-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P+x4a1pfQn/Qd+GR4b10bt9ynw+T3gHbXp7kEHH8WnwkiUTiXA6vlpV7NA94qIu3 U5akv2puP/oLomeCAfEt6w== 0001019687-04-001391.txt : 20040621 0001019687-04-001391.hdr.sgml : 20040621 20040621153349 ACCESSION NUMBER: 0001019687-04-001391 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040430 FILED AS OF DATE: 20040621 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SGD HOLDINGS LTD CENTRAL INDEX KEY: 0001106836 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-JEWELRY, WATCHES, PRECIOUS STONES & METALS [5094] IRS NUMBER: 731344983 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-29671 FILM NUMBER: 04872605 BUSINESS ADDRESS: STREET 1: 111 RHODES STREET STREET 2: - CITY: CONROE STATE: TX ZIP: 77301 BUSINESS PHONE: 9367566888 MAIL ADDRESS: STREET 1: 111 RHODES STREET STREET 2: - CITY: CONROE STATE: TX ZIP: 77301 FORMER COMPANY: FORMER CONFORMED NAME: GOLDONLINE INTERNATIONAL INC DATE OF NAME CHANGE: 20000428 FORMER COMPANY: FORMER CONFORMED NAME: BENTON VENTURES INC DATE OF NAME CHANGE: 20000214 10QSB 1 sgd_10q-043004.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended: APRIL 30, 2004 Commission File Number: 0-29671 SGD HOLDINGS, LTD. ------------------ (Exact name of small business issuer as specified in its charter) DELAWARE 13-3986493 -------- ---------- (State of Incorporation) (IRS Employer ID No) 4385 SUNBELT DRIVE, ADDISON, TEXAS 75001 ---------------------------------------- (Address of principal executive office) (972) 248-0266 -------------- (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. The number of shares outstanding of registrant's common stock, par value $.0001 per share, as of April 30, 2004 was 45,526,824. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]. SGD HOLDINGS, LTD. AND SUBSIDIARIES Form 10-QSB Index Page No. -------- Part I. Unaudited Financial Information Item 1. Condensed Consolidated Balance Sheet - April 30, 2004 3 Condensed Consolidated Statements of Operations - Three Months Ended April 30, 2004 and 2003 4 Condensed Consolidated Statements of Operations - Nine Months Ended April 30, 2004 and 2003 5 Condensed Consolidated Statements of Cash Flows - Nine Months Ended April 30, 2004 and 2003 6 Notes to Condensed Consolidated Financial Statements - 7-15 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16-21 Item 3. Controls and Procedures 22 Part II. Other Information 23-27 2 SGD HOLDINGS, LTD. AND SUBSIDIARIES Condensed Consolidated Balance Sheet April 30, 2004 (Unaudited) ASSETS: Current assets: Cash and cash equivalents $ 1,306,664 Trade accounts receivable, net of allowance of $61,752 1,268,513 Inventory 2,332,204 Due from related parties 42,053 Deferred income taxes 235,600 Prepaid expenses and other assets 209,593 ------------- Total current assets 5,394,627 Property and equipment, net 261,621 Goodwill, net 3,718,439 Marketable equity securities 7,100 Other assets 32,392 ------------- Total assets $ 9,414,179 ============= LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Notes payable $ 1,105,530 Notes payable - related parties 1,350,488 Accounts payable 675,806 Accrued expenses 66,464 Due to related parties 243,893 ------------- Total current liabilities 3,442,181 Deferred income taxes payable 10,600 ------------- Total liabilities 3,452,781 ------------- Minority interest - Commitments and contingencies Stockholders' equity: Common stock, $.0001 par value; 200,000,000 shares authorized; 45,526,824 shares issued and outstanding 4,553 Additional paid-in capital 9,918,549 Accumulated deficit (3,682,954) Accumulated other comprehensive loss (278,750) ------------- Total stockholders' equity 5,961,398 ------------- Total liabilities and stockholders' equity $ 9,414,179 ============= See accompanying notes to condensed consolidated financial statements. 3
SGD HOLDINGS, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations Three Months Ended April 30, 2004 and 2003 (Unaudited) 2004 2003 Sales and revenues $ 2,576,881 $ 2,264,293 Cost of sales 1,905,723 1,752,289 ------------ ------------ Gross profit 671,158 512,004 Selling, general and administrative expense 815,507 690,436 ------------ ------------ Loss from operations (144,349) (178,432) Other income (expense): Unrealized gain (loss) on marketable securities 45,857 (1,943) Loss on sale of marketable securities (47,750) -- Interest expense (14,055) (31,054) Interest expense - related parties (27,257) (66,600) Gold consignment fee (31,629) (52,930) Interest and other income (expense) (558) 5,199 ------------ ------------ Total other income (expense) (75,392) (147,328) ------------ ------------ Loss from continuing operations before income taxes (219,741) (325,760) Income tax benefit (71,100) (54,800) ------------ ------------ Loss from continuing operations (148,641) (270,960) ------------ ------------ Discontinued operations: Loss from operation of discontinued operations -- (671,559) Income tax benefit -- -- ------------ ------------ Loss on discontinued operations -- (671,559) ------------ ------------ Net loss before minority interest (148,641) (942,519) Minority interest 200 -- ------------ ------------ Net loss $ (148,441) $ (942,519) ============ ============ Basic and diluted loss per share: Continuing operations $ (0.00) $ (0.01) Discontinued operations -- (0.02) ------------ ------------ Net loss per share $ (0.00) $ (0.03) ============ ============ Weighted average shares outstanding (thousands) 43,337.9 32,912.1 ============ ============ See accompanying notes to condensed consolidated financial statements. 4
SGD HOLDINGS, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations Nine Months Ended April 30, 2004 and 2003 (Unaudited) 2004 2003 Sales and revenues $ 10,331,588 $ 10,907,808 Cost of sales 7,741,380 8,211,108 ------------- ------------- Gross profit 2,590,208 2,696,700 Selling, general and administrative expense 2,468,888 2,165,735 ------------- ------------- Earnings from operations 121,320 530,965 Other income (expense): Unrealized gain (loss) on marketable securities 85,067 (7,407) Loss on sale of marketable securities (69,783) -- Interest expense (39,536) (82,113) Interest expense - related parties (119,457) (118,600) Gold consignment fee (102,431) (143,825) Interest and other income 5,373 6,437 ------------- ------------- Total other income (expense) (240,767) (345,508) ------------- ------------- Earnings (loss) from continuing operations before income taxes (119,447) 185,457 Income tax expense (benefit) (34,400) 120,500 ------------- ------------- Earnings (loss) from continuing operations (85,047) 64,957 ------------- ------------- Discontinued operations: Loss from operation of discontinued operations -- (1,228,166) Income tax benefit -- (187,600) ------------- ------------- Loss on discontinued operations -- (1,040,566) ------------- ------------- Net loss before minority interest (85,047) (975,609) Minority interest 200 -- ------------- ------------- Net loss $ (84,847) $ (975,609) ============= ============= Basic and diluted loss per share: Continuing operations $ (0.00) $ 0.00 Discontinued operations -- (0.03) ------------- ------------- Net loss per share $ (0.00) $ (0.03) ============= ============= Weighted average shares outstanding (thousands) 38,663.0 29,732.4 ============= ============= See accompanying notes to condensed consolidated financial statements. 5
