control groups and their associates with respect to election of direct ors or other matters.




53


Changes in Control





We are not aware of any arrangements that may result in a change in control of the Company.





ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.





Described below are transactions, since the beginning of our last fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets for the last three completed fiscal years, and in which any of our directors, nominee directors, executive officers, security holders who beneficially own 5% or more of our voting securities, and any member of the immediate family of any of the foregoing persons, had, or will have, a direct or indirect material interest. We believe that terms of each transaction below were comparable to those obtainable from unaffiliated third parties.





There were no related party transactions in the fiscal year ended March 31, 2010.





Director Independence





None of our directors are deemed to be independent.





ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES




Dominic K.F. Chan & Co. (“Dominic”) was our principal auditor.





Audit Fees





The aggregate fees billed by Dominic for professional services rendered for the audit of our annual financial statements and review of financial statements included in our Form 10-Q or services that are normally provided in connection with statutory and regulatory filings were $30,000 and $30,000 for fiscal years ended March 31, 2010 and March 31, 2009, respectively.




54


Audit-Related Fees





No Dominic’s fees were billed for assurance and related services related to the audit or review of the Company’s financial statements for the fiscal years ended March 31, 2010 and March 31, 2009, respectively.





Tax Fees





No Dominic’s fees were billed for professional services for tax compliance, tax advice, and tax planning for the fiscal years ended March 31, 2010 and March 31, 2009, respectively.





All Other Fees





No Dominic’s fees were billed for other products and services for the fiscal years ended March 31, 2010 and March 31, 2009, respectively.





The Board has received and reviewed the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and has discussed with its auditors its independence from the Company. The Board has considered whether the provision of services other than audit services is compatible with maintaining auditor independence.





Based on the review and discussions referred to above, the Board approved the inclusion of the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for its 2010 fiscal year for filing with the SEC.





The Board pre-approved all fees described above.




55


PART IV





ITEM 15.  EXHIBITS AND REPORTS.


Number
Exhibits3.1
Certificate of Incorporation of Freedom 3, Inc. (1)3.1.1
Amendment to the Certificate of Incorporation of Freedom 3, Inc., dated October 25, 2007 (2)3.2
Bylaws (1)4.1
Form of Common Stock Certificate (3)10.1
Share Exchange Agreement, dated October 25, 2007, between Freedom 3, Inc. and Sound Worldwide Limited (2)10.2
Banking Facilities of Asian Point Investment Limited (3)10.3
Management Agreement, dated March 31, 2005, between Asian Point Investment Limited and Yin Kee Weaving Factory Ltd. (3)10.4
Management Agreement, dated March 31, 2006, between Asian Point Investment Limited and Yin Kee Weaving Factory Ltd. (3)10.5
Share Purchase and Exchange Agreement, dated May 27, 2008, among Sound Worldwide Holdings, Inc., Sound Worldwide Limited, Best Allied Industrial Limited and Ms. Ivy S.K. Lam (5)10.6
Settlement Agreement and Release, dated May 27, 2008, by Sound Worldwide Holdings, Inc. and Ms. Ivy S.K. Lam (5)14.1
Code of Ethics (6)14.2
Code of Business Conduct (6)16.1
Letter from Conner & Associates, PC, dated October 25, 2007 (4)21.
Subsidiaries (7)31.1
Certification of the Company’s Principal Executive Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002, with respect to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2010 (7)31.2
Certification of the Company’s Principal Financial Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002, with respect to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2010 (7)32.1
Certification of the Company’s Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (7)32.2
Certification of the Company’s Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (7)




56




(1)
Filed as an exhibit to the Company’s Registration Statement on Form 10SB (SEC File No.: 000-52116) filed on July 7, 2006 and incorporated by reference herein.





(2)
Filed as an exhibit to the Company’s Registration Statement on Form SB-2 (SEC File No.: 333-146986) filed on October 29, 2007 and incorporated by reference herein.





(3)
Filed as an exhibit to the Company’s Registration Statement on Form SB-2/Amendment No. 1 (SEC File No.: 333-146986) filed on January 22, 2008 and incorporated by reference herein.





(4)
Filed as an exhibit to the Company’s Current Report on Form 8-K (SEC File No.: 000-52116) filed on October 29, 2007 and incorporated by reference herein.





(5)
Filed as an exhibit to the Company’s Current Report on Form 8-K (SEC File No.: 000-52116) filed on May27, 2008 and incorporated by reference herein.(6)
Filed as an exhibit to the Company’s Annual Report for the fiscal year ended March 31, 2008 and incorporated by reference herein.(7)
Filed herein.





57




SIGNATURES





In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.





