##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 o
    
    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.
  Nevada
(State or other jurisdiction 
of incorporation or organization)
    
    67-0695367
(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)
 þ o
 o þ




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##### Table of Contents



SILVERGRAPH INTERNATIONAL, INC.
  
 INDEX
 Page No.PART I
    
    FINANCIAL INFORMATION
    
    3Item 1
    
    Financial Statements
    
    3Condensed, Consolidated Balance Sheets September 30, 2006 (Unaudited) and December 31, 2005
    
    3Condensed, Consolidated Statements of Operations Three Months Ended September 30, 2006 and 2005 (Unaudited), and Nine Months Ended September 30, 2006 and 2005 (Unaudited)
    
    4Condensed, Consolidated Statement of Stockholders Equity (Deficit) Nine Months Ended September 30, 2006 (Unaudited)
    
    5Condensed, Consolidated Statements of Cash Flows Nine Months Ended September 30, 2006 and 2005 (Unaudited)
    
    6Notes to Condensed, Consolidated Financial Statements Nine Months Ended September 30, 2006 and 2005 (Unaudited)
    
    7Item 2
    
    Managements Discussion and Analysis or Plan of Operation
    
    14Item 3
    
    Controls and Procedures
    
    19PART II
    
    OTHER INFORMATION
    
    19Item 1
    
    Legal Proceedings
    
    19Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    19Item 3
    
    Defaults Upon Senior Securities
    
    19Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    19Item 5
    
    Other Information
    
    19Item 6
    
    Exhibits
    
    19EXHIBIT 10.6EXHIBIT 10.7EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS PINECREST SERVICES, INC.)
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2006 (unaudited)
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    181,554
    
    
    $
    171,034Accounts receivable, net of allowance for doubtful accounts, adjustments and
sales returns of $5,000
    
    
    197,243
    
    
    
    42,945Inventories
    
    
    118,380
    
    
    
    83,042Prepaid expenses and other current assets
    
    
    
    
    
    
    7,838Total current assets
    
    
    497,177
    
    
    
    304,859Property and equipment, net
    
    
    247,988
    
    
    
    329,841Other assets
    
    
    43,335
    
    
    
    Total assets
    
    $
    788,500
    
    
    $
    634,700LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Accounts payable
    
    $
    255,611
    
    
    $
    147,205Accrued expenses
    
    
    79,298
    
    
    
    47,086Line of credit
    
    
    45,178
    
    
    
    46,159Capital lease obligation, current
    
    
    79,767
    
    
    
    74,712Note payable
 stockholder
    
    
    280,000
    
    
    
    Due to related party
    
    
    
    
    
    
    103,045Total current liabilities
    
    
    739,854
    
    
    
    418,207Convertible notes payable
    
    
    200,000
    
    
    
    Capital lease obligation  long-term
    
    
    35,347
    
    
    
    95,820Total liabilities
    
    
    975,201
    
    
    
    514,027Commitments and contingenciesStockholders equity (deficit):Common Stock, $0.001 par value, 100,000,000 shares authorized: 36,000,015 and
23,100,000 shares issued and outstanding
    
    
    36,000
    
    
    
    23,100Additional paid-in capital
    
    
    1,772,618
    
    
    
    1,222,347Accumulated deficit
    
    
    (1,995,319
    )
    
    
    (1,124,774
    )Total stockholders equity (deficit)
    
    
    (186,701
    )
    
    
    120,673Total liabilities and stockholders equity (deficit)
    
    $
    788,500
    
    
    $
    634,700
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SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS PINECREST SERVICES, INC.)
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 Three months
    
    
    Three months
    
    
    
    
    
    
    Nine monthsended
    
    
    ended
    
    
    Nine months
    
    
    endedSeptember 30,
    
    
    September 30,
    
    
    ended September
    
    
    September 30,2006
    
    
    2005
    
    
    30, 2006
    
    
    2005Revenues
    
    $
    302,557
    
    
    
    196,633
    
    
    
    715,106
    
    
    
    604,034Cost of Sales
    
    
    140,396
    
    
    
    138,804
    
    
    