SGD HOLDINGS, LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows Nine Months Ended April 30, 2004 and 2003 (Unaudited) 2004 2003 Cash flows provided (used) by operating activities: Net loss $ (84,847) $ (975,609) Loss from discontinued operations -- (1,040,566) ------------ ------------ Earnings (loss) from continuing operations (84,847) 64,957 Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities: Depreciation and amortization 57,520 51,658 Deferred income taxes (34,400) 120,500 Unrealized (gain) loss on marketable securities (85,067) 7,407 Proceeds from sale of marketable securities 23,797 -- Loss on sale of marketable securities 69,783 -- Common stock issued for services -- 50,000 Minority interest (200) -- Changes in assets and liabilities: Accounts receivable (77,139) (226,347) Inventory 114,964 (522,424) Other assets 178,815 112,379 Accounts payable and accrued expenses 340,200 (267,077) ------------ ------------ Net cash provided (used) by continuing operations 503,426 (608,947) Net cash used by discontinued operations -- (382,855) ------------ ------------ Net cash provided (used) by operations 503,426 (991,802) ------------ ------------ Cash flows used by investing activities: Capital expenditures (82,014) (75,326) Cash received in excess of cash paid for Gem Pak 6,214 -- ------------ ------------ Net cash used by continuing operations (75,800) (75,326) Net cash used by discontinued operations -- (7,205) ------------ ------------ Net cash used by investing activities (75,800) (82,531) ------------ ------------ Cash flows provided (used) by financing activities: Amounts due related parties 100,736 31,333 Proceeds from sale of common stock 36,000 200,000 Loans made to Gem Pak before acquisition (148,477) -- Funds transferred to discontinued operations -- (14,590) Repayment of long-term debt and notes payable (8,049) (12,876) ------------ ------------ Net cash provided (used) by continuing operations (19,790) 203,867 Net cash provided by discontinued operations -- 390,059 ------------ ------------ Net cash provided (used) by financing activities (19,790) 593,926 ------------ ------------ Net increase (decrease) in cash and cash equivalents 407,836 (480,407) Cash and cash equivalents, beginning of period 898,828 1,156,355 ------------ ------------ Cash and cash equivalents, end of period $ 1,306,664 $ 675,948 ============ ============ See accompanying notes to condensed consolidated financial statements. 6
SGD HOLDINGS, LTD. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) PRINCIPLES OF CONSOLIDATION AND PRESENTATION The condensed consolidated financial statements include the accounts of SGD Holdings, Ltd. ("SGD") and its wholly owned subsidiaries: HMS Jewelry Company, Inc. ("HMS"); Jewelry Solutions & Commerce, Inc. ("Jewelry"); Tandori, Inc. ("Tandori"); Con-Tex Silver Imports, Inc. ("Silver"); Gem Pak, Inc. (Gem Pak), the 80% subsidiary of HMS; and Rings N' Things, LLC ("Rings"), the 80% owned subsidiary of Jewelry, (collectively referred to as the "Company"). Tandori and Silver are inactive. All material intercompany accounts and transactions have been eliminated. (B) ORGANIZATION SGD was incorporated on May 22, 1996 in Delaware as Transun International Airways, Inc. and until June 1999 was a development stage company with plans to establish itself as an air transport company providing non-scheduled air service (charter flights) for tour operators, charter brokers, cruise line casinos, theme parks and theme attractions. Transun International Airways, Inc. changed its name to Goldonline International, Inc. on June 10, 1999. Goldonline International, Inc. changed its name to SGD Holdings, Ltd. on January 24, 2001. On April 20, 2000, pursuant to an agreement and plan of reorganization dated April 11, 2000, SGD acquired 100% of the issued and outstanding common stock of Benton Ventures, Inc. ("Benton"), a Delaware corporation, in exchange for 1,200,000 newly issued common shares of SGD. On April 25, 2000, the Board of Directors of SGD elected to merge Benton into SGD pursuant to Section 253 of Delaware's General Corporate Laws. As a result of the merger, SGD became the surviving company and assumed the reporting responsibilities under successor issuer status as more fully detailed in Section 12(g)(3) of The Securities Exchange Act of 1934. Benton was a dormant company and its assets and liabilities were insignificant. HMS was incorporated on October 12, 2000 in Texas. Jewelry was incorporated on February 3, 1999 in Delaware. Rings was incorporated on September 2, 2003 in Nevada. Gem Pak was incorporated on May 24, 2002 in Texas. 7 On June 10, 1999, SGD acquired all of the issued and outstanding common stock of Silver and Jewelry. For accounting purposes, the acquisitions were treated as the acquisition of Silver and Jewelry by SGD with Silver as the acquiror (reverse acquisition). The historical financial amounts prior to June 10, 1999 is that of Silver. Effective October 1, 2000, SGD completed the acquisition of HMS Jewelry Co., Ltd., a Texas limited partnership, and HMS Operating Company, a Texas corporation, and transferred the assets acquired and liabilities assumed into HMS Jewelry Company, Inc. For accounting purposes, the acquisition was treated as a purchase. Effective September 1, 2001, SGD completed the acquisition of Tandori in a transaction treated as a purchase for accounting purposes. Effective April 1, 2004, HMS completed the acquisition of 80% of Gem Pak in a transaction treated as a purchase for accounting purposes. SGD issued 100,000 shares of its common stock for 80% of Gem Pak's common stock. (C) DISCONTINUED OPERATIONS The operations of Silver and Tandori were discontinued at the end of July 2003, see Note 2. (D) NATURE OF BUSINESS SGD is a holding company principally engaged in acquiring and developing jewelry businesses. HMS is primarily involved in the wholesale gold jewelry business. Jewelry and Rings are operating three small retail locations. Gem Pak sells packaging and display materials, primarily to jewelry stores. (E) GENERAL The condensed consolidated financial statements included in this report have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and include all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation. These condensed consolidated financial statements have not been audited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations for interim reporting. The Company believes that the disclosures contained herein are adequate to make the information presented not misleading. However, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report for the year ended July 31, 2003, which is included in the Company's Form 10-KSB dated July 31, 2003 and filed November 13, 2003. The financial data for the interim periods presented may not necessarily reflect the results to be anticipated for the complete year. Certain reclassifications of the amounts presented for the comparative period have been made to conform to the current presentation. 