SGD HOLDINGS, LTD. AND SUBSIDIARY
Second Quarter
January 31, 2010
(Unaudited - Prepared by Management)
2
SGD Holdings, Ltd. and Subsidiary
January 31, 2010
Table of Contents
Consolidated Balance Sheets as of January 31, 2010 and July 31, 2009
3
Consolidated Statements of Operations and Accumulated Deficit for the six
months ended January 31, 2010 and the period from inception (January 1,
2009) through July 31, 2009
4
Consolidated Statements of Cash Flows for the six months ended January 31,
2010 and the period from inception (January 1, 2009) through July 31, 2009
5
Notes to Consolidated Interim Financial Statements
6
3
SGD Holdings, Ltd. and Subsidiary
Consolidated Balance Sheets
As of January 31, 2010 and July 31, 2009
(Unaudited - Prepared by Management)
January 31,
July 31,
2010
2009
Assets
Current assets
Cash
3,638
$
5,725
$
Accounts receivable
9,679
8,783
Prepaid expenses
78,946
5,000
Inventory
65,541
29,862
Total current assets
157,804
49,370
Equipment, net
8,167
9,383
Intangible assets
267,793
261,947
Total assets
433,764
$
320,700
$
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable
22,860
$
2,630
$
Accrued expenses
12,237
4,735
Notes payable
350,000
303,000
Due to stockholder
8,492
9,835
393,589
320,200
Stockholders' equity
Common stock
6,737
6,032
Additional paid in capital
2,314,994
2,140,699
Deferred consulting services
(1,312,500)
(1,575,000)
Accumulated deficit
(969,056)
(571,231)
Total stockholders' equity
40,175
500
Total liabilities and stockholders' equity
433,764
$
320,700
$
Approved on behalf of the Board of Directors:
/s/ Harry Johansing, President and Director
4
SGD Holdings, Ltd. and Subsidiary
Interim Consolidated Statements of Operations and Accumulated Deficit
Six months ended January 31, 2010 and Inception (January 1, 2009) through July 31, 2009
(Unaudited - Prepared by Management)
Six Months
Inception
Ended
to
January 31,
July 31,
2010
2009
Sales
28,946
$
55,751
$
Cost of sales
27,199
44,092
Gross profit
1,747
11,659
Costs and expenses
Selling expenses
17,498
18,218
Administrative expenses
109,055
38,795
Non-cash consulting services
262,500
525,000
389,053
582,013
Net loss from operations
(387,306)
(570,354)
Other income (expense):
Miscellaneous income
491
622
Interest expense
(11,010)
(1,499)
(10,519)
(877)
Net loss
(397,825)
(571,231)
Accumulated deficit, beginning of period
(571,231)
-
Accumulated deficit, end of period
(969,056)
(571,231)
Loss per share, basic and fully diluted
(0.01)
$
(0.01)
$
Weighted average shares outstanding
63,213,654
41,369,504
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SGD Holdings, Ltd. and Subsidiary
Interim Consolidated Statements of Cash Flows
Six months ended January 31, 2010 and Inception (January 1, 2009) through July 31, 2009
(Unaudited - Prepared by Management)
Six Months
Inception
Ended
to
January 31,
July 31,
2010
2009
Operating activities:
Net loss
(397,825)
$
(571,231)
$
Adjustments to reconcile net loss from operations
to net cash used in operating activities:
Depreciation
1,216
1,043
Common stock issued for services
262,500
525,000
Changes in operating assets and liabilities:
Accounts receivable
(897)
(8,782)
Inventory
(35,678)
26,040
Prepaid expenses and other assets
(73,946)
(5,000)
Accounts payable
20,230
(1,603)
Accrued expenses
6,160
11,334
Net cash used in operations
(218,240)
(23,199)
Investing activities:
Purchase of other assets
(5,847)
(2,576)
Net cash used in investing activities
(5,847)
(2,576)
Financing activities:
Sale of common stock
175,000
3,500
Loan proceeds
47,000
28,000
Net cash provided by financing activities
222,000
31,500
Net increase (decrease) in cash and equivalents
(2,087)
5,725
Cash and cash equivalents, beginning of period
5,725
-
Cash and cash equivalents, end of period
3,638
$
5,725
$
Supplemental cash flow information:
Cash paid for interest and income taxes:
Interest
-
-
Income taxes
-
-
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SGD Holdings, Ltd. and Subsidiary
Notes to Interim Consolidated Financial Statements
Six Months Ended January 31, 2010
(Unaudited - Prepared by Management)
1. Formation and Nature of Business
a. Basis of Presentation - The consolidated financial statements include the accounts of
SGD Holdings, Ltd. ("SGD") and its wholly owned subsidiary Ecopaper, Inc. ("EP")
(collectively "we," "us," or the "Company"). All intercompany transactions have been
eliminated in consolidation.
b. Organization - SGD was originally incorporated on May 22, 1996, in Delaware as
Transun International Airways, Inc. ("Transun") and until June 1999, was a development
stage company with plans to establish itself as an air transport company providing non-
scheduled air service (charter flights).