    380,811
    
    
    
    378,281Gross Profit
    
    
    162,161
    
    
    
    57,829
    
    
    
    334,295
    
    
    
    225,753Operating expenses
    
    
    353,944
    
    
    
    189,385
    
    
    
    783,405
    
    
    
    509,818Reorganization
expenses
    
    
    64,540
    
    
    
    
    
    
    
    424,540
    
    
    
    Operating loss
    
    
    (256,323
    )
    
    
    (131,556
    )
    
    
    (873,650
    )
    
    
    (284,065
    )Other income (loss)
    
    
    (4,207
    )
    
    
    1,039
    
    
    
    3,105
    
    
    
    4,363Net Loss
    
    $
    (260,530
    )
    
    $
    (130,517
    )
    
    $
    (870,545
    )
    
    $
    (279,702
    )Net Loss per share,
basic and fully
diluted
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.03
    )
    
    $
    (0.01
    )Weighted average
shares outstanding,
basic and fully
diluted
    
    
    36,000,015
    
    
    
    23,100,000
    
    
    
    30,546,869
    
    
    
    23,100,000
  4




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SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS PINECREST SERVICES, INC.)
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 (UNAUDITED)
 AdditionalCommon
    
    
    Stock
    
    
    Paid-in
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    TotalBalance, December 31, 2005
    
    
    23,100,000
    
    
    $
    23,100
    
    
    $
    1,222,347
    
    
    $
    (1,124,774
    )
    
    $
    120,673Cash distributions
    
    
    
    
    
    
    
    
    
    
    (113,703
    )
    
    
    
    
    
    
    (113,703
    )Repurchase and cancellation
of Silvergraph LLC
membership units, prior to
share exchange
    
    
    
    
    
    
    
    
    
    
    (45,000
    )
    
    
    
    
    
    
    (45,000
    )Distribution of liability
resulting from transfer of
LGT business into
Silvergraph LLC
    
    
    
    
    
    
    
    
    
    
    103,045
    
    
    
    
    
    
    
    103,045Fair value of vested warrants
    
    
    
    
    
    
    
    
    
    
    18,701
    
    
    
    
    
    
    
    18,701Sale of equity securities
    
    
    9,300,000
    
    
    
    9,300
    
    
    
    590,828
    
    
    
    
    
    
    
    600,128Shares transferred upon
share exchange transaction
    
    
    3,600,015
    
    
    
    3,600
    
    
    
    (3,600
    )
    
    
    
    
    
    
    Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (870,545
    )
    
    
    (870,545
    )Balance, September 30, 2006
(unaudited)
    
    
    36,000,015
    
    
    $
    36,000
    
    
    $
    1,772,618
    
    
    $
    (1,995,319
    )
    
    $
    (186,701
    )
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SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS PINECREST SERVICES, INC.)
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 Nine months ended September 30,2006
    
    
    2005Operating activities:Net loss
    
    $
    (870,545
    )
    
    $
    (279,702
    )Adjustment to reconcile net loss to net cash used
in operating activities:Depreciation
    
    
    83,904
    
    
    
    82,022Equity based compensation expense
    
    
    18,701
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    (154,299
    )
    
    
    (2,755
    )Inventory
    
    
    (35,338
    )
    
    
    (35,413
    )Other assets
    
    
    (35,496
    )
    
    
    (21,568
    )Accounts payable and accrued expenses
    
    
    140,618
    
    
    
    54,562Net cash used in operating activities
    
    
    (852,455
    )
    
    
    (202,854
    )Investing activities:Purchases of furniture and equipment
    
    
    (2,051
    )
    
    
    (2,115
    )Net cash used in investing activities
    
    
    (2,051
    )
    
    
    (2,115
    )Financing activities:Debt principal payments
    
    
    (981
    )
    
    
    (14,395
    )Principal payments on capital leases
    
    
    (55,418
    )
    
    
    (50,786
    )Proceeds from issuance of notes payable and debt
    
    
    480,000
    
    
    
    Proceeds from sale of Silvergraph LLC member interests
    
    
    600,128
    
    
    