Registrant
Sound Worldwide Holdings, Inc.Date: July 13, 2010
By:
/s/ Roger Kwok Wing FanRoger Kwok Wing Fan

Chief Executive Officer (Principle Executive Officer)July 13, 2010
By:
/s/Tony Ka Kin ChuiTony Ka Kin Chui

Chief Financial Officer (Principle Financial Officer)








Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.




July 13, 2010
By:
/s/ Roger Kwok Wing FanRoger Kwok Wing FanDirector, Chief Executive Officer, (Principal Executive Officer,July 13, 2010
By:
/s/ Tony Ka Kin ChuiTony Ka Kin ChuiDirector, Chief Financial Officer (Principle Financial Officer)July 13, 2010
By:
/s/ Hung Man ToHung Man To

Director, Operations Director





58





SOUND WORLDWIDE HOLDINGS, INC.







CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED MARCH 31, 2010, 2009 AND 2008


AND INDEPENDENT AUDITORS’ REPORT











SOUND WORLDWIDE HOLDINGS, INC.


CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED MARCH 31 2010, 2009 AND 2008


AND INDEPENDENT AUDITORS’ REPORT










INDEX TO CONSOLIDATED FINANCIAL STATEMENTS








PAGESREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
F-1CONSOLIDATED BALANCE SHEETS
F-2CONSOLIDATED STATEMENTS OF OPERATIONS
F-3CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYAND COMPREHENSIVE INCOME
F-4CONSOLIDATED STATEMENTS OF CASH FLOWS
F-5NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-6 - F-24





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To the Board of Directors and Stockholders of


SOUND WORLDWIDE HOLDINGS, INC.





We have audited the accompanying consolidated balance sheets of SOUND WORLDWIDE HOLDINGS, INC. (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as of March 31, 2010 and 2009 and the related consolidated statements of operations, shareholders’ equity and other comprehensive income, and cash flows for the years ended March 31, 2010, 2009 and 2008. These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.





We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.





In our opinion, these consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group and its subsidiaries as of March 31, 2010 and 2009 and the consolidated results of its operations and their cash flows for the years ended March 31, 2010, 2009 and 2008 in conformity with accounting principles generally accepted in the United States of America.





The accompanying consolidated financial statements have been prepared assuming that the Group will continue as a going concern. As discussed in Note 1b to the consolidated financial statements the Group has incurred significant operating loss and has ceased operation during the year. These factors raise substantial doubt about the Group’s ability to continue as a going concern and is dependent upon its ability to develop additional sources of capital and to establish new profitable operations. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.














Dominic K.F. Chan & Co


Certified Public Accountants


Hong Kong


June 25, 2010





F-1





SOUND WORLDWIDE HOLDINGS, INC.


CONSOLIDATED BALANCE SHEETS


(Stated in US Dollars)





At March 31,Notes


2010


2009$



$ASSETSCurrent assets:Cash and cash equivalents





30,837



7,989Accounts receivable, net of allowancefor doubtful accounts


3



494,650



1,538,779Prepaid expenses and other receivables






510,159



422Inventories


4



-



137,260Total current assets






1,035,646



1,684,450Plant and equipment, net


5



-



1,891,844TOTAL ASSETS






1,035,646



3,576,294LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIESCurrent liabilities:Accounts payable






104,762



43,178Bank and other borrowings


6



-



340,066Accrued expenses and other liabilities


8



123,375



204,506Amount due to a director






14,357



-TOTAL LIABILITIES






242,494



587,750Commitments and contingencies


11Stockholder’s equity:Common stock (USD 0.0001 par value - authorized 100,000,000 shares;issued and outstanding 15,646,250 shares in 2008shares in 2010 and 14,336,250 shares in 2009)






1,565



1,434Additional paid-in capital






820,881



645,726(Accumulated deficit)/Retained earnings






(49,258
)


2,321,202Accumulated other comprehensive income






19,964



20,182Total stockholders’ equity






793,152



2,988,544TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY






1,035,646



3,576,294





See accompanying notes to consolidated financial statements




F-2





SOUND WORLDWIDE HOLDINGS, INC.


