10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(mark one)

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

For the quarterly period ended March 31, 2007

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

For the transition period from           To          

Commission File Number 0-16345

SED International Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)

GEORGIA
(State or Other Jurisdiction
of Incorporation or Organization) 22-2715444
(I.R.S. Employer
Identification No.)

4916 NORTH ROYAL ATLANTA DRIVE, TUCKER, GEORGIA	30084
(Address of principal executive offices)	(Zip Code)

(770) 491-8962
(Registrant’s telephone number, including area code)

NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)

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 þ No 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 and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o      Accelerated Filer o      Non-accelerated filer þ

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

The number of shares outstanding of the Registrant’s common stock, par value $.01 per share, at May 1, 2007 was 3,878,856 shares.

SED International Holdings, Inc. and Subsidiaries

INDEX

	Page
PART I — FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2007 (Unaudited) and June 30, 2006		3
Condensed Consolidated Statements of Operations for the three months and nine months ended March 31, 2007 (Unaudited) and 2006 (Unaudited)		4
Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2007 (Unaudited) and 2006 (Unaudited)		5
Notes to Condensed Consolidated Financial Statements (Unaudited)		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
Item 3. Quantitative and Qualitative Disclosures about Market Risk		18
Item 4. Controls and Procedures		19
PART II — OTHER INFORMATION:
Item 1. Legal Proceedings		19
Item 1A. Risk Factors		20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		20
Item 3. Defaults Upon Senior Securities		20
Item 4. Submission of Matters to a Vote of Security Holders		20
Item 5. Other Information		20
Item 6. Exhibits		21
SIGNATURES		22
EX-10.62 SEVENTH ADENDUM TO LEASE
EX-10.63 THIRD AMENDMENT TO WACHOVIA LOAN AND SECURITY AGREEMENT
EX-31.1 SECTION 302 CERTIFICATION OF THE PEO
EX-31.2 SECTION 302 CERTIFICATION OF THE PFO
EX-32.1 SECTION 906 CERTIFICATION OF THE PEO
EX-32.2 SECTION 906 CERTIFICATION OF THE PFO

FORWARD LOOKING STATEMENT INFORMATION

Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving 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. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein particularly in view of the current state of our operations, the inclusion of such information should not be regarded as a statement by us or any other person that our objectives and plans will be achieved. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. The terms “we”, “our”, “us”, or any derivative thereof, as used herein refer to SED International Holdings, Inc. and Subsidiaries.

2

Part 1. Financial Information

Item 1. Financial Statements

SED International Holdings, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)

	March 31, 2007			June 30, 2006
	(Unaudited)			(Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	5,490		$	4,426
Trade accounts receivable, net		36,037			33,584
Inventories, net		39,832			32,720
Deferred income taxes, net		44			58
Other current assets		3,641			3,586
Total current assets		85,044			74,374
Property and equipment, net		1,038			941
Total assets	$	86,082		$	75,315
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	39,744		$	31,480
Accrued and other current liabilities		4,289			4,834
Revolving credit facility		19,622			17,532
Total liabilities		63,655			53,846
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $1.00 par value; authorized: 129,000 shares, none issued		—			—
Common stock, $.01 par value; 100,000,000 shares authorized; 5,573,347 shares issued at March 31, 2007 and 5,583,347 shares issued at June 30, 2006		56			56
Additional paid-in capital		68,531			68,584
Accumulated deficit		(29,435	)		(29,596	)
Accumulated other comprehensive loss		(3,638	)		(4,488	)
Treasury stock, 1,694,491 shares at March 31, 2007 and at June 30, 2006 at cost		(13,087	)		(13,087	)
Total shareholders’ equity		22,427			21,469
Total liabilities and shareholders’ equity	$	86,082		$	75,315

See notes to condensed consolidated financial statements.

3

SED International Holdings, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2007			2006		2007			2006
Net sales	$	107,692		$	109,557	$	297,322		$	314,841
Cost of sales		101,662			103,891		280,804			299,416
Gross profit		6,030			5,666		16,518			15,425
Operating expenses:
Selling, general and administrative expense		5,106			4,450		14,344			13,227
Depreciation and amortization expense		108			101		300			329
Foreign currency transaction (gain) loss		(9	)		46		(461	)		43
Total operating expenses		5,205			4,597		14,183			13,599
Operating income		825			1,069		2,335			1,826
Interest expense		434			378		1,180			1,000
Income before income taxes and discontinued operations		391			691		1,155			826
Income tax expense		370			250		994			686
Income from continuing operations		21			441		161			140
Loss from discontinued operations		—			—		—			(7	)
Net income	$	21		$	441	$	161		$	133
Basic and diluted income per share
From continuing operations	$	—		$	.11	$	.04		$	.03
From discontinued operations		—			—		—			—
Basic and diluted income per common share	$	—		$	.11	$	.04		$	.03
Weighted average number of shares outstanding:
Basic		3,884,000			3,874,000		3,880,000			3,871,000
Diluted		3,918,000			3,888,000		3,914,000			3,877,000

See notes to condensed consolidated financial statements.

4

SED International Holdings, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

	Nine Months Ended
	March 31,
	2007			2006
Net cash used in operating activities	$	(1,215	)	$	(11,572	)
Cash flows used in investing activities:
Purchases of equipment		(369	)		(146	)
Net cash used in investing activities		(369	)		(146	)
Cash flows provided by financing activities:
Net borrowings under revolving credit facility		2,090			11,293
Net proceeds from issuance of stock		—			2
Net cash provided by financing activities		2,090			11,295
Effect of exchange rate changes on cash		558			15
Net increase (decrease) in cash and cash equivalents		1,064			(408	)
Cash and cash equivalents at beginning of period		4,426			3,082
Cash and cash equivalents at end of period	$	5,490		$	2,674

See notes to condensed consolidated financial statements.

5

SED International Holdings, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data)
(Unaudited)

1. Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements of SED International Holdings, Inc. and its wholly-owned subsidiaries, SED International, Inc., SED International de Colombia Ltda., and Intermaco S.R.L., (collectively, “SED“or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months and nine months ended March 31, 2007 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2007, or any other interim period. The June 30, 2006 balance sheet has been derived from the audited consolidated financial statements included in SED’s 2006 Form 10-K.

     For further information, refer to the consolidated financial statements and footnotes thereto included in the SED International Holdings, Inc. Annual Report on Form 10-K for the year fiscal year ended June 30, 2006.

2. Earnings per Common Share

     Basic earnings per common share is computed on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Included in diluted earnings are the dilutive effect of 67,500 and 50,000 options for the three months and nine months ended March 31, 2007 and 2006, respectively.

     Diluted earnings per common share for the three and nine month periods ended March 31, 2007 and 2006 does not reflect the total of any incremental shares related to the assumed exercise of anti-dilutive stock options (438,909 and 476,039 for the three months and nine months ended March 31, 2007 and 2006, respectively).

3. Discontinued Operations

     In February 2003, SED resolved to discontinue commercial operations of its Brazilian subsidiary, SED International do Brasil Distribuidora, Ltda. Accordingly, the operating results of SED International do Brasil Distribuidora, Ltda. (the “Brazil Operation”) have been classified as a discontinued operation for all periods presented in SED’s consolidated statements of operations. Additionally, SED has reported all of SED International do Brasil Distribuidora, Ltda. assets at their estimated net realizable values in SED’s consolidated balance sheets as of March 31, 2007 and June 30, 2006. As of June 30, 2006, the assets of SED International do Brasil Distribuidora, Ltda. had no net realizable value.

     SED International do Brasil Distribuidora, Ltda. has been transitioned from a commercial operating company into dormancy. During the dormancy period, SED will incur ongoing operating expenses for attorney fees, statutory bookkeeping and reporting services.

     SED International do Brasil Distribuidora Ltda. has various litigation related to additional income taxes and social taxes allegedly due from the fiscal years 1998 through 2004. These legal claims were filed during the years 2002 and 2003. The legal claims range from $3,000 to $219,000 each or $522,000 in the aggregate. SED has an accrued liability of $200,000 to cover potential losses and expenses related to these claims.

6

4. Accounts Receivable

	March 31,			June 30,
	2007			2006
Trade receivables	$	37,030		$	34,021
Less: allowance for doubtful accounts		(993	)		(437	)
	$	36,037		$	33,584

5. Inventory

	March 31,			June 30,
	2007			2006
Inventory on hand	$	33,267		$	27,550
Inventory in transit		7,692			6,207
Less: allowances		(1,127	)		(1,037	)
	$	39,832		$	32,720

6. Comprehensive Income

     Comprehensive income is defined as the change in equity (net assets) of a business enterprise during a period from transactions or other events and circumstances from non-owner sources, and is comprised of net income and other comprehensive income (loss). SED’s other comprehensive income (loss) is comprised exclusively of changes in SED’s foreign currency translation adjustments, including income taxes attributable to those changes.

     Comprehensive income, net of income taxes, for the three months and nine months ended March 31, 2007 and 2006, respectively, is as follows:

	Three months ended					Nine months ended
	March 31,					March 31
	2007		2006			2007		2006
Net income	$	21	$	441		$	161	$	133
Changes in foreign translation adjustments		106		(57	)		850		(109	)
Comprehensive income	$	127	$	384		$	1,011	$	24

     There were no income tax effects related to the changes in foreign translation adjustments for the three months and nine months ended March 31, 2007 or 2006. The deferred income tax asset related to the cumulative translation adjustment was fully offset by a valuation allowance as of the beginning and end of the three months and nine months periods ended March 31, 2007 and 2006; and, therefore, the comprehensive income or loss for these periods had no income tax effect.

     Accumulated other comprehensive loss included in shareholders’ equity totaled $3.6 million and $4.5 million at March 31, 2007 and June 30, 2006, respectively, and consisted solely of foreign currency translation adjustments.

7

7. Segment Reporting

     SED operates in one business segment as a wholesale distributor of microcomputer, consumer electronics and wireless telephone products. SED operates and manages in two geographic regions, the United States and Latin America. Sales of products between SED’s geographic regions are made at market prices and eliminated in consolidation. All corporate over-head is included in the results of U.S. operations.

     Financial information for continuing operations by geographic region is as follows:

	United States			Latin America		Eliminations			Consolidated
For the three months ended March 31, 2007
Net sales to unaffiliated customers	$	84,261		$	24,092	$	(661	)	$	107,692
Gross profit	$	4,047		$	1,983		—		$	6,030
Operating (loss) income	$	(26	)	$	851		—		$	825
Interest expense	$	434			—		—		$	434
Income tax expense		—		$	370		—		$	370
(Loss) income from continuing operations	$	(460	)	$	481		—		$	21
Total assets at March 31, 2007	$	76,520		$	22,080	$	(12,518	)	$	86,082
For the three months ended March 31, 2006
Net sales to unaffiliated customers	$	86,524		$	23,033		—		$	109,557
Gross profit	$	4,042		$	1,624		—		$	5,666
Operating income	$	463		$	606		—		$	1,069
Interest expense	$	378			—		—		$	378
Income tax expense		—		$	250		—		$	250
Income from continuing operations	$	85		$	356		—		$	441
Total assets at March 31, 2006	$	74,517		$	21,138	$	(12,252	)	$	83,403

     Net sales by product category is as follows:

	Micro-		Consumer		Wireless
For the three months	Computer		Electronics		Telephone		Handling
ended March 31,	Products		Products		Products		Revenue		Total
2007	$	89,748	$	16,287	$	1,383	$	274	$	107,692
2006	$	96,539	$	6,741	$	5,940	$	337	$	109,557

     Approximately 39.6% and 37.0% of SED’s net sales for the three months ended March 31, 2007 and 2006, respectively, consisted of sales to customers for export principally into Latin America and direct sales to customers in Colombia and Argentina.

8

	United States			Latin America		Eliminations			Consolidated
For the nine months ended March 31, 2007
Net sales to unaffiliated customers	$	233,881		$	64,301	$	(860	)	$	297,322
Gross profit	$	11,486		$	5,032		—		$	16,518
Operating (loss) income	$	(25	)	$	2,360		—		$	2,335
Interest expense	$	1,180			—		—		$	1,180
Income tax expense	$	7		$	987		—		$	994
(Loss) income from continuing operations	$	(1,212	)	$	1,373		—		$	161
Total assets at March 31, 2007	$	76,520		$	22,080	$	(12,518	)	$	86,082
For the nine months ended March 31, 2006
Net sales to unaffiliated customers	$	257,339		$	57,502		—		$	314,841
Gross profit	$	10,967		$	4,458		—		$	15,425
Operating income	$	139		$	1,687		—		$	1,826
Interest expense	$	1,000			—		—		$	1,000
Income tax expense	$	6		$	680		—		$	686
(Loss) income from continuing operations	$	(867	)	$	1,007		—		$	140
Total assets at March 31, 2006	$	74,517		$	21,138	$	(12,252	)	$	83,403

     Net sales by product category is as follows:

	Micro-		Consumer		Wireless
For the nine months	Computer		Electronics		Telephone		Handling
ended March 31,	Products		Products		Products		Revenue		Total
2007	$	254,715	$	36,200	$	5,631	$	776	$	297,322
2006	$	263,966	$	24,197	$	25,679	$	999	$	314,841

     Approximately 38.7% and 33.4% of SED’s net sales for the nine months ended March 31, 2007 and 2006, respectively, consisted of sales to customers for export principally into Latin America and direct sales to customers in Colombia and Argentina.

