UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.  20549   FORM 10-QSB   SQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2007  £TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from _____________ to ______________  Commission File Number 000-30951   SILVERGRAPH INTERNATIONAL, INC. (Exact name of small business issuer as specified in its charter)   Nevada67-0695367(State or other jurisdiction
of incorporation or organization)(IRS Employer Identification No.)   11919 Burke Street Santa Fe Springs, CA  90670-2507 (Address of principal executive offices)   (562) 693-3737 (Issuers telephone number)   N/A (Former name, former address and former fiscal year, if changed since last report)   Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  S No £  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes £  No  S  State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date:  36,000,015 shares of our common stock were issued and outstanding as of March 31, 2007.       SILVERGRAPH INTERNATIONAL, INC.INDEXPage No.PART IFINANCIAL INFORMATION3Item 1Financial Statements3Condensed, Consolidated Balance Sheets
March 31, 2007 (Unaudited) and December 31, 20063Condensed, Consolidated Statements of Operations
Three Months Ended March 31, 2007 and 2006 (Unaudited)4Condensed, Consolidated Statement of Stockholders Deficiency
Three Months Ended March 31, 2007 (Unaudited)5Condensed, Consolidated Statements of Cash Flows
Three Months Ended March 31, 2007 and 2006 (Unaudited)6Notes to Condensed, Consolidated Financial Statements
Three Months Ended March 31, 2007 and 2006 (Unaudited)7Item 2Management's Discussion and Analysis or Plan of Operation16Item 3Controls and Procedures20PART IIOTHER INFORMATION20Item 1Legal Proceedings20Item 2Unregistered Sales of Equity Securities and Use of Proceeds20Item 3Defaults Upon Senior Securities20Item 4Submission of Matters to a Vote of Security Holders20Item 5Other Information20Item 6Exhibits21   PART I  FINANCIAL INFORMATION  Item 1.  Financial Statements. SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS  March 31, 2007 (unaudited)December 31,
2006ASSETSCurrent assets:Cash and cash equivalents$154,300$50,425Accounts receivable, net of allowance for doubtful accounts, adjustments and sales returns of $5,0002,095135,878Inventories164,458172,003Prepaid expenses and other current assets-19,431Total current assets320,853377,737Property and equipment, net195,543221,247Other assets53,14661,479Total assets$569,542$660,463LIABILITIES AND STOCKHOLDERS DEFICIENCYCurrent liabilities:Accounts payable$172,854$274,744Accrued expenses101,69273,830Line of credit43,90844,128Capital lease obligation, current82,72280,936Note payable  stockholder280,000280,000Total current liabilities681,176753,638Convertible notes payable665,000325,000Capital lease obligation - long-term-21,362Total liabilities1,346,1761,100,000Commitments and contingenciesStockholders' deficiency:Common Stock, $0.001 par value, 100,000,000 shares authorized: 36,000,015 and 23,100,000 shares issued and outstanding36,01936,000Additional paid-in capital1,861,4521,784,091Accumulated deficit(2,674,105)(2,259,628)Total stockholders' deficiency(776,634)(439,537)Total liabilities and stockholders equity deficiency$569,542$660,463 The accompanying notes are an integral part of these condensed consolidated financial statements.  3   SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)  Three months ended
March 31, 2007Three months ended
March 31, 2006Revenues$7,387133,605Cost of Sales67,76996,906Gross Profit (Loss)(60,382)36,699Operating expenses268,538213,648Operating loss(328,920)(176,949)Other income (loss)(85,557)7,571Net Loss$(414,477)$(169,378)Net Loss per share, basic and fully diluted$(0.01)$(0.01)Weighted average shares outstanding, basic and fully diluted36,012,51527,750,000  The accompanying notes are an integral part of these condensed consolidated financial statements.  4   SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS DEFICIENCY (UNAUDITED)  AdditionalCommon StockPaid-inAccumulatedSharesAmountCapitalDeficitTotalBalance, January 1, 200736,000,015$36,000$1,784,091$(2,259,628)$(439,537)Beneficial conversion feature of convertible notes payable--75,505-75,505Issuance of stock to consultant18,750191,856-1,875Net Loss---(414,477)(414,477)Balance, March 31, 2007 (unaudited)36,018,765$36,019$1,861,452$(2,674,105)$(776,634)    The accompanying notes are an integral part of these condensed consolidated financial statements.  5   SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)  Three months ended March 31,20072006Operating activities:Net loss$(414,477)$(169,378)Adjustment to reconcile net loss to net cash used in operating activities:Depreciation25,70426,280Non-cash interest expense75,505-Equity based compensation expense1,87514,961Changes in assets and liabilities:Accounts receivable133,78339,623Inventory7,54515,415Other assets27,7647,838Accounts payable and accrued expenses(74,028)(52,301)Net cash used in operating activities(216,329)(117,562)Financing activities:Debt principal payments(220)(334)Principal payments on capital leases(19,576)(18,072)Proceeds from issuance of notes payable and debt340,000-Proceeds from sale of Silvergraph LLC member interests-500,118Repurchase of member interests-(45,000)Distributions-(52,256)Net cash provided by financing activities320,204384,456Change in cash and cash equivalents103,875266,894Cash and cash equivalents, beginning of period50,425171,034Cash and cash equivalents, end of period$154,300$437,928Supplemental cash flow information:Cash paid for interest$2,099$3,533Cash paid for income taxes--   The accompanying notes are an integral part of these condensed consolidated financial statements.      6   SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (UNAUDITED   NOTE 1THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES  The Company  Silvergraph International, Inc. ("Silvergraph" or the Company) is a leading designer, manufacturer, marketer and branded retailer of fine-art reproductions, art-based home decorative accessories, collectibles and gift products. Silvergraph's primary products are canvas and paper lithographs as well as other forms of fine-art reproductions. Silvergraph distributes products through a variety of distribution channels, including corporate and independently owned retail stores, independent dealers and strategic partners.  