8 (F) STOCK OPTIONS AND WARRANTS The Company accounts for stock-based awards to employees using the intrinsic value method described in Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees" and its related interpretations. Accordingly, no compensation expense has been recognized in the accompanying condensed consolidated financial statements for stock-based awards to employees when the exercise price of the award is equal to or greater than the quoted market price of the stock on the date of the grant. As of April 30, 2004, the Company had options outstanding to its three current directors and one former director, which vested on May 31, 2001, for 100,000 shares each. These options all expire on May 31, 2004. No options have been granted since that date. Accordingly, there is no pro forma disclosure for the current period. SFAS No. 123, "Accounting for Stock-Based Compensation" and SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FASB Statement No. 123" require disclosures as if the Company had applied the fair value method to employee awards rather than the intrinsic value method. The fair value of stock-based awards to employees is calculated through the use of option pricing models, which were developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. These models also require subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. 2. DISCONTINUED OPERATIONS (a) On April 23, 2003, Silver filed a Voluntary Petition for Reorganization under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division, Case No. 03-43783-DML-11. During the week ended July 25, 2003, management of the Company determined to cease operations of Silver. Accordingly, in SGD's next scheduled Board of Director's meeting, on August 7, 2003, the Board voted to convert the Chapter 11 case to Chapter 7 and all operations of Silver were immediately discontinued. The Voluntary Petition for Reorganization under Chapter 11 was converted to Chapter 7 on September 23, 2003. The operations of Silver have been included in discontinued operations for the periods presented. 9 Silver was involved in both the wholesale and retail jewelry business, principally silver, with retail locations in Texas. The wholesale operation of Silver consisted of sales directly from its headquarters in Conroe, Texas, sales from a Dallas location and sales from jewelry shows at locations throughout the south central United States. Silver had sales of $275,165 and $1,394,376 during the three-month and nine-month periods ended April 30, 2003, respectively. (b) On July 17, 2003, the Company received an offer to acquire the assets and business of Tandori, effective July 31, 2003, in exchange for assumption of liabilities, excluding payroll taxes. In addition, the buyer agreed to pay SGD up to 50% of any profits the buyer might make from the sale of Tandori's assets, up to $1,000,000, if the buyer should sell the assets to a third party within three years of the acquisition. The Company subsequently approved the offer and the operations have been included in discontinued operations for the periods presented. The purchaser was G. David Gordon and the former President of Tandori. Tandori operated under the LifeStyle Technologies(TM) name as a full service home technology integration company providing complete installation and equipment for structured wiring, home audio, home theater, home security, PC networking, central vacuum, accent lighting and other current technology applications. Tandori had sales of $802,872 and $2,689,494 during the three-month and nine-month periods ended April 30, 2003, respectively. 3. RELATED PARTY TRANSACTIONS HMS leases its facility from HMS Leasing Company, LLC, at the rate of $8,075 per month pursuant to a lease agreement that expires on October 31, 2010. This obligation amounted to $72,675 during the nine-month periods ended April 30, 2004 and 2003. HMS Leasing Company, LLC is owned by the president of HMS. HMS is a guarantor of the loan obligation of HMS Leasing Company, LLC on the facility, which has a balance of $509,700 at April 30, 2004. At April 30, 2004, the Company owed G. David Gordon, CEO of HMS, a shareholder and the brother of a Director, compensation in the amount of $150,000 at April 30, 2004, which is payable one-half in SGD common stock and one-half in cash. David Gordon was also owed $1,507 in accrued interest at April 30, 2004. At April 30, 2004, the Company had made net advances of $9,254 to the president of HMS, including companies owned by him. See Note 7 for details of the $1,350,488 in note obligations to related parties. 10 The Company has made net sales to Premier Concepts, Inc. ("Premier") of $64,221 during the nine-month period ended April 30, 2003 and sales of $15,734 during the current nine-month period. The Company has net receivables from Premier at April 30, 2004 of $32,799. The Company owns 7.9% of the stock of Premier at April 30, 2004 and the Chief Executive Officer of Premier is the Acting CEO and a Director of the Company. On October 10, 2003, Premier filed a Voluntary Petition for Reorganization under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Central District of California, Los Angeles Division; Case No. LA 03-36445 BR. Amounts due to related parties include $21,000 in accrued compensation due to Terry Washburn, Acting CEO of the Company, and $6,132 in reimbursements due to a company owned by Mr. Washburn. On January 28, 2004, the Company issued Mr. Washburn 1,500,000 common shares in exchange for $15,000 due him. On January 28, 2004, the Company issued 3,500,000 common shares to BJB Services, Inc., whose principal serves as controller for the Company, in exchange for $35,000 due for prior services. At April 30, 2004, the Company owes BJB $43,975 for services rendered and owes another company, which is 50% owned by the principal of BJB, $2,153 for services rendered. At April 30, 2004, Carolyn Greco, President of Gem Pak, is owed $19,126 for advances made to Gem Pak. 4. MARKETABLE EQUITY SECURITIES The following summarizes the Company's investments in securities at April 30, 2004: Trading securities - None. Available-for-sale securities (Premier Concepts, Inc., a related party): Cost $ 429,550 Unrealized gain (loss) (422,450) -------------- Fair value $ 7,100 ============== The Company recognized an unrealized gain from trading securities in the amount of $45,857 and $85,067 during the three-month and