8. Restricted Stock, Stock Options and Other Stock Plans

     SED reversed $65,000 of expense during the three months ended September 30, 2006 related to the forfeiture of non-vested share-based compensation of 10,000 shares and none for the following six months ended March 31, 2007. No stock-based compensation expense was recognized during the three months ended March 31, 2007. Stock-based compensation expense recognized during the nine months ended March 31, 2007 was approximately $12,000.

     As of March 31, 2007, there was no unrecognized compensation cost related to non-vested share-based compensation arrangements under our plans.

     No stock options or awards were granted during the nine months ended March 31, 2007 and 2006.

9. Credit Facility and Bank Debt

     On September 21, 2005, SED entered into a three year credit facility with Wachovia Bank, National Association (the “Wachovia Agreement”). The Wachovia Agreement provides for revolving borrowings up to $35 million based upon SED’s eligible accounts receivable and inventory as defined therein. Under the Wachovia Agreement, the credit facility may be increased to $50 million in $5 million increments if certain additional criteria are met.

9

     On March 1, 2007 SED signed an amendment on the loan agreement. The new maturity date is September 21, 2011. Borrowings under the Wachovia Agreement accrue interest based upon a variety of interest rate options depending upon the computation of availability as defined therein. The interest rates range from LIBOR, plus a margin ranging from 1.25% to 2.00% (1.75% to 2.25% prior to amendment), to the prime rate. SED is also subject to a commitment fee of .25% (.25% to .50% prior to amendment), on the unused portion of the facility. Interest is payable monthly. Borrowings under the Wachovia Agreement are collateralized by substantially all domestic assets of SED and 65% of each of SED’s shares in its foreign subsidiaries, respectively.

     The Wachovia Agreement contains certain covenants which, among other things, require that SED maintain availability of $5 million or more during the agreement to make advances to SED’s Latin American subsidiaries. SED’s advances to its Latin American subsidiaries are restricted. The Wachovia agreement also contains a covenant which requires that if SED’s availability is less than $3.5 million ($5.0 million prior to amendment) at any time during the agreement, then maintenance of a minimum fixed charge coverage ratio is required, as defined. The Wachovia Agreement also restricts SED’s ability to distribute dividends.

     Available borrowings under this agreement, based on collateral limitations at March 31, 2007 were $10.4 million. Average borrowings, maximum borrowings and weighted average interest rate for the three months ended March 31, 2007 were $21.4 million, $25.9 million and 7.1%, respectively. The weighted average interest rate on outstanding borrowings under credit facilities was 7.2% at March 31, 2007. Average borrowings, maximum borrowings and weighted average interest rate for the nine months ended March 31, 2007 were $20.4 million, $25.9 million and 7.2%, respectively.

     The carrying value of all bank debt at March 31, 2007 approximates its fair value based on the variable market rates of interest on such bank debt. Outstanding Letters of Credit under the Wachovia Agreement totaled $ 3.8 million at March 31, 2007.

     On January 26, 2007, the Company entered into a 3 year interest rate swap contract to reduce the impact of the fluctuations in the interest rate on $5,000,000 notional amount of the revolving credit facility. The contract effectively converted the variable rate to a fixed rate of 5.2%. The Company utilizes derivative financial instruments to reduce interest rate risk. The Company does not hold or issue derivative financial instruments for trading purposes. Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), establishes accounting and reporting standards for derivative instruments and hedging activities. As required by SFAS 133, the Company recognizes all derivatives as either assets or liabilities in the balance sheet and measures those instruments at fair value. Changes in the fair value of those instruments are reported in earnings or other comprehensive income depending on the use of the derivative and whether it qualifies for hedge accounting. The accounting for gains and losses associated with changes in the fair value of the derivative and the effect on the financial statements will depend on its hedge designation and whether the hedge is highly effective in achieving offsetting changes in the fair value of cash flows of the asset or liability hedged. The fair value of the interest rate swap contract was not material at March 31, 2007.

10. Legal Proceedings

     On June 19, 2006 the Company instituted an action in the Superior Court of Fulton County, State of Georgia captioned SED International, Inc. vs. Michael Levine, Civil Action file no. 2006-CV-118591. In the action, the Company asserts that Mr. Levine breached the terms of the Termination Agreement with the Company and request that the court grant injunctive relief. In response, Mr. Levine has denied the Company’s assertions, filed a third party complaint against the Company and asserted counterclaims against SED International, the Company’s operating subsidiary, alleging breach and infliction of emotional distress. In connection with the third party complaint and the counterclaims, Mr. Levine has asked that the court award him costs, fees and punitive damages. In October 2006, the Company filed an Answer to his third party complaint and discovery has commenced. Since that time, Mr. Levine has dismissed, without prejudice, all counterclaims filed by him against SED International. The Company believes that it has meritorious defenses to his complaint and counterclaims and will vigorously defend and prosecute this matter.

10

     As disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2006, on November 3, 2005, Mark Diamond (“Mr. Diamond”) filed a suit in the Superior Court of Dekalb County, State of Georgia captioned Mark Diamond vs. SED International Holdings, Inc., et al., Civil Action file no. 05-CV-12452-7. From 1999 to 2005 Mr. Diamond was president, chief operating officer and a director. From 1999 to 2005 Mr. Diamond was president and chief operating officer, and from 2003 to 2005 he was also chief executive officer of the Company; from 2004 to 2005 he was president, chief executive and chief operating officer of SED International; and from 1996 to 2005 he was also a director of the Company. In this lawsuit, he alleges that the Company breached his employment agreement and has made multiple other claims, and has asked the court for declaratory judgment on some of the claims and an award of monetary damages under the theory of quantum meruit. With respect to the claims for declaratory judgment, the Company moved for summary judgment and the court has ruled in the Company’s favor. Subsequently, an appeal by Mr. Diamond, of that summary judgment decision was withdrawn. Upon withdrawal, the trial court scheduled a hearing on the Company’s motion to disqualify the attorney representing Mr. Diamond due to a conflict of interest. The Company is currently waiting for that hearing to be rescheduled. On March 2, 2007, Mr. Diamond voluntarily dismissed this lawsuit without prejudice. On March 15, 2007, Mr. Diamond re-filed essentially the same lawsuit (minus the claims that previously had been dismissed by the court on summary judgment) in the Superior Court of Fulton County, State of Georgia, captioned Mark Diamond v. SED International Holdings, Inc. et al., Civil Action file no. 2007CV131027. The Company believes that it has meritorious defenses to his complaint and counterclaims and will vigorously defend this matter.

     On August 19, 2005, Mr. Diamond filed a complaint against SED International with the United States Department of Labor, Case No. 2006-SOX-000444, alleging that SED International violated the employee protection provisions of Title XIII of the Sarbanes-Oxley Act of 2002 when it terminated him from his executive officer positions. He has asked the Department of Labor to award him damages in the form of back-pay and reinstatement as an executive officer of SED International. On December 13, 2005 the Department of Labor issued a decision in our favor. Mr. Diamond appealed that decision and SED International motioned for summary judgment in its favor. In October 2006, the Department of Labor denied the motion for summary judgment in connection with his appeal and a trial was held on the issues. In connection with the trial, both sides submitted briefs in January 2007. Response briefs were filed prior to March 31, 2007. SED International believes that it has meritorious defenses to his complaint and will vigorously defend this matter.

     As disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2006, on October 25, 2005, the Company was named in a lawsuit filed by Rockland Credit Finance, LLC, a Maryland limited liability company (“Rockland”), in the Superior Court of New Jersey, County of Essex captioned Rockland Credit Finance, LLC vs. Nikada Inc., et al., Docket no. ESX-L-00-8310-05. In the lawsuit, Rockland alleges that the Company is indebted to them as a result of the Company’s relationship with Nikada, Inc., a New Jersey corporation and a former product supplier to the Company, and seeks money damages in the amount of approximately $700,000 plus interest, costs and attorneys’ fees. The Company denies all the allegations. The Company has brought a third party claim against Nikada and its owner for misrepresentations. A Motion to Dismiss filed by the Company was denied and discovery on the merits of the case has commenced. A tentative trial date has been set for the week of June 25, 2007. The Company believes that it has meritorious defenses and will vigorously defend this matter.

11. New Accounting Pronouncements

     In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. (FIN) 48, Accounting for Uncertainty in Income Taxes-An Interpretation of Financial Accounting Standards Board Statement No. 109 (“FIN 48”). The interpretation prescribes a consistent recognition threshold and measurement standard, as well as clear criteria for subsequently recognizing, derecognizing, classifying and measuring tax positions for financial statement purposes. The interpretation also requires expanded disclosure with respect to uncertainties as they relate to income tax accounting. FIN 48 will be adopted by SED no later than the beginning of its fiscal year ending June 30, 2008, as required. Management is currently evaluating the impact of FIN 48 on its consolidated financial statements. The cumulative effect of the interpretation will be reflected as an adjustment to beginning retained earnings upon adoption.

11

     In September 2006, the Securities and Exchange Commission (the “SEC”) issued Staff Accounting Bulletin No. 108 (“SAB 108”), Financial Statements – Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a potential current year misstatement. Prior to SAB 108, companies could evaluate the materiality of financial statement misstatements using either the income statement or balance sheet approach, with the income statement approach focusing on new misstatements added in the current year, and the balance sheet approach focusing on the cumulative amount of misstatement present in a company’s balance sheet. Misstatements that could be immaterial under one approach could be viewed as material under another approach, and not be corrected. SAB 108 now requires that companies view financial statement misstatements as material if they are material according to either the income statement or balance sheet approach. The Company is required to adopt the provisions of SAB 108 effective with the fiscal year ending June 30, 2007 and does not expect the provisions of SAB 108 to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

     In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States of America and expands disclosures about fair value measurements. The Company is required to adopt the provisions of FAS 157 in the first quarter of fiscal 2008. The Company is currently in the process of assessing what impact FAS 157 may have on its consolidated financial position, results of operations or cash flows.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with the condensed consolidated financial statements of SED and the notes thereto included in this quarterly report. Historical operating results are not necessarily indicative of trends in operating results for any future period.

Overview

     SED is an international distributor of microcomputer products, including personal computers, printers and other peripherals, supplies, networking products, consumer electronics and wireless telephone products, serving value-added resellers and dealers throughout the United States and Latin America.

Critical Accounting Policies and Estimates

General. Management’s discussion and analysis of SED’s financial condition and results of operations are based upon SED’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, management evaluates its estimates, including those related to vendor programs and incentives, bad debts, inventories, investments and income taxes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue Recognition. Revenue is recognized once four criteria are met: (1) SED must have persuasive evidence that an arrangement exists; (2) delivery must occur, which generally happens at the point of shipment (this includes the transfer of both title and risk of loss, provided that no significant obligations remain); (3) the price must be fixed or determinable; and (4) collectibility must be reasonably assured. Shipping revenue is included in net sales while the related costs, including shipping and handling costs, are included in the cost of products sold. SED allows its customers to return product for exchange or credit subject to certain limitations. A provision for such returns is recorded based upon historical experience.

12

Commitments and Contingencies. During the ordinary course of business, contingencies arise resulting from an existing condition, situation, or set of circumstances involving uncertainty as to possible gain, a gain contingency, or loss contingency, that will ultimately be resolved when one or more future events occur or fail to occur. Resolution of the uncertainty may confirm the acquisition of an asset or the reduction of a liability or the loss or impairment of an asset or the incurrence of a liability. When loss contingencies exist, such as, but not limited to, pending or threatened litigation, actual or possible claims and assessments, collectibility of receivables or obligations related to product warranties and product defects or statutory obligations, the likelihood of the future event or events occurring generally will confirm the loss or impairment of an asset or the incurrence of a liability.

Accounts Receivable. Accounts receivable are carried at the amount owed by customers less an allowance for doubtful accounts.