As of and subsequent to the share exchange described below, the historical financial statements included the combined accounts of Silvergraph LGT, LLC (Silvergraph LLC) and its combined affiliate Lee Graphic Technologies, Inc. (LGT, and combined with Silvergraph LLC also referred to as the Company). These financial statements were combined due to the following facts: · The companies have been operated as one business over the past three (3) years, · The managing member and owners of 28% of Silvergraph LLCs membership interests own 100% of LGT, and · The business assets, liabilities, business contacts and intellectual property of LGT were transferred at no cost to Silvergraph LLC on April 1, 2006, which was merged into New Era Studios, Inc. (New Era) on June 9, 2006, which then consummated a share exchange with Pinecrest Services, Inc. (Pinecrest) effective June 23, 2006.  Culminating with the Companys share exchange effective June 23, 2006, the Company consummated a series of transactions as detailed below: · On April 1, 2006, LGT transferred all of their business assets and liabilities to Silvergraph LLC · Silvergraph LLC merged into New Era, a shell Nevada corporation, effective June 9, 2006, and · On June 23, 2006, New Era was acquired by Pinecrest.  The Company, exchanged 100% of its outstanding common stock for 32,400,015 shares of Pinecrest common stock. The transaction was accounted for as a recapitalization with the Company deemed the accounting acquirer, and Pinecrest the legal acquirer.  Additionally, the Company paid $280,000 to certain shareholders of Pinecrest for 15,000,000 shares of their outstanding common stock, which were immediately retired (See Note 3).  This payment, along with other expenses associated with the share exchange, has been reflected as reorganization expenses in the Companys accompanying income statements.  Simultaneous with the closing of the share exchange, Pinecrest Services, Inc. changed its name to Silvergraph International, Inc.  All intercompany balances and transactions have been eliminated in consolidation.  The interim consolidated financial statements are unaudited, but in the opinion of management of the Company, contain all adjustments, which include normal recurring adjustments, necessary to present fairly the financial position at March 31, 2007, and the results of operations and cash flows for the three months ended March 31, 2007 and 2006,.  The results of operations for the three months ended March 31, 2007 may not be indicative of the full fiscal year. The Company's audited financial statements as of and for the years ended December 31, 2006 and 2005 are included in its 10-KSB filing on April 17, 2007.   7   SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (UNAUDITED   NOTE 1THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)  Going Concern  The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses from its combined operations since its inception and has an accumulated deficit of $2,259,628 at December 31, 2006 and $2,674,105 at March 31, 2007 (unaudited).  Additionally, as of March 31, 2007, the Company had a working capital deficiency of $360,323 and a stockholders deficiency of $776,634.  The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might be necessary should the Company be unable to continue its existence. The recovery of the Companys assets is dependent upon continued operations of the Company.  In addition, the Company's recovery is dependent upon future events, the outcome of which is undetermined. The Company intends to continue to attempt to raise additional capital, but there can be no certainty that such efforts will be successful.  Impairment of Long-Lived Assets  Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. When such "triggering" events occur, the Company compares the carrying value of long-lived assets to the undiscounted expected future cash flows related to those assets. If this comparison indicates that impairment is present, the amount of the impairment is calculated using discounted expected cash flow using a weighted average cost of capital. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use are based on the fair value of the asset. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.  Income Taxes  The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes Under SFAS No. 109, income taxes are recognized for the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets are recognized for the future tax consequences of transactions that have been recognized in the Companys financial statements or tax returns.  A valuation allowance is provided when it is more likely than not that some portion or the entire deferred tax asset will not be realized.  Cash and cash equivalents  Highly liquid investments with original maturities of three months or less are classified as cash and cash equivalents.  Concentration of credit and foreign currency risks  Financial instruments that potentially subject the Company to concentrations of credit risk consist mainly of trade accounts receivable from distributors and end users.  Consequently, its foreign exchange risk is deemed insignificant. The Company offers credit terms on the sale of its products and performs ongoing credit evaluations of its customers' financial condition, but generally requires no collateral. The Company maintains an allowance for doubtful accounts based on the collectibility of all accounts receivable.  Accounts Receivable  The Company extends credit to its customers. Collateral is generally not required. Credit losses are provided for in the financial statements based on managements evaluation of historical and current industry trends. Although the Company expects to fully collect amounts due, actual collections may differ from estimated amounts.   8   SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (UNAUDITED   NOTE 1THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)  Inventories  Inventories are stated at the lower of cost or market. Cost is determined on a standard cost basis which approximates the first-in, first-out (FIFO) method. Appropriate consideration is given to obsolescence, excessive levels, deterioration and other factors in evaluating net realizable value.  