CONSOLIDATED STATEMENTS OF OPERATIONS


(Stated in US Dollars)





Year ended March 31,Notes


2010


2009


2008$


$



$Net sales





2,280,608



4,227,552



17,652,601Cost of sales





(2,242,917
)


(3,907,813
)


(14,638,853
)Gross profit





37,691



319,739



3,013,748Selling, general and administrative expenses, including share based compensation


9



(1,267,925
)


(407,199
)


(1,564,142
)Loss on disposal of plant and equipment






(1,108,946
)


-



-Other income






-



48



151,677(Loss)/income from operations






(2,339,180
)


(87,412
)


1,601,283Loss on disposal of a subsidiary






-



(276,855
)


-Interest expenses






(31,280
)


(16,023
)


(100,859
)(Loss)/income before income taxes






(2,370,460
)


(380,290
)


1,500,424Income tax expenses


7



-



-



-Net (loss)/income






(2,370,460
)


(380,290
)


1,500,424(Loss)/earnings per share of common stock


2- Basic






(0.17
)


(0.03
)


0.08- Diluted






(0.15
)


(0.03
)


0.08Weighted average number of common stock


2- Basic






13,631,572



14,053,685



18,599,727- Diluted






15,646,250



14,336,250



20,000,000





See accompanying notes to consolidated financial statements




F-3




SOUND WORLDWIDE HOLDINGS, INC.


CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


AND COMPREHENSIVE INCOME


(Stated in US Dollars)




Common stock


Additional

paid-in


Accumulated

other

Comprehensive


RetainedShares


Amount


capital


(loss)/income


earnings


Total$


$Balance, March 31, 2007


17,500,000



1,750



620,308



(2,233
)


1,201,068



1,820,893Shares of stock held byFreedom 3’s shareholders


300,000



30



-



-



-



30Issuance of common stock for consultants upon completion of the share exchange transaction


2,200,000



220



-



-



-



220Recapitalization in connection with the share exchange transaction


-



-



7,608



-



-



7,608Net income


-



-



-



-



1,500,424



1,500,424Foreign currency translationAdjustments


-



-



-



4,219



-



4,219Comprehensive income














4,219



1,500,424



1,504,643Dividend


-



-



-



-



-



-Balance, March 31, 2008


20,000,000



2,000



627,916



1,986



2,701,492



3,333,394Retirement of shares


(6,063,750
)


(606
)


606



-



-



-Issuance of shares


400,000



40



(10
)


-



-



30Share based compensation


-



-



17,214



-



-



17,214Net loss


-



-



-



-



(380,290
)


(380,290
)Foreign currency translation adjustments


-



-



-



18,196



-



18,196Comprehensive loss










-



18,196



(380,290
)


(362,094
)Dividend


-



-



-



-



-



-Balance, March 31, 2009


14,336,250



1,434



645,726



20,182



2,321,202



2,988,544Issuance of shares


-



-



-



-



-



-Share based compensation


1,310,000



131



175,155



-



-



175,286Net loss


-



-



-



-



(2,370,459
)


(2,370,459
)Foreign currency translation adjustment


-



-



-



(218
)


-



(218
)Comprehensive loss














(218
)


(2,370,459
)


(2,370,677
)Dividend


-



-



-



-



-



-Balance, March 31, 2010


15,646,250



1,565



820,881



19,964



(49,257
)


793,153





See accompanying notes to consolidated financial statements




F-4




SOUND WORLDWIDE HOLDINGS, INC.




CONSOLIDATED STATEMENTS OF CASH FLOWS


(Stated in US Dollars)





Year ended March 31,2010


2009


2008$


$


$Cash flows from operating activities:Net (loss) / income


(2,370,460
)


(380,290
)


1,500,424Adjustments to reconcile net income toNet cash (used in)/provided by operating activities:Depreciation expense


271,994



199,724



140,611Loss on disposal of plant and equipment


1,108,946



-



5,692Shares based compensation


149,486



17,214



-Changes in current assets and liabilitiesAccounts receivable


1,043,295



932,021



(1,783,404
)Prepaid expenses and other receivables


(510,445
)


122,556



(85,450
)Inventories


137,247



802,454



(525,320
)Accounts payable


61,733



(564,599
)


327,849Amounts due to related parties


1,458



-



(68,466
)Amounts due to a director


14,357Accrued expenses and other liabilities


(81,117
)


(77,728
)


(29,514
)Net cash flows generated from /(used in) operating activities


(173,506
)


1,051,352



(517,578
)Cash flows from investing activities:Purchases of plant and equipment


510,721



(390,272
)


(12,555
)Proceeds from sale of plant and equipment


-



-



-Net cash used in investing activities


510,721



(390,272
)


(12,555
)Cash flow from financing activities:Issuance of new shares


25,800



-



7,858Proceeds from bank borrowings


(340,033
)


677,756



5,455,840Repayment of new bank borrowings


-



(1,619,337
)


(4,778,316
)Dividend paid


-



-



-Net cash (used in)/provided by financing activities


(314,233
)


(941,581
)


685,382Effect of exchange rate changes on cashand cash equivalents


(134
)


134



(5,547
)Net (decrease) increase in cash and cash equivalents


22,848



(280,367
)