Allowance for Doubtful Accounts. An allowance for uncollectible accounts has been established based on our collection experience and an assessment of the collectibility of specific accounts. SED evaluates the collectibility of accounts receivable based on a combination of factors. Initially, SED estimates an allowance for doubtful accounts as a percentage of accounts receivable based on historical collections experience. This initial estimate is periodically adjusted when SED becomes aware of a specific customer’s inability to meet its financial obligations (e.g., bankruptcy filing) or as a result of changes in the overall aging of accounts receivable.

Inventory. Inventories are stated at the lower of cost (first-in, first-out method) or market. Most of SED’s vendors allow for either return of goods within a specified period (usually 90 days) or for credits related to price protection. However, for other vendor relationships and inventories, SED is not protected from the risk of inventory loss. Therefore, in determining the net realizable value of inventories, SED identifies slow moving or obsolete inventories that (1) are not protected by our vendor agreements from risk of loss, and (2) are not eligible for return under various vendor return programs. Based upon these factors, SED estimates the net realizable value of inventories and records any necessary adjustments as a charge to cost of sales. If inventory return privileges or price protection programs were discontinued in the future, or if vendors were unable to honor the provisions of certain contracts which protect SED from inventory losses, the risk of loss associated with obsolete and slow moving inventories would increase.

Foreign Currency Translation. The assets and liabilities of foreign operations are translated at the exchange rates in effect at the balance sheet date, with related translation gains or losses reported as a separate component of shareholders’ equity, net of tax. The results of foreign operations are translated at the weighted average exchange rates for the year. Gains or losses resulting from foreign currency transactions are included in the statement of operations.

13

Results of Continuing Operations

     The following table sets forth for the periods indicated the percentage of net sales represented by certain line items from SED’s consolidated statements of operations:

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2007			2006			2007			2006
Net sales		100.00	%		100.00	%		100.00	%		100.00	%
Cost of sales, including buying and occupancy expense		94.40	%		94.83	%		94.44	%		95.10	%
Gross profit		5.60	%		5.17	%		5.56	%		4.90	%
Operating expenses:
Selling, general and administrative expense		4.74	%		4.06	%		4.83	%		4.20	%
Depreciation and amortization expense		.10	%		.09	%		.10	%		.10	%
Foreign currency transaction (gain) loss		(.01	)%		.04	%		(.16	)%		.02	%
Total operating expenses		4.83	%		4.19	%		4.77	%		4.32	%
Operating income		.77	%		.98	%		.79	%		.58	%
Interest expense		.40	%		.35	%		.40	%		.32	%
Income before income taxes		.37	%		.63	%		.39	%		.26	%
Income tax expense		.35	%		.23	%		.33	%		.22	%
Income from continuing operations		.02	%		.40	%		.06	%		.04	%

Three Months Ended March 31, 2007 and 2006

Revenues. Total revenues for the three months ended March 31, 2007 decreased 1.7% to $107.7 million as compared to $109.6 million for the three months ended March 31, 2006. The decrease in total revenues is primarily attributable to the decrease in our wireless telephone revenues and a decrease in microcomputer product sales. Sales of consumer electronics products increased. Microcomputer product sales for the three months ended March 31, 2007 decreased 7.0% to $89.7 million as compared to $96.5 million for the three months ended March 31, 2006. The decrease in microcomputer product sales was primarily due to a decrease in revenues from mass storage products. Wireless telephone revenues for the three months ended March 31, 2007 decreased 76.7% to $1.4 million as compared to $5.9 million for the three months ended March 31, 2006. The decrease in wireless revenues was primarily due to LG product availability issues caused by a discontinued vendor relationship with LG. Consumer electronics product sales for the three months ended March 31, 2007 increased 141.6% to $16.3 million as compared to $6.7 million for the three months ended March 31, 2006. The increase in consumer electronics revenues resulted from an increase in sales of flat panel televisions.

     Information concerning SED’s domestic and international revenues is summarized below:

	Three Months Ended
	March 31,					Change
	2007			2006		Amount			Percent
United States
Domestic	$	65.8		$	69.0	$	(3.2	)		(4.6	)%
Export		18.5			17.6		.9			5.1	%
Latin America		24.1			23.0		1.1			4.8	%
Elimination		(.7	)		—		(.7	)		—
Consolidated	$	107.7		$	109.6	$	(1.9	)		(1.7	)%

     Domestic revenues declined $3.2 million to $65.8 million or 4.6 % for the three months ended March 31, 2007 as compared to $69.0 million for the three months ended March 31, 2006. The decrease is primarily attributed to a decline in cellular sales and microcomputer products.

14

     The increase in the U.S. export sales was due primarily from an improvement in the sale of printers and printer consumables.

     The increase in sales in Latin America was principally due to the slightly improving economies in both Argentina and Colombia.

     Sales of microcomputer products, including shipping and handling revenue, represented approximately 83.6% of SED’s third quarter net sales compared to 88.4% for the same period last year. Sales of wireless telephone products accounted for approximately 1.3% of SED’s third quarter net sales compared to 5.4% for the same period last year. Sales of consumer electronics represented 15.1% for third quarter and 6.2% for the same period last year.

Gross Profit Margins. Gross profit margin was $6.0 million or 5.6% for the three months ended March 31, 2007 compared to $5.7 million or 5.2 % for the three months ended March 31 2006. SED’s margins may be affected by several factors including (i) the mix of products sold, (ii) the price of products sold and provided and (iii) increased competition.

Selling, General and Administrative Expense. Selling, general and administrative expenses were $5.1 million for the three months ended March 31, 2007 compared to $4.5 million at March 31, 2006. Selling, general and administrative expenses as a percentage of revenues were 4.7 % for the three months ended March 31, 2007 as compared to 4.1% for the three months ended March 31, 2006. The increase in expense over the prior year quarter is primarily attributed to several factors including (i) an increase in security related expenses of $70,000 at Company warehouse facilities, (ii) a credit of $188,000 recorded in the prior year quarter for sales tax, (iii) an increase of $120,000 in collection related expenses, (iv) an increase of $67, 000 in professional fees, (v) an increase of $86,000 in temporary and contract expenses, and (vi) an increase of $63,000 in telephone and rent expenses.

Depreciation and Amortization. Depreciation and amortization expense was $108,000 and $101,000 for the three months ended March 31, 2007 and 2006, respectively. The increase reflects a slight increase in capital expenditures.

Foreign Currency Transaction. Foreign currency transaction gains for the three months ended March 31, 2007 were $9,000 as compared to foreign currency transaction losses of $46,000 for the three months ended March 31, 2006. The increase in foreign currency transaction gains reflects the improvement in the foreign currencies and exchange rates in which SED operates.

Interest Expense. Interest expense was $434,000 and $378,000 for the three months ended March 31, 2007 and 2006, respectively. The increase in interest expense is related to rising interest rates and higher average loan balances.

Provision for Income Taxes. Income tax expense was approximately $370,000 for the three months ended March 31, 2007 as compared to $250,000 for the three months ended March 31, 2006. The provision is primarily related to income generated by SED’s Latin American subsidiaries. The provision for income taxes differs from the amount which would result from applying the statutory federal income tax rate due to the taxes imposed on the foreign subsidiaries as well as the fact that the Company is not fully valuing a tax asset and benefit on the net operating loss carry-forward.

Nine months Ended March 31, 2007 and 2006

Revenues. Total revenues for the nine months ended March 31, 2007 decreased 5.6% to $297.3 million as compared to $314.8 million for the nine months ended March 31, 2006. The decrease in total revenues is primarily attributable to the decrease in our wireless telephone sales and a decrease in microcomputer product sales. Sales of consumer electronics products increased. Microcomputer product sales for the nine months ended March 31, 2007 decreased 3.5% to $254.7 million as compared to $264.0 million for the nine months ended March 31, 2006. The decrease in microcomputer product sales was primarily due to a decrease in revenues from mass storage products. Wireless telephone revenues for the nine months ended March 31, 2007 decreased 78.1% to $5.6 million as compared to $25.7 million for the nine months ended March 31, 2006. The decrease in wireless revenues was primarily due to LG product availability issues caused by a discontinued vendor relationship with LG. Consumer electronics product sales for the nine months ended March 31, 2007 increased 49.6% to $36.2 million as compared to $24.2 million for the nine months ended March 31, 2006. The increase in consumer electronics revenues resulted from an increase in sales of flat panel televisions.

15

     Information concerning SED’s domestic and international revenues is summarized below:

	Nine months Ended
	March 31,					Change
	2007			2006		Amount			Percent
United States
Domestic	$	182.2		$	209.6	$	(27.4	)		(13.1	)%
Export		51.7			47.7		4.0			8.4	%
Latin America		64.3			57.5		6.8			11.8	%
Elimination		(.9	)		—		(.9	)		—
Consolidated	$	297.3		$	314.8	$	(17.5	)		(5.6	)%

     Domestic revenues declined $ 27.4 million to $182.2 million or 13.1% for the nine months ended March 31, 2007 as compared to $209.6 million for the nine months ended March 31, 2006. The decrease is primarily attributed to a decline in cellular and micro computer product sales.

     The increase in the U.S. export sales was due primarily from an improvement in the sale of printers and printer consumables.

     The increase in sales in Latin America was principally due to the slightly improving economies in both Argentina and Colombia.

     Sales of microcomputer products, including shipping and handling revenue, represented approximately 85.9% of SED’s nine months ended March 31, 2007 net sales compared to 84.2% for the same period last year. Sales of wireless telephone products accounted for approximately 1.9% of SED’s nine months ended March 31, 2007 net sales compared to 8.1% for the same period last year. Sales of consumer electronics represented 12.2% for nine months ended March 31, 2007 and 7.7% for the same period last year.

Gross Profit Margins. Gross profit margin was $16.5 million or 5.6% for the nine months ended March 31, 2007 compared to $15.4 million or 4.9% for the nine months ended March 31, 2006. SED’s margins may be affected by several factors including (i) the mix of products sold, (ii) the price of products sold and provided and (iii) increased competition.

Selling, General and Administrative Expense. Selling, general and administrative expenses were $14.3 million for the nine months ended March 31, 2007 compared to $13.2 million at March 31, 2006. Selling, general and administrative expenses as a percentage of revenues were 4.8% for the nine months ended March 31, 2007 as compared to 4.2% for the nine months ended March 31, 2006. The increase in expense over the prior year period is primarily attributed to several factors including (i) credits totaling $350,000 for reversed sales tax accruals which was recorded in the prior year period; (ii) miscellaneous litigation settlements of $150,000, which was recorded in the prior year period; (iii) increases in security of $143,000, legal fees of $43,000 and audit/ tax fees of $84,000 and (iv) customer appeasements were up $110,000.

Depreciation and Amortization. Depreciation and amortization expense was $300,000 and $329,000 for the nine months ended March 31, 2007 and 2006, respectively.

Foreign Currency Transaction. Foreign currency transaction gains for the nine months ended March 31, 2007 were $461,000 as compared to foreign currency losses of $43,000 for the nine months ended March 31, 2006. The increase in foreign currency transaction gains reflects the improvement in the foreign currencies and exchange rates in which SED operates.
Interest Expense. Interest expense was $1,180,000 and $1,000,000 for the nine months ended March 31, 2007 and 2006, respectively. The increase in interest expense is related to rising interest rates and higher average loan balances.

Provision for Income Taxes. Income tax expense was approximately $994,000 for the nine months ended March 31, 2007 as compared to $686,000 for the nine months ended March 31, 2006. The provision is primarily related to income

16

generated by SED’s Latin American subsidiaries. The provision for income taxes differs from the amount which would result from applying the statutory federal income tax rate due to the taxes imposed on the foreign subsidiaries as well as the fact that the Company is not fully valuing a tax asset and benefit on the net operating loss carry-forward.

Results of Discontinued Operations

     In February 2003, SED resolved to discontinue commercial operations of its Brazilian subsidiary, SED International do Brasil Distribuidora, Ltda. Accordingly, the operating results of SED International do Brasil Distribuidora, Ltda. (the “Brazil Operation”) have been classified as a discontinued operation for all periods presented in SED’s consolidated statements of operations. Additionally, SED has reported all of SED International do Brasil Distribuidora, Ltda. assets at their estimated net realizable values in SED’s consolidated balance sheets as of March 31, 2007 and June 30, 2006. As of June 30, 2006, the assets of SED International do Brasil Distribuidora, Ltda. had no net realizable value.

     The Brazil Operation had no recognized loss or gain from discontinued operations for the nine months ended March 31, 2007 and had a loss from discontinued operations of $7,000 for the nine months ended March 31, 2006. Sales activity in Brazil ceased after fiscal year 2003.