Property and equipment  Property and equipment is stated at cost less accumulated depreciation and amortization. Repairs and maintenance costs are expensed as incurred. Depreciation and amortization are computed on a straight-line basis over the following estimated useful lives:  Machinery and equipment5-10 yearsFurniture and fixtures7 yearsLeasehold improvementsLesser of 7 to 10 years or life of leaseComputer hardware and software5 yearsVehicles7 years  Revenue Recognition The Company recognizes revenue from gross product sales, including freight charges, and revenues from the license of products, in compliance with Staff Accounting Bulletin No. 101 ("SAB 101") and No. 104 (SAB 104) which require that title and risk of loss have passed to the customer, there is persuasive evidence of an arrangement, delivery has occurred or services have been rendered, the sales price is fixed and determinable, collectibility is reasonably assured, and customer acceptance criteria, if any, have been successfully demonstrated. Equity-based compensation  The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs.  The Company adopted SFAS No. 123R effective January 1, 2006, and is using the modified prospective method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS No. 123R for all share-based payments granted after the effective date and (b) based on the requirements of SFAS No. 123R for all awards granted to employees prior to the effective date of SFAS No. 123R that remain unvested on the effective date.  The Company accounts  for stock option and warrant grants issued and vesting to non-employees in accordance with EITF No. 96-18: "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services and EITF00-18 Accounting Recognition for Certain Transactions involving Equity Instruments Granted to Other Than Employees whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete.  Use of Estimates  The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates are used in the accounting for revenues, allowance for doubtful accounts, product returns and other sales allowances, inventory reserves, depreciation and amortization, lease guarantees, long-lived assets and income taxes. Actual results could differ from those estimates.  Significant customers  The Company made sales to one significant customer, comprising 0% and 81% of total sales, during the three months ended March 31, 2007, and 2006.  As of March 31, 2007, accounts receivable from the Companys significant customer comprised 0% of its total accounts receivable.   9   SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (UNAUDITED   NOTE 1THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)  Fair value of financial instruments  The carrying amounts of cash, accounts receivable, due from affiliates, accounts payable and accrued expenses approximate fair value because of the short maturity of these items. The carrying amounts of notes payable and capital lease obligation approximate fair value, because the related effective rates on these instruments approximate rates currently available to the Company.  Earnings (loss) per share  Statement of Financial Accounting Standards No. 128, "Earnings per Share", requires presentation of basic earnings per share ("Basic EPS") and diluted earnings per share ("Diluted EPS"). Basic earnings (loss) per share is computed by dividing earnings (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Weighted average number of shares outstanding have been retroactively restated for the equivalent number of shares received by the accounting acquirer as a result of the Exchange transaction as if these shares had been outstanding as of the beginning of the earliest period presented. The 3,600,015 shares issued to the legal acquirer are in included in the weighted average share calculation from April 15, 2006, the date of the exchange agreement.  Diluted earnings per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company.  In computing diluted earnings per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period.  Options and warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. As the Company had a loss in three month periods ended March 31, 2007 and 2005, basic and diluted loss per share are the same.  At March 31, 2007 and 2006, potentially dilutive securities consisted of outstanding common stock purchase warrants and stock options to acquire an aggregate of 880,770 and 488,170, respectively.  Recent Accounting Pronouncements  In February 2007, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities   Including an amendment of FASB Statement No. 115 (FAS 159). FAS 159, which becomes effective for the company on January 1, 2008, permits companies to choose to measure many financial instruments and certain other items at fair value and report unrealized gains and losses in earnings. Such accounting is optional and is generally to be applied instrument by instrument. The company does not anticipate that election, if any, of this fair-value option will have a material effect on its consolidatedfinancial condition, results of operations, cash flows or disclosures.  In September 2006, the FASB issued FAS No. 157 (FAS 157), Fair Value Measurements, which establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about fair value measurements. FAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. FAS 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact this standard will have on its consolidated financial condition, results of operations, cash flows or disclosures.   10   SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (UNAUDITED   NOTE 1THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)  Adoption of New Accounting Policy  Effective January 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). an interpretation of FASB Statement No. 109, Accounting for Income Taxes. The Interpretation addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.  At the date of adoption, and as of March 31, 2007, the Company does not have a liability for unrecognized tax uncertainties.  The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is subject to U.S. federal or state income tax examinations by tax authorities for years after 2002. During the periods open to examination, the Company has net operating loss and tax credit carry forwards for U.S. federal and state tax purposes that have attributes from closed periods. Since these NOLs and tax credit carry forwards may be utilized in future periods, they remain subject to examination.  The Companys policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of March 31, 2007, The Company has no accrued interest or penalties related to uncertain tax positions. NOTE 2BALANCE SHEET COMPONENTS Inventories: Inventories as of March 31, 2007 and December 31, 2006 were as follows: March 31,2007