149,702Cash and cash equivalents at beginning of the year


7,989



288,356



138,654Cash and cash equivalents at end of the year


30,837



7,989



288,356Supplementary disclosures of cash flow information:Interest paid


(31,280
)


16,023



100,859Income taxes paid


-



-



15,380





See accompanying notes to consolidated financial statements




F-5





SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)




1a.
Organization and nature of operations 
 Sound Worldwide Holdings, Inc. (the “Company”) and its subsidiaries (collectively referred to as 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 (“PRC”) 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.
  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, 2009, Ms. Lam purchased from the Group 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.
  F-6
 
 
 SOUND WORLDWIDE HOLDINGS, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)




1a.
Organization and nature of operations (continued) 
 On March 31, 2010, the Group’s subsidiary, Asian Point Investment Limited (“APIL”) has entered into a fixed asset purchase agreement with Kam Wing Shing Textile Manufactory Limited for the sale of all plant and equipment at a consideration of RMB4,500,000. APIL has ceased operation during the year.
  As of March 31, 2010, the subsidiaries of the Group include the following:




Name of company
Place and date of incorporation
Attributable equity interest held
Principal activitiesSound Worldwide Limited (“SWL”)
BVI

July, 28th, 1999
100%
Investment holdingAsian Point Investment Limited(“Asian Point”)
BVI

March 26th, 1997
100%
Manufacturing and trading of denim fabrics




1b.
Going concern




These financial statements have been prepared in accordance with generally accepted principles in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Group’s major operating subsidiary, Asian Point Investment Limited (“APIL”), has sold out all its plant and equipment at a loss of US$1,108,946 resulting to a net financial loss of US$2,370,460 during the year. APIL has ceased operation during the year.




The conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company’s ability to continue as a going concern. The financial statements have been prepared on a going concern basis, the validity of which depend its ability to develop additional sources of capital and to establish new profitable operations. The financial statements do not include any adjustments that would result from failure to obtain of the above. We consider that the material uncertainty has been adequately disclosed in the financial statements.




F-7





SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)




2.
Summary of principal accounting policies


Basis of presentation and consolidation




The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America.




On June 29, 2009,the Financial Accounting Standards Board(FASB) established the FASB Accounting Standards Codification (Codification) as the single source of authoritative US generally accepted accounting principles (GAAP) for all non governmental entities Rules and interpretive releases of the Securities and Exchange Commission (SEC) and also sources of authoritative US GAAP for SEC registrants. The Codification does not change US GAAP but takes previously issued FASB standards and other U.S. GAAP authoritative pronouncements, changes the way the standards are referred to, and includes them in specific topic arrears. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of the Codification did not have any impact on the Group’s financial statement.




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 years are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal.




The Company also evaluates consolidation of entities under Financial Accounting Standards Board (FASB) Interpretation No.46, “Consolidation of Variable Interest Entities” (FIN 46). FIN 46 requires management to evaluate whether an entity or interest is a variable interest entity and whether the Company is the primary beneficiary. Consolidation is required if both of these criteria are met. The Company does not have any variable interest entities requiring consolidation.




Use of estimates




In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting year. These accounts and estimates include, but are not limited to, the valuation of accounts receivable, deferred income taxes and the estimation on useful lives of plant and equipment. Actual results could differ from those estimates.




Cash and cash equivalents




Cash and cash equivalents include all cash, deposits in banks and other highly liquid investments with initial maturities of three months or less at the date of acquisition.  These investments are carried at cost, which approximates market value.




F-8





SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)




2.
Summary of principal accounting policies (continued)


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.




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




During the reporting year ended 31 March 2010, 2009 and 2008, the Group did not experience any bad debts and accordingly, did not make any allowance for doubtful debts.




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.




Plant and equipment




Plant and equipment are stated at cost less accumulated depreciation.  Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use.  Maintenance, repairs and betterments, including replacement of minor items, are charged to expense; major additions to physical properties are capitalized.




Depreciation of plant and equipment is provided using the straight-line method over their estimated useful lives of the following annual rates:-





Machinery

Furniture and office equipment

Motor vehicles
10%-20%

20%

20%





F-9





SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)