     SED International do Brasil Distribuidora, Ltda. has been transitioned from a commercial operating company into dormancy. During the dormancy period, SED will incur ongoing operating expenses for attorney fees, statutory bookkeeping and reporting services.

Financial Condition and Liquidity

Overview. At March 31, 2007 SED had cash and cash equivalents totaling approximately $5.5 million. At March 31, 2007, SED’s principal source of liquidity is its $5.5 million of cash, and availability under its revolving credit facility. SED’s availability under the Wachovia Agreement was $10.4 million on March 31, 2007, net of $3.8 million in reserves for outstanding Letters of Credit. Historically, SED has financed its liquidity needs largely through internally generated funds, borrowings under a revolving credit agreement, subsidiary bank credit agreements, and vendor lines of credit. In September 2005, SED entered into a three year, $35 million credit facility with Wachovia Bank, National Association, which was used in part to pay off the Fleet Capital Corporation Bank borrowings. SED derives a substantial portion of its operating income and reported cash flows from its foreign subsidiaries and, due to certain bank and regulatory regulations, relies on such cash flows to satisfy its foreign obligations. While SED continues operations in Latin America, management believes that domestic banking agreements and international monetary restrictions may limit SED’s ability to transfer cash between its domestic and international subsidiaries. SED has no off-balance sheet arrangements or transactions involving special purpose entities.

     SED maintains an experienced customer credit staff and relies on customer payment history and third party data to make customer credit decisions. Nevertheless, SED may experience customer credit losses in excess of its expectations. SED maintains credit insurance policies for certain customers located in the United States and select Latin American countries (subject to certain terms and conditions). However, the terms of the credit insurance agreement require SED to maintain certain minimum standards and policies with respect to extending credit to customers. If SED does not adhere to such policies, the insurance companies may not pay claims submitted by SED.

Operating Activities. Cash used in operating activities was $1.2 million for the nine months ended March 31, 2007 as compared to $11.6 million used in operating activities for the nine month period ended March 31, 2006.

     Net trade receivables were $36.0 million at March 31, 2007 and $33.6 million at June 30, 2006. The increase in trade receivables is a direct result of an increase in sales from the March 2007 quarter compared to the June 2006 quarter. Average days sales outstanding at March 31, 2007 were approximately 30.1 days as compared to 31.3 days at June 30, 2006.

17

     Net inventories increased $7.1 million to $39.8 million at March 31, 2007 from $32.7 million at June 30, 2006. The increase in inventory is primarily due to an increase in SED’s mass storage inventory and consumer electronics flat panel television products.

     Other current assets were $3.6 million at March 31, 2007 and June 30, 2006.

     Accounts payable increased $8.2 million to $39.7 million at March 31, 2007 compared to $31.5 million at June 30, 2006. The increase in accounts payable is primarily attributed to the increase in inventory from June 30, 2006 and the timing of vendor payments.

Financing Activities. Net borrowings under the revolving credit facility increased $2.1 million to $19.6 million at March 31, 2007 compared to $17.5 million at June 30, 2006.

     There have been no material changes to obligations and/or commitments since year-end. Purchase orders or contracts for the purchase of inventory and other goods and services are not included in our estimates. We are not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders may represent authorizations to purchase rather than binding agreements. Our purchase orders are based on our current distribution needs and are fulfilled by our vendors within short time horizons. SED does not have significant agreements for the purchase of inventory or other goods specifying minimum quantities or set prices that exceed our expected requirements for the three months ended March 31, 2007.

Summary. SED believes that funds generated from operations, together with its revolving credit agreement, subsidiary bank credit agreements, vendor credit lines and current cash, will be sufficient to support the working capital and liquidity requirements for the next 12 months.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     SED is subject to market risk arising from adverse changes in interest rates and foreign exchange. SED does not enter into financial investments for speculation or trading purposes and is not a party to any financial or commodity derivatives.

Interest Rate Risk

     SED’s cash equivalents and short-term investments and its outstanding debt bear variable interest rates which adjust to market conditions. Changes in the market rate affect interest earned and paid by SED. Changes in the interest rates are not expected to have a material impact on SED’s results of operations.

     On January 26, 2007, SED entered into a 3 year interest rate swap contract to reduce the impact of the fluctuations in the interest rate on $5,000,000 notional amount of the revolving credit facility. The contract effectively converted the variable rate to a fixed rate of 5.2%. SED utilizes derivative financial instruments to reduce interest rate risk.

Foreign Currency Exchange

     The functional currency for SED’s international subsidiaries is the local currency for the country in which the subsidiaries own their primary assets. The translation of the applicable currencies into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. Any related translation adjustments are recorded directly to shareholders’ equity as a component of comprehensive income. As a result of the change in currency, SED recorded foreign currency translation gain as a component of comprehensive loss of approximately $850,000 for the nine months ended March 31, 2007.

     SED distributes many of its products in foreign countries, primarily in Latin America. Approximately 38.7% of SED’s total net sales were generated from sales made to resellers located in Latin American countries during the nine month period ended March 31, 2007. SED manages its risk to foreign currency rate changes by maintaining foreign

18

currency bank accounts in currencies in which it regularly transacts business. Additionally, SED’s foreign subsidiaries procure inventory payable in US dollars for resale in their respective countries. Upon settlement of the payables, SED may be required to record transaction gains or losses resulting from currency fluctuations from the time the subsidiary entered into the agreement to settlement date of the liability. During the nine months ended March 31, 2007, SED recorded transaction gains of approximately $461,000. At March 31, 2007, SED’s foreign subsidiaries had approximately $6.3 million in US dollar denominated liabilities. In the aggregate, if the value of the dollar against the foreign denominated currency strengthens by 10%, SED would record a transaction loss of approximately $630,000. Conversely, if the value of the dollar declines by 10%, SED would record a transaction gain of approximately $630,000. SED was not a party to any hedge transactions as of March 31, 2007. The information included in SED’s financial statements, and other documentation, does not include the potential impact that might arise from any decline in foreign currency in Latin America after March 31, 2007 or those declines which may occur in the future and, accordingly, should be analyzed considering that circumstance.

ITEM 4. CONTROLS AND PROCEDURES

     Our management, with the participation of our principal executive and financial officers, have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based on that evaluation, our principal executive and financial officers have concluded that, as of the end of such period, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act 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 management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

     There have not been changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

     On June 19, 2006 we instituted an action in the Superior Court of Fulton County, State of Georgia captioned SED International, Inc. vs. Michael Levine, Civil Action file no. 2006-CV-118591. In the action, we assert that Mr. Levine breached the terms of our Termination Agreement and request that the court grant injunctive relief. In response, Mr. Levine has denied our assertions, filed a third party complaint against SED International Holdings and asserted counterclaims against SED International alleging breach and infliction of emotional distress. In connection with the third party complaint and the counterclaims, Mr. Levine has asked that the court award him costs, fees and punitive damages. In October 2006, we filed an Answer to his third party complaint and discovery has commenced. Since that time, Mr. Levine has dismissed, without prejudice, all counterclaims filed by him against SED International. We believe that we have meritorious defenses to his complaint and will vigorously defend and prosecute this matter.

     As disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2006, on November 3, 2005, Mark Diamond (“Mr. Diamond”) filed a suit in the Superior Court of Dekalb County, State of Georgia captioned Mark Diamond vs. SED International Holdings, Inc., et al., Civil Action file no. 06-CV-12452-7. From 1999 to 2005 Mr. Diamond was president, chief operating officer and a director. During that period, from 2003 to 2005 he was also chief executive officer; from 2004 to 2005 he was president, chief executive and chief operating officer of SED International. In this lawsuit, he alleges that we breached his employment agreement and has made multiple other claims, and has asked the court for declaratory judgment on some of the claims and an award of monetary damages under the theory of quantum meruit. With respect to the claims for declaratory judgment, we moved for summary judgment and the court has ruled in our favor. Subsequently, an appeal by Mr. Diamond of that summary judgment decision was withdrawn. Upon withdrawal, the trial court scheduled a hearing on our motion to disqualify the attorney representing Mr. Diamond due to a conflict of interest. On March 2, 2007, Mr. Diamond voluntarily dismissed this lawsuit without prejudice. On March 15, 2007, Mr. Diamond re-filed essentially the same lawsuit (minus the claims that previously had been dismissed by the

19

court on summary judgment) in the Superior Court of Fulton County, State of Georgia, captioned Mark Diamond v. SED International Holdings, Inc. et al., Civil Action file no. 2007CV131027. We believe that we have meritorious defenses to his complaint and will vigorously defend this matter if and when the complaint is served.

     On August 19, 2005, Mr. Diamond filed a complaint against SED International with the United States Department of Labor, Case No. 2006-SOX-000444, alleging that SED International violated the employee protection provisions of Title XIII of the Sarbanes-Oxley Act of 2002 when it terminated him from his executive officer positions. He has asked the Department of Labor to award him damages in the form of back-pay and reinstatement as an executive officer of SED International. On December 13, 2005 the Department of Labor issued a decision in our favor. Mr. Diamond appealed that decision and we motioned for summary judgment in our favor. In October 2006, the Department of Labor denied our motion for summary judgment in connection with his appeal and a trial was held on the issues. In connection with the trial, both sides submitted briefs in January 2007. Response briefs were filed prior to March 31, 2007. We believe that we have meritorious defenses to his complaint and will vigorously defend this matter.

ITEM 1A. Risk Factors

     In addition to other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2006, which could materially affect our business, financial position and results of operations. The risks described in our Annual Report on Form 10-K are not the only risks facing SED. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial position and results of operations. There have been no material changes to the Risk Factors included in our Annual Report on Form 10-K, for the fiscal year ended June 30, 2006.

     The risk factors in our Annual Report on Form 10-K for the year ended June 30, 2006 should be considered in connection with evaluation the forward-looking statements contained in this Quarterly Report on Form 10-Q because these factors could cause the actual results and conditions to differ materially form those projected in the forward-looking statements. If any of the risks actually occur, our business, financial condition or results of operations could be negatively affected. In that case, the trading price of SED’s could decline, and you may lose all or part of your investment.

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

     Not applicable.

ITEM 3. Defaults Upon Senior Securities

     Not applicable.

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

     Not applicable.

ITEM 5. Other Information

     Not applicable.

20

ITEM 6. Exhibits

Exhibit
Number	Description
10.62	Seventh Addendum to Lease Dated March 13, 2007 for 1729 NW 84th Avenue, Doral, Florida 33126
10.63	Third Amendment to Wachovia Loan and Security Agreement dated March 1, 2007
31.1	Rule 13a-14(a)/15d-14(a) Certification by Principal Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification by Principal Financial Officer.
32.1	Section 1350 Certification by Principal Executive Officer.
32.2	Section 1350 Certification by Principal Financial Officer.

21

SIGNATURES

     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.

	SED International Holdings, Inc.
	(Registrant)
Date: May 14, 2007	/s/ Jean Diamond
	Jean Diamond
	Chief Executive Officer (Principal Executive Officer)
Date: May 14, 2007	/s/ Lyle Dickler
	Lyle Dickler
	Vice President of Finance (Principal Financial and Accounting Officer)

22

EX-10.62

Exhibit 10.62

SEVENTH ADDENDUM TO LEASE

          THIS SEVENTH ADDENDUM TO LEASE (the “Seventh Addendum”) is made and entered into as of the 13^th day of March, 2007, by and between AMB HTD — BEACON CENTRE, LLC. a Florida limited liability company (the “Landlord”), and SED INTERNATIONAL, INC., a Georgia corporation (the “Tenant”).