(unaudited)December 31, 2006Raw materials$32,131$32,131Work in process69,52873,028Finished goods62,79966,844$164,458$172,003  Property and equipment, net  Property and equipment as of March 31, 2007 and December 31, 2005 was as follows:  March 31, 2007
(unaudited)December 31, 2006Machinery and equipment$685,060$685,060Furniture and fixtures3,0513,051Computer hardware and software8,6288,628696,739696,739Accumulated depreciation and amortization(501,196)(475,492)$195,543$221,247  Depreciation expense for the three months ended March 31, 2007 and 2006 was $25,704 and $26,280, respectively.  11   SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (UNAUDITED   NOTE 3DEBT  Convertible notes payable  During 2006 the Company issued convertible notes payable (the Notes) in the aggregate principal amount of $325,000 and warrants to purchase 143,000 shares of our common stock to five accredited investors. The outstanding principal and interest on the Notes are payable by the Company on or before August 31, 2008. The notes will bear interest at a rate of eight and one half percent (8.5%) per annum. The Company will pay in kind quarterly all interest due and owing on each note by adding such amounts to the then outstanding principal balance of each note, thereby increasing the outstanding principal balance of each note. All the payments-in-kind shall accrue interest as though such amounts were original principal indebtedness. The Company will not pay any principal payments in cash prior to maturity unless we close any equity financing or financings with gross proceeds totaling at least $2,000,000 and the blended equity offering price is less than $0.45 per share.   At December 31, 2006, $325,000 was outstanding under these notes.  Each holder of a Note may convert in whole or in part the outstanding principal plus accrued but unpaid interest into the Companys common stock at a conversion price of $0.45 per share. In the event that the Company issues additional common stock, or securities convertible into common stock, at a price lower than the conversion price while these notes are outstanding, the conversion price of these notes will automatically adjust downward to such price at which the new common stock has been issued.  The conversion price of the Note, however, shall never be adjusted to less than $0.01 per share.  If the Company engages in any equity based financing or a combination of equity financings with gross proceeds totaling at least $2,000,000, the outstanding principal amount of the notes together with all accrued but unpaid interest will automatically convert into shares of the Companys common stock five business days after the closing of such equity financing(s), provided, however, that if the blended per share purchase price of the securities purchased in such equity financing(s) is less than the conversion price, the Company will have the option to redeem the outstanding principal and interest of the notes. If the Company does not elect to redeem the notes, the conversion price will be the price equal to a 10% discount to the equity offering price.  In addition to the Notes, the Company issued 143,000 warrants to the five accredited investors. The exercise price of each warrant is equal to $0.65 per share. The warrants shall remain exercisable for a period of three years from the date of issue. The Company may compel the exercise of the warrants in full if our common stock trades at or above two and one half (2 1/2) times the exercise price for 15 consecutive trading days. Based upon the fair value of the Companys common stock at the time of the issuance of the Notes and warrants, the value of the beneficial conversion feature and warrants are immaterial and have, therefore, not been recorded in the Companys financial statements.  The subscription agreements we entered into with the five accredited investors require us to prepare and file with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 registering the common stock issuable upon conversion of the notes (up to $2,000,000 original principal amount of notes) and 100% of the shares of our common stock issuable upon exercise of the warrants issued in connection with the purchase of the notes. These demand registration rights are, based upon the underlying agreement, best efforts from the Companys basis and include no penalties for not meeting such deadlines.  During 2007, the Company issued $340,000 of additional convertible notes and warrants.  These notes have the same characteristics as the notes discussed above, except that they convert into common shares at a price of $0.22 per share.  As such, the conversion rates of the notes issued during 2006 reset to $0.22 per share resulting in a beneficial conversion feature of $75,055 which was charged to interest expense during the quarter ended March 31, 2007.  Line of credit  The Company has a $50,000 revolving bank line-of-credit, which automatically renews unless an event of default occurs.  Borrowings under the facility bear interest at the bank's prime rate plus 2% (10.25% at March 31, 2007).  The facility is secured by substantially all of the Company's assets. At March 31, 2007 and December 31, 2006, the Company had $43,908 and $44,128 outstanding under this line of credit.   12   SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (UNAUDITED   NOTE 3DEBT (CONT.)  Note payable - stockholder  One of our shareholders loaned $280,000 to the Company in June 2006. In consideration of this loan, the Company issued a promissory note in the principal amount of $280,000, plus 7% interest per annum on the outstanding principal, which note was amended and restated in its entirety on August 14, 2006. The amended and restated note was originally due and payable by the Company on September 23, 2006.  The Company issued a second amended and restated promissory note to extend the maturity date of the note from September 23, 2006 to December 31, 2006.  The shareholder did not, pursuant to the terms of the amended and restated note, elect to require the Company to pay to it the outstanding principal balance and accrued interest on the note during the period beginning September 23, 2006 and continuing up to and including the issuance of the second amended and restated note on September 27, 2006.  The second amended and restated note was amended and restated in its entirety by the Companys issuance of a third amended and restated promissory note on December 31, 2006, which extends the maturity date of the note from December 31, 2006 to June 30, 2007.  NOTE 4COMMITMENTS AND CONTINGENCIES  Leases  The Company entered into two non-cancelable operating leases for facilities in Santa Fe Springs, California expiring during 2007 and 2008, respectively. The two leased facilities consist of a combined approximately 20,700 square feet of office, manufacturing and warehouse space. The Company also has other non-cancelable operating and capital leases for machinery and equipment. Future minimum lease commitments under non-cancelable operating and capital leases as of March 31, 2007 are as follows:  Fiscal YearOperating