2.
Summary of principal accounting policies (continued)
  Plant and equipment (continued)
  Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an assed may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flow, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciation.
  Impairment of long-lived assets
  SFAS NO. 142, goodwill and other intangible Assets (“SFAS 142”), requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite. The Group does not have any goodwill.
  The Group accounts for the impairment of long-lived assets, such as plant and equipment, leasehold land and intangible assets, under the provisions of FASB Accounting Standard Codification Topic 360 (“ASC 360”) “Property, Plant and Equipment – Overall” (formerly known as SFAS No. 144, “Accounting for the Impairment of Long-Lived Assets” (“SFAS 144”)). ASC 360 establishes the accounting for impairment of long-lived tangible and intangible assets other than goodwill and for the disposal of a business. Pursuant to ASC 360, the Group periodically evaluates, at least annually, whether facts or circumstances indicate that the carrying value of its depreciable assets to be held and used may not be recoverable. If such circumstances are determined to exist, an estimate of undiscounted future cash flows produced by the long-lived asset, or the appropriate grouping of assets, is compared to the carrying value to determine whether impairment exists. In the event that the carrying amount of long-lived assets exceeds the undiscounted future cash flows, then the carrying amount of such assets is adjusted to their fair value. The Group reports an impairment cost as a charge to operations at the time it is recognized.
  There was no impairment of long-lived assets in 2008, 2009 or 2010.





F-10





SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)




2.
Summary of principal accounting policies (continued)
  Revenue recognition
  The Group 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 Group 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 Group 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 Group 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 Group 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.
  Shipping and handling fees and costs
  Costs incurred by the Group for shipping and handling, including costs paid to third-party transportation companies, to transport and deliver products to customers, are included in “Selling, general and administrative expenses”. Shipping and handling fees and costs amounted to $8, $Nil and $102,823 for the years ended March 31, 2010, 2009 and 2008, respectively.
  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 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 consolidated statements of comprehensive income in the period that includes the enactment date.




F-11


SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)





2.
Summary of principal accounting policies (continued)
  Income Taxes (continued)
  The FASB issued Accounting Standard Codification Topic 740 (ASC 740) “Income Taxes”. ASC 740 clarifies the accounting for uncertainty in tax positions. This requires that an entity recognized in the consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. The adoption of ASC 740 did not have any impact on the Group’s results of operations or financial condition for the year ended March 31, 2010.  As of the date of the adoption of ASC 740, the Group has no material unrecognized tax benefit which would favorably affect the effective income tax rate in future periods.  The Group has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the consolidated statements of operations.
  Comprehensive income
  Other comprehensive income refers to revenues, expenses, gains and losses that under U.S. GAAP are included in comprehensive income but are excluded from net income as these amounts are recorded as a component of stockholders’ equity. The Group’s other comprehensive income represented foreign currency translation adjustment.
  Foreign currency translation
  The functional currency of the Group is Hong Kong dollars (“HK$”). The Group maintains its financial statements in the functional currency.  Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.





F-12





SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)





2.
Summary of principal accounting policies (continued)
  Foreign currency translation (continued)
  In translating the financial statements of the Group from its functional currency into its reporting currency of United States dollars, balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using an average exchange rate prevailing during the reporting period. Any translation adjustments resulting are not included in determining net income but are included in cumulative other comprehensive income (loss), a component of stockholders’ equity.





2010

2009

2008Year end HK$ : US$ exchange rate
7.7645

7.7530

7.7820Average yearly HK$ : US$ exchange rate
7.7538

7.7768

7.7982





Transactions and balances




Transactions in foreign currencies are translated into the functional currency at the approximate rates of exchange ruling on the transaction date. Exchange gains and losses resulting from this translation policy are recognized in the statements of operations.




Share-based compensation




Effective January 1, 2006, the Group adopted Statements of Financial Accounting Standards (“SFAS”) No. 123R, Share-Based Payment (“SFAS No. 123R”). Under SFAS No. 123R, the Group measures the cost of employee and consultant services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the costs over the period the employee or consultant is required to provide service in exchange for the award, which generally is the vesting period.




Share-based compensation expense of $149,686, $17,214 and $nil for the years ended March 31, 2010, 2009 and 2008, respectively. Since share-based compensation is not tax deductible in Hong Kong, the PRC and the United States, no related tax benefit has been recognized.





F-13





SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)





2.
Summary of principal accounting policies (continued)
  Basic and diluted earnings per share
  The Group computes earnings per share (“EPS’) in accordance with FASB Accounting Standard Codification Topic 260 (ASC 260) “Earnings Per Share”, and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
  The calculation of diluted weighted average common shares outstanding for the year ended 31 March 2010 is based on the estimate fair value of The Group’s common stock during such periods applied to options using the treasury stock method to determine if they are dilutive.
  The following tables are a reconciliation of the weighted average shares used in the computation of basic and diluted earnings per share for the periods presented:





Year Ended

31 Mar, 2010

Year Ended

31 Mar, 2009

Year Ended

31 Mar, 2008Numerator for basic and dilutedearnings per share:
$

$

$Net (loss)/Income
(2,370,460)

(380,290)