W I T N E S S E T H:

          WHEREAS, Landlord (as successor-in-interest to New World Partners Joint Venture Number Two) and Tenant (as successor-in-interest to Southern Electronics Distributors, Inc.) are parties to that certain Lease-Industrial Commercial, dated August 9, 1993, whereby Landlord’s predecessor leased to Tenant’s predecessor, and Tenant’s predecessor leased from Landlord’s predecessor, the Premises, as defined in the Lease, consisting of approximately 15,420 rentable square feet in Building 6 of Beacon Centre, Miami, Florida;

          WHEREAS, the Lease-Industrial Commercial was amended by that certain Addendum to Lease, of even date with the Lease-Industrial Commercial; and

          WHEREAS, the Lease-Industrial Commercial was further amended by that certain Second Addendum to Lease, dated January 10, 1996, whereby the Premises was relocated to that certain space in Building 2 of Beacon Centre, consisting of approximately thirty-one thousand two hundred fifty-two (31,252) rentable square feet, with an address of 1729 N.W. 84th Avenue, Miami, Florida 33126; and

          WHEREAS, the Lease-Industrial Commercial was further amended by that certain Third Addendum to Lease, dated July 24, 1996, whereby the Premises was increased to sixty-one thousand twelve (61,012) rentable square feet (which includes approximately eight thousand five hundred eighty-nine (8,589) square feet of office space), by the expansion into twenty-nine thousand seven hundred sixty (29,760) rentable square feet in Building 2, with an address of 1715 N.W. 84th Avenue, Miami, Florida 33126; and

          WHEREAS, the Lease-Industrial Commercial was further amended by that certain Fourth Addendum to Lease, dated February 19, 2001; and

          WHEREAS, the Lease-Industrial Commercial was further amended by that certain Fifth Addendum to Lease, dated December 4, 2003, whereby the Premises was reduced to approximately thirty-one thousand two hundred fifty-two (31,252) rentable square feet (which includes approximately eight thousand five hundred eighty-nine (8,589) square feet of office space), in Building 2 of Beacon Centre, with a current address of 1729 N.W. 84th Avenue, Doral, Florida 33126; and

          WHEREAS, the Fifth Addendum to Lease was amended by that certain letter agreement (the “Letter Agreement”) dated January 28, 2004; and

          WHEREAS, the Lease-Industrial Commercial was further amended by that certain Sixth Addendum to Lease, dated March 19, 2004 (the Lease-Industrial Commercial, the Addendum to Lease, the Second Addendum to Lease, the Third Addendum to Lease, the Fourth Addendum to Lease, the Fifth Addendum to Lease, the Letter Agreement, and the Sixth Addendum to Lease are hereinafter collectively referred to as the “Lease”); and

          WHEREAS, the Term of the Lease expires on March 31, 2007, and Landlord and Tenant desire to renew the Term of the Lease for sixty (60) months, commencing on April 1, 2007, on the terms and conditions hereinafter set forth.

          NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. Landlord and Tenant hereby agree as follows:

     1. Incorporation of Recitals. The above recitals are true and correct and are incorporated herein as if set forth in full.

     2. General Provisions. All defined terms in this Seventh Addendum shall have the same meaning as in the Lease, except as otherwise noted. Except as amended and modified by this Seventh Addendum, all of the terms, covenants, conditions, and agreements of the Lease shall remain in full force and effect. In the event of any conflict between the provisions of the Lease and the provisions of this Seventh Addendum, this Seventh Addendum shall control.

     3. Fourth Renewal. The Term of the Lease is hereby renewed and extended commencing on April 1, 2007 (the “Fourth Renewal Term Commencement Date”) and, unless earlier terminated in accordance with the Lease, expiring on March 31, 2012 (the “Fourth Renewal Term”). Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises for the Fourth Renewal Term.

     4. Improvements; Allowance.

     (a) Tenant acknowledges and agrees that, except as expressly set forth below. Tenant is accepting the Premises in “as-is” condition on the date hereof and that Landlord shall have no obligation whatsoever to furnish, render, or supply any money, work, labor, fixture, material, decoration, or equipment in order to prepare the

Premises for Tenant’s occupancy for the Fourth Renewal Term, except as expressly set forth below. Except as expressly set forth below, any and all alterations and improvements to the Premises shall be at Tenant’s expense and are subject to the provisions of the Lease applicable to alterations, including, without limitation, that the plans and specifications, and the contractors and subcontractors to be used by Tenant, for any alterations are subject to the prior written approval of Landlord.

     (b) Notwithstanding the foregoing, as soon as reasonably practicable following the Fourth Renewal Term Commencement Date, Landlord, at its expense, will perform the following improvements, all using Landlord’s building-standard methods and materials (the “Improvements”): (i) remove the warehouse office space located on the south side of the warehouse portion of the Premises, and (ii) install two (2) new dock-high roll-up doors at the punch-out panels located behind the warehouse office space as may be permitted by the City of Doral building department.

     (c) Tenant acknowledges that the construction of the Improvements may affect Tenant’s use and occupancy of the Premises during the period of construction, and that access to the Premises and construction by Landlord and its contractors shall not constitute an actual or constructive eviction of Tenant, in whole or in part, nor shall it entitle Tenant to any abatement or diminution of rent or relieve Tenant from any obligation under the Lease (as modified hereby).

     (d) In addition, Landlord shall be responsible to contribute up to Forty-Five Thousand and No/100 ($45,000.00) Dollars for alterations and improvements to be made to the Premises by Tenant (including any necessary demolition and including any architectural and engineering fees) (the “Improvement Allowance”), all of which improvements shall be made by Tenant within one (1) year after the Fourth Renewal Term Commencement Date. The plans and specifications, and the contractors and subcontractors to be used by Tenant, for any such alterations and improvements are subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld. The Improvement Allowance shall be paid by Landlord to Tenant within thirty (30) days after submission of an invoice to Landlord and receipt by Landlord of a certificate of occupancy for such work (if applicable), a contractor’s affidavit from Tenant’s general contractor, releases of lien from the applicable subcontractors, suppliers, and laborers, and as-built drawings of such work, with a list and description of all work performed by the contractors, subcontractors, and material suppliers (provided that as-built drawings and a list and description of all work are required only in connection with alterations and improvements affecting the structure of the Building and/or the base-building HVAC, mechanical, electrical, plumbing, and/or fire safety systems). Tenant shall be solely responsible for any and all costs and expenses with respect to any alterations or improvements to the Premises which are above the Improvement Allowance. Tenant shall receive no credit or payment for any unused portion of the Improvement Allowance.

          However, even if all requirements set forth above have been met for payment of the Improvement Allowance, the Improvement Allowance shall not be payable by Landlord if at such time there exists on the part of Tenant a monetary default under the Lease beyond the expiration of applicable notice and cure periods. If such a monetary default exists, then Landlord will not be required to remit the Improvement Allowance to Tenant until such monetary default has been cured.

     5. Minimum Rent. Commencing on the Fourth Renewal Commencement Date, the Minimum Rent for the Fourth Renewal Term (payable in the manner set forth in the Lease for payments of Minimum Rent) shall be as follows:

	ANNUAL MINIMUM RENT	MONTHLY MINIMUM RENT
LEASE YEAR	RATE PER SQUARE FOOT	(NOT INCL. SALES TAX)
1	$6.95	$18,100.12
2	$7.23	$18,829.33
3	$7.52	$19,584.59
4	$7.82	$20,365.89
5	$8.13	$21,173.23

     6. Operating Costs. It is expressly agreed that as of the Fourth Renewal Term Commencement Date, (a) the Lease is converted from a gross lease to a “triple net” Lease, and (b) all references in the Lease to the Base Year shall be disregarded. In accordance therewith, the parties acknowledge and agree as follows: (a) commencing on the Fourth Renewal Term Commencement Date, in addition to Minimum Rent with respect to the Premises, Tenant shall pay to the Landlord the Tenant’s proportionate share of Operating Costs, which shall otherwise continue to be determined as provided in the Lease. For informational purposes only, Operating Costs for calendar year 2007 for the Premises are estimated (but not guaranteed or capped) at $2.92 per square foot.

     7. Security Deposit. The existing security deposit consisting of Thirty-Seven Thousand Two Hundred Seventeen and 32/100 ($37,217.32) Dollars shall continue to be held by Landlord as security for Tenant’s obligations under the Lease (as modified hereby), pursuant to the terms and conditions of the Lease with respect thereto.

     8. Parking. During the Fourth Renewal Term, Tenant shall continue to have the right to use forty (40) unassigned parking spaces in the parking area for the Building, on the terms and conditions set forth in the Lease, including, without limitation, section 11.1.

-2-

     9. Cancellation Option. Paragraph 10 of the Sixth Addendum to Lease referenced above is hereby deleted in its entirety and is of no force or effect.

     10. Addresses for Notices and Rent Payments. Until further notice, Landlord’s addresses for notices and rent payments pursuant to the Lease (as modified hereby) are as follows:

Landlord’s address
for notices:	AMB HTD — Beacon Centre, LLC
	c/o AMB Property, L.P.
	Sixty State Street, Suite 1200
	Boston, Massachusetts 02109
	Attention: Christos F. Kombouras, Vice President
with a copy to:	Flagler Real Estate Services, Inc.
	8323 N.W. 12th Street, Suite 108
	Doral, Florida 33126
	Attention: Property Manager
Landlord’s address
for rent payments:	AMB HTD — Beacon Centre, LLC
	P.O. Box 6110
	Hicksville, New York 11802-6110

     11. Brokerage. Landlord and Tenant each represent and warrant one to the other that except as may be hereinafter set forth, neither of them has employed any broker in connection with the negotiations of the terms of this Seventh Addendum or the execution hereof. Landlord and Tenant hereby agree to indemnify and to hold each other harmless against any loss, expense, or liability with respect to any claims for commissions or brokerage fees arising from or out of any breach of the foregoing representation and warranty. Landlord recognizes Flagler Real Estate Services, Inc. Oncor International (“Landlord’s Broker”) (representing Landlord), and DiGiacomo Group, Inc. (representing Tenant) (“Tenant’s Broker”), as the sole brokers with whom Landlord has dealt in this transaction. Landlord shall pay any commissions payable to Landlord’s Broker pursuant to separate agreement between Landlord and Landlord’s Broker, and Landlord shall cause Landlord’s Broker to pay any commissions payable to Tenant’s Broker pursuant to separate agreement between Landlord’s Broker and Tenant’s Broker.

     12. OFAC/Patriot Act. Tenant represents and warrants that (a) neither Tenant nor any person or entity that directly or indirectly owns an interest in it nor any of its officers, directors, or managing members is a person or entity (each, a “Prohibited Person”) with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including Executive Order 13224 (the “Executive Order”) signed on September 24, 2001 and entitled “Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism”), or other governmental action, (b) Tenant’s activities do not violate the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 or the regulations or orders promulgated thereunder (as amended from time to time, the “Money Laundering Act”) (i.e, Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”), and (c) throughout the Term, Tenant shall comply with the Executive Order, the Money Laundering Act, and the Patriot Act.

     13. Entire Agreement; No Set-Off. The Lease, as modified by this Seventh Addendum, sets forth the entire agreement between the Landlord and Tenant concerning the Premises and Tenant’s use and occupancy thereof and there are no other agreements or understandings between them. Tenant certifies and affirms that, as of the date hereof, there are no claims, offsets, or breaches of the Lease, or any action or causes of action against Landlord directly or indirectly relating to the Lease.

     14. Counterparts; Facsimile. This Seventh Addendum may be executed in counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement. This Seventh Addendum may be executed by facsimile signature which shall, for all purposes, serve as an original executed counterpart of this Seventh Addendum.

[signatures on next page]

-3-

     IN WITNESS WHEREOF, Landlord and Tenant have executed this Seventh Addendum as of the day and year first above written.

WITNESSES:	LANDLORD:
	AMB HTD—BEACON CENTRE, LLC, a Florida limited liability company
	By:	AMB Property, L.P., a Delaware limited partnership, its sole member

By: AMB Property Corporation, a Maryland corporation, general partner

	By:	/s/ Christos F. Kombouras
Mandy M. Battier		Christos F. Kombouras
Nicole Reeje		Vice Presidend

	TENANT:
	SED INTERNATIONAL, INC., a Georgia corporation
Eileen Clark	By:	/s/ Mark Divito
Barbara Gay	Name:	Mark Divito
	Title:	VP OPERATIONS

-4-

EX-10.63

Exhibit 10.63

THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT

     THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is made and entered as of March 1, 2007, by and among SED INTERNATIONAL HOLDINGS, INC., a Georgia corporation (“Parent”), SED INTERNATIONAL, INC., a Georgia corporation (“SED”), SED MAGNA (MIAMI), INC., a Delaware corporation (“Magna”; Parent, SED and Magna are collectively referred to herein as “Borrowers” and each individually as a “Borrower”), the parties to the Loan Agreement (as hereinafter defined) from time to time as lenders (collectively, “Lenders” and each individually, a “Lender”) and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, in its capacity as agent for Lenders (in such capacity, “Agent”).

Recitals:

     Borrowers, Agent and Lenders are parties to that certain Loan and Security Agreement dated September 21, 2005, as amended by that certain letter amendment dated January 24, 2006 and that certain Second Amendment to Loan and Security Agreement dated May 12, 2006 (as at any time amended, restated, modified or supplemented, the “Loan Agreement”), pursuant to which Lenders have made certain revolving credit loans and other financial accommodations to Borrowers.

     The parties desire to amend the Loan Agreement as hereinafter set forth.

     NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby severally acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

     1. Definitions. All capitalized terms used in this Amendment, unless otherwise defined herein, shall have the meaning ascribed to such terms in the Loan Agreement.