LeasesCapital
Leases2007 (remainder)91,17665,025200875,50121,675Total minimum lease payments$166,66786,700Interest3,978Total82,722Less current portion(82,722)Long term$-  Rent expense under operating leases was $37,050 and $37,485 for the three months ended March 31, 2007 and 2006.  Art Content Sourcing  During 2006, the Company signed an agreement with a company to produce exclusive art images for the Companys wall décor collection.  In exchange for 100 images to be produced by the company during the initial 12 months of the agreement, the Company will pay them $10,000 per month and a royalty of 8% of the total revenues generated on sales of such images.  The Company will have the exclusive use of these images in the home décor market for a period of three (3) years.  13   SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (UNAUDITED   NOTE 4COMMITMENTS AND CONTINGENCIES (CONT.)  Investor Relations Agreement On January 22, 2007 we entered into an agreement with RJ Falkner & Company, Inc. for a period of at least one year whereby RJ Falkner & Company, Inc. will provide investor relations support to the Company beginning February 1, 2007.  The agreement requires the Company to pay a cash retainer of $3,000 per month in advance and to cover expenses.  Further, the Company shall issue a total of 56,250 shares of its restricted common stock to R. Jerry Falkner in installments of 18,750 shares every three months until paid in full.  The agreement allows the Company to halt issuance of future stock grants by agreeing to increase the monthly retainer to $5,000.  The Company also agreed to issue R. Jerry Falkner a ten-year stock option to purchase 100,000 shares of the Companys restricted common stock with an exercise price of $0.72 per share.  The agreement carries registration rights for the common stock to be issued whereby the Company agreed to register the shares with the Securities and Exchange Commission within 24 months of the start date of the agreement.  Should the Company fail to register the shares, the previously granted option shall become a cashless exercise option.  During February 2007, the Company issued 18,750 common shares to the consultant, which were valued at $1,875 and recorded as an operating expense in the Companys statement of operations.  Due to the fair value of the Companys common stock at the time of the issuance of the aforementioned stock option, the Company has deemed that the option has negligible value.  Litigation  From time to time, the Company is involved in various legal proceedings arising from the normal course of its business activities. Any adverse outcome from these matters is currently not expected to have a material adverse impact on the results of operations, cash flows or financial position of the Company, either individually or in the aggregate.  NOTE 5EQUITY  During the three months ended March 31, 2007,the Company issued 18,750 shares of common stock to a consultant pursuant to a service contract (see Note 4).  NOTE 6COMMON STOCK WARRANTS  The Company granted a warrant to purchase 488,170 shares of common stock in connection with professional services performed by the Companys Chief Financial Officer.  The warrant is exercisable at $0.14 per share, has a five year term and is fully vested, with the Company holding a right to cancel 50% of the units underlying the warrant, with such right to cancel such remaining warrants decreasing ratably on a monthly basis over a one year period ending June 30, 2007, upon the occurrence of certain events as defined within the agreement.  The Company estimated the fair value of the warrant to be $30,174 as of the date of grant, all of which was recognized as expense during the second through fourth quarters of 2006.  The fair value of the warrant was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for the periods indicated:  Dividend yield--Risk-free interest rate4.50%Expected volatility50.00%Expected life of options4 years  The Companys other outstanding warrants related to warrants issued in conjunction with the issuance of Convertible Notes (See Note 3).    14   SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (UNAUDITED  NOTE 7  INCOME TAXES  The Company did not provide for any Federal or state income tax expense during the three months ended March 31, 2007 as a result of the availability of net operating loss carryfowards.  As of March 31, 2007, the Company had provided a 100% valuation allowance with respect to such Federal and state net operating loss carryforwards, as it cannot determine that it is more likely than not that it will be able to realize such deferred tax assets.  This valuation allowance represents the difference in the Companys effective income tax of 0% and the Federal statutory income tax rate of 34% for the three months ended March 31, 2007.  As of March 31, 2007, for Federal and state income tax purposes, the Company had approximately $937,000 in net operating loss carryforwards expiring through 2015.  Internal Revenue Code Section 382 substantially restricts the ability of a corporation to utilize existing net operating losses in the event of a defined "ownership change".  The Company has determined that there will likely be significant limitations on its ability to utilize its net operating loss carryforwards in future periods for Federal income tax purposes due to such ownership changes.   15     Item 2.  Managements Discussion and Analysis or Plan of Operation. a.   