    525,008Repurchase of member interests
    
    
    (45,000
    )
    
    
    Distributions
    
    
    (113,703
    )
    
    
    (76,066
    )Net cash provided by financing activities
    
    
    865,026
    
    
    
    383,760Change in cash and cash equivalents
    
    
    10,520
    
    
    
    178,791Cash and cash equivalents, beginning of period
    
    
    171,034
    
    
    
    133,741Cash and cash equivalents, end of period
    
    $
    181,554
    
    
    $
    312,532Supplemental cash flow information:Cash paid for interest
    
    $
    8,433
    
    
    $
    11,787Cash paid for income taxes
    
    
    
    
    
    
    Supplemental Non cash investing and
financing activities:Transfer of related party liability to
additional paid in capital as a result
of the transfer of LGT Business
into Silvergraph
    
    $
    103,045
    
    
    $
    
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SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS PINECREST SERVICES, INC.)
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)
 NOTE 1THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
 The Company
   
    
    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.
  
    
    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.
  Going Concern
  7




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SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS PINECREST SERVICES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)
 NOTE 1THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
 Going Concern (continued)
  Revenue Recognition
  Equity-based compensation
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SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS PINECREST SERVICES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)
 NOTE 1THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
 Use of Estimates
  Significant customers
  Earnings (loss) per share
   Recent Accounting Pronouncements
  9




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SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS PINECREST SERVICES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)
 NOTE 2BALANCE SHEET COMPONENTS
 Inventories:
  September 30,
    
    
    December 31,2006
    
    
    2005Raw materials
    
    $
    55,140
    
    
    $
    42,695Work in process
    
    
    22,075
    
    
    
    Finished goods
    
    
    41,165
    
    
    
    40,347$
    118,380
    
    
    $
    83,042
 Property and equipment, net
  September 30,
    
    
    December 31,2006
    
    
    2005Machinery and equipment
    
    $
    685,060
    
    
    $
    685,060Furniture and fixtures
    
    
    3,051
    
    
    
    1,000Computer hardware and software
    
    
    8,628
    
    
    
    8,628Vehicles
    
    
    
    
    
    
    51,965696,739
    
    
    
    746,653Accumulated depreciation and amortization
    
    
    (448,751
    )
    
    
    (416,802
    )$
    247,988
    
    
    $
    329,841
  NOTE 3DEBT
 Convertible notes payable
   10




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SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS PINECREST SERVICES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)
 NOTE 3DEBT (CONT.)
 Convertible notes payable (continued)
   Line of credit
  Note payable  stockholder
  NOTE 4COMMITMENTS AND CONTINGENCIES
 Leases
  11




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SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS PINECREST SERVICES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)
 NOTE 4COMMITMENTS AND CONTINGENCIES (CONT.)
 Leases (continued)
 Operating
    
    
    CapitalFiscal Year
    
    Leases
    
    
    Leases2006 (remainder)
    
    $
    37,570
    
    
    $
    21,6752007
    
    
    129,266
    
    
    
    86,7002008
    
    
    75,501
    
    
    
    14,450Total minimum lease payments
    
    $
    242,337
    
    
    
    122,825Interest
    
    
    
    
    
    
    7,711Total
    
    
    
    
    
    
    115,114Less current portion
    
    
    
    
    
    
    (79,767
    )Long term
    
    
    
    
    
    $
    35,347
  Art Content Sourcing
  Litigation
  NOTE 5EQUITY
 Membership interest repurchase
  12




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SILVERGRAPH INTERNATIONAL, INC. AND SUBSIDIARY
(FORMERLY KNOWN AS PINECREST SERVICES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)
 NOTE 6COMMON STOCK WARRANTS
   Dividend yield
    
    
    Risk-free interest rate
    
    
    4.50
    %Expected volatility
    
    
    50.00
    %Expected life of options
    
    4 years
  NOTE 7
 INCOME TAXES
   13




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Item 2. Managements Discussion and Analysis or Plan of Operation.
 Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
   Overview
   14




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Results of Operations
 Quarters ended September 30, 2006 and 2005 (all amounts for these periods are unaudited)
 Revenues.
 Gross profit.
  Operating expenses.
  15




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Reorganization
 expenses.
 Other income (expense).
 Nine months ended September 30, 2006 and 2005 (all amounts for these periods are unaudited)
 Revenues.
 Gross profit.
 Operating expenses.
 Reorganization expenses.
 Other income (expense).
 Liquidity and Capital Resources
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Inflation and Seasonality
  Critical Accounting Policies
   
    
    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.
   17




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Revenue Recognition
  
    
    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
  Inventories
  Recent Accounting Pronouncements
   18




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Item 3. Controls and Procedures.
   