     2. Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows:

     (a) By deleting the definitions of “Applicable Margin”, “Applicable Unused Line Fee Margin”, “Financial Covenant Trigger Amount,” “Inventory Loan Limit” and “ Letter of Credit Limit” contained in Section 1 of the Loan Agreement and by substituting the following new definitions, respectively, in lieu thereof:

     1.9 “Applicable Margin” shall mean, effective as of March 1, 2007, a percentage equal to zero with respect to Revolving Loans that are Prime Rate Loans and 1.75% with respect to Revolving Loans that are Eurodollar Rate Loans, provided that the Applicable Margin shall be increased or (if no Default or Event of Default exists) decreased, on a monthly basis as of the first day of each fiscal month (commencing with the fiscal quarter ending on or about March 31, 2007), according to the performance of Borrowers as measured by Average Excess Availability for the immediately preceding fiscal month of Borrowers, as follows:

	AVERAGE EXCESS
LEVEL	AVAILABILITY	REVOLVING LOANS
I	> $8,000,000	Adjusted Eurodollar Rate + 1.50%	Prime Rate + zero
II	> $4,000,000 £ $8,000,000	Adjusted Eurodollar Rate + 1.75%	Prime Rate + zero
III	£ $4,000,000	Adjusted Eurodollar Rate + 2.00%	Prime Rate + zero

On the date of any adjustment, if the Fixed Charge Coverage Ratio (as defined in Section 9.17 hereof) is greater than 2.0 to 1.0 based upon the immediately preceding twelve month period, then the applicable percentage referenced in the grid above shall be reduced by 0.25 until the next adjustment date.

     1.10 “Applicable Unused Line Fee Margin” shall mean a percentage equal to 0.25%.

     1.54 “Financial Covenant Trigger Amount” shall mean, on any date of determination, an amount equal to $3,500,000, plus, in the event that Borrowers request and receive any incremental Revolving Loan Line Increase, an amount equal to 10% of each such Revolving Loan Line Increase.

     1.72 “Inventory Loan Limit” shall mean, at any time, the amount equal to $20,000,000 minus Letters of Credit to the extent provided in the definition of the term Borrowing Base.

     1.77 “Letter of Credit Limit” shall mean $7,500,000.

     (b) By deleting the definition of “Borrowing Base” contained in Section 1.19 of the Loan Agreement and by substituting the following in lieu thereof:

     1.19 “Borrowing Base” shall mean, at any time, the amount equal to the sum of:

(1) (a) eighty-five percent (85%) of the Eligible Accounts, plus (b) the lesser of (i) the Foreign Accounts Loan Limit or (ii) eighty-five percent (85%) of the Eligible Foreign Accounts, plus (2) the lesser of (a) the Inventory Loan Limit or (b) the sum of: (i) the lesser of (A) sixty percent (60%) multiplied by the Value of the Eligible Inventory on hand 90 days or less or (B) eighty-five percent (85%) of the Net Recovery Percentage of such Eligible Inventory, plus (ii) the lesser of (A) twenty-five percent (25%) multiplied by the Value of the Eligible Inventory on hand more than 90 days but not more than 180 days or (B) eighty-five percent (85%) of the Net Recovery Percentage of such Eligible Inventory, plus (iii) the lesser of (A) the Westinghouse Inventory Loan Limit, (B) 70% of the Value of Eligible Westinghouse Inventory, or (C) 115% of the Net Recovery Percentage of such Eligible Westinghouse Inventory (using the general

- 2 -

television category on the Agent’s appraisal to determine the applicable Net Recovery Percentage fraction), minus (3) Reserves.

          For purposes only of applying the Inventory Loan Limit, Agent may treat the then undrawn amounts of outstanding Letters of Credit for the purpose of purchasing Eligible Inventory as Revolving Loans to the extent Agent is in effect basing the issuance of the Letter of Credit on the Value of the Eligible Inventory being purchased with such Letter of Credit. In determining the actual amounts of such Letter of Credit to be so treated for purposes of the sublimit, the outstanding Revolving Loans and Reserves shall be attributed first to any components of the lending formulas set forth above that are not subject to such sublimit, before being attributed to the components of the lending formulas subject to such sublimit. The amounts of Eligible Inventory of any Borrower shall, at Agent’s option, be determined based on the lesser of the amount of Inventory set forth in the general ledger of such Borrower or the perpetual inventory record maintained by such Borrower.

     (c) By deleting subclause (f) of the definition of “Eligible Accounts” contained in Section 1.39 of the Loan Agreement and by substituting the following in lieu thereof:

     (f) the chief executive office of the account debtor with respect to such Accounts is located in the United States of America (including Puerto Rico) or Canada (provided, that, at any time promptly upon Agent’s request, such Borrower shall execute and deliver, or cause to be executed and delivered, such other agreements, documents and instruments as may be required by Agent to perfect the security interests of Agent in those Accounts of an account debtor with its chief executive office or principal place of business in Puerto Rico or Canada in accordance with the applicable laws of Puerto Rico or the Province of Canada, as applicable, in which such chief executive office or principal place of business is located and take or cause to be taken such other and further actions as Agent may request to enable Agent as secured party with respect thereto to collect such Accounts under the applicable laws of Puerto Rico or Canada);

     (d) By adding the following new sentence to the end of the definition of “Eligible Inventory” contained in Section 1.40 of the Loan Agreement:

Any amount which is included as “Eligible Westinghouse Inventory” on any Borrowing Base certificate shall not also be included as Eligible Inventory on the same Borrowing Base certificate.

     (e) By adding the following new definitions of “Eligible Foreign Account”, “Eligible Westinghouse Inventory,” “Foreign Accounts Loan Limit”, “Revolver Loan Increase Conditions” and “Westinghouse Inventory Loan Limit”, respectively, as a new Section 1.127 of the Loan Agreement immediately following Section 1.126 thereof:

          1.127 Additional Definitions (Third Amendment to Loan and Security Agreement):

     “Eligible Foreign Account” means an Account which satisfies all of the criteria for an “Eligible Account” set forth in the definition thereof other than

- 3 -

clause (f) thereof and which arises from a sale or lease to an account debtor with its chief executive office or principal place of business outside the United States or the Commonwealth of Puerto Rico or Canada, if either: (i) the account debtor has delivered to such Borrower an irrevocable letter of credit issued or confirmed by a bank satisfactory to Agent and payable only in the United States of America and in U.S. dollars, sufficient to cover such Account, in form and substance satisfactory to Agent and if required by Agent, the original of such letter of credit has been delivered to Agent or Agent’s agent and the issuer thereof, and such Borrower has complied with the terms of Section 5.3(f) hereof with respect to the assignment of the proceeds of such letter of credit to Agent or naming Agent as transferee beneficiary thereunder, as Agent may specify, or (ii) such Account is subject to credit insurance payable to Agent issued by an insurer and on terms and in an amount acceptable to Agent; provided, that, any amount which is included as an “Eligible Foreign Account” on any Borrowing Base certificate shall not also be included as an Eligible Account on the same Borrowing Base certificate.

     “Eligible Westinghouse Inventory” means Inventory which satisfies all of the criteria for “Eligible Inventory” set forth in the definition thereof and which (i) consists of Westinghouse branded LCD, DLP or plasma television inventory that is aged less than 45 days and (ii) is subject to a purchase order worksheet that has been delivered to Borrower by the Home Shopping Network and with respect to which an “air date” has been set by the Home Shopping Network; and (iii) is subject to a letter agreement executed and delivered by Westinghouse to Agent confirming Agent’s right to dispose of such Inventory in connection with any enforcement action conducted by Agent and containing such other terms as may be reasonably required by Agent.

     “Foreign Accounts Loan Limit” means an amount equal to $4,000,000.

     “Revolver Loan Limit Increase Conditions” shall mean each of the following conditions, the satisfaction of which shall be determined by Agent on the date of the proposed Revolver Loan Limit Increase: (A) the payment of a fee equal to 0.15% of the amount of the proposed Revolver Loan Limit Increase to Agent for the account of Lenders; (B) no Default or Event of Default shall exist on such date, either before or after giving effect to the Revolving Loan Limit Increase, (C) Borrowers are in compliance with the Fixed Charge Coverage Ratio for the applicable period as set forth in Section 9.17 hereof, (D) Borrowers shall have Excess Availability of not less than $5,000,000 for 30 consecutive days prior to, at the time of, and after giving effect to, the Revolving Loan Limit Increase, (E) Borrowers shall have paid all costs and expenses of Agent in connection with the Revolving Loan Limit Increase, and (F) Borrowers shall have delivered or caused to be delivered to Agent such legal agreements, opinions, certificates, financing statement amendments and other documents as Agent may reasonably request.

     “Westinghouse Inventory Loan Limit” means an amount equal to $4,500,000.

- 4 -

     (f) By deleting Section 2.1(d) of the Loan Agreement in its entirety and by substituting the following in lieu thereof:

     (d) Borrowers shall have the right to request a permanent increase in the amount of the Revolving Loan Limit and the Commitments in an aggregate amount not to exceed $15,000,000 (the “Revolving Loan Limit Increase”), in minimum increments of $5,000,000, at any time and from time to time upon written notice to Agent of such requested Revolving Loan Limit Increase, subject to the satisfaction, as determined by Agent, of each of the Revolving Loan Limit Increase Conditions. Upon the effectiveness of any Revolving Loan Limited Increase, each Lender’s respective Commitment shall be increased by the amount required to maintain such Lender’s pro rata share of all of the Commitments immediately before and after giving effect such Revolving Loan Limit Increase.

     (g) By deleting Section 9.10(l) of the Loan Agreement and by substituting the following in lieu thereof:

     (l) one or more Parent Share Repurchases, provided that (i) the aggregate Share Repurchase Amount for all Parent Share Repurchases consummated during the Term shall not exceed $500,000, (ii) Parent and/or SED shall pay no more than a commercially reasonable price for any Capital Stock repurchased pursuant to a Parent Share Repurchase, which shall be remitted to the applicable seller, in cash, on or about the date of such Parent Share Repurchase, (iii) immediately prior to, and after giving effect to, any Parent Share Repurchase, Excess Availability is not less than $4,000,000, (iv) Parent or SED shall deliver written notice to Agent of any Parent Share Repurchase at least five (5) Business Days prior to the consummation of such Parent Share Repurchase, and (v) immediately prior to, and after giving effect to, any Parent Share Repurchase, no Default or Event of Default shall exist.

     (h) By deleting Section 9.17(b) of the Loan Agreement in its entirety and by substituting the following in lieu thereof:

     (b) The financial covenants set forth in subsection (a) of this Section 9.17 shall be effective only if Excess Availability is, at the close of business on any Business Day, less than the Financial Covenant Trigger Amount and, from and after such date, the provisions of subsection (a) of this Section 9.17 shall be effective at all times thereafter unless subsequently, Excess Availability exceeds $6,000,000 for sixty (60) consecutive days and no Default or Event of Default occurs or exists during such 60-day period, in which event the financial covenants set forth in subsection (a) of this Section 9.17 shall cease to be effective until Excess Availability is less than the Financial Covenant Trigger Amount on any Business Day thereafter. Within one (1) Business Day after the date on which Excess Availability is less than the Financial Covenant Trigger Amount, Borrowers shall deliver to Agent a Compliance Certificate which reflects Borrowers’ compliance or non-compliance with the provisions of Section 9.17. Notwithstanding the foregoing, for purposes of computing Excess Availability for purposes of this Section 9.17 only, the Minimum Reserve shall not be deducted as a Reserve.

- 5 -

     (i) By deleting subclause (f) of Section 9.22 of the Loan Agreement and by substituting in lieu thereof the following:

(f) all out-of-pocket expenses and costs heretofore and from time to time hereafter incurred by Agent during the course of periodic field examinations or appraisals of the Collateral and such Borrower’s operations, plus a per diem charge at Agent’s then standard rate for Agent’s examiners in the field and office (which rate as of the date hereof is $850 per person per day), which out-of-pocket expenses, costs and per-diem charges shall not exceed $12,500 per field examination; provided, that, so long as Excess Availability is not less than $4,000,000 for any period of 5 consecutive days during the immediately preceding 12-month period, Borrower shall not be required to pay to Agent or reimburse Agent for the expenses, costs and charges for any more than three (3) field examinations and two (2) inventory appraisals during such 12-month period; provided, further, that if at any time after Excess Availability has fallen below $4,000,000 for 5 consecutive days, Borrowers subsequently maintain Excess Availability of at least $6,000,000 for at least 60 consecutive days and no Default or Event of Default occurs or exists during such 60-day period, then Borrower shall once again not be required to pay to Agent or reimburse Agent for the expenses, costs and charges for any more than three (3) field examinations and two (2) inventory appraisals during the applicable 12-month period; provided, further, that the foregoing limitations on payment and reimbursement of expenses, costs and charges shall not be construed to limit Agent’s or any Lender’s right to conduct field examinations and appraisals of the Collateral as otherwise permitted under this Agreement; Agent and Lenders acknowledge and agree that, so long as no Default or Event of Default exists, no separate appraisal of Eligible Westinghouse Inventory will be required and Agent shall use the general television category net orderly liquidation value percentage for purposes of determining the Net Recovery Percentage of Eligible Westinghouse Inventory; and

     (j) By deleting the first sentence of Section 13.1(a) of the Loan Agreement and by substituting the following in lieu thereof:

This Agreement and the other Financing Agreements shall become effective as of the date set forth on the first page hereof and shall continue in full force and effect for a term ending on the date September 21, 2011 (the “Renewal Date”), and from year to year thereafter, unless sooner terminated pursuant to the terms hereof.