Managements Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements  Statements made in this Form 10-QSB (the "Quarterly  Report") that are not historical or current facts are  "forward-looking  statements" made pursuant to the safe harbor  provisions of Section 27A of the  Securities Act of 1933, as amended, and Section 21E of the Securities  Exchange Act of 1934, as amended.  We intend that such forward-looking statements be subject to the safe harbors for such statements.  We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.  Any forward-looking statements represent our best judgment as to what may occur in the future.  These forward-looking statements include our plans and objectives for our future growth, including plans and objectives related to the consummation of acquisitions and future private and public issuances of our equity and debt securities.   The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties.  Assumptions relating to the foregoing involve 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 the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Form 10-QSB will prove to be accurate.   In light of the significant uncertainties inherent in the forward-looking statements included herein, you should not regard the inclusion of such information as our representation or the representation of any other person that we will achieve our objectives and plans.  We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.  The words "we," "us," "our," and the "Company" refer to, unless otherwise indicated, Silvergraph International, Inc. and New Era Studios, Inc. (as statutory successor in interest to Silvergraph LGT, LLC). The words or phrases "may," "will," "expect," "believe," "anticipate," "estimate," "approximate," or "continue," "would  be," "will allow," "intends to," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," or similar expressions, or the negative thereof, are intended to identify  "forward-looking  statements." Actual results could differ materially from those projected in the forward looking statements as a result of a number of risks and  uncertainties,  including  but not limited to: (a) our failure to implement  our  business  plan within the time period we originally planned to accomplish; and (b) other risks that are discussed in this Form 10-QSB or that we included in our previous filings with the Securities and Exchange Commission, most particularly our Form 10-KSB, filed April 17, 2007 with the SEC.  Overview  On February 10, 1999, we became incorporated as Pinecrest Services, Inc., now known as Silvergraph International, Inc., in Nevada.  From inception to June, 2006, we had limited sources of capital and our sole business plan was to seek, investigate, and, if warranted, acquire an interest in a business opportunity by merger, exchange of stock, or otherwise.  On June 23, 2006 we and New Era Studios, Inc., a Nevada corporation and successor in interest by merger to Silvergraph LGT, LLC, a Delaware limited liability company, completed a share exchange, pursuant to which the shareholders of New Era exchanged their issued and outstanding shares of New Era common stock for shares of restricted Silvergraph International common stock.  In connection with the share exchange, we also changed our name from Pinecrest Services, Inc. to Silvergraph International, Inc.  We treated the share exchange as a recapitalization for accounting purposes, and New Era is now our wholly-owned subsidiary effective June 23, 2006.  Through New Era, formerly known as Silvergraph LGT, LLC, we develop and distribute wall art to the $19.7 billion U.S. mass wall art market.  From inception through 2004, New Era focused its activity on developing and refining our patent-pending and proprietary technology with only modest, non-strategic, sales and revenue.  We are currently prosecuting an international application under the Patent Cooperation Treaty, No. PCT/US2005/028501, which describes and claims the mechanical deposit of ink to emulate hand painted original works of art. Our patent pending technology significantly lowers the cost of producing textured fine art quality prints.  A result of this lower production cost is the enlargement of our potential customer base that can now afford prints that previously fine art galleries might sell for thousands of dollars.  16     In 2005, we successfully soft launched our product with an established home décor company that sells through 100,000 independent sales representatives throughout the United States, Canada and Mexico.  This customer has since expanded the program by adding new stock keeping units and ordering 60,000 units in the first 12 months.  In 2005, we also initiated a strategic relationship with a Fortune 1000 company that develops and holds children-oriented brands.  We have received purchase orders to launch products with this company.  In 2006, the program successfully launched and  the Fortune 1000 company continues to reorder product.  We derive a significant portion of our revenues from one customer, accounting for approximately 0% and 81% of total sales during the three months ended March 31, 2007 and 2006.  The loss of all or a substantial portion of the business from this customer could have a material adverse effect on us.  In 2006 and beyond, we plan to expand our operations, enabling us to release our products through new sales channels including home furnishings stores and national retailers.  To that end, we have partnered with Applejack Art Partners, an art publishing company in Manchester, Vermont, to help develop and select new trend oriented images with the goal of releasing a series of exclusive art collections utilizing our patent pending technology.  Applejack represents approximately 200 artists and maintains over 40,000 available images.  We currently expect to release our first exclusive art collection in the United States in November 2006.  Until we successfully develop these new sales channels, we expect our revenue will be uneven due to the fact that we are highly dependent on a small number of customers.  We believe select acquisitions will complement our plan to grow from internal operations and, as such, we may acquire or combine with one or more established framers or art publishers.  We intend to balance our domestic production with opportunities to source raw goods from domestic and foreign manufacturers, as appropriate, in order to maintain our competitive advantage.  Results of Operations  Quarters ended March 31, 2007 and 2006 (all amounts for these periods are unaudited)  Revenues.    