nine-month periods ended April 30, 2004, respectively. The Company recognized an unrealized loss from trading securities in the amount of $1,943 and $7,407 during the three-month and nine-month periods ended April 30, 2003, respectively. Unrealized losses from available-for-sale securities, which are restricted under Rule 144 and which is included as a component of equity, as of April 30, 2004, were as follows: Unrealized losses $ (422,450) Deferred income taxes 143,700 -------------- Accumulated other comprehensive income (loss) $ (278,750) ============== 11 5. INVENTORIES AND GOLD CONSIGNMENT AGREEMENT Inventories at April 30, 2004 consist of: Inventory, principally gold jewelry $ 5,390,903 Less consigned gold (3,058,699) ---------------- Net inventories $ 2,332,204 ================ HMS has a gold consignment agreement with a gold lender. Under the terms of the agreement, HMS is entitled to lease the lesser of an aggregate amount of 13,200 ounces, or an aggregate consigned gold value not to exceed $4,950,000 less any balance outstanding on its $1,500,000 line of credit. Title to such consigned gold remains with the gold lender until HMS purchases the gold. However, during the period of consignment, the entire risk of loss, damage or destruction of the gold is borne by HMS. The purchase price per ounce is based on the daily Second London Gold Fix. HMS pays the gold consignor a consignment fee based upon the dollar value of gold ounces outstanding, as defined in the agreement. At April 30, 2004, HMS had 7,873.1 ounces of gold on consignment with a market value of $3,058,699 ($388.50 per ounce). Consigned gold is not included in inventory, and there is no related liability recorded. As a result of these consignment arrangements, HMS is able to shift a substantial portion of the risk of market fluctuations in the price of gold to the gold lender, since HMS does not purchase gold from the gold lender until receipt of a purchase order from, or shipment of jewelry to, its customers. The gold lender has also provided a line of credit to HMS in the amount of $1,500,000 that is due on demand, including interest at the lender's prime rate plus 3/4%. HMS does not have any advances on this line of credit at April 30, 2004. Payment for the consigned gold and the line of credit is secured by substantially all property of HMS including its cash, accounts receivable, inventory and equipment, the personal guaranty of the President of HMS, the personal guaranty of G. David Gordon and the corporate guaranty of SGD. The consignment agreement may be terminated by the gold lender upon 60 days notice. If the gold lender were to terminate its existing gold consignment agreement, HMS does not believe it would experience an interruption of its gold supply that would materially adversely affect its business. HMS believes that other consignors would be willing to enter into similar arrangements should its gold lender terminate its relationship with the company. The consignment agreement contains certain restrictive covenants relating to maximum usage, net worth, working capital, and other financial ratios, and the agreement requires HMS to own a specific amount of gold at all times. 12 HMS is currently negotiating with its gold lender to increase the size of the consignment facility and to modify certain terms and conditions of the current agreement. 6. NOTES PAYABLE Notes payable consists of the following at April 30, 2004: Note payable to a company, extended to July 31, 2004; interest payable monthly at 5.8% (a) $ 835,000 Note payable to a bank, with monthly payments of $4,658.36 including interest at 5.25%; with the balance of $250,252.77 due December 10, 2004; guaranteed by the President of Gem Pak; collateralized by bonds owned by an individual who is also a personal guarantor 270,530 ----------- Total notes payable $ 1,105,530 =========== (a) Convertible into common stock at the lesser of $.015 per share or the market price, limited to 9.9% of the total outstanding shares of the Company at the time of conversion. All of the issued and outstanding common stock of HMS is collateral on the note, in second position behind the collateral position of the note due the president of HMS and the note is guaranteed by G. David Gordon. In the event of default on any of the loans secured by the HMS common stock, the lender has the option to purchase HMS for $5,000,000. On January 28, 2004, the Company issued 250,000 shares of its common stock as a loan extension fee and issued 1,210,746 shares of its common stock for $12,107 in accrued interest. 7. NOTES PAYABLE DUE RELATED PARTIES Notes payable due related parties consists of the following at April 30, 2004: Note payable to the president of HMS, due on July 31, 2004; interest payable monthly at 8%; collateralized by the common stock of HMS; guaranteed by G. David Gordon; convertible into common stock of the Company at $.01 per share, limited to 9.9% of the total outstanding shares of the Company at the time; with anti-dilution rights $ 1,250,000 13 Note payable to G. David Gordon, CEO of HMS, a shareholder and the brother of a Director of the Company; due on July 31, 2004 with interest at 6% payable monthly; collateralized by the common stock of HMS in third position behind the other notes above; all principal and accrued interest convertible into common stock of the Company at $.01 per share; and all shares have anti-dilution rights 100,488 ----------- Total notes payable due related parties $ 1,350,488 =========== The Company issued the president of HMS 300,000 shares of its common stock as a loan extension fee on January 28, 2004. 8. SEGMENT INFORMATION The Company reports segments based upon the management approach, which designates the internal reporting that is used by management for making operating decisions and assessing performance. With the disposition of Silver and Tandori, continuing operations currently includes one segment, the wholesale gold operations of HMS. 9. LEGAL MATTERS On December 13, 2002, SGD filed a petition against James G. "Greg" Gordon ("Gordon") in the 342nd District Court, Tarrant County, Texas alleging breach of fiduciary duty, conversion of corporate funds and misappropriation of corporate funds. SGD alleged that Gordon, who was President of SGD from June 10, 1999 until November 25, 2002, wrongfully and without authority or approval, transferred approximately $2.7 million from two separate SGD bank accounts into an account or accounts held by Silver. Thereafter, Gordon utilized a portion of SGD's funds for his and his family's personal use and enjoyment, his personal financial gain and for unauthorized transactions on Silver's behalf. SGD was seeking to recover its damages, which were in excess of $2.7 million, costs of court and pre-judgment interest, as allowed by law. SGD dismissed its claim against Gordon as it determined the cost would exceed any benefit and the funds it saved