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  
 Item 6. Exhibits.
 ExhibitNumber
    
    Description2.1
    
    Agreement and Plan of Share Exchange dated June 23, 2006, between
Pinecrest Services, Inc. and New Era Studios, Inc. (incorporated
by reference from our Current Report on Form 8-K filed on June 27,
2006).3.1
    
    Articles of Incorporation (incorporated by reference from our
Current Report on Form 8-K filed on June 27, 2006).
 19




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ExhibitNumber
    
    Description3.2
    
    Articles of Merger for Pinecrest Services, Inc. (incorporated by
reference from our Registration Statement on Form 10-SB filed on
July 6, 2000).3.3
    
    Articles of Exchange by and between Pinecrest Services, Inc. and
New Era Studios, Inc. filed with the Nevada Secretary of State on
June 23, 2006 (incorporated by reference from our Current Report
on Form 8-K filed on June 27, 2006).3.4
    
    Certificate of Amendment to Articles of Incorporation of Pinecrest
Services, Inc. filed with the Nevada Secretary of State on June
23, 2006 (incorporated by reference from our Current Report on
Form 8-K filed on June 27, 2006).3.5
    
    Amended and Restated Bylaws of Silvergraph International, Inc.
(incorporated by reference from our Current Report on Form 8-K
filed on June 27, 2006).10.1
    
    Standard Sublease dated as of June 26, 2006 by and between William
W. Lee, New Era Studios, Inc. and Silvergraph International, Inc.
(incorporated by reference from our Current Report on Form 8-K
filed on June 27, 2006).10.2
    
    Employment Agreement, dated June 9, 2006, between New Era Studios,
Inc. and James R. Martin (incorporated by reference from our
Current Report on Form 8-K filed on June 27, 2006).10.3
    
    Employment Agreement, dated June 9, 2006, between New Era Studios,
Inc. and James R. Simpson (incorporated by reference from our
Current Report on Form 8-K filed on June 27, 2006).10.4
    
    Employment Agreement, dated June 9, 2006, between New Era Studios,
Inc. and William W. Lee (incorporated by reference from our
Current Report on Form 8-K filed on June 27, 2006).10.5
    
    Promissory Note, dated June 23, 2006 from New Era Studios, Inc. to
and in favor of Edward Brian ODwyer Separate Property Trust
(incorporated by reference from our Current Report on Form 8-K
filed on June 27, 2006).10.6
    
    Amended and Restated Promissory
Note, dated August 14, 2006 from
New Era Studios, Inc. to and in favor of Edward Brian ODwyer
Separate Property Trust10.7
    
    Second Amended and Restated Promissory Note, dated September 27,
2006 from New Era Studios, Inc. to and in favor of Edward Brian
ODwyer Separate Property Trust10.8
    
    2006 Stock Option Plan of Silvergraph International, Inc., dated
June 26, 2006 (incorporated by reference from our Current Report
on Form 8-K filed on June 27, 2006).31.1
    
    Certification 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 2002.31.2
    
    Certification 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 2002.32.1
    
    Certification 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 2002.32.2
    
    Certification 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.
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SIGNATURES
  SILVERGRAPH INTERNATIONAL, INC.Date: November 13, 2006
    
    
    
    By:
    
    /s/ James R. SimpsonJames R. Simpson, Chief Executive Officer(Principal Executive Officer)Date: November 13, 2006
    
    
    
    By:
    
    /s/ Gary FreemanGary Freeman, Chief Financial Officer(Principal Financial Officer)
 21