Our revenues decreased $126,218 or 95%, to $7,387 for the three months ended March 31, 2007, as compared to $133,605 for the three months ended March 31, 2006.  The decrease in revenues was due primarily to the lack of orders by our largest customer.  Gross profit.    Cost of sales consists primarily of raw material and component costs, manufacturing and supervisory labor, manufacturing overhead costs and royalties.  The gross profit for the three months ended March 31, 2007 was $(60,382), a decrease of $97,081 or 265% as compared to $36,699 for the three months ended March 31, 2006.  The gross profit for the three months ended March 31, 2007 represented 54% of revenue for that same period as compared to the gross profit for the three months ended March 31, 2006 which represented 29% of revenue for that same period.  The Companys significant negative gross margin during the first quarter of 2007 was due to the lack of capitalization of normal fixed manufacturing costs.  Operating expenses.    Operating expenses consist of selling and marketing expenses, which are primarily salaries, commissions and promotional expenses, and general and administrative expenses, which are primarily salaries and bonuses, rent expense, depreciation and professional services such as legal and accounting fees.  Operating expenses increased by $54,890 or 26% to $268,538 for the three months ended March 31, 2007 versus $213,648 for the three months ended March 31, 2006.  The operating expenses during the three months ended March 31, 2007 represented 3,635% of revenue for that same period, versus the operating expenses for the three months ended March 31, 2006 which represented 160% of revenue for that same period.  The increase in operating expenses was principally due to additional expenses incurred during 2006 associated with our share exchange with New Era, as well as the launching of new business initiatives subsequent to the share exchange.   Other income (expense).    Other income (expense) principally consists of interest income and expense, as well as non-operational revenues or expenses earned or incurred by us.  We had other expenses of $85,557 during the three months ended March 31, 2007 versus other income of $7,571 during the three months ended March 31, 2006.  The significant change was due to additional interest expense recognized from the issuance of convertible notes payable during the three months ended March 31, 2007.  17     Liquidity and Capital Resources  We derived our primary source of funds during the three months ended March 31, 2007 from the sale of additional equity and debt securities. Working capital as of March 31, 2007 was negative $360,323 as compared to negative working capital of $375,901 as of December 31, 2006. The cash balance at March 31, 2007 was $154,300 compared to $50,425 at December 31, 2006.  Net cash used in operating activities was $216,329 for the three months ended March 31, 2007, as compared to $117,562 for the three months ended March 31, 2006.  During each period presented, we used net cash principally to fund our net losses.  Net cash provided by financing activities was $320,204 during the three months ended March 31, 2007, as compared to net cash provided by financing activities of $384,456 for the three months ended March 31, 2006. Net cash provided by financing activities during 2006 was principally related to the sale of additional equity securities of $500,118, respectively, which was partially offset by a repurchase of membership units and principal payments on capital leases and distributions.  The Company also issued debt securities during the three months ended March 31, 2007, netting proceeds of $480,000.  We have suffered recurring losses from operations and have an accumulated deficit of approximately $2,259,628 at December 31, 2006 and $2,674,105 at March 31, 2007.  Additionally, as of May 15, 2007, we had cash and cash equivalents of $56,000 which, along with our accounts receivable, will allow us to sustain operations for approximately 2 months.  Primarily as a result of our recurring losses and our lack of liquidity, we have received a report from our independent auditors for our financial statements for the year ended December 31, 2006 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. To continue our operations and to grow our current operations and to make acquisitions, if any, under our current business model during the next 12 months, we will need to secure additional working capital, by way of equity or debt financing, or otherwise.  After this 12 month period, we may need additional financing for working capital, and in the case of acquisitions for payment of seller notes and future earned cash to sellers of acquired companies. There can be no assurance that we will be able to secure sufficient financing or on terms acceptable to us. If adequate funds are not available on acceptable terms, we would need to delay, limit or eliminate some or all of our proposed operations, and we may be unable to successfully promote our products or develop new or enhanced products or prosecute acquisitions, any of which could lower our revenues and net income, if we achieve profitability in the future.  If we raise additional funds through the issuance of convertible debt or equity securities, the percentage ownership of our current stockholders is likely to be diluted, unless some of our current stockholders were to invest in subsequent convertible debt or equity financings, and some of the newly issued securities may also have rights superior to those of the common stock.  Additionally, if we issue or incur debt to raise funds, we may be subject to limitations on our operations.  Inflation and Seasonality  Inflation has not been material to us during the past five years. Although seasonality has not historically been material, we believe that as our business expands, seasonality may begin to affect our quarterly results of operations.   Critical Accounting Policies  The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires us to make judgments, assumptions and estimates that affect the amounts reported. Note 1 of the Notes to Combined Financial Statements describes the significant accounting policies used in the preparation of the consolidated financial statements. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below. On a regular basis, we review the accounting policies we use in reporting our financial results.   