could be used to pay creditors of the Company; however the Company still maintains the right to re-file the lawsuit against Gordon. On January 3, 2003, James G. Gordon and Lisa K. Gordon ("Plaintiffs") filed a petition in the District Court of Montgomery County, Texas, Cause No. 03-01-00006-CV against SGD Holdings, Ltd., G. David Gordon and David Covey. G. David Gordon is the brother of James G. Gordon and David Covey is the former president of Tandori, Inc., a wholly owned subsidiary of SGD. Plaintiffs, in their claim asserted against SGD, are seeking to declare the one for six stock split, which occurred in September 1999, void. If declared void, they claim they would presently own 75,000,000 shares of SGD common stock instead of 11,250,000 shares of SGD common stock as currently reported by the Company. Presently, the case is in discovery and Company counsel has not obtained all information necessary to assess the merits of Plaintiffs' claim and is therefore unable to determine a possible outcome or the extent of the Company's liability, if any. 14 In March 2003, Con-Tex Silver Imports, Inc. filed a petition in the District Court of Galveston County, Texas, Cause No. 03CV0316 against Debbie King, the sister-in-law of James G. Gordon. Effective October 28, 2002, James G. Gordon, the former President of Silver entered into a transaction with his sister-in-law whereby he sold the assets of one of the retail locations of Silver for cash proceeds of $30,645. The Company recorded a loss on the transaction of $51,015. In its claim, Silver alleged conspiracy, unjust enrichment and that the sale of the retail location is void because of unconscionability. Additionally, Silver requested a return of profits received by Defendant. This action is currently stayed due to Silver filing a Voluntary Petition for Reorganization under Chapter 11 of Title 11 of the United States Code on April 23, 2003. The Voluntary Petition for Reorganization under Chapter 11 was converted to Chapter 7 on September 23, 2003. On April 23, 2003, SGD's wholly owned subsidiary, Con-Tex Silver Imports, Inc. filed a Voluntary Petition for Reorganization under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division, Case No. 03-43783-DML-11 and on September 23, 2003 the Voluntary Petition was converted to Chapter 7. On May 2, 2003, Lakewood Development Corporation ("Lakewood"), a stockholder, filed a petition in the District Court of Tarrant County, Texas, Cause No. 96 198685 03 against SGD Holdings, Ltd. and James G. Gordon, former President of SGD. Lakewood, in its claim asserted against SGD and Gordon, alleged fraud in stock transactions under Section 27.01 of the Texas Business and Commerce Code, violations of the anti-fraud provisions of the Texas Securities Act and common law fraud. In addition, Lakewood is alleging breach of fiduciary duty against Gordon. Lakewood is seeking restitution of the $7,817,500 which it invested in common stock based upon representations made by Gordon, together with damages, expenses and interest. Presently, the case is in discovery and Company counsel has not obtained all information necessary to assess the merits of Lakewood's claims and therefore is unable to determine a possible outcome or the extent of the Company's liability, if any. On December 31, 2003, Richard Singer and Robert Bertsch, on behalf of the Company, filed suit against James G. Gordon, a director of the Company, for his breach of fiduciary duty as a result of his unilateral actions to prevent the Company from exercising its option to acquire the building which HMS currently leases. The parties have yet to begin any substantial discovery and, therefore, the Company and its attorneys are not in a position to assess the merits of this action. 10. COMMITMENTS In addition to the HMS lease discussed in Note 3, the Company has two non-cancelable operating leases. Future minimum lease payments amount to $34,529 for the balance of fiscal 2004, $81,116 for fiscal 2005 and $46,116 for fiscal 2006. 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS From time to time, the Company may publish forward-looking statements relative to such matters as anticipated financial performance, business prospects, technological developments and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. All statements other than statements of historical fact included in this section or elsewhere in this report are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include: 1. General economic factors including, but not limited to, changes in interest rates, trends in disposable income; 2. Information and technological advances; 3. Cost of products sold; 4. Competition; 5. Legal issues; and 6. Success of marketing, advertising and promotional campaigns. The continuing operations of the Company consist primarily of the wholesale sales of HMS. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital decreased from $2,198,988 at July 31, 2003 to $1,952,446 at April 30, 2004. The decrease in working capital of $246,542 consists of an increase in current assets of $540,698 less an increase in current liabilities of $787,240. The major items of the increase in current assets consisted of an increase in accounts receivable of $104,824, an increase in inventory of $131,385 and an increase in cash of $407,836. The major increase in current liabilities was from an increase in accounts payable of $314,463 and an increase in notes payable of $270,530. The Company has a number of unresolved legal issues with one of its Directors, James G. Gordon and will continue to have high legal costs, which amounted to approximately $76,000 during the nine months ended April 30, 2004, until these issues can be resolved. The Company anticipates that it will be able to raise additional funds, as necessary, to fund these lawsuits. The Company sold 2,400,001 shares of its common stock during the quarter ended April 30, 2004 for $36,000 in cash. The Company acquired property and equipment in the amount of $82,014 during the nine-month period ended April 30, 2004 and is currently budgeting an additional $20,000 for capital expenditures for the remainder of fiscal 2004. The Company plans to use cash and existing credit sources for the acquisitions. 