1,500,424Denominator:Basic weighted average shares
13,631,572

14,053,685

18,599,727Effect of dilutive securities
2,014,678

282,565

1,400,273Diluted weighted average shares
15,646,250

14,336,250

20,000,000Basic earnings/(loss) per share:
(0.17)

(0.03)

0.08Diluted earnings/(loss) per share:
(0.15)

(0.03)

0.08




F-14


SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)





2.
Summary of principal accounting policies (continued)
  Related parties transactions
  A related party is generally defined as (i) any person that holds 10% or more of The Group’s securities and their immediate families, (ii) the Group management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Group, or (iv) anyone who can significantly influence the financial and operating decisions of the Group. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
  Commitments and contingencies
  Liabilities for loss contingencies arising from claims, assessments, litigation, fines and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonable estimated.
  Recently issued accounting pronouncements
  In December 2007, ASC 810, Consolidation (“ASC 810”) includes new guidance issued by the FASB governing the accounting for and reporting of non-controlling interests (previously referred to as minority interests). This guidance established reporting requirements which include, among other things, that non-controlling interests be reflected as a separate component of equity, not as a liability. It also requires that the interests of the parent and the non-controlling interest be clearly identifiable. Additionally, increases and decreases in a parent’s ownership interest that leave control intact shall be reflected as equity transactions, rather than step acquisitions or dilution gains or losses. This guidance also requires changes to the presentation of information in the financial statements and provides for additional disclosure requirements. ASC 810 was effective for fiscal years beginning on or after December 15, 2008. The Group implemented this guidance as of January 1, 2009. The effect of implementing this guidance was not material to The Group’s financial position or results of operations.





F-15





SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)





2.
Summary of principal accounting policies (continued)
  Recently issued accounting pronouncements (continued)
  In December 2007, ASC 805, Business Combinations (“ASC 805”) contains guidance that was issued by the FASB. It requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in a transaction at the acquisition-date fair value, with certain exceptions. Additionally, the guidance requires changes to the accounting treatment of acquisition related items, including, among other items, transaction costs, contingent consideration, restructuring costs, indemnification assets and tax benefits. ASC 805 also provides for a substantial number of new disclosure requirements. ASC 805 also contains guidance that was formerly issued as FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies which was intended to provide additional guidance clarifying application issues regarding initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. ASC 805 was effective for business combinations initiated on or after the first annual reporting period beginning after December 15, 2008. The Group implemented this guidance effective January 1, 2009. Implementing this guidance did not have an effect on The Group’s financial position or results of operations; however it will likely have an impact on The Group’s accounting for future business combinations, but the effect is dependent upon acquisitions, if any, that are made in the future.
  In April 2009, the FASB issued ASC805-20-35. ASC805-20-35 amends the provisions for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. ASC805-20-35 eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria and instead carries forward most of the provisions in ASC805 for acquired contingencies. ASC805-20-351 is effective for contingent assets and contingent liabilities acquired in business combinations for which the acquisition date is on or after the first annual reporting period beginning on or after December 15, 2008. We do not expect ASC805-20-35 to have any impact on the Group’s consolidated results of operations and financial condition.
  In May 2009, ASC 855, Subsequent Events (“ASC 855”) includes guidance that was issued by the FASB, and is consistent with current auditing standards in defining a subsequent event. Additionally, the guidance provides for disclosure regarding the existence and timing of a company’s evaluation of its subsequent events. ASC 855 defines two types of subsequent events, “recognized” and “non-recognized”. Recognized subsequent events provide additional evidence about conditions that existed at the date of the balance sheet and are required to be reflected in the financial statements. Non-recognized subsequent events provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date and, therefore; are not required to be reflected in the financial statements. However, certain non-recognized subsequent events may require disclosure to prevent the financial statements from being misleading. This guidance was effective prospectively for interim or annual financial periods ending after June 15, 2009. The Group implemented the guidance included in ASC 855 as of April 1, 2009. The effect of implementing this guidance was not material to The Group’s financial position or results of operations.




F-16


SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)