18     A critical accounting policy is one that is both material to the presentation of our combined financial statements and requires us to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes:  · we have to make assumptions about matters that are highly uncertain at the time of the estimate; and · different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on the our financial condition or results of operations.  We cannot make estimates and assumptions about future events or determine their effects with certainty. We base our estimates on historical experience and on various other assumptions that we believe to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as we obtain additional information and as our operating environment changes. These changes have historically been minor and we have included them in the combined financial statements as soon as they became known.  In addition, we periodically face uncertainties, the outcomes of which are not within our control and we will not know for prolonged periods of time. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, we believe that our combined financial statements are fairly stated in accordance with accounting principles generally accepted in the United States of America, and present a meaningful presentation of our financial condition and results of operations.  We believe that the following are our critical accounting policies:  Revenue Recognition  We recognize revenue from gross product sales, including freight charges, and revenue from the license of products, in compliance with Staff Accounting Bulletin No. 101 ("SAB 101") and No. 104 (SAB 104) which require that title and risk of loss have passed to the customer, there is persuasive evidence of an arrangement, delivery has occurred or services have been rendered, the sales price is fixed and determinable, collectibility is reasonably assured, and customer acceptance criteria, if any, have been successfully demonstrated.  Accounts Receivable  We extend credit to our customers.  We generally do not require collateral.  We provide for credit losses in the combined financial statements based on our evaluation of historical and current industry trends. Although we expect to fully collect amounts due, actual collections may differ from estimated amounts.  Inventories  We state inventories at the lower of cost or market.  We determine cost on a standard cost basis which approximates the first-in, first-out (FIFO) method.  We give appropriate consideration to obsolescence, excessive levels, deterioration and other factors in evaluating net realizable value.  Recent Accounting Pronouncements    In February 2007, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities   Including an amendment of FASB Statement No. 115 (FAS 159). FAS 159, which becomes effective for the company on January 1, 2008, permits companies to choose to measure many financial instruments and certain other items at fair value and report unrealized gains and losses in earnings. Such accounting is optional and is generally to be applied instrument by instrument. The company does not anticipate that election, if any, of this fair-value option will have a material effect on its consolidatedfinancial condition, results of operations, cash flows or disclosures.  In September 2006, the FASB issued FAS No. 157 (FAS 157), Fair Value Measurements, which establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about fair value measurements. FAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. FAS 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact this standard will have on its consolidated financial condition, results of operations, cash flows or disclosures.   19     Item 3.  Controls and Procedures.  As of March 31, 2007, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, regarding the effectiveness of the design and operation of our disclosure controls and procedures.  Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective for the purposes contemplated by Rules 13a-15(e) and 15d-15(e) promulgated by the Securities and Exchange Commission.  There were no changes in our internal control over financial reporting that occurred during the quarterly period ended March 31, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  We do not expect that our disclosure controls and procedures and internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that we have detected all control issues and instances of fraud, if any.  The design of any system of controls also is based in part upon assurance that any design will succeed in achieving its stated goals under all potential future conditions. However, controls may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, we may not detect misstatements due to error or fraud.  PART II  OTHER INFORMATION  Item 1.  Legal Proceedings.  We know of no material, active or pending legal proceedings which we are a party to, or which our property is subject to.  Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.  None, except as previously reported in our Form 8-K dated June 23, 2006, as amended.   Item 3.  Defaults Upon Senior Securities.  None.  Item 4.  Submission of Matters to a Vote of Security Holders.  As previously reported in our Form 8-K dated June 23, 2006, as amended, our shareholders approved by Written Consent the share exchange by and between Pinecrest Services, Inc. and New Era Studios, Inc., and certain amendments to our Articles of Incorporation.  Item 5.  Other Information.  None.  20     Item 6.  Exhibits. Exhibit
NumberDescription31.1Certification of the Registrants Principal Executive Officer under Exchange Act Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2Certification of the Registrants Principal Financial Officer under Exchange Act Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1Certification of the Registrants Principal Executive Officer under 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2Certification of the Registrants Principal Financial Officer under 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.   21     SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SILVERGRAPH INTERNATIONAL, INC.  Date: May 21, 2007 By: /s/ James R. Simpson James R. Simpson, Chief Executive Officer (Principal Executive Officer)   Date: May 21, 2007 By: /s/ Gary Freeman Gary Freeman, Chief Financial Officer (Principal Financial Officer)  22