16 HMS relies on a gold consignment program, short-term borrowings and internally generated funds to finance its inventories and accounts receivable. HMS fills most of its gold supply needs through a gold consignment arrangement with a gold lender. Under the terms of that arrangement, HMS is entitled to lease the lesser of an aggregate of 13,200 ounces of fine gold or an aggregate consigned gold value not to exceed $4,950,000, reduced by any outstanding balance on its $1,500,000 line of credit. The consigned gold is secured by substantially all property of HMS, including its cash, accounts receivable, inventory and machinery and equipment, the corporate guaranty of SGD and the individual guaranty's of Harry Schmidt, President of HMS, and G. David Gordon. HMS pays the gold lender a consignment fee based on the dollar value of ounces of gold outstanding under their agreement, which value is based on the daily Second London Gold Fix. HMS believes that its financing rate under the consignment arrangement is substantially similar to the financing rates charged to gold consignees similarly situated to HMS. As of April 30, 2004, HMS held 7,873.1 ounces of gold on consignment with a market value of $3,058,699. The consignment agreement contains restrictive covenants relating to maximum usage, net worth, working capital and other financial ratios and the agreement requires HMS to own a specific amount of gold at all times. The consignment agreement may be terminated by the gold lender upon 60 days notice. If the gold lender were to terminate its existing gold consignment arrangement, HMS does not believe it would experience an interruption of its gold supply that would materially adversely affect its business. HMS believes that other consignors would be willing to enter into similar arrangements should its gold lender terminate its relationship with the company. Consigned gold is not included in inventory, and there is no related liability recorded. As a result of these consignment arrangements, HMS is able to shift a substantial portion of the risk of market fluctuations in the price of gold to the gold lender, since HMS does not purchase gold from the gold lender until receipt of a purchase order from, or shipment of jewelry to, its customers. While we believe our supply of gold is relatively secure, significant increases or rapid fluctuations in the cost of gold may impact the demand for our products. Fluctuations in the precious metals markets and credit may result in an interruption of our gold supply or the credit arrangements necessary to allow us to support our accounts receivable and continue the use of consigned gold. The gold lender has also provided a line of credit to HMS in the amount of $1,500,000 that is due on demand, including interest at the lender's prime rate plus 3/4%. HMS does not have any advances on this line of credit at April 30, 2004. 17 RESULTS OF OPERATIONS THREE MONTHS ENDED APRIL 30, 2004 AND 2003 SALES AND COST OF SALES - The Company's sales and cost of sales may be summarized as follows for the three-month periods ended April 30, 2004 and 2003: 2004 2003 Sales and revenues $ 2,576,881 $ 2,264,293 Cost of sales 1,905,723 1,752,289 ----------- ----------- Gross profit $ 671,158 $ 512,004 =========== =========== Total sales increased $312,588 (13.8%) during the three-month period ended April 30, 2004, as compared to the same prior year period. The increase consists of $178,942 in retail sales by the jewelry stores and Gem Pak and an increase of $133,646 in wholesale gold sales. Gem Pak distributed its new catalog during April 2004 and HMS distributed its catalog during May and June 2004. The Company expects improved sales from new products. The Second London Gold Fix was $388.50 per ounce on April 30, 2004 and $399.75 per ounce on January 31, 2004, the beginning of the current year quarter. The Second London Gold Fix was $336.75 per ounce on April 30, 2003 and $367.50 per ounce on January 31, 2003. Sales volumes were down during the current quarter, countering one-half of the approximate 12% average increase in gold price. The decline in volume sold is attributed to lower consumer spending due to the general state of the economy. In addition, the Company is currently in the second year of its catalog and sales have generally been better during the initial year of a catalog. Gross profit has increased to 26.0% during the current year period from 22.6% during the same prior year period. The 3.4% improvement includes 0.5% for HMS and 2.9% from the higher gross profit realized from new operations. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE - The following summarizes the Company's selling, general and administrative expenses ("SGA") for the three-month periods ended April 30, 2004 and 2003: 2004 2003 HMS $ 617,835 $ 597,998 Jewelry and Rings 122,745 1,122 Gem Pak 33,615 -- Corporate and other 41,312 91,316 ----------- ----------- Total $ 815,507 $ 690,436 =========== =========== HMS's SGA for the quarter ended April 30, 2004 increased 3.3% from the year earlier period. Jewelry and Rings SGA commenced operations during the current quarter and represents the SGA associated with their retail operations. Gem Pak was acquired during the current quarter and the SGA represents one month of operations. Corporate SGA decreased $50,004 during the quarter ended April 30, 2004 as compared to the year earlier period. The prior year corporate SGA includes a $50,000 charge for a settlement with G. David Gordon. 18 INTEREST EXPENSE AND GOLD CONSIGNMENT FEE - Related party interest expense decreased $39,343 to $27,257 during the quarter ended April 30, 2004, as compared to the year earlier period. Interest expense decreased $16,999 during the quarter ended April 30, 2004, as compared to the year earlier period. The decrease in related party interest expense is primarily due to the prior year amount including amortization of loan and guaranty fees in the amount of $40,000. The decrease in other interest expense is primarily due to the prior year amount including $13,300 in amortization of loan fees. The gold consignment fee decreased $21,301 during the three month period ended April 30, 2004, as compared to the prior year period. The decrease is due to having lower balances on the gold consignment facility as a result of a reduction in the number of ounces of gold on consignment. At April 30, 2004, HMS had 7,873.1 ounces of gold on consignment with a related consignment obligation of $3,058,699 ($388.50 per ounce). At April 30, 2003, HMS had 12,925 ounces of gold on consignment with a related consignment obligation of $4,352,494 ($336.75 per ounce). Accordingly, the decrease is a result of the 39% decrease in the quantity of gold on consignment offset by the 12% average increase in the price of gold, since the rate was approximately the same. UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES - The Company recognized an unrealized gain in the amount of $45,857 during the three month period ended April 30, 2004, from its investment in marketable equity securities that have been classified as trading securities. During the three month period ended April 30, 2003, the Company recognized an unrealized loss of $1,943. LOSS ON SALE OF MARKETABLE SECURITIES - The Company sold its remaining trading marketable securities during the current year quarter and realized a loss of $47,750. INCOME TAXES - The Company recorded an income tax benefit of $71,100 during the three month period ended April 30, 2004, and a benefit for income taxes in the amount of $54,800 during the three month period ended April 30, 2003. DISCONTINUED OPERATIONS - The Company recognized a loss of $671,559, with no income tax benefit, during the three months ended April 30, 2003, from its discontinued operations. 