2.
Summary of principal accounting policies (continued)
  Recently issued accounting pronouncements (continued)
  In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends ASC Topic 820, Measuring Liabilities at Fair Value, which provides additional guidance on the measurement of liabilities at fair value. These amended standards clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, we are required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, we are required to use another valuation technique, such as an income approach or a market approach. These amended standards are effective for us beginning in the fourth quarter of fiscal year 2009. There was no material impact upon the adoption of this standard on The Group’s consolidated financial statements.
  In September 2009, the FASB issued ASU 2009-06, Income Taxes (Topic 740), ”Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities”, which provides implementation guidance on accounting for uncertainty in income taxes, as well as eliminates certain disclosure requirements for nonpublic entities.  For entities that are currently applying the standards for accounting for uncertainty in income taxes, this update shall be effective for interim and annual periods ending after September 15, 2009. For those entities that have deferred the application of accounting for uncertainty in income taxes in accordance with paragraph 740-10-65-1(e), this update shall be effective upon adoption of those standards. The adoption of this standard is not expected to have an impact on The Group’s consolidated financial position and results of operations since this accounting standard update provides only implementation and disclosure amendments.
  In September 2009, the FASB has published ASU 2009-12, “Fair Value Measurements and Disclosures (Topic 820) - Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)”. This ASU amends Subtopic 820-10, “Fair Value Measurements and Disclosures – Overall”, to permit a reporting entity to measure the fair value of certain investments on the basis of the net asset value per share of the investment (or its equivalent). This ASU also requires new disclosures, by major category of investments including the attributes of investments within the scope of this amendment to the Codification. The guidance in this update is effective for interim and annual periods ending after December 15, 2009. Early application is permitted.   The Group is in the process of evaluating the impact of this standard on its consolidated financial position and results of operations.




F-17


SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)





2.
Summary of principal accounting policies (continued)
  Recently issued accounting pronouncements (continued)
  In October 2009, the FASB has published ASU 2009-13, “Revenue Recognition (Topic 605)-Multiple Deliverable Revenue Arrangements”, which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. Specifically, this guidance amends the criteria in Subtopic 605-25, “Revenue Recognition-Multiple-Element Arrangements”, for separating consideration in multiple-deliverable arrangements. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable, which is based on: (a) vendor-specific objective evidence; (b) third-party evidence; or (c) estimates. This guidance also eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method and also requires expanded disclosures. The guidance in this update is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on The Group’s consolidated financial position and results of operations.
  ASC 105, Generally Accepted Accounting Principles (“ASC 105”), reorganized by topic existing accounting and reporting guidance issued by the Financial Accounting Standards Board (“FASB”) into a single source of authoritative generally accepted accounting principles (“GAAP”) to be applied by nongovernmental entities. All guidance contained in the Accounting Standards Codification (“ASC”) carries an equal level of authority. Rules and interpretive releases of the Securities and Exchange.
  Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Accordingly, all other accounting literature will be deemed “non-authoritative”. ASC 105 is effective on a prospective basis for financial statements issued for interim and annual periods ending after September 15, 2009. The Group has implemented the guidance included in ASC 105 as of July 1, 2009. The implementation of this guidance changed the Group’s references to GAAP authoritative guidance but did not impact the Group’s financial position or results of operations.
  In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of purchases, sales, issuances, and settlements relating to Level 3 measurements and clarification of existing fair value disclosures.  ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010 (the Group’s fiscal year 2012); early adoption is permitted.  The Group is currently evaluating the impact of adopting ASU 2009-14 on its financial statements.





F-18





SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)




3.
Accounts receivable, net 
 Accounts receivable consist of the following:





At March 31,2010

2009$

$Accounts receivable
494,650

1,538,779





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.


4.
Inventories




Inventories by major categories are summarized as follows:





At March 31,2010

2009$

$Raw materials
-

53,100Finished goods
-

84,160-

137,260





No inventories were written off in 2010 and 2009.
  F-19





SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)




5.
Plant and equipment, net 
 Plant and equipment consists of the following:





At March 31,2010

2009$

$CostMachinery
2,088,488

2,091,586Furniture and office equipment
593

593Motor vehicles
46,092

46,161Disposals
(2,135,173)

--

2,138,340Accumulated depreciationMachinery
471,439

200,237Furniture and office equipment
217

99Motor vehicles
46,092

46,160Disposals
(517,748)

--

246,496NetMachinery
-

1,891,349Furniture and office equipment
-

494Motor vehicles
-

1-

246,496





Depreciation expenses for the years ended March 31, 2010, 2009 and 2008 were $271,994, $199,724 and $140,611.




6.
Bank and other borrowings




At March 31,2010

2009$

$Secured:Repayable within one yearShort-term loans
-

340,066





F-20





SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)




7.
Income taxes 
 The Group is incorporated in the United States, and is subject to United States federal and state income taxes. The Group did not generate taxable income in the United States for the years ended March 31, 2008, 2009 and 2010. Its subsidiaries that are incorporated in the British Virgin Islands are not subject to income taxes under those jurisdictions.  The Group’s subsidiary is subject to Hong Kong income or profit tax at 16.5% in 2010 (2009: 16.5%).
  The provision for income taxes consists of the following:





Year ended March 31,2010

2009

2008$

$

$Current taxHong Kong
-

-

-Deferred tax
-

-

--

-

-





A reconciliation between income tax expense and amounts calculated using the Hong Kong statutory tax rate is as follows:





At March 31,2010

2009

2008$

$

$(Loss)/income before income tax
(2,220,974)

(380,290)

1,500,424Hong Kong statutory tax rate
16.5%

16.5%

17.5%Computed “expected” tax expenses
-

-

262,574Effect of tax exemptions granted
-

-

(262,574)Income taxes
-

-

-





No provision for deferred tax liabilities has been made as the Group has no material temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements.