     (k) By deleting the early termination fee grid contained in Section 13.1(c) of the Loan Agreement and by substituting the following in lieu thereof:

- 6 -

Amount	Period
.50% of Maximum Credit	From and after March 1, 2007 to and including September 21, 2007
.25% of Maximum Credit	From and after September 22, 2007 to and including September 23, 2008
0.00% ($-0-)	After September 23, 2008

     (l) By deleting Section 9.18 of the Loan Agreement and by substituting in lieu thereof the following (in order to reflect Agent’s and Lenders’ agreement that there shall no longer be an Excess Availability covenant in Section 9.18 of the Loan Agreement or in Section 3 of the Second Amendment thereto):

          9.18 Reserved.

     4. Ratification and Reaffirmation. Each Borrower hereby ratifies and reaffirms the Obligations, each of the Financing Agreements and all of such Borrower’s covenants, duties, indebtedness and liabilities under the Financing Agreements.

     5. Acknowledgments and Stipulations. Each Borrower acknowledges and stipulates that the Loan Agreement and the other Financing Agreements executed by such Borrower are legal, valid and binding obligations of such Borrower that are enforceable against such Borrower in accordance with the terms thereof; all of the Obligations are owing and payable without defense, offset or counterclaim (and to the extent there exists any such defense, offset or counterclaim on the date hereof, the same is hereby waived by such Borrower); and the security interests and liens granted by Borrowers in favor of Agent are duly perfected, first priority security interests and liens, subject only to liens and other encumbrances permitted under the Loan Agreement.

     6. Representations and Warranties. Each Borrower represent and warrant to Agent and Lenders, to induce Agent and Lenders to enter into this Amendment, that no Default or Event of Default exists on the date hereof; delivery and performance of this Amendment have been duly authorized by all requisite corporate action on the part of each Borrower and this Amendment has been duly executed and delivered by each Borrower; and all of the representations and warranties made by each Borrower in the Loan Agreement are true and correct in all material respects on and as of the date hereof, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date.

     7. Reference to Loan Agreement. Upon the effectiveness of this Amendment, each reference in the Loan Agreement to “this Agreement,” “hereunder,” or words of like import shall mean and be a reference to the Loan Agreement, as amended by this Amendment.

     8. Breach of Amendment. This Amendment shall be part of the Loan Agreement and a breach of any representation, warranty or covenant herein shall constitute an Event of Default.

     9. Condition Precedent. The effectiveness of the amendments contained in Section 2 hereof is subject to the delivery to Agent of (a) an original counterpart of this Amendment executed by each Borrower, (b) an updated Certificate Regarding Distribution Agreements executed by each

- 7 -

Borrower and (c) such other documents, instruments and agreements as the Agent may require, in each case in form and substance satisfactory to Agent.

     10. Amendment Fee; Expenses of Agent. In consideration of Agent’s and Lenders’ willingness to enter into this Amendment as set forth herein, Borrowers jointly and severally agree to pay to Lenders an amendment fee in the amount of $42,750 in immediately available funds on the date hereof. Additionally, Borrowers jointly and severally agree to pay, on demand, all costs and expenses incurred by Agent in connection with the preparation, negotiation and execution of this Amendment and any other Financing Agreements executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the costs and fees of Agent’s legal counsel and any taxes or expenses associated with or incurred in connection with any instrument or agreement referred to herein or contemplated hereby.

     11. Effectiveness; Governing Law. This Amendment shall be effective upon acceptance by Agent and Lenders (notice of which acceptance is hereby waived), whereupon the same shall be governed by and construed in accordance with the internal laws of the State of Georgia.

     12. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

     13. No Novation, etc.. Except as otherwise expressly provided in this Amendment, nothing herein shall be deemed to amend or modify any provision of the Loan Agreement or any of the other Financing Agreements, each of which shall remain in full force and effect. This Amendment is not intended to be, nor shall it be construed to create, a novation or accord and satisfaction, and the Loan Agreement as herein modified shall continue in full force and effect.

     14. Counterparts; Telecopied Signatures. This Amendment may be executed in any number of counterparts and by different parties to this Amendment on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by facsimile transmission shall be deemed to be an original signature hereto.

     15. Further Assurances. Each Borrower agrees to take such further actions as Agent shall reasonably request from time to time in connection herewith to evidence or give effect to the amendments set forth herein or any of the transactions contemplated hereby.

     16. Section Titles. Section titles and references used in this Amendment shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto.

     17. Release of Claims. To induce Agent and Lenders to enter into this Amendment, each Borrower hereby releases, acquits and forever discharges Agent and each Lender, and all officers, directors, agents, employees, successors and assigns of Agent and each Lender, from any and all liabilities, claims, demands, actions or causes of action of any kind or nature (if there be any), whether absolute or contingent, disputed or undisputed, at law or in equity, which are known to Borrowers, that each Borrower now has or ever had against Agent and any Lender arising under or in connection with any of the Financing Agreements or otherwise. Each Borrower represents and warrants to Agent and Lenders that such Borrower has not transferred or assigned

- 8 -

to any Person any claim that such Borrower ever had or claimed to have against Agent or any Lender.

     18. Waiver of Jury Trial. To the fullest extent permitted by applicable law, the parties hereto each hereby waives the right to trial by jury in any action, suit, counterclaim or proceeding arising out of or related to this Amendment.

[This space intentionally left blank; signatures on following page]

- 9 -

     IN WITNESS WHEREOF, the Borrowers have caused this Amendment to be duly executed under seal and delivered in Atlanta, Georgia by their respective duly authorized officers on the date first written above.

SED INTERNATIONAL HOLDINGS, INC.
By:	/s/ M. Darby
Title:	Secretary
By:	/s/ Jean A. Diamond
Title:	CEO
	[CORPORATE SEAL]
SED INTERNATIONAL, INC.
By:	/s/ M. Darby
Title:	Secretary
By:	/s/ Jean A. Diamond
Title:	CEO
	[CORPORATE SEAL]
SED MAGNA (MIAMI), INC.
By:	/s/ M. Darby
Title:	Secretary
By:	/s/ Jean A. Diamond
Title:	CEO
	[CORPORATE SEAL]
Accepted and agreed:
WACHOVIA BANK, NATIONAL ASSOCIATION, as Agent and sole Lender
By:	/s/ David Luce
Title:	Director

Third Amendment to Loan and Security Agreement

CONSENT IN LIEU OF SPECIAL MEETING
OF THE BOARD OF DIRECTORS OF
SED INTERNATIONAL HOLDINGS, INC.

     The undersigned, constituting all the members of the Board of Directors of SED International Holdings, Inc. (the “Corporation”) do hereby give their written consent (a) to the dispensation of a special meeting of the Board of Directors of the Corporation and (b) to the taking of the following actions, which actions could have been taken by said Board of Directors had said meeting been held:

     RESOLVED, that the Chairman of the Board, President, any Vice President, or any other officer or board member of this Corporation (or the designee of any of them), each be, and each hereby is, authorized and empowered (either alone or in conjunction with any one or more of the other officers of the Corporation) to take, from time to time, all or any part of the following actions on or in behalf of the Corporation: (i) to make, execute and deliver to WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, in its capacity as agent (together with its successors in such capacity, “Agent”) for various financial institutions (“Lenders”) and such Lenders, (1) a Third Amendment to Loan and Security Agreement (the “Amendment”) providing for the amendment of certain terms of that certain Loan and Security Agreement dated September 21, 2005, among the Corporation, the other borrowers named therein, Agent and Lenders (as at any time amended, restated, modified or supplemented, the “Loan Agreement”), and (2) all other agreements, documents and instruments contemplated by or referred to in the Amendment or executed by the Corporation in connection therewith; said Amendment and other agreements, documents and instruments to be substantially in the form presented by Agent with such additional, modified or revised terms as may be acceptable to any officer or director of the Corporation, as conclusively evidenced by his or her execution thereof; and (ii) to carry out, modify, amend or terminate any arrangements or agreements at any time existing among the Corporation, Lenders and Agent.

     RESOLVED, that any arrangements, agreements, security agreements, or other instruments or documents referred to or executed pursuant to the Amendment by any officer or director of the Corporation, or by an employee of the Corporation acting pursuant to delegation of authority, may be attested by such person and may contain such terms and provisions as such person shall, in his or her sole discretion, determine.

     RESOLVED, that the Loan Agreement and each amendment to the Loan Agreement heretofore executed by any officer or director of the Corporation and any actions taken under the Loan Agreement as thereby amended are hereby ratified and approved.

	/s/ Jean A. Diamond
Dated: February 27, 2007	Jean A. Diamond
	/s/ Melvyn Cohen
	Melvyn Cohen
	/s/ Stewart Aaron
	Stewart Aaron
	/s/ Joseph Segal
	Joseph Segal
	CONSTITUTING ALL THE MEMBERS OF THE BOARD OF DIRECTORS OF SED INTERNATIONAL HOLDINGS, INC.

CONSENT IN LIEU OF A SPECIAL MEETING
OF THE BOARD OF DIRECTORS OF
SED INTERNATIONAL, INC.

     The undersigned, constituting all the members of the Board of Directors of SED International, Inc. (the “Corporation”) do hereby give their written consent (a) to the dispensation of a special meeting of the Board of Directors of the Corporation and (b) to the taking of the following actions, which actions could have been taken by said Board of Directors had said meeting been held:

     RESOLVED, that the Chairman of the Board, President, any Vice President, or any other officer or board member of this Corporation (or the designee of any of them), each be, and each hereby is, authorized and empowered (either alone or in conjunction with any one or more of the other officers of the Corporation) to take, from time to time, all or any part of the following actions on or in behalf of the Corporation: (i) to make, execute and deliver to WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, in its capacity as agent (together with its successors in such capacity, “Agent”) for various financial institutions (“Lenders”) and such Lenders, (1) a Third Amendment to Loan and Security Agreement (the “Amendment”) providing for the amendment of certain terms of that certain Loan and Security Agreement dated September 21, 2005, among the Corporation, the other borrowers named therein, Agent and Lenders (as at any time amended, restated, modified or supplemented, the “Loan Agreement”), and (2) all other agreements, documents and instruments contemplated by or referred to in the Amendment or executed by the Corporation in connection therewith; said Amendment and other agreements, documents and instruments to be substantially in the form presented by Agent with such additional, modified or revised terms as may be acceptable to any officer or director of the Corporation, as conclusively evidenced by his or her execution thereof; and (ii) to carry out, modify, amend or terminate any arrangements or agreements at any time existing among the Corporation, Lenders and Agent.

     RESOLVED, that any arrangements, agreements, security agreements, or other instruments or documents referred to or executed pursuant to the Amendment by any officer or director of the Corporation, or by an employee of the Corporation acting pursuant to delegation of authority, may be attested by such person and may contain such terms and provisions as such person shall, in his or her sole discretion, determine.

     RESOLVED, that the Loan Agreement and each amendment to the Loan Agreement heretofore executed by any officer or director of the Corporation and any actions taken under the Loan Agreement as thereby amended are hereby ratified and approved.

	/s/ Jean A. Diamond
	Jean A. Diamond
Dated: February 27, 2007
	/s/ Melvyn Cohen
	Melvyn Cohen
	/s/ Stewart Aaron
	Stewart Aaron
	CONSTITUTING ALL THE MEMBERS OF THE BOARD OF DIRECTORS OF SED INTERNATIONAL, INC.

CONSENT IN LIEU OF SPECIAL MEETING
OF THE BOARD OF DIRECTORS OF
SED MAGNA (MIAMI), INC.