Transun changed its name to Goldonline
International, Inc. on June 10, 1999 and changed its name to SGD Holdings, Ltd. on
January 24, 2001 to reflect its change in business.
Until 2004, SGD ("Debtor") acquired and operated several companies, principally in the
wholesale and retail gold and silver jewelry businesses. On January 20, 2005, SGD filed
a voluntary petition for relief under Chapter 11 of Title 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court") (Case No. 05-10182).
The Debtor continued to manage its
properties as "debtors-in-possession" under the jurisdiction of the Bankruptcy Court and
in accordance with the applicable provisions of the Bankruptcy Code, until June 2, 2005,
when a Chapter 11 Trustee ("Trustee") was appointed. In February 2005, a motion was
filed to transfer venue of the case from Delaware to the Northern District of Texas, Fort
Worth Division and a new case number (Case No. 05-42392-rfn-11) was assigned on
March 4, 2005 when the motion was granted. All liabilities were settled in 2006 and a
Motion for Final Decree was filed on April 8, 2010. When the final decree is granted
SGD's bankruptcy case will be closed and it will be released from the jurisdiction of the
bankruptcy court.
Effective July 1, 2009, SGD acquired EP, a California corporation organized on January
1, 2008, for 38,500,000 shares of its common stock, which resulted in the shareholders
of EP having control of SGD. Accordingly, the transaction was recorded for accounting
purposes as the acquisition of EP by SGD with EP as the acquirer (reverse acquisition).
The consolidated financial statements of the Company prior to July 1, 2009 are those of
EP.
c. Nature of Business and Current Operations - SGD is a holding company. EP has created
techniques for producing paper that make it possible to never have to cut down another
tree again for the production of paper. The Company does this by producing its paper
products from natural fibers, such as banana or coffee.
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d. Going Concern - The Company has limited assets and substantial debt and is currently
relying on sales of its common stock and loans to support operations. It is unknown if the
Company will be able to continue to raise sufficient funds to support its operations from
loans and sales of its common stock until the business is able to increase to a level to
support itself. The financial statements do not include any adjustments that may result
from the outcome of these uncertainties.
2.
Summary of Significant Accounting Policies
a. Use of estimates - The preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United States requires management
to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those estimates.
b. Cash and cash equivalents - include demand and time deposits with maturities of three
months or less when acquired.
c. Income taxes - benefits have not been recorded as the benefit of any net operating loss
has been fully reserved.
d. Earnings per share - Basic earnings per share is based on the sum of the weighted average
number of common shares outstanding. Diluted earnings per share include any dilutive
effect of stock options and convertible securities (common stock equivalents). During
the periods presented, there were no common stock equivalents outstanding.
Accordingly, basic and fully diluted earnings per share are the same.
e. Revenue - the Company records revenue when the product is shipped to its customers and
relieves inventory for the cost of product sold at the same time.
f. Accounting Standards Codification - The Company adopted the Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") during 2009.
The ASC did not alter current accounting principles generally accepted in the United
States of America ("GAAP"), but rather integrated existing accounting standards with
other authoritative guidance. The ASC provides a single source of authoritative GAAP
for nongovernmental entities and supersedes all other previously issued non-public
accounting and reporting guidance. The adoption of the ASC had no effect on the
Company's consolidated financial statements.
g. Recent Accounting Pronouncements - During 2009, the Company adopted the FASB
ASC Topic 105 (previously FASB Statement No. 168, "The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles." ASC
Topic 105 established the ASC as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the preparation of
financial statements in conformity with accounting principles generally accepted in the
United States of America. Management does not believe that any recently issued but not
yet adopted accounting standards will have a material effect on the Company's results of
operations or on the reported amounts of its assets and liabilities upon adoption.
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3.
Notes Payable
Notes payable consist of the following at January 31, 2010:
Note dated June 1, 2008; maturity date May 31, 2009; interest at 12% per annum;
convertible into common stock at $0.001 per share; interest due at maturity
25,000
$
Note dated October 1, 2009; maturity date March 1, 2010; interest at 8% per annum;
interest due monthly, beginning November 1, 2009
47,000
Note dated October 1, 2009; maturity date March 1, 2010; interest at 8% per annum;
interest due monthly, beginning November 1, 2009
28,000
Note dated October 30, 2007; maturity date September 30, 2010; interest at 6% per
annum; interest due monthly, beginning December 1, 2007
250,000
350,000
$
4.
Stockholders' Equity
Common stock - Authorized 200,000,000 shares with par value of $0.0001. Issued and fully
paid 67,370,176 shares at January 31, 2010.
Deferred consulting services - On July 15, 2009, the Company entered into two consulting
agreements. The terms of the agreements required the Company to issue 3,500,000 shares of
its common stock on July 15, 2009. The Company is also required to issue 10,500,000
shares of its common stock on a monthly basis over a three year period. The shares were
valued at the date of the consulting agreements and the full amount was recorded as deferred
consulting services, which is being amortized to expense over the three year period. At
January 31, 2010, the balance of $1,312,500 represents 8,750,000 shares to be issued.