F-21





SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)




8.
Accrued expenses and other liabilities





Accrued expenses and other liabilities consists of the following:





At March 31,2010

2009$

$Legal and professional fees
121,899

163,077Accrued staff related costs
-

25,208Other accruals and liabilities
1,476

16,221123,375

204,506




9.
Share based compensation 
 On March 9, 2009, the Board of Directors adopted the 2009 Equity Incentive Plan (the “2009 Incentive Plan”) pursuant to which 6,000,000 shares of the Company’s common stock are reserved for issuance upon exercise of stock options, and for the issuance of stock appreciation rights, restricted stock awards and performance shares. The purpose of the 2009 Incentive Plan is to provide additional incentive to employees, directors, advisors and consultants. The 2009 Incentive Plan provides for a term of 10 years from the date of its adoption by the Board of Directors, after which no awards may be made, unless the 2009 Incentive Plan is early terminated by the Board.
  A summary of non-vested equity share units issued under the 2009 Incentive Plan is as follows:





Weightedaverage grantShares

date fair value$Balance as of April 1, 2009
220,000

0.51Granted on Nov 18, 2009
120,000

0.05Granted on Jan 31, 2010
700,000

0.05Granted on Feb 2, 2010
50,000

0.05Granted on Mar 2, 2010
220,000

0.05Balance as of March 31, 2010
1,310,000





The stock awards vest equally over a period of one year from the date of grant.





F-22





SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)




11.
Commitments and contingencies


The Company has operating lease agreements principally for its office facilities. The leases have remaining terms of 3 to 24 months. Rental expense was $36,557 and $25,454 for the years ended March 31, 2010 and 2009, respectively.




Future minimum lease payments under non-cancellable operating lease agreements as of March 31, 2010 were as follows:





$Year ending March 31,2011
92,4002012
23,100Total
115,500





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 March 31, 2010.




12.
Related party balances and transactions




Related party transactions





Related party

Description of transactions

Year ended March 31,2010

2009

2008$

$

$Yin Kee Weaving Factory(“Yin Kee”)

Purchase of rawmaterial

-

1,267

-





F-23





SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)




13.
Concentration of credit 
 A substantial percentage of the Company's sales are made to the following customers.  Details of the customers accounting for 10% or more of total net revenue in any of the years ended March 31, 2010, 2009 and 2008 are as follows:





2010

2009

2008Group A
56%

50%

29%Group B
33%

25%

23%Group C
-

*

*Group D
-

*

**  Less than 10%





Details of the accounts receivable from the customers with the largest receivable balances at March 31, 2010, 2009 and 2008are as follows:





Percentage of accounts receivable2010

2009

2008Group A
79%

82%

77%Group B
-

-

11%Group C
-

-

-Group D
-

-

-Group E
-

-

-Largest receivable balances
79%

82%

88%




14.
Employee benefit plans


The Company operates a Mandatory Provident Fund Scheme for all qualifying employees in Hong Kong. The assets of the scheme are held separately from those of the Company by trustees. The Company contributes 5% of relevant payroll costs to the scheme, which contribution is matched by employees. The contributions paid by the Company for the years ended March 31, 2010, 2009 and 2008 were $Nil, $Nil and $42,579, respectively.




15.
Fair value of financial instruments


The fair values of cash and cash equivalents, trade accounts receivable, amount due from a related party, short-term loans, trade accounts payable, and other payables and accrued liabilities approximated the respective carrying amounts because of the short maturity of these instruments.





F-24





SOUND WORLDWIDE HOLDINGS, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated in US Dollars)




16.
Interest rate risk 
 The Group is exposed to interest rate risk arising from short-term variable rate borrowings from time to time. The Group’s future interest expense will fluctuate in line with any change in borrowing rates. The Group does not have any derivative financial instruments as of March 31, 2010 and 2009 and believes its exposure to interest rate risk is not material.




17.
Subsequent Events 
 We have evaluated significant events and transactions that occurred from March 31, 2009 through the date of this report.




18.
Comparative amounts 
 Certain amounts included in prior years’ consolidated financial statements have been reclassified to conform to the current year’s presentation.  These reclassifications had no effect on reported total assets, liabilities, shareholders’ equity, or net income.





F-25