     The undersigned, constituting all the members of the Board of Directors of SED Magna (Miami), Inc. (the “Corporation”) do hereby give their written consent (a) to the dispensation of a special meeting of the Board of Directors of the Corporation and (b) to the taking of the following actions, which actions could have been taken by said Board of Directors had said meeting been held:

     RESOLVED, that the Chairman of the Board, Chief Executive Officer, President, any Vice President, or any other officer or board member of this Corporation (or the designee of any of them), each be, and each hereby is, authorized and empowered (either alone or in conjunction with any one or more of the other officers of the Corporation) to take, from time to time, all or any part of the following actions on or in behalf of the Corporation: (i) to make, execute and deliver to WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, in its capacity as agent (together with its successors in such capacity, “Agent”) for various financial institutions (“Lenders”) and such Lenders, (1) a Third Amendment to Loan and Security Agreement (the “Amendment”) providing for the amendment of certain terms of that certain Loan and Security Agreement dated September 21, 2005, among the Corporation, the other borrowers named therein, Agent and Lenders (as at any time amended, restated, modified or supplemented, the “Loan Agreement”), and (2) all other agreements, documents and instruments contemplated by or referred to in the Amendment or executed by the Corporation in connection therewith; said Amendment and other agreements, documents and instruments to be substantially in the form presented by Agent with such additional, modified or revised terms as may be acceptable to any officer or director of the Corporation, as conclusively evidenced by his or her execution thereof; and (ii) to carry out, modify, amend or terminate any arrangements or agreements at any time existing among the Corporation, Lenders and Agent.

     RESOLVED, that any arrangements, agreements, security agreements, or other instruments or documents referred to or executed pursuant to the Amendment by any officer or director of the Corporation, or by an employee of the Corporation acting pursuant to delegation of authority, may be attested by such person and may contain such terms and provisions as such person shall, in his or her sole discretion, determine.

     RESOLVED, that the Loan Agreement and each amendment to the Loan Agreement heretofore executed by any officer or director of the Corporation and any actions taken under the Loan Agreement as thereby amended are hereby ratified and approved.

	/s/ Jean A. Diamond
	Jean A. Diamond
Dated: February 27, 2007
	/s/ Melvyn Cohen
	Melvyn Cohen
	/s/ Stewart Aaron
	Stewart Aaron
	CONSTITUTING ALL THE MEMBERS OF THE BOARD OF DIRECTORS OF SED MAGNA (MIAMI), INC.

SED MAGNA (MIAMI), INC.
SECRETARY’S CERTIFICATE
OF
BOARD OF DIRECTORS RESOLUTIONS

     I, LYLE DICKLER, DO HEREBY CERTIFY, that I am the Secretary and Treasurer of SED MAGNA (MIAMI), INC. (the “Corporation”), a corporation duly organized and existing under and by virtue of the laws of the State of Delaware and am keeper of the records and seal thereof; that the following is a true, correct and compared copy of the resolutions duly adopted by the unanimous consent of all members of the Board of Directors of said Corporation effective as of February 27, 2007; and that said resolutions are still in full force and effect:

     RESOLVED, that the Chairman of the Board, President, any Vice President, or any other officer or board member of this Corporation (or the designee of any of them), each be, and each hereby is, authorized and empowered (either alone or in conjunction with any one or more of the other officers of the Corporation) to take, from time to time, all or any part of the following actions on or in behalf of the Corporation: (i) to make, execute and deliver to WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, in its capacity as agent (together with its successors in such capacity, “Agent”) for various financial institutions (“Lenders”) and such Lenders, (1) a Third Amendment to Loan and Security Agreement (the “Amendment”) providing for the amendment of certain terms of that certain Loan and Security Agreement dated September 21, 2005, among the Corporation, the other borrowers named therein, Agent and Lenders (as at any time amended, restated, modified or supplemented, the “Loan Agreement”), and (2) all other agreements, documents and instruments contemplated by or referred to in the Amendment or executed by the Corporation in connection therewith; said Amendment and other agreements, documents and instruments to be substantially in the form presented by Agent with such additional, modified or revised terms as may be acceptable to any officer or director of the Corporation, as conclusively evidenced by his or her execution thereof; and (ii) to carry out, modify, amend or terminate any arrangements or agreements at any time existing among the Corporation, Lenders and Agent.

     RESOLVED, that any arrangements, agreements, security agreements, or other instruments or documents referred to or executed pursuant to the Amendment by any officer or director of the Corporation, or by an employee of the Corporation acting pursuant to delegation of authority, may be attested by such person and may contain such terms and provisions as such person shall, in his or her sole discretion, determine.

     RESOLVED, that the Loan Agreement and each amendment to the Loan Agreement heretofore executed by any officer or director of the Corporation and any actions taken under the Loan Agreement as thereby amended are hereby ratified and approved.

     I DO FURTHER CERTIFY that Jean A. Diamond is the Chief Executive Officer of the Corporation and is duly elected, qualified and acting as such.

     IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Seal of the Corporation, this 28 day of February, 2007.

By:	/s/ Lyle Dickler
	Lyle Dickler, Secretary and Treasurer
[CORPORATE SEAL]

     I, Jean A. Diamond, Chief Executive Officer of said Corporation, do hereby certify that the foregoing is a correct copy of the resolutions passed by the Board of Directors of the Corporation and that Lyle Dickler is Secretary and Treasurer of the Corporation and is duly authorized to attest to the passage of said resolutions.

By:	/s/ Jean A. Diamond
	Jean A. Diamond, Chief Executive Officer

4

SED INTERNATIONAL, INC.
SECRETARY’S CERTIFICATE
OF
BOARD OF DIRECTORS RESOLUTIONS

     I, LYLE DICKLER, DO HEREBY CERTIFY, that I am the Secretary and Treasurer of SED INTERNATIONAL, INC. (the “Corporation”), a corporation duly organized and existing under and by virtue of the laws of the State of Georgia and am keeper of the records and seal thereof; that the following is a true, correct and compared copy of the resolutions duly adopted by the unanimous consent of all members of the Board of Directors of said Corporation effective as of February 27, 2007; and that said resolutions are still in full force and effect:

     RESOLVED, that the Chairman of the Board, President, any Vice President, or any other officer or board member of this Corporation (or the designee of any of them), each be, and each hereby is, authorized and empowered (either alone or in conjunction with any one or more of the other officers of the Corporation) to take, from time to time, all or any part of the following actions on or in behalf of the Corporation: (i) to make, execute and deliver to WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, in its capacity as agent (together with its successors in such capacity, “Agent”) for various financial institutions (“Lenders”) and such Lenders, (1) a Third Amendment to Loan and Security Agreement (the “Amendment”) providing for the amendment of certain terms of that certain Loan and Security Agreement dated September 21, 2005, among the Corporation, the other borrowers named therein, Agent and Lenders (as at any time amended, restated, modified or supplemented, the “Loan Agreement”), and (2) all other agreements, documents and instruments contemplated by or referred to in the Amendment or executed by the Corporation in connection therewith; said Amendment and other agreements, documents and instruments to be substantially in the form presented by Agent with such additional, modified or revised terms as may be acceptable to any officer or director of the Corporation, as conclusively evidenced by his or her execution thereof; and (ii) to carry out, modify, amend or terminate any arrangements or agreements at any time existing among the Corporation, Lenders and Agent.

     RESOLVED, that any arrangements, agreements, security agreements, or other instruments or documents referred to or executed pursuant to the Amendment by any officer or director of the Corporation, or by an employee of the Corporation acting pursuant to delegation of authority, may be attested by such person and may contain such terms and provisions as such person shall, in his or her sole discretion, determine.

     RESOLVED, that the Loan Agreement and each amendment to the Loan Agreement heretofore executed by any officer or director of the Corporation and any actions taken under the Loan Agreement as thereby amended are hereby ratified and approved.

     I DO FURTHER CERTIFY that Jean A. Diamond is the Chairman of the Board and the Chief Executive Officer of the Corporation and is duly elected, qualified and acting as such.

     IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Seal of the Corporation, this 28 day of February, 2007.

By:	/s/ Lyle Dickler
	Lyle Dickler, Secretary and Treasurer
[CORPORATE SEAL]

     I, Jean A. Diamond, Chairman of the Board and Chief Executive Officer of said Corporation, do hereby certify that the foregoing is a correct copy of the resolutions passed by the Board of Directors of the Corporation and that Lyle Dickler is Secretary and Treasurer of the Corporation and is duly authorized to attest to the passage of said resolutions.

By:	/s/ Jean A. Diamond
	Jean A. Diamond, Chairman of the Board and Chief Executive Officer

- 2 -

SED INTERNATIONAL HOLDINGS, INC.
SECRETARY’S CERTIFICATE
OF
BOARD OF DIRECTORS RESOLUTIONS

     I, LYLE DICKLER, DO HEREBY CERTIFY, that I am the Secretary and Treasurer of SED INTERNATIONAL HOLDINGS, INC. (the “Corporation”), a corporation duly organized and existing under and by virtue of the laws of the State of Georgia and am keeper of the records and seal thereof; that the following is a true, correct and compared copy of the resolutions duly adopted by the unanimous consent of all members of the Board of Directors of said Corporation effective as of February 27, 2007; and that said resolutions are still in full force and effect:

     RESOLVED, that the Chairman of the Board, President, any Vice President, or any other officer or board member of this Corporation (or the designee of any of them), each be, and each hereby is, authorized and empowered (either alone or in conjunction with any one or more of the other officers of the Corporation) to take, from time to time, all or any part of the following actions on or in behalf of the Corporation: (i) to make, execute and deliver to WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, in its capacity as agent (together with its successors in such capacity, “Agent”) for various financial institutions (“Lenders”) and such Lenders, (1) a Third Amendment to Loan and Security Agreement (the “Amendment”) providing for the amendment of certain terms of that certain Loan and Security Agreement dated September 21, 2005, among the Corporation, the other borrowers named therein, Agent and Lenders (as at any time amended, restated, modified or supplemented, the “Loan Agreement”), and (2) all other agreements, documents and instruments contemplated by or referred to in the Amendment or executed by the Corporation in connection therewith; said Amendment and other agreements, documents and instruments to be substantially in the form presented by Agent with such additional, modified or revised terms as may be acceptable to any officer or director of the Corporation, as conclusively evidenced by his or her execution thereof; and (ii) to carry out, modify, amend or terminate any arrangements or agreements at any time existing among the Corporation, Lenders and Agent.

     RESOLVED, that any arrangements, agreements, security agreements, or other instruments or documents referred to or executed pursuant to the Amendment by any officer or director of the Corporation, or by an employee of the Corporation acting pursuant to delegation of authority, may be attested by such person and may contain such terms and provisions as such person shall, in his or her sole discretion, determine.

     RESOLVED, that the Loan Agreement and each amendment to the Loan Agreement heretofore executed by any officer or director of the Corporation and any actions taken under the Loan Agreement as thereby amended are hereby ratified and approved.

     I DO FURTHER CERTIFY that Jean A. Diamond is the Chairman of the Board of the Corporation and is duly elected, qualified and acting as such.

     IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Seal of the Corporation, this 28 day of February, 2007.

By:	/s/ Lyle Dickler
	Lyle Dickler, Secretary and Treasurer
[CORPORATE SEAL]

     I, Jean A. Diamond, Chairman of the Board of said Corporation, do hereby certify that the foregoing is a correct copy of the resolutions passed by the Board of Directors of the Corporation and that Lyle Dickler is Secretary and Treasurer of the Corporation and is duly authorized to attest to the passage of said resolutions.

By:	/s/ Jean A. Diamond
	Jean A. Diamond, Chairman of the Board

- 2 -

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Jean Diamond, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of SED International Holdings, Inc.;
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.	The registrant’s other certifying officers and I are 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 we have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our 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 control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our 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:

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.

Date: May 14, 2007

/s/ Jean Diamond

Jean Diamond
Chief Executive Officer
(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Lyle Dickler certify that:

1. I have reviewed this quarterly report on Form 10-Q of SED International Holdings, Inc.;

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. The registrant’s other certifying officers and I are 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 we have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our 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 control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our 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:

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.

Date: May 14, 2007

/s/ Lyle Dickler

Lyle Dickler
Vice President of Finance
(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of SED International Holdings, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jean Diamond, Chief Executive Officer of SED, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of SED.

     A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

/s/ Jean Diamond

Jean Diamond
Chief Executive Officer
(Principal Executive Officer)

Date: May 14, 2007

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of SED International Holdings, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lyle Dickler, Vice President Finance of SED, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of SED.

     A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

/s/ Lyle Dickler

Lyle Dickler
Vice President of Finance
(Principal Financial Officer)

Date: May 14, 2007