19 NINE MONTHS ENDED APRIL 30, 2004 AND 2003 SALES AND COST OF SALES - The Company's sales and cost of sales may be summarized as follows for the nine-month periods ended April 30, 2004 and 2003: 2004 2003 Sales and revenues $ 10,331,588 $ 10,907,808 Cost of sales 7,741,380 8,211,108 ------------ ------------ Gross profit $ 2,590,208 $ 2,696,700 ============ ============ Total sales, principally gold sales, have decreased $576,220 (5.3%) during the nine-month period ended April 30, 2004, as compared to the same prior year period. The Second London Gold Fix was $388.50 per ounce on April 30, 2004 as compared to $354.75 per ounce on July 31, 2003, the beginning of the current year period. The Second London Gold Fix was $336.75 per ounce on April 30, 2003 as compared to $304.65 per ounce on July 31, 2002. Sales volumes were down substantially during the current year period, more than countering the approximate 16% average increase in gold price. The decline in volume sold is attributed to lower consumer spending due to the general state of the economy. In addition, the Company is currently in the second year of its catalog and sales have generally been better during the initial year of a catalog. The decline in sales began to reverse in the quarter ended April 30, 2004, and the Company released its new catalog during May and June 2004, which is expected to result in improved sales. Total gross profit has increased to 25.1% during the current year period from 24.7% during the same prior year period. HMS gross profit declined to 23.7% during the current year period as compared to 24.7% during the same prior year period. HMS has a fixed dollar amount of profit for each ounce of gold sold. Accordingly, with the gold value increasing, the gross profit percentage is a smaller percentage of sales. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE - The following summarizes the Company's selling, general and administrative expenses ("SGA") for the nine-month periods ended April 30, 2004 and 2003: 2004 2003 HMS $ 1,912,299 $ 1,914,691 Jewelry and Rings 286,154 3,401 Gem Pak 33,615 -- Corporate 236,820 247,643 ------------ ------------ Total $ 2,468,888 $ 2,165,735 ============ ============ HMS's SGA for the nine-month period ended April 30, 2004 decreased 0.1% from the year earlier period. Jewelry and Rings SGA commenced operations during the current year period and this cost represents the SGA associated with their retail operations. Gem Pak was acquired April 1, 2004 and this cost represents the SGA associated with one month of operations. Corporate SGA decreased $10,823 (4.4%) during the nine-month period ended April 30, 2004 as compared to the year earlier period. 20 INTEREST EXPENSE AND GOLD CONSIGNMENT FEE - Related party interest expense increased $857 to $119,457 during the nine-month period ended April 30, 2004, as compared to the year earlier period. Interest expense decreased $42,577 during the nine-month period ended April 30, 2004, as compared to the year earlier period. The decrease in other interest expense is primarily due to the prior year amount including $39,900 in amortization of loan and guaranty fees. The gold consignment fee decreased $41,394 during the nine-month period ended April 30, 2004, as compared to the prior year period. The decrease is due to having lower balances on the gold consignment facility as a result of a reduction in the number of ounces of gold on consignment. At April 30, 2004, HMS had 7,873.1 ounces of gold on consignment with a related consignment obligation of $3,058,699 ($388.50 per ounce). At April 30, 2003, HMS had 12,925 ounces of gold on consignment with a related consignment obligation of $4,352,494 ($336.75 per ounce). Accordingly, the decrease is a result of the 39% decrease in the quantity of gold on consignment offset by the 12% increase in the price of gold, since the rate was approximately the same. UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES - The Company recognized an unrealized gain in the amount of $85,067 during the nine-month period ended April 30, 2004, from its investment in marketable equity securities that have been classified as trading securities. During the nine-month period ended April 30, 2003, the Company recognized an unrealized loss of $7,407. LOSS ON SALE OF MARKETABLE SECURITIES - The Company sold its remaining trading marketable securities during the current year period and realized a loss of $69,783. INCOME TAXES - The Company recorded an income tax benefit of $34,400 during the nine-month period ended April 30, 2004, and a provision for income taxes in the amount of $120,500 during the nine-month period ended April 30, 2003. DISCONTINUED OPERATIONS - The Company recognized a loss of $1,040,566, including an income tax benefit of $187,600, during the nine-month period ended April 30, 2003, from its discontinued operations. 21 ITEM 3. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that are filed under the Exchange Act is accumulated and communicated to management, including the principal executive officer, as appropriate to allow timely decisions regarding required disclosure. Under the supervision of and with the participation of management, including the principal executive officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of April 30, 2004, and, based on its evaluation, our principal executive officer has concluded that these controls and procedures are effective. (b) Changes in Internal Controls There have been no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation described above, including any corrective actions with regard to significant deficiencies and material weaknesses. 22 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On December 13, 2002, SGD filed a petition against James G. "Greg" Gordon ("Gordon") in the 342nd District Court, Tarrant County, Texas alleging breach of fiduciary duty, conversion of corporate funds and misappropriation of corporate funds. SGD alleged that Gordon, who was President of SGD from June 10, 1999 until November 25, 2002, wrongfully and without authority or approval, transferred approximately $2.7 million from two separate SGD bank accounts into an account or accounts held by Silver. Thereafter, Gordon utilized a portion of SGD's funds for his and his family's personal use and enjoyment, his personal financial gain and for unauthorized transactions on Silver's behalf. SGD was seeking to recover its damages, which were in excess of $2.7 million, costs of court and pre-judgment interest, as allowed by law. SGD dismissed its claim against Gordon as it determined the cost would exceed any benefit and the funds it saved could be used to pay creditors of the Company; however the Company still maintains the right to re-file the lawsuit against Gordon. On January 3, 2003, James G. Gordon and Lisa K. Gordon ("Plaintiffs") filed a petition in the District Court of Montgomery County, Texas, Cause No. 03-01-00006-CV against SGD Holdings, Ltd., G. David Gordon and David Covey. G. David Gordon is the brother of James G. Gordon and David Covey is the former president of Tandori, Inc., a wholly owned subsidiary of SGD. Plaintiffs, in their claim asserted against SGD, are seeking to declare the one for six stock split, which occurred in September 1999, void. If declared void, they claim they would presently own 75,000,000 shares of SGD common stock instead of 11,250,000 shares of SGD common stock as currently reported by the Company. Presently, the case is in discovery and Company counsel has not obtained all information necessary to assess the merits of Plaintiffs' claim and is therefore unable to determine a possible outcome or the extent of the Company's liability, if any. In March 2003, Con-Tex Silver Imports, Inc. filed a petition in the District Court of Galveston County, Texas, Cause No. 03CV0316 against Debbie King, the sister-in-law of James G. Gordon. Effective October 28, 2002, James G. Gordon, the former President of Silver entered into a transaction with his sister-in-law whereby he sold the assets of one of the retail locations of Silver for cash proceeds of $30,645. The Company recorded a loss on the transaction of $51,015. In its claim, Silver alleged conspiracy, unjust enrichment and that the sale of the retail location is void because of unconscionability. Additionally, Silver requested a return of profits received by Defendant. This action is currently stayed due to Silver filing a Voluntary Petition for Reorganization under Chapter 11 of Title 11 of the United States Code on April 23, 2003. The Voluntary Petition for Reorganization under Chapter 11 was converted to Chapter 7 on September 23, 2003. On April 23, 2003, SGD's wholly owned subsidiary, Con-Tex Silver Imports, Inc. filed a Voluntary Petition for Reorganization under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division, Case No. 03-43783-DML-11 and on September 23, 2003, the Voluntary Petition was converted to Chapter 7. 23 On May 2, 2003, Lakewood Development Corporation ("Lakewood"), a stockholder, filed a petition in the District Court of Tarrant County, Texas, Cause No. 96 198685 03 against SGD Holdings, Ltd. and James G. Gordon, former President of SGD. Lakewood, in its claim asserted against SGD and Gordon, alleged fraud in stock transactions under Section 27.01 of the Texas Business and Commerce Code, violations of the anti-fraud provisions of the Texas Securities Act and common law fraud. In addition, Lakewood is alleging breach of fiduciary duty against Gordon. Lakewood is seeking restitution of the $7,817,500 which it invested in common stock based upon representations made by Gordon, together with damages, expenses and interest. Presently, the case is in discovery and Company counsel has not obtained all information necessary to assess the merits of Lakewood's claims and therefore is unable to determine a possible outcome or the extent of the Company's liability, if any. On December 31, 2003, Richard Singer and Robert Bertsch, on behalf of the Company, filed suit against James G. Gordon, a director of the Company, for his breach of fiduciary duty as a result of his unilateral actions to prevent the Company from exercising its option to acquire the building which HMS currently leases. The parties have yet to begin any substantial discovery and, therefore, the Company and its attorneys are not in a position to assess the merits of this action. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS During the quarter ended April 30, 2004, the Company issued 2,400,001 shares of its common stock in exchange for $36,000 in cash and issued 100,000 shares of its common stock to acquire 80% of Gem Pak. The small business issuer claimed exemption from registration based upon Section 4(2) of the Securities and Exchange Act of 1933. ITEM 5. OTHER INFORMATION Although the Company does not currently employ a Chief Financial Officer, Terry Washburn, President and Acting CEO, is also the principal accounting officer. 24 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 31 Certification pursuant to 18 U.S.C. Section 1350 Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 32 Certification pursuant to 18 U.S.C. Section 1350 Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K None. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SGD HOLDINGS, LTD. Date: June 21, 2004 By: /s/ Terry Washburn ------------------------------------- Terry Washburn, President, Acting CEO and Principal Accounting Officer 25 EX-31 2 sgc_10qex-31.txt EXHIBIT 31 SGD HOLDINGS, LTD. FORM 10-QSB FOR THE QUARTER ENDED APRIL 30, 2004 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Terry Washburn, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of SGD Holdings, Ltd. (the registrant); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have; a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal controls over financial reporting that occurred during the registrant's current fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and; 5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Terry Washburn --------------------------------- Terry Washburn President and Acting CEO (and equivalent of CFO) June 21, 2004 26 EX-32 3 sgc_10qex-32.txt EXHIBIT 32 SGD HOLDINGS, LTD. FORM 10-QSB FOR THE QUARTER ENDED APRIL 30, 2004 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Terry Washburn, certify that 1. I am the President and Acting Chief Executive Officer of SGD Holdings, Ltd. 2. Attached to this certification is Form 10-QSB for the quarter ended April 30, 2004, a periodic report (the "periodic report") filed by the issuer with the Securities Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 (the "Exchange Act"), which contains financial statements. 3. I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that o The periodic report containing the financial statements fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act, and o The information in the periodic report fairly presents, in all material respects, the financial condition and results of operations of the issuer for the periods presented. June 21, 2004 /s/ Terry Washburn ------------------------------- Terry Washburn President and Acting CEO (and equivalent of CFO) A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by SGD Holdings, Ltd. and furnished to the Securities and Exchange Commission or its staff upon request. This certification will not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. This certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 even if the document with which it is submitted to the Securities and Exchange Commission is so incorporated by reference. 27 -----END PRIVACY-